# EDGAR Filing Document

**Accession Number:** 0001694600
**File Stem:** 0001104659-23-036560
**Filing Date:** 2023-3
**Character Count:** 1200313
**Document Hash:** 67290895e8c5d397c08b7b5798c668ba
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-23-036560.hdr.sgml**: 20230324

**ACCESSION NUMBER**: 0001104659-23-036560

**CONFORMED SUBMISSION TYPE**: 1-A

**PUBLIC DOCUMENT COUNT**: 31

**FILED AS OF DATE**: 20230324

**DATE AS OF CHANGE**: 20230324

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** GROUNDFLOOR REAL ESTATE 1, LLC
- **CENTRAL INDEX KEY:** 0001694600
- **STANDARD INDUSTRIAL CLASSIFICATION:** REAL ESTATE [6500]
- **IRS NUMBER:** 814730228
- **STATE OF INCORPORATION:** GA
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 1-A
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 024-12196
- **FILM NUMBER:** 23759347

**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 NE
- **STREET 2:** SUITE 810
- **CITY:** ATLANTA
- **STATE:** GA
- **ZIP:** 30308

## Part

**PART II**

OFFERING CIRCULAR

**Groundfloor Real Estate 1, LLC**,<br> a Georgia limited liability company

Up to $152,460 in aggregate amount of Limited Recourse Obligations

600 Peachtree Street, Suite 810

Atlanta, GA 30308

(404) 850-9225

Dated: March 24, 2023

This Offering Circular relates to the offer and sale of up to $152,460 in aggregate amount of Limited Recourse Obligations (the "LROs") to be issued by Groundfloor Real Estate 1, LLC ("GRE 1"). GRE 1 makes LROs available for investment on a web-based investment platform <u>www.groundfloor.com</u> (the "Groundfloor Platform") owned and operated by Groundfloor Finance Inc. ("Groundfloor" or "Groundfloor Finance"). Except as the context requires otherwise, as used in this Offering Circular, the terms the "Company," "our Company," "we," "us," or "our" refer to GRE 1 exclusively. Groundfloor Finance and GRE 1 operate out of the same offices located at 600 Peachtree Street, Suite 810, Atlanta, Georgia 30308. The phone number for these offices is (404) 850-9225. Our mailing address is PO Box 79346, Atlanta, GA 30357.

The LROs will be issued in distinct series, each corresponding to a real estate development project (each, a "Project") financed by a commercial loan from GRE 1 (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 Offering Circular relates to the offer and sale of each separate series of LROs corresponding to the Projects for which GRE 1 extends Loans, as described below (the "Offering").

The LROs will be unsecured special, limited obligations of GRE 1. 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. GRE 1's 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 this Offering Circular for the specific terms of the LROs.

**We do not guarantee payment of the LROs in the amount or on the time frame expected. The LROs are not obligations of Groundfloor Finance, 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 "General Terms of the LROs—Administration, Service, Collection, and Enforcement of Loan Documents."

**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 LROs only if you can afford a complete loss of your investment. See the "Risk Factors" section on page 10 of this Offering Circular.**

We will commence the offering of each series of LROs promptly after the date this Offering Circular 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 Offering Circular 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 the officers of our sole member and manager, Groundfloor Finance, 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.

This Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sales of these securities in any state in which such offer, solicitation, or sale would be unlawful, prior to registration or qualification under the laws of any such state.

**NO FEDERAL OR STATE SECURITIES COMMISSION HAS APPROVED, DISAPPROVED, ENDORSED, OR RECOMMENDED THIS OFFERING. YOU SHOULD MAKE AN INDEPENDENT DECISION WHETHER THIS OFFERING MEETS YOUR INVESTMENT OBJECTIVES AND FINANCIAL RISK TOLERANCE LEVEL. NO INDEPENDENT PERSON HAS CONFIRMED THE ACCURACY OR TRUTHFULNESS OF THIS DISCLOSURE, NOR WHETHER IT IS COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS ILLEGAL.**

**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(1)(2)** | **Proceeds to other<br> persons** |
| **Per Unit of LRO** | $**10** | **N/A** | $**10** | **N/A** |
| **Total LRO Minimum** | $**N/A** | **N/A** | $**N/A** | **N/A** |
| **Total LRO Maximum** | $**152460** | **N/A** | $**152460** | **N/A** |

---

<sup>(1)</sup> We estimate all expenses for this Offering to be approximately $70,000, 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 Offering Circular.

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
| [OFFERING CIRCULAR SUMMARY](#SP1_001) | [2](#SP1_001) |
| [RISK FACTORS](#SP1_002) | [10](#SP1_002) |
| [SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS](#PR_010) | [29](#PR_010) |
| [DESCRIPTION OF THE BUSINESS OF GRE 1 AND OF GROUNDFLOOR FINANCE](#sp3_001) | [30](#sp3_001) |
| [CAPITALIZATION](#SP6_001) | [70](#SP6_001) |
| [MANAGEMENT](#SP6_002) | [70](#SP6_002) |
| [PRINCIPAL SHAREHOLDERS](#SP6_003) | [74](#SP6_003) |
| [INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS](#SP6_004) | [76](#SP6_004) |
| [TRANSACTIONS WITH PROMOTERS](#PR_001) | [79](#PR_001) |
| [MANAGEMENT DISCUSSION AND ANALYSIS](#PR_002) | [79](#PR_002) |
| [GENERAL TERMS OF THE LROS](#PR_003) | [96](#PR_003) |
| [THE LROS COVERED BY THIS OFFERING CIRCULAR](#PR_004) | [104](#PR_004) |
| [PLAN OF DISTRIBUTION](#PR_005) | [105](#PR_005) |
| [USE OF PROCEEDS](#PR_006) | [107](#PR_006) |
| [FEDERAL TAX ASPECTS](#PR_007) | [107](#PR_007) |
| [LEGAL MATTERS](#PR_008) | [112](#PR_008) |
| [EXPERTS](#PR_009) | [112](#PR_009) |
| [INDEX TO FINANCIAL STATEMENTS](#financials) | [F-1](#financials) |
| [PROJECT SUMMARIES](#PS_001) | [PS-1](#PS_001) |

---

**THIS OFFERING CIRCULAR CONTAINS ALL OF THE REPRESENTATIONS BY THE COMPANY CONCERNING THIS OFFERING, AND NO PERSON SHALL MAKE DIFFERENT OR BROADER STATEMENTS THAN THOSE CONTAINED HEREIN. INVESTORS ARE CAUTIONED NOT TO RELY UPON ANY INFORMATION NOT EXPRESSLY SET FORTH IN THIS OFFERING CIRCULAR.**

**IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THESE AUTHORITIES HAVE NOT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.**

**THE LIMITED RECOURSE OBLIGATIONS HAVE NOT BEEN QUALIFIED UNDER THE SECURITIES LAWS OF ANY STATE OR JURISDICTION.**

**THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD PURCHASE THESE SECURITIES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT.**

**NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS OFFERING CIRCULAR, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY US.**

**IMPORTANT INFORMATION ABOUT THIS OFFERING CIRCULAR**

Please carefully read the information in this Offering Circular as well in any additional supplements or post-qualification amendments (or "PQAs) we may file with the Securities and Exchange Commission (the "SEC"). You should rely only on the information contained in this Offering Circular and any additional supplements or PQAs we file with the SEC. We have not authorized anyone to provide you with different information. This Offering Circular (and any related supplements or PQAs) may only be used where it is legal to sell these LROs. You should not assume that the information contained in this Offering Circular (or in any supplement or PQA we may file in the future) is accurate as of any date later than the date hereof or such other dates as are stated herein or as of the respective dates of any documents or other information incorporated herein by reference.

This Offering Circular is part of an offering statement that we filed with the SEC using a continuous offering process. GRE 1 will offer LROs continuously, and sales of LROs through the Groundfloor Platform can occur on a daily basis. We may add additional series of LROs to this Offering from time to time by filing one or more PQAs to this Offering Circular that identify the terms of the new series of LROs to be offered. We will commence offering additional series of LROs only after the qualification of a PQA covering such additional LROs. We also plan to file periodic supplements to this Offering Circular pursuant to Rule 253(g) under the Securities Act of 1933, as amended (the "Securities Act"), in which we will provide an update on our operations and on the servicing of outstanding Loans originated by us and by our affiliated companies.

In the event of other material developments, we will provide an offering circular supplement that may add, update or change information contained in this Offering Circular. We may also file a PQA to reflect any facts or events arising after qualification of the offering statement which, individually or in the aggregate, represent a fundamental change in the information set forth in the offering statement. Any statement that we make in this Offering Circular (as well as the offering statement of which it is a part) will be modified or superseded by any inconsistent statement made by us in a subsequent offering circular supplement or PQA. The offering statement we filed with the SEC includes exhibits that provide more detailed descriptions of the matters discussed in this Offering Circular.

The offering statement and all supplements and PQAs that we have filed or will file in the future can be read at the SEC website, www.sec.gov*.* You may also access this information through the internal directory on the Groundfloor Platform. The contents of the Groundfloor Platform and the Groundfloor website (other than this Offering Circular, the offering statement and the appendices and exhibits thereto, and the Listings) are not incorporated by reference in or otherwise a part of this Offering Circular.

**OFFERING CIRCULAR SUMMARY**

This summary highlights information contained elsewhere in this Offering Circular. This summary is not complete and does not contain all of the information that you should consider before investing in the LROs. You should carefully read the entire Offering Circular, especially concerning the risks associated with the investment in the securities covered by this Offering Circular discussed under the "Risk Factors" section beginning on page 10 and the information contained in the Project Summaries beginning on page PS-1. Some of the statements in this Offering Circular are forward-looking statements. See the section entitled "Special Note Regarding Forward-Looking Statements" below.

This Offering Circular relates to the Offering of up to $152,460 in aggregate amount of the separate series of LROs, as identified below. See "The LROs Covered by this Offering Circular" below, the Project Summaries beginning on page PS-1, and the form of LRO Agreement beginning on page LRO-1.

**Our Business**

***General***

GRE 1 is a development stage company that was formed on December 16, 2016 by its sole member and manager, Groundfloor Finance. GRE 1 operates out of the same offices as Groundfloor Finance. Our principal offices are located at 600 Peachtree Street, Suite 810, Atlanta, GA 30308. The phone number for these offices is (404) 850-9225. Our mailing address is PO Box 79346, Atlanta, GA 30357.

***The Groundfloor Platform and Limited Recourse Obligations***

GRE 1 uses the web-based platform (the "Groundfloor Platform") owned and operated by Groundfloor Finance to provide real estate development investment opportunities to the public, specifically for these purposes through the issuance and sale by GRE 1 of Limited Recourse Obligations (or "LROs"). Investors under this Offering Circular have the opportunity to buy LROs issued by GRE 1, the proceeds of which will fund a corresponding Loan facilitated through the Groundfloor Platform. We will issue LROs in denominations of $10 and integral multiples of $10. We will issue each series of LROs as soon as possible (typically within five days) after the end of the Offering Period (subject to completion of the Withdrawal Period as outlined below). We refer to the date the LROs are issued as the "original issue date."

On each LRO in a series, we will pay to each holder thereof the Purchase Amount and the Accrued Return (each, as defined below) earned thereon (the "LRO Payments"). Our obligation to make LRO Payments is limited, in all circumstances, to an amount equal to the holder's pro rata share of the amount of payments, if any, actually received on the corresponding Loan, net of certain fees and expenses (as described in more detail below, the "Loan Payments"). We will make LRO Payments within five business days of receipt of the corresponding Loan Payments. Our obligation to make LRO Payments automatically terminates (and the corresponding LRO shall be of no further force or effect) on the final payment date, which corresponds to the maturity date of the corresponding Loan, assuming the entire Purchase Amount and Accrued Return earned thereon have been paid to the holder at that time. Our obligation to make LRO Payments is automatically extended (up to a maximum of two years) if such amounts were not paid at the final payment date.

Through this basic structure, the LROs establish an expected yield (or expected return on investment), equal to the Purchase Amount paid for the LRO plus the Accrued Return earned thereon, which should be paid at a specified time.

For instance, if the Purchase Amount on a particular LRO was $100, at an Expected Rate of Return of 10% per annum, with a final payment date of 12 months following issuance, expected yield for the LRO would be $110, to be paid no later than 12 months (plus up to five business days for administrative convenience) after the date of issuance.

**Investing in LROs is not without risk, and actual receipt of the expected yield in the time frame specified is not guaranteed.** The LRO Agreement gives us sole discretion in applying amounts we receive from, or for the account of, the Borrower, with respect to the corresponding Loan, and we may make payments on the LROs out of any funds at our disposal. 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 "General Terms of the LROs—Administration, Service, Collection, and Enforcement of Loan Documents." We may prepay the LROs at any time without penalty, and our payment obligation may be satisfied by making LRO Payments to investors of an amount that may be more or less than the expected yield, on a date different than originally specified. See "Risk Factors—You may receive a different return on your investment than originally expected and could suffer a complete loss of your investment." If GRE 1 becomes subject to a bankruptcy or similar proceeding, you as holder of a LRO will have a general unsecured claim against GRE 1 that may or may not be limited in recovery to borrower payments in respect of the corresponding Loan. See "Risk Factors—If we or Groundfloor Finance were to become subject to a bankruptcy or similar proceeding . . .," "—In a bankruptcy or similar proceeding of the Company or Groundfloor .. . .," and "—If we or Groundfloor Finance were to cease operations or enter into bankruptcy proceedings........" for additional information on this and other risks related to GRE 1 or Groundfloor Finance becoming subject to a bankruptcy or similar proceeding.

The LROs will be unsecured special, limited obligations of GRE 1 only. The LROs are unsecured, and holders of the LROs do not have a security interest in the corresponding Loans or the proceeds of those corresponding Loans, or in any assets of the Company (or of Groundfloor Finance or its subsidiaries), or of any Borrower or any of its Principal(s). The LROs are not obligations of Groundfloor Finance, the Borrowers or their Principals, and we do not guarantee payment on the corresponding Loans.

The intended focus of the financing program is the commercial market for lending to developers of residential and small commercial real estate projects owned and occupied by parties other than the real estate developer that owns and operates the Project or toward refinancing existing indebtedness. The Borrower for each Project is a legal entity that owns the underlying property and has been organized by its Principal(s). Proceeds from the Loans typically will be applied toward the Project's acquisition and/or renovation or construction costs. In some circumstances, we may permit a portion of the proceeds from the Loan to be used by the Borrower to offset a portion of the purchase price of the property, works completed, or equity, but such offset will then reduce its amount of "skin-in-the-game" the Borrower would have in the Project (see below under "Description of the Business of GRE 1 and of Groundfloor Finance—Our Loans to Borrowers—Credit Risk and Valuation Assessment—The Grading Algorithm—'Skin-in-the-Game' ").

Generally, the Loans related to the LROs range between $10,000 and $3,000,000, at interest rates that range, subject to applicable law, between 3% and 26%, and mature six months to five years from the date when the Loan is made. The terms of each series of LROs generally correspond to those of the corresponding Loan. For example, assuming a Borrower wishes to enter into a Loan covering $10,000, with an interest rate of 10% and a 12-month term, the aggregate Purchase Amount of the LROs of the series corresponding to that Loan would be $10,000, with an Expected Rate of Return of 10% per annum, and a final payment date of 12 months from the date of issuance.

We may use the proceeds of the sale of the corresponding series of LROs to originate the Loan and, in those circumstances, we would close and fund the corresponding Loan on the original issue date of the LROs. However, now that we have implemented our loan advance program, in most circumstances, we, Groundfloor Finance, or a subsidiary of Groundfloor Finance will advance Loans prior to the qualification or sale of the corresponding series of LROs. These advances are typically funded from one or more lines of credit or borrowing arrangements entered into by Groundfloor Finance or one of its subsidiaries, but there may be circumstances that we, or Groundfloor Finance or one of its subsidiaries, could utilize operating capital for these purposes. See "Description of the Business of GRE 1 and of Groundfloor Finance—How the Groundfloor Platform Operates— Loan Advances." If we subsequently qualify and fully subscribe a series of LROs that corresponds to an advanced Loan, all or a portion of the proceeds from the sale of the corresponding series of LROs will be used to repay the advanced amount. The advanced Loan is also assigned to GRE 1 at that time and, to ensure investors have the right to receive the expected yield on the LROs as described in the corresponding Project Summary, the maturity date is also adjusted to reflect a loan term as if the origination had occurred on the original issue date. Although most of our Loans will be advanced, it will nevertheless be noted under the "Project Specific Risk Factors" on the applicable Project Summary. If a Loan is advanced after the series of LROs corresponding to such loan has been qualified, but before such LROs have been issued, we will notify investors by email within 48 hours of the advance, and update the Project Summary of the advanced Loan on the Groundfloor Platform within the same time period to reflect the status of the Loan. An offering circular supplement will also be filed with the SEC on EDGAR including the revised Project Summary.

The specific terms for each series of LROs being offered under this Offering Circular are set forth in "The LROs Covered by this Offering Circular" below, the Project Summaries beginning on page PS-1, and the form of LRO Agreement. GRE 1 will repay the amounts advanced for the Loan and/or fund each Loan out of the proceeds of the sale of the series of corresponding LROs. The Borrower will use the proceeds from the Loan GRE 1 finances to complete the Project, repaying principal and interest (either as a balloon payment at maturity or on a monthly/quarterly basis) to GRE 1.

GRE 1 will take out a lien on the real estate underlying the Project to secure the Loan; however, investors in the corresponding series of LROs will not have any recourse against Groundfloor Finance, the Borrower or its Principals. Your recourse against us is limited to an amount equal to the amount of any LRO Payments we owe you (as determined pursuant to the terms of the corresponding LRO Agreement).

We will charge Borrowers origination (which currently range between 2% and 6% of the principal loan amount) and servicing (which currently range between 0.5% and 5% of the principal loan amount) fees, which typically will be included in the total amount of the Loan. Investors are not charged any fees in connection with this Offering of the LROs and are not charged any service fees with respect to LRO Payments made with respect to the LROs covered by this Offering Circular. Investors are not currently charged any fees for the use of the Groundfloor Platform. See below and "Description of the Business of GRE 1 and of Groundfloor Finance—Fees and Related Expenses."

The general terms of the LROs are summarized in the following table. See "General Terms of the LROs" below for additional information. For specific details on the information for each series of LROs covered by this Offering Circular and their corresponding Loans and Projects, see "The LROs Covered by this Offering Circular" below, the Project Summaries beginning on page PS-1, and the form of LRO Agreement beginning on page LRO-1.

We may abandon or withdraw an offering of a particular series of LROs at any time prior to its issuance, in each case as further described below. If we abandon or withdraw an offering of a particular series of LROs, we will promptly release all funds (without interest) committed to purchase that series; after which you may elect to transfer such funds to your bank account or make a commitment to purchase a different series of LROs.

**General Terms of the LROs**

**Limited Recourse Obligations**

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| | |
|:---|:---|
| **Issuer** | **Groundfloor Real Estate 1, LLC, a Georgia limited liability company.** |
| **Security Offered** | **Limited Recourse Obligations, or LROs, issued in series, with each series of LROs related to a corresponding Loan.** |
|  | All LROs will be issued in electronic form only. All LROs will be offered only through the Groundfloor Platform to potential investors who have registered and established a funding account on the Groundfloor Platform, and there will be no commissioned sales agents, underwriters, or underwriting discounts. See "Plan of Distribution." |
| **Minimum Purchase Amount** | **Investments may be made in denominations of $10 and integral multiples of $10. We refer to the aggregate amount invested by a holder of a single LRO of a series as the "Purchase Amount" of that LRO. The aggregate Purchase Amounts of all LROs of a particular series will equal the total principal amount of the corresponding Loan.** |
| **Expected Rate of Return and Accrued Return** | **The expected annual rate of return on the LRO (the "Expected Rate of Return") will be the same as the interest rate for the corresponding Loan. The "Accrued Return" is the amount earned on the Purchase Amount at the Expected Rate of Return from the original issue date through the date the Company's obligation to make any LRO Payments terminates. The form of LRO Agreement made available at the time you make your non-binding commitment will reflect the original issue date as "to be determined."** |
| **Loan Payments** | **All amounts received by the Company as payment of the corresponding Loan, including, without limitation, all payments or prepayments of principal and interest, any Collection Proceeds (as defined below); provided, however, that such payments shall be net of any Company Fees and Expenses (as defined below), Collection Costs (as defined below), loan modification fees or fees deducted by a backup or successor servicer (the categorization of all such items to be determined by the Company or its agent in a manner consistent with the Loan Agreement).** |
| **LRO Payments** | **The LRO Agreement provides that, subject to the application of Loan Payments received as Collection Proceeds and our ability to prepay the LRO, we will pay to each holder of a LRO the Purchase Amount and the Accrued Return earned thereon as "LRO Payments." Our obligation to make LRO Payments is limited, in all circumstances, to an amount equal to the holder's pro rata share of the amount of Loan Payments, if any, actually received on the corresponding Loan.** |
|  | The LRO Agreement gives us sole discretion in applying amounts we receive from, or for the account of, the Borrower, with respect to the corresponding Loan, and we may make LRO Payments out of any funds at our disposal. |

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| | |
|:---|:---|
|  | LRO Payments will occur within five business days of receipt of Loan Payments with respect to the corresponding Loan. As a result, the expected repayment schedule on each series of LROs generally reflects the same repayment schedule (subject to prepayment) as the corresponding Loan. The repayment schedule for the Loans will vary by Project; however, typically, repayment is made either as a balloon payment at maturity or interest only on a monthly/quarterly basis, with the principal amount paid at maturity. |
| **Final Payment Date** | **The date our obligation to make payments on a series of LROs terminates, unless otherwise extended. The final payment date for each series of LROs corresponds to the maturity date of the corresponding Loan.** |
| **Extended Payment Date** | **The date that corresponds to the second anniversary of the final payment date.** |
|  | If, on or within five business days of the final payment date, any Purchase Amount of, or Accrued Return earned on, the LRO through the final payment date remains due and payable, our payment obligation with respect to that series of LROs will automatically be extended for no more than two years. In such case, our obligation to make LRO Payments on such series of LROs will terminate on the earlier of (1) the date on which the remaining Purchase Amount of, or Accrued Return earned on, the LRO through the date of payment has been paid in full, (2) the date on which all available Collection Proceeds have been applied and the Holder's pro rata share thereof paid as LRO Payments in accordance with the terms of the LRO Agreement, or (3) the extended payment date. The Company will not have to make any further LRO Payments (irrespective of whether the expected yield on the LRO has been paid in full) after the extended payment date. |
| **Event of Default** | **The LRO Agreement stipulates certain events that would trigger an event of default under the LRO and the remedies you may pursue. See "General Terms of the LROs—Events of Default."** |
| **Servicing Standards** | **The administration, servicing, collection, and enforcement activities on a Loan are undertaken by Groundfloor Finance (acting as GRE 1's agent) in each particular circumstance, in accordance with specific servicing standards set forth in the LRO Agreement, with the goal of maximizing the amount of the LRO Payments to be paid to investors prior to termination of our limited payment obligation thereunder. See "General Terms of the LROs—Administration, Service, Collection, and Enforcement of Loan Documents" and "—Collection Proceeds, Costs, and Expenses."** |
| **Abandonment** | **We may abandon an offering of a particular series of LROs at any time prior to its issuance. Offerings are typically abandoned because the Borrower withdraws its funding request or they are not fully subscribed by the end of the Offering Period. If we abandon an offering of a particular series of LROs, we will promptly (but under no circumstances more than 48 hours following receipt of a withdrawal notice from the Borrower or our determination to abandon the offering) release all funds (without interest) committed to purchase that series; after which, you may elect to transfer such funds to your bank account or make a commitment to purchase a different series of LROs.** |
| **Withdrawn Offerings** | **We may withdraw an offering of a particular series of LROs at any time prior to its issuance. Offerings are typically withdrawn due to the need to correct or modify specific disclosures about the terms of the related series of LROs and the series of LROs that correspond to Loans that are withdrawn are typically re-qualified at a later date. More often than not, we withdraw Loans from an offering before commencing the Offering Period for the corresponding LROs. However, if commitments have been made towards a series that is withdrawn, we will promptly (but under no circumstances more than 48 hours following receipt of a withdrawal notice from the Borrower or our determination to withdraw the offering) release all funds (without interest) committed to purchase that series; after which, you may elect to transfer such funds to your bank account or make a commitment to purchase a different series of LROs.** |
| **Prepayment** | **We may prepay the LROs at any time without penalty. Generally, outside of the context of a Borrower default, we will only prepay a series of LROs if the Borrower prepays the corresponding Loan. Our obligation to make any LRO Payments will automatically terminate (and the corresponding LRO shall be of no further force or effect) once all of the Purchase Amount of, and Accrued Return earned on, any LRO through the date of payment is paid in full.** |

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| **Investment Documents** | **In addition to the Terms of Service and Privacy Policy (each as defined below), each investor must agree to the Investor Agreement (as defined below), which governs the general rights and obligations in connection with investing in LROs issued by GRE 1 through the Groundfloor Platform, and the LRO Agreement, which governs the offer and sale of each particular series of LROs, as well as certain rights and obligations of purchasers of a series of LROs and of the Company. The standard form of LRO Agreement begins on page LRO-1 of this Offering Circular. Investors may review the form of LRO Agreement applicable to a particular series of LROs by accessing the hyperlink on the corresponding Project Summary on the Groundfloor Platform.** |
|  | At the time you make your non-binding commitment for a particular series of LROs, you will be provided (by hyperlink) with a PDF copy of the LRO Agreement that is applicable to your particular investment. This version of the LRO Agreement will reflect the terms of your proposed investment (including the Purchase Amount and Expected Rate of Return); however, the original issue date, final payment date and extended payment date will be reflected as "to be determined," since those dates are dependent upon the actual issuance of the corresponding series of LROs and the maturity date of the corresponding Loan. Following the issuance of the LROs and without any action on your part, we will (1) revise the LRO Agreement to reflect the actual original issue date, the final payment date (to correspond with the maturity date of the Loan) and the extended payment date, (2) notify you (by email) of such change, and (3) make available a copy of the LRO Agreement (as revised) through the Groundfloor Platform. |
| **Ranking** | The LROs will not be contractually senior or contractually subordinated to any indebtedness of GRE 1 (or of Groundfloor Finance or any of its subsidiaries). The LROs will be unsecured special, limited obligations of GRE 1 only. Holders of the LROs do not have a security interest in the corresponding Loans or the proceeds of those corresponding Loans, or in any assets of the Company (or of Groundfloor Finance or its subsidiaries), or of any Borrower or of its Principal(s). **Investing in the LROs is not without risk, and actual receipt of the expected yield in the time frame specified is not guaranteed. 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 "General Terms of the LROs— Administration, Service, Collection, and Enforcement of Loan Documents." |
|  | We will be obligated to make payments on the LROs only if and to the extent we receive Loan Payments on the corresponding Loan. We will pay to holders of the corresponding series of LROs an amount equal to their respective pro rata share of the amount of Loan Payments, if any, actually received. Loan Payments will be secured by the assets of the corresponding Project. |
|  | In the event of a bankruptcy or similar proceeding of the Company, the relative rights of the holder of the LROs as compared to the holders of unsecured indebtedness of the Company are uncertain. If we were to become subject to a bankruptcy or similar proceeding, the holder of the LROs will have an unsecured claim against us that may or may not be limited in recovery to the corresponding Loan. For a more detailed description of the possible implications if we or Groundfloor Finance became subject to a bankruptcy or similar proceeding, see "Risk Factors—If we or Groundfloor Finance were to become subject to a bankruptcy or similar proceeding . . . ," "—In a bankruptcy or similar proceeding of the Company or Groundfloor . . . ," and "—If we or Groundfloor Finance were to cease operations or enter into bankruptcy proceedings......." |
| **Offering Period** | We will commence the offering of a series of the LROs promptly after the date this Offering Circular or a PQA covering such series is qualified by posting on the Groundfloor Platform a separate Project Summary corresponding to each particular Loan and Project (each, a "Project Summary"). Copies of each of the Project Summaries as posted at the commencement of the offering begin on page PS-1 of this Offering Circular. The offering of each series of LROs covered by this Offering Circular 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; 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. A commitment to purchase LROs becomes irrevocable following expiration of the Withdrawal Period. Commitments to purchase LROs made after expiration of the Withdrawal Period, if any, are irrevocable when authorized and may not be withdrawn. |
|  | We will issue each series of LROs as soon as possible (typically within five days) after the end of the Offering Period. Unless the Loan has not been advanced, all or a portion of the proceeds from the sale of the corresponding series of LROs will be used to repay the advanced amount. The advanced Loan is also assigned to GRE 1 and its maturity date adjusted to reflect the term as if the origination had occurred on the original issue date. If the Loan has not been advanced, we will use the proceeds of the sale of the corresponding series of LROs to originate the Loan and will close and fund the corresponding Loan on the original issue date of the LROs. |
|  | If the offering of a series of LROs is abandoned or withdrawn before, or not fully subscribed with irrevocable funding commitments by, the end of the Offering Period, we will notify investors and promptly release committed funds and make them available in their funding accounts. |

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| **Use of Proceeds** | **We will use the proceeds of each offering of a series of LROs to repay the funds (without any interest) used to advance the Loan or, if applicable, to fund the Loan to a Borrower that we are originating directly. See "Use of Proceeds."** |
| **Secondary Trading** | **The LROs do not contain any provision restricting their transferability, other than the requirements that any transfer be conducted consistent with applicable law, that any transferee register as an investor with us, and that such transferee agrees to the terms of the Investor Agreement and the LRO Agreement governing such series of LROs. However, the LROs will not be listed on any securities exchange, nor do we have plans to establish any kind of trading platform to assist investors who wish to sell their LROs. We will not facilitate or otherwise participate in the secondary transfer of any Security. There is no public market for the LROs, and none is expected to develop. Certain states, including California and Texas, also impose additional statutory restrictions on secondary trading of the LROs purchased in the Offering, which may further restrict the transferability of the LROs. Prospective investors are urged to consult their own legal advisors with respect to secondary trading in the LROs.** |
| **Risk Factors** | **An investment in any series of LROs involves a high degree of risk. See the section entitled "Risk Factors" on page 10 of this Offering Circular and additional information that may be contained in the Project Summaries beginning on page PS-1 of this Offering Circular.** |

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**General Terms of Loans to Borrowers**

Terms of our Loans with a particular Borrower are determined through an application and intake process managed on the Groundfloor Platform. (See "Description of the Business of GRE 1 and of Groundfloor Finance—How the Groundfloor Platform Operates.") The Company and each Borrower will enter into a loan agreement (the "Loan Agreement") and certain additional documents, including a promissory note, certain mortgage instruments (including a deed of trust or similar security document), and other documents or instruments evidencing or securing the Loan and any other documents entered into in connection with the Loan Agreement (together, with the Loan Agreement, the "Loan Documents").

The terms of each series of LROs generally correspond to those of the corresponding Loans. The specific terms of the Loan corresponding to each series of LROs being offered hereby are set forth in "The LROs Covered by this Offering Circular" below, the Project Summaries beginning on page PS-1, and the form of LRO Agreement beginning on page LRO-1. This information can also be accessed on the Groundfloor Platform.

The following discussion provides an overview of the range of terms offered to Borrowers.

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| **Loan Principal** | **The total principal amount borrowed under the corresponding Loan (the "Loan Principal"), which ranges between $10,000 and $3,000,000 depending on the Project. Borrowers are charged origination and servicing fees and closing expenses, which may be included in the total amount of the Loan or paid directly by the Borrower at closing.** |
| **Interest Rate of Loans to Borrowers** | **Annual fixed interest rate between 3% and 26%, depending upon the Project and subject to applicable law. Interest begins to accrue on all Loan Principal from the origination date of the Loan, irrespective of when funds are advanced to Borrowers.** |
| **Advancement of Loan Proceeds** | **The proceeds of the Loan (less any fees and expenses included in the Loan Principal) (the "Loan Proceeds") will remain in an account maintained at the FBO Servicer (as defined below) titled in our name "for the benefit of GRE 1 Borrowers" (the "GRE 1 Borrower FBO Account") until disbursed pursuant to the terms of the Loan Agreement. Typically amounts are disbursed to the Borrower from time to time as construction advances or draws (each, a "Draw"). Under limited circumstances (for instance if the Loan Principal is $50,000 or less or when an amount greater than $50,000 is needed for the acquisition of a property) the full amount of the Loan Proceeds will be disbursed to the Borrower on the origination date of the Loan.** |

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| **Maturity Date of Loans to Borrowers** | **Varies by Project. The maturity of the Loans typically ranges between six months and five years. The maturity date of any advanced Loans will always be adjusted in connection with the issuance of the corresponding LROs to reflect the term disclosed in the corresponding Project Summary.** |
| **Repayment Terms of Loans to Borrowers** | **The repayment schedule for the Loans will vary by Project; however, typically, repayment is made either as a balloon payment at maturity or interest only on a monthly/quarterly basis, with the principal amount paid at maturity.** |

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**Prepayment** Loans may be prepaid without penalty.

We do not make any general solicitation or advertisement of this Offering in any jurisdiction that this Offering is not registered. This Offering is being conducted on a "best-efforts" basis, which means the officers of our sole member and manager, Groundfloor Finance, will attempt to sell the LROs to prospective investors through the Groundfloor Platform without the use of an underwriter. We will not pay any commission or other remuneration to the officers for these efforts. In the future, we or our affiliates may conduct separate offerings of additional series of LROs under Regulation A or in reliance on other exemptions from federal and state registration requirements.

**Fees and Related Expenses**

Subject to the application of Loan Payments received as Collection Proceeds and our ability to prepay the LRO, we will pay to each holder of a LRO the Purchase Amount and the Accrued Return earned thereon as LRO Payments. Our obligation to make LRO Payments is limited, in all circumstances, to an amount equal to the holder's pro rata share of the amount of Loan Payments, if any, actually received on the corresponding Loan. For these purposes, LRO Payments include all payments or prepayments of principal and interest under the Loan as well as amounts received whether prior to or in connection with a Borrower bankruptcy or in connection with any exercise of the Company's powers to administer, service, collect and enforce the terms of the Loan or of the Loan Documents.

The chart below summarizes the current treatment of the various fees we charge and expenses we incur in connection with our underwriting and loan administration services, each of which is discussed in more detail below under "Description of the Business of GRE 1 and of Groundfloor Finance—Fees and Related Expenses," "General Terms of the LROs —Collection Proceeds, Costs, and Expenses," and "Description of the Business of GRE 1 and of Groundfloor Finance—Project Funding and Payment of Expected Yield—Servicing and Collection of Loans Generally."

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| **Type of Fee** | **Amount of Fee/Expense** | **Application of Fees** |
| Origination Fees | Typically ranging from 2% to 6% | Charged to each Borrower and retained by entity originating the Loan. Fee typically included in total amount of the Loan funded on the Groundfloor Platform or paid directly by the Borrower at closing. |
| Servicing Fees | Typically ranging from 0.5% to 5% | Charged to each Borrower and retained by GRE 1 (unless the originating entity is in the position to service the Loan at the time fee is charged). Fee is levied with each draw, or upon repayment of full Loan Principal. |
| Closing Expenses | $500 to $3,500 | Charged to the Borrower and retained by entity originating Loan. Fee is typically included in total amount of the Loan funded on the Groundfloor Platform or paid directly by the Borrower at closing. |
| Check Processing Fee | Up to $15 | Fees would be paid by the Borrower and retained by GRE 1. |
| Non-Sufficient Funds | $15 to $35 | Fees would be paid by the Borrower and retained by GRE 1. |
| Loan Modification Fees | Variable | Fees paid by the Borrower and retained by GRE 1. |

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 **Collection Proceeds and Collection Costs**

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| Penalty Interest Rate | Variable. Typically, up to an additional 2%, subject to applicable law | Additional interest paid by the Borrower. Corresponding amounts, less Collection Costs, are included in LRO Payments |
| Late Charge | The lesser of 4% or the maximum amount permitted to be charged under applicable law | Late charge is paid by the Borrower. Corresponding amounts, less Collection Costs, are included in LRO Payments. |
| Default Rate | The lesser of 20% or the maximum rate permitted to be charged, less Collection Costs | Additional interest paid by the Borrower. Corresponding amounts, less Collection Costs, are included in LRO Payments. |
| Other Collection Proceeds | Variable | Corresponding amounts, less Collection Costs, are included in LRO Payments. |
| Collection Costs | Variable | Expenses paid and retained by GRE 1 (or its agent) out of the Collection Proceeds. |

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Investors are not charged any fees in connection with the Offering of, and will not charge any service fees with respect to LRO Payments made with respect to, the LROs covered by this Offering Circular. Neither we nor Groundfloor currently charge investors any fees for the use of the Groundfloor Platform. See the section titled "Description of the Business of GRE 1 and of Groundfloor Finance—Fees and Related Expenses" below for more information.

**Example LRO and Expected Yield**

By way of illustration, assume we approve an acquisition and construction Loan with the following terms: $100,000 in principal amount, with a 10% interest rate over a 12-month term, and a balloon payment upon maturity. We would offer LROs covering $100,000 in aggregate Purchase Amount, at an Expected Rate of Return of 10%; with the final payment date of 12 months following the original issue date.

If the Borrower elects to include our origination and servicing fees (of $4,000 or 4%) and closing expenses (of $1,000) in the Loan Principal, upon funding of the Loan by investors, the Borrower's FBO Account would be credited with $95,000 (equal to the entire Loan Principal of $100,000 less the $5,000 in fees and expenses, which we retain). Interest on the entire $100,000 would accrue beginning on the original issue date, through the 12-month term of the Loan, and, at the end of that 12-month term (assuming there are no additional fees and expenses incurred by the Company and no prepayment or default by the Borrower), the Borrower would pay us a total of $110,000 (equal to the entire Loan Principal of $100,000, plus $10,000 of accrued interest). We would, within five business days of receipt of these funds, disburse to each holder of the corresponding series of LROs an amount equal to such holder's pro rata share of $110,000 (the total Loan Payment we received from the Borrower).

In most cases, the Loan will have been advanced prior to qualification of the corresponding series of LROs. As a result, the Loan would be amended in connection with the closing of the series of LROs to assign the Loan to GRE 1 from Groundfloor Finance or applicable subsidiary and to amend the maturity date to match the term of the corresponding series of LROs (i.e., 12 months in the example above). Interest that accrues on the advanced Loan before the issuance of the corresponding series of LROs is retained by GRE 1; thereafter, there would be no other difference between the original issue date and the payment of the Loan and corresponding series of LROs as described above. See "Description of the Business of GRE 1 and of Groundfloor Finance—How the Groundfloor Platform Operates—Loan Advances" below for more information on the loan advance program.

**Summary Financial Information**

Since its inception, Groundfloor Finance has financed its operations through debt and equity financings. Groundfloor Finance intends to continue financing its activities and working capital needs (and those of GRE 1) largely from private financing from individual investors and venture capital firms until such time that funds provided by operations are sufficient to fund working capital requirements.

**GRE 1 and Groundfloor Finance Business Information**

GRE 1 is a Georgia limited liability company. Groundfloor Finance is a Georgia corporation. The principal offices of GRE 1 and Groundfloor Finance is located at 600 Peachtree Street, Suite 810, Atlanta, GA 30308. The phone number for these offices is (404) 850-9225. The mailing address for GRE 1 and Groundfloor Finance is PO Box 79346, Atlanta, GA 30357, and our email address is contact@groundfloor.com.

**RISK FACTORS**

*Investing in the LROs involves a high degree of risk. In deciding whether to purchase the LROs, you should carefully consider the following risk factors and additional information about the risks associated with a particular series of LROs that may be contained in the Project Summaries beginning on page PS-1 of this Offering Circular. Any of the following risks could have a material adverse effect on the value of the LROs you purchase and could cause you to lose all or part of your initial Purchase Amount or could adversely affect future payments you expect to receive on the LROs. Only investors who can bear the loss of their entire Purchase Amount should purchase the LROs.*

**Risks Related to Investing in the LROs**

***Groundfloor Finance's auditor has expressed substantial doubt about its ability to continue as a going concern.***

Groundfloor's consolidated financial statements for the period ended December 31, 2022 include a going concern note from its auditors. Groundfloor incurred a net loss for the twelve months ended December 31, 2022, and 2021, and has an accumulated deficit as of December 31, 2022 of $35.6 million. In view of these matters, Groundfloor's ability to continue as a going concern is dependent upon Groundfloor's ability to increase operations and to achieve a level of profitability. Since inception, Groundfloor has financed its operations through debt and equity financings. Groundfloor intends to continue financing its future activities and its working capital needs largely from private financing from individual investors and venture capital firms until such time that funds provided by operations are sufficient to fund working capital requirements. The failure to obtain sufficient debt and equity financing and to achieve profitable operations and positive cash flows from operations could adversely affect Groundfloor's ability to achieve its business objective and continue as a going concern.

***We have a limited operating history as does our parent company. As companies in the early stages of development, we face increased risks, uncertainties, expenses and difficulties.***

GRE 1 has a limited operating history and Groundfloor Finance (with its affiliates) has a limited operating history. GRE 1 previously issued Limited Recourse Obligations pursuant to a Regulation A Offering Statement (File No. 024-10671) qualified by the Staff on May 5, 2017. In connection with such Regulation A Offering Statement, GRE 1 originated thirty-five (35) Loans and issued Limited Recourse Obligations until September 1, 2017. No Limited Recourse Obligations issued pursuant to such Regulation A Offering Statement nor any Loans corresponding to such Limited Recourse Obligations remain outstanding at this time. Groundfloor Finance owns and operates the Groundfloor Platform. Groundfloor Finance began originating real estate loans in Georgia through a subsidiary in November 2013 and transitioned to multi-state operations through the sale of LROs under a Regulation A offering in September 2015. See "Management Discussion and Analysis" below.

For Groundfloor's business to be successful, the number of real estate development projects financed by us, Groundfloor and its subsidiaries will need to increase, which will require Groundfloor to increase its facilities, personnel and infrastructure to accommodate the greater servicing obligations and demands on the Groundfloor Platform. The Groundfloor Platform is dependent upon Groundfloor's website to maintain current listings and transactions in the LROs offered by us and by our affiliates. Groundfloor must constantly update its software and website, expand its customer support services and retain an appropriate number of employees to maintain the operations of the Groundfloor Platform, as well as to satisfy our servicing obligations on the Loans and to make payments on the LROs. If Groundfloor is unable to increase the capacity of the Groundfloor Platform and maintain the necessary infrastructure, you may experience delays in receipt of payments on the LROs and periodic downtime of our systems.

***Groundfloor and GRE 1 have incurred net losses in the past and expects to incur net losses in the future. If Groundfloor becomes insolvent or bankrupt, you may lose your investment.***

Groundfloor has incurred net losses in the past, and Groundfloor expects to incur net losses in the future. Groundfloor incurred a net loss for the twelve months ended December 31, 2022, and 2021, and has an accumulated deficit as of December 31, 2022 of $35.6 million. Groundfloor has not been profitable since its inception, and Groundfloor may not become profitable. The same can be said for GRE 1. In addition, Groundfloor expects its operating expenses to increase in the future as Groundfloor expands its operations. If operating expenses exceeds expectations, financial performance could be adversely affected. If revenue does not grow to offset these increased expenses, GRE 1 and Groundfloor may never become profitable. In future periods, GRE 1 and Groundfloor may not have any revenue growth or the revenue of GRE 1 and Groundfloor could decline. Groundfloor's failure to become profitable could impair the operations of the Groundfloor Platform by limiting Groundfloor's access to working capital required to operate the Groundfloor Platform. If GRE 1 or Groundfloor were to become insolvent or bankrupt, it is likely that GRE 1 would default on GRE 1's payment obligations under the LROs, and you may lose your investment.

***Groundfloor Finance has relied on multiple debt financings and has substantial indebtedness, which many affect the financial condition of Groundfloor Finance and GRE 1.***

Historically, Groundfloor Finance relied on debt financing to fund its start-up costs and working capital for its operations. See "Management Discussion and Analysis— Liquidity and Capital Resources" for more information on these financings. More recently, Groundfloor Finance has relied on debt financing in connection with its loan advance program. See "Description of the Business of GRE 1 and of Groundfloor Finance—How the Groundfloor Platform Operates—Loan Advances" and "Interest of Management and Others in Certain Transactions—ISB Note" below for more information on these financings. Groundfloor Finance's obligations under these loans will reduce its available cash for re-investment and, therefore, may negatively impact its potential profitability until all amounts are repaid. In addition, since Groundfloor Finance has granted a security interest under these loans for certain assets. If Groundfloor Finance defaulted on its obligations, the secured parties could elect foreclose on these assets and such a foreclosure would have an adverse affect on the ability of Groundfloor (and GRE 1) to operate its business.

Groundfloor Finance's substantial indebtedness may also limit its ability to borrow additional funds or obtain additional financing in the future. If GRE 1 or Groundfloor Finance obtain additional debt financing to fund our and/or its operations or as capital for the loan advance program, a substantial portion of our and/or its operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, and the terms of the debt securities issued could impose significant restrictions on our and/or its operations.

***Our management team has limited experience in mortgage loan underwriting.***

GRE 1 has a limited operating history and Groundfloor Finance (with its affiliates) has a limited operating history. GRE 1 previously issued Limited Recourse Obligations pursuant to a Regulation A Offering Statement (File No. 024-10671) qualified by the Staff on May 5, 2017. In connection with such Regulation A Offering Statement, GRE 1 originated thirty-five (35) Loans and issued Limited Recourse Obligations until September 1, 2017. No Limited Recourse Obligations issued pursuant to such Regulation A Offering Statement nor any Loans corresponding to such Limited Recourse Obligations remain outstanding at this time. GRE 1 relies on Groundfloor Finance to make underwriting decisions with respect to the Loans that are being funded through the sale of LROs. Groundfloor Finance began originating real estate loans in Georgia through a subsidiary in November 2013 and transitioned to multi-state operations through the sale of LROs under a Regulation A offering in September 2015. A limited number of our management team has experience in mortgage loan underwriting and the founders of Groundfloor Finance had no such experience at the time it began operations. See "Management Discussion and Analysis—Overview" and "Management—Biographies of Directors, Executive Officers and Significant Employees of Groundfloor Finance." If the method adopted by Groundfloor Finance for evaluating potential Projects to fund and for establishing interest rates for the corresponding Loans proves flawed, investors may not receive the expected yield on the LROs. Although the proprietary Grading Algorithm utilized by Groundfloor Finance is based upon certain quantifiable characteristics that have been developed and is primarily driven by leverage and asset value, there is no assurance that the Grading Algorithm will accurately assess the risks associated with the Borrower or the property for which the Loan is being sought.

***If we are not current on certain registrations, licenses, filings, or other documents, we may be required to repurchase securities you have bought.***

In December 2016, Groundfloor Finance issued and sold three series of LROs after the original Form U-1 for such offering had expired. The LROs were refunded in full, including all accrued interest, and submitted again to be offered under a subsequent post-qualification amendment to Groundfloor Finance's Offering Statement on Form 1-A, covered by the Form U-1 dated December 21, 2016. See "Description of the Business of GRE 1 and of Groundfloor Finance—Legal Proceedings" for additional information. If GRE 1 does not stay current on certain registrations, licenses, filings, or other documents related to the Offering, we may be required to repurchase securities you have bought and as a result you would not receive the expected yield on the LROs purchased.

***Payments on the LROs depend entirely on the payments received from the Borrower. If we do not receive such payments from the Borrower, you will not receive any payments on your LRO.***

Only GRE 1, and not Groundfloor Finance, is obligated to make LRO Payments only to the extent GRE 1 receives Loan Payments on the corresponding Loan. Borrowers are able to make payments on their loans primarily from proceeds received for the sale, lease or refinancing of the real property connected with the corresponding Project. If the Borrower is unable to sell, lease or refinance the property, it is likely that the Borrower will be unable to make payments on its Loan, and you will not be entitled to, and will not receive any, payments under the LRO Agreement.

***You may receive a different return on your investment than originally expected and could suffer a complete loss of your investment.***

Investing in LROs is not without risk, and actual receipt of the expected yield in the time frame specified is not guaranteed. The LRO Agreement gives us sole discretion in applying amounts we receive from, or for the account of, the Borrower, with respect to the corresponding Loan, and we may make payments on the LROs out of any funds at our disposal. We may withdraw or abandon an offering of a particular series of LROs at any time without penalty prior to issuance. If we withdraw or abandon an offering of a particular series of LROs, you will not earn any return on the amounts you may have committed to purchase such LROs. By committing to one series of LROs that may be withdrawn or abandoned, you are forgoing the opportunity to use your money elsewhere. See "Risk Factors—Abandonment or withdrawal of an offering of a particular series of LROs prior to issuance will extinguish your ability to earn any return on the corresponding LROs you may purchase" below.

We may also prepay the LROs at any time without penalty, and (subject to the servicing standards set forth in the LRO Agreement) we have the power to modify the terms of the Loan in connection with our administration, servicing, collection and enforcement of the Loan, which could impact our obligation to make any payments to you and, in some instances, could result in the loss of your entire investment. For instance, the total amount of the LRO Payment owed to an investor would decrease if we sell the corresponding Loan below par, if, as a result of a negotiated modification, we agree to reduce the principal or stated interest of the corresponding Loan or if the Loan is deemed uncollectable and we decide to write it off. These, and similar collection and enforcement actions, could have the effect (without any further action on your part) of automatically decreasing the total amount of the LRO Payments owed to you and the expected timing of such payments.

***The LROs are unsecured special, limited obligations of GRE 1 only and are not secured by any collateral or guaranteed or insured by any third party.***

The LROs are unsecured special, limited obligations of GRE 1 only and will not represent an obligation of Groundfloor Finance, the Borrower, its Principals or any other party except GRE 1. The LROs are not secured by any collateral and are not guaranteed or insured by any governmental agency or instrumentality or any third party.

***The payment obligations of the Borrower are not guaranteed or insured by Groundfloor Finance or any third party, and, in the event of a default, you must rely on us or a third-party collection agency to pursue collection against the Borrower.***

Payment of the amounts owed under the Loan and other obligations of the Borrower under the Loan Documents are not guaranteed or insured by any third party, including the Groundfloor Finance Borrower's Principals, or backed by any governmental authority in any way. In the event of a default on such payment obligations, therefore, we may be limited in our ability to collect on the Borrower's corresponding Loan Payments, and you will need to rely upon GRE 1, Groundfloor (acting as our agent) or a third-party collection agency to pursue collection against such Borrower. If the Borrower fails to make any Loan Payments on the Loan, you will not be entitled to, and will not receive, any LRO Payments.

***Although the Borrower's obligations under the Loan Documents are recourse, our remedy in the event of nonpayment may be limited to the value of the property securing the debt.***

The Loan Documents with each Borrower will provide that such Borrower's obligations under the Loan are recourse, which means that, in the event of nonpayment, we may collect any outstanding amount owed for the debt from the Borrower even after we have foreclosed on the collateral securing the debt. Even though the Loan obligations are recourse to the Borrower, in most cases, the Borrower's assets are limited primarily to its interest in the related mortgaged property. Further, our remedies against the Borrower may be limited by state law in certain jurisdictions. For instance, some jurisdictions restrict a mortgagee's right to seek a deficiency against the Borrower in the event the amount realized from a foreclosure sale is insufficient to repay the underlying debt, commonly referred to as anti-deficiency statutes. Moreover, in jurisdictions where deficiency actions are permitted, the burden of proof with respect to the adequacy of the amount realized from the foreclosure is often imposed on the party seeking the deficiency, such that deficiency actions may result in costly and protracted litigation. Further, some jurisdictions continue to apply the common-law doctrine of "election of remedies" pursuant to which a mortgagee must elect either to sue for recovery under the obligation or pursue foreclosure against the property subject to the mortgage lien. While such restrictions can frequently be waived as a matter of contract, the election of remedies doctrine represents a potential defense in certain circumstances. Other jurisdictions may implement a judicial foreclosure process, where we must first petition the courts of that jurisdiction in order to obtain title to the property. This process delays foreclosure efforts (by up to a year) and increases collection expenses, both of which increase the chance that investors may not be made whole should we need to foreclose on a particular property. Since the Principals are not obligors under the Loan Documents, we are limited in seeking recourse for non-payment to the borrowing entity itself. If the Borrower fails to make payments on the Loan and our remedy is limited to the value of the property securing the Loan, you may lose some, or all, of the expected return on the LROs.

***The Company (and Groundfloor, as agent), in its capacity as Loan servicer, has the authority to waive or modify the terms of the Loan without consent of the LRO holders.***

The Company (or Groundfloor, acting as its agent) is obligated to use commercially reasonable efforts to service and collect the Loans in accordance with industry standards and consistent with the terms of the LRO Agreement. Subject to that obligation and provided that the Company has reasonably and prudently determined that such action will not be materially adverse to the interests of the relevant LRO holders, the Company has the authority (without the consent of the relevant LRO holders) generally (and among other actions), to waive or modify the terms of any Loan, including to change the payment date, reduce the principal amount or the rate of interest, change the time or manner of making loan payments on the Loan or amend any other material term of the Loan, to enforce any security interest in the assets pledged to secure the Loan or sell all or any portion of its right, title and interest to any person under the Loan Documents, whether at, below or above par, and, if in the Company's business judgment the reasonable costs and expenses associated with further action to collect or enforce the terms of the Loan Documents will exceed the aggregate Loan Payments reasonably recoverable or realizable to write-off the Loan if it becomes uncollectable. For example, in the context of a Borrower default, the Company may negotiate to extend payment dates and could agree to a modified payment plan that could result in the LRO holder receiving less than the expected return at the Extended Payment Date.

If, in connection with its powers to administer, service, collect and enforce the terms of the Loan and the Loan Documents, the Company (or Groundfloor, as its agent) takes action that would materially impact the amount or timing of the LRO Payments owed to investors, it will promptly notify investors (by email) thereof and of the impact such action will or is expected to have on such investors' rights to receive LRO Payments. Furthermore, in circumstances other than Borrower default or prepayment, the modification of a term of a Loan (e.g., a reduction in the interest rate charged on the Loan) could be deemed to be a material modification of the terms of the corresponding series of LROs. In such instance, it is possible that the modified series of LROs would constitute a new security under the Securities Act and under applicable State securities laws. Before implementing any modification to the terms of a Loan (other than in circumstances involving Borrower default or prepayment) that would cause the corresponding series of LROs (as modified) to constitute a new security, the Company will be required to either register the offer of the modified LRO under Section 5 of the Securities Act and under applicable State securities laws or find an exemption from such registration requirements. See "General Terms of the LROs—Administration, Service, Collection, and Enforcement of Loan Documents" and "—Collection Proceeds, Costs, and Expenses."

***Loans that are advanced may involve additional risks.***

In some situations, we, Groundfloor Finance, or a subsidiary of Groundfloor Finance may elect to originate and advance funds for a Loan prior to GRE 1 offering the corresponding series of LROs to the public, which could involve additional risks. Although advances are typically funded from one or more lines of credit or borrowing arrangements entered into by Groundfloor Finance or one of its subsidiaries, if we elect to do so from our own operating capital, that would have the effect of reducing the amount of cash we have available for other business expenditures until the advance is repaid. The same would be the case in the event Groundfloor Finance elected to use its own operating capital to fund advances. In addition, we may be required (either directly as GRE 1 or indirectly through Groundfloor Finance or through one of its subsidiaries) to continue to hold and service the advanced Loans in the event we are unable to qualify the corresponding series of LROs or if the Offering of such LROs is not fully subscribed and abandoned. Furthermore, the borrowing arrangements that may be used to make the advances will require the principal to be repaid within a short period of time as well as periodic interest payments. This may negatively impact the cash flow and cash position of Groundfloor Finance, particularly if GRE 1 is not able to issue and sell the corresponding LROs on a timely basis, increasing the risk to the overall business of GRE 1, Groundfloor Finance and its subsidiaries.

In addition, the Borrower may begin work on the Project immediately and by the time the corresponding LROs are sold, substantial work may have been completed. This would effectively reduce the amount of time the LROs may be held, as the Borrower is now closer to its proposed exit than when LROs were first offered and therefore may be able to prepay the Loan. If the Borrower prepays the Loan as a result, you will receive a lower yield than expected on the LROs purchased.

***If you decide to invest through the Groundfloor Platform and concentrate your investment in a single series of LROs, your entire return will depend on the performance of a single Loan.***

If you decide to invest through the Groundfloor Platform and concentrate your investment in one Project, your entire return will depend on the performance of that single Project. For example, if you plan to purchase $400 of LROs and choose to invest the entire $400 in a single Project instead of investing $10 in 40 Projects corresponding to Loans of 40 different Borrowers, your entire $400 investment will depend on the performance of a single Loan. Failing to diversify your investment increases the risk of losing your entire investment due to a single Borrower's default or a small number of Borrower defaults. Diversification, however, will not eliminate the risk that you may lose some, or all, of the expected yield on the LROs.

***An investment in a LRO issued by GRE 1 may be subject to risks that are different from, and potentially greater than, an investment in a LRO issued by Groundfloor Finance.***

Prior to the qualification of this Offering Circular, Groundfloor Finance, GRE 1's sole member and manager, offered and sold LROs under a separate offering qualified by the SEC and various states. Pursuant to GRE 1's operating agreement, Groundfloor Finance has the authority to manage the business of GRE 1, including the authority to distribute its cash and other assets to Groundfloor Finance at the times and in the amounts as it may from time to time direct. As a result of this relationship, particularly the control Groundfloor Finance has over GRE 1's operations, an investment in a LRO issued by GRE 1 may be subject to risks that are different from, and potentially greater than, an investment in a LRO issued by Groundfloor Finance.

***We may not set appropriate interest rates for the Loans.***

If we set interest rates for the Loans too low, investors may not be compensated appropriately for the level of risk that they are assuming in purchasing a LRO, while setting the interest rate too high may increase the risk of non-payment on a Loan. In either case, failure to set rates appropriately may cause the expected return on the LROs not to be commensurate with the risks investors have assumed in acquiring such LROs.

***If GRE 1, Groundfloor Finance, or one of its subsidiaries advances a Loan prior to the sale of a corresponding series of LROs, some (or all) of the proceeds from the subsequent sales of such series of LROs will be used to repay the amount of the advance.***

GRE 1, Groundfloor Finance, or a subsidiary of Groundfloor Finance may advance Loans to Borrowers prior to the qualification or sale of the series of LROs that correspond to such Loans. The funds for such an advance may be from one or more lines of credit or borrowing arrangements entered into by Groundfloor Finance or one of its subsidiaries, but there may be circumstances that we, Groundfloor Finance or one of its subsidiaries could utilize operating capital for these purposes. For any Loans advanced prior to the qualification and sale of a corresponding series of LROs, some (or all) of the proceeds from the sale of subsequently qualified and sold LROs corresponding to such Loans will be used to repay the amount of the advance.

***Borrowers are generally permitted to prepay Loan obligations at any time without penalty. Borrower prepayments will extinguish or limit your ability to earn expected returns on the corresponding LRO.***

Prepayment by a Borrower occurs when a Borrower decides to pay some or all of the principal amount on the Loan earlier than originally scheduled. With all of the Projects financed on the Groundfloor Platform, the Borrower may prepay all or a portion of the remaining principal amount at any time without penalty. Upon a prepayment of the entire remaining unpaid principal amount and accrued interest on the Loan, within five business days you will receive an amount equal to your pro rata share of such prepayment and your LRO will automatically terminate (and the corresponding LRO shall be of no further force or effect) without any further payments being made to you. If prevailing commercial loan rates decline in relation to the LRO's effective interest rate, the Borrower may choose to prepay the Loan with lower-cost funds. If the Borrower prepays a portion of the remaining unpaid principal balance on the Loan, the term for final payment of the Loan will not change, but you will not earn the Accrued Return on the prepaid portion, which would reduce the expected yield on the LRO. In addition, you may not be able to find a similar rate of return on another investment at the time at which the Loan is prepaid.

***The LROs will not be listed on any securities exchange, and no liquid market for the LROs is expected to develop.***

The LROs will not be listed on any securities exchange or interdealer quotation system. There is no trading market for the LROs, and we do not expect that such a trading market will develop in the foreseeable future, nor do we intend to offer any features on the Groundfloor Platform to facilitate or accommodate such trading. You do not have any rights of redemption or repurchase rights with respect to the LROs. Therefore, any investment in the LROs will be highly illiquid, and investors in the LROs may not be able to sell or otherwise dispose of their LROs in the open market. Accordingly, you should be prepared to hold the LROs you purchase until our payment obligations thereunder terminate.

***The Investor Agreement and the LRO Agreement limit your rights in some important respects.***

When you make an investment through the Groundfloor Platform, you are required to agree to the terms of GRE 1's standard Investor Agreement, which sets forth your principal rights and obligations as an investor in the LROs we issue (the "Investor Agreement") and to agree to the terms of a LRO Agreement, which sets forth the specific terms of the series of LROs you are committing to purchase. The Investor Agreement and the LRO Agreement limit the investor's right to collect or attempt to collect from any Borrower or its Principals, directly or through any third party, any amount owing under any of the investor's LROs or on any of the Loan Payments that correspond to the investor's LROs.

In addition, under the Investor Agreement and LRO Agreement, we may require that any claims against us, including without limitation, claims alleging violations of federal securities laws by us or any of our officers or directors and claims other than in connection with this offering, be resolved through binding arbitration rather than in the courts. Notwithstanding the foregoing sentence, you may elect to opt out of the arbitration provision for all purposes by sending an arbitration opt out notice to the Company in accordance with the terms and conditions set forth in Section 39(b) of the Investor Agreement and Section 12(b) of the LRO Agreement. If you do not opt out of binding arbitration, Section 39 of the Investor Agreement, which is incorporated by reference in Section 12(a) of the Form of LRO Agreement, provides, among other things, that (i) arbitration is final and binding on the parties; (ii) the parties are waiving their right to seek remedies in courts, including the right to jury trial; (iii) pre-arbitration discovery is generally more limited and potentially differs in form and scope from court proceedings; (iv) an award by an arbitrator is not required to include factual findings or legal reasoning, and your right to appeal or to seek modification of a ruling by the arbitrator is strictly limited; and (v) the arbitrator (or three arbitrator panel, if applicable) may include a minority of persons engaged in the securities industry. As a result, the arbitration process may be less favorable to investors than court proceedings and may limit your right to engage in discovery proceedings or to appeal an adverse decision. These provisions may have the effect of discouraging lawsuits against us and our directors and officers. Your agreement to the arbitration provisions in the Agreements will not waive the Company's compliance with the federal securities laws and the rules and regulations promulgated thereunder.

The Company believes that the arbitration provisions in the Agreements are enforceable under federal and state law. The Federal Arbitration Act ("FAA") is an act of Congress that provides for judicial facilitation of dispute resolution through arbitration and embodies a national policy favoring arbitration, providing that a written contractual provision evidencing a transaction involving interstate commerce to arbitrate a controversy "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract." Further, the United States Supreme Court has interpreted the FAA as creating a uniform body of federal substantive law regulating the enforceability of agreements to arbitrate that applies to all contracts involving interstate commerce in both state and federal court. The arbitration provision in the Investor Agreement specifically states that it is made pursuant to a transaction involving interstate commerce and shall be governed by and enforceable under the FAA.

In the event that enforceability issues arise under state law, the Company maintains its belief that the arbitration clause will be upheld. In *AT&T Mobility LLC v. Concepcion*, 131 S. Ct. 1740 (2011), the United State Supreme Court recognized that in order to accomplish the general purpose of the FAA to promote efficient streamlined procedures for resolving disputes, federal law has developed a preference for enforcing arbitration agreements according to their terms. Consistent with this preference, the Court has held that state laws discriminating against arbitration are preempted by the FAA because such rules stand as an obstacle to the FAA's objectives. Further, the FAA is presumed to preempt the state law selected in a general choice-of-law clause unless the contract expressly evidences the parties' intent that state arbitration law applies in place of or in addition to the FAA. As cited above, the arbitration provision in the Investor Agreement clearly sets forth the parties' intent that the FAA should apply rather than state law.

You also waive your right to a jury trial under the Investor Agreement and LRO Agreement. Accordingly, if you bring a claim against the Company in connection with matters arising under the Investor Agreement or LRO Agreement, including claims under federal securities laws, you may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and our directors and officers. If a lawsuit is brought against us under the Investor Agreement or LRO Agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action. It is advisable that you consult legal counsel regarding the jury waiver provision before entering into the Investor Agreement and LRO Agreement.

While the Company believes that a contractual pre-dispute jury trial waiver is generally enforceable, the enforceability of the jury trial waiver is not free from doubt. To the Company's knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. With respect to enforceability under Georgia state law, the Company acknowledges that the state courts of Georgia, which have jurisdiction over state law matters arising under the Investor Agreement and the LRO Agreement, have upheld the minority position that contractual pre-dispute jury trial waivers are not enforceable. If the Company opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the Investor Agreement and LRO Agreement.

Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the Investor Agreement and LRO Agreement with a jury trial if you have not elected to opt out with respect to binding arbitration as set forth in Section 39 of the Investor Agreement and Section 12 of the LRO Agreement. No condition, stipulation or provision of the Investor Agreement or the LRO Agreement serves as a waiver by any Investor or LRO holder of the Company's compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.

Furthermore, the investor acknowledges in the Investor Agreement that the LROs are intended to be debt instruments issued by the Company that have original issue discount ("OID") for U.S. federal income tax purposes and agrees not to take any position inconsistent with that treatment of the LROs for tax, accounting, or other purposes, unless required by law.

Additionally, by entering into the LRO Agreement, the investor expressly waives and releases, as a condition of and as part of the consideration for the issuance of the LRO, any recourse under or upon any obligation, covenant or agreement contained in the LRO Agreement, or because of any obligations evidenced therein, against any incorporator, or against any past, present or future shareholder, officer or director, as such, of the Company, either directly or through the Company, under any rule of law, statute (other than applicable federal securities laws) or constitutional provision or by the enforcement of any assessment or penalty or otherwise. This provision has the effect of limiting the available parties against which an investor may seek recourse in connection with the Company's obligations under the LRO Agreement.

***Pursuant to Section 40 of the Investor Agreement and Section 12(b) of the Form of LRO Agreement (collectively, the "Agreements"), in connection with your purchase of the LROs, to the extent permitted by law, you waive your right to a jury trial in any litigation relating to the Agreements, including the purchase of the LROs.***

When you purchase the LROs, you are required to agree to the terms of the Investor Agreement and the Form of LRO Agreement. Among other things, both agreements provide that you waive your right to a jury trial in any litigation relating to each agreement and your purchase of the LROs, including claims under the federal securities laws. You will have the right to litigate claims, including claims under the federal securities laws through a court before a judge, but you will not have that right if any party elects arbitration pursuant to the terms of the Agreements unless you opt out as provided in Section 39(b) of the Investor Agreement and Section 12(b) of the LRO Agreement. Neither your waiver of jury trial nor your agreement to the arbitration provision shall be deemed to waive the Company's compliance with the federal securities laws and the rules and regulations promulgated thereunder. Please refer to the risk factor "The Investor Agreement and the LRO Agreement limit your rights in some important respects" for more information regarding the jury trial waiver provision contained in the Investor Agreement and the Form of LRO Agreement.

***You are required to indemnify us for losses that may arise out of representations made, and covenants given, to us in the documents you enter into through the Groundfloor Platform.***

By executing the Investor Agreement, you agree to indemnify, defend, protect and hold harmless the Company, its parent company, Groundfloor Finance, Inc., any affiliates, any subsidiaries and their respective officers, directors, managers, members, shareholders, employees and agents (the "Groundfloor Parties") against all claims, liabilities, actions, costs, damages, losses, demands and expenses of every kind, known or unknown, contingent or otherwise (including, but not limited to, any and all expenses incurred in investigating, preparing or defending against any litigation commenced or threatened) (collectively, the "Losses"), based upon or arising out of (1) any material breach of any obligation you undertake in the Investor Agreement or in any other Investment Document, including but not limited to your obligation to comply with applicable laws; or (2) your acts and omissions, and your representations (and those of your employees, agents or representatives) relating to the Groundfloor Parties. Except with respect to Losses based upon or arising out of any inaccuracy in or breach of certain fundamental representations you make to us (as set forth in Section 8 of the Investor Agreement) or of your covenant not to violate applicable laws (as contained in Section 9(e) of the Investor Agreement), your liability to us is limited to an amount equal to the aggregate LRO Payments due under any LROs you hold. We may, among other remedies we can pursue, collect against Losses by off-setting amounts owed to you as LRO Payments. However, to the extent that any indemnification provision in the Investor Agreement purports to include indemnification for liabilities arising under the Securities Act, you should be aware that in the SEC's opinion this indemnification provision would be contrary to public policy and therefore unenforceable.

***If the offering of a series of LROs is not fully subscribed with irrevocable funding commitments, you will not be issued any of the securities you have committed to purchase and will not realize any benefit from the investment transaction.***

There is no guarantee that the corresponding Loan in which you commit to purchase LROs will actually be funded. If a sufficient number of investors do not invest in a series of LROs, the offering with respect to those particular securities will not be closed and you will not be issued your securities. Your funds, intended for investment, will be released and made available in your funding account, without interest, even though you may otherwise wish to invest, and you will not have realized any benefit from the transaction.

***Certain securities qualification exemptions for secondary trading in California will not be available to investors with respect to the LROs.***

We have been advised by the California Department of Corporations that the exemptions for secondary trading in California available under California Corporations Code Section 25104(h) will be withheld with respect to the LROs, although there may be other exemptions to cover private sales in California of a bona fide owner for his own account without advertising and without being effected by or through a broker-dealer in a public offering. **Prospective investors are urged to consult their own legal advisors licensed to practice law in California with respect to the transfer of, or secondary trading in, the LROs.**

***If we fail to fully subscribe an offering of a series of LROs corresponding to a Loan that has been advanced, the advanced Loan will remain a lending obligation of Groundfloor Finance (or its subsidiary).***

If we fail to fully subscribe an offering of a series of LROs corresponding to a Loan that has been advanced, Groundfloor Finance will still be responsible for servicing and otherwise managing the underlying Loan. We, Groundfloor Finance (or the affiliated entity that originated the Loan) may need to use cash on hand or raise additional capital to continue to service the Loan or to repay any amounts borrowed under its borrowings to finance the advance. This may limit the amount of capital Groundfloor Finance has available to fund its operations.

***The activities of Groundfloor Finance in connection with the Offering may result in the classification of Groundfloor Finance by the Commission or a court of competent jurisdiction as a statutory "underwriter" under the Securities Act***

Section 2(a)(11) of the Securities Act provides that an "underwriter" is as "any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates, or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking." The activities of Groundfloor Finance as the sole member and manager of GRE 1 in connection with the offering, which among other things, include the use of the Groundfloor Finance website and social media profiles by GRE 1 for marketing initiatives and the provision of Groundfloor Finance personnel to GRE 1, may result in the classification of Groundfloor Finance by the Commission as a statutory "underwriter" of the LROs pursuant to the federal securities laws. Such classification would require Groundfloor Finance to register with the Commission pursuant to the Securities Act. Groundfloor Finance does not intend to register with the Commission as a broker-dealer nor does GRE 1 intend to engage a third-party broker-dealer at this time in order to act in the capacity of an accommodating broker-dealer and to process investors in connection with the Offering. It is possible that in the future, the Commission or a court of competent jurisdiction may determine that Groundfloor Finance is a statutory "underwriter" under the federal securities laws and require registration under the Securities Act.

**Risks Related to the Borrower, its Principal(s) and the Project**

***Real estate projects involve considerable risk, which may affect the Borrower's ability to make payments under its Loan and our ability to collect Loan Payments on a timely basis.***

Real estate development projects are inherently risky, and the risks they involve may affect the Borrower's ability to make payments under its Loan. The risks involved in real estate development projects include the following:

&nbsp;&nbsp;&nbsp;&nbsp;· changes in the general economic climate and market conditions;

&nbsp;&nbsp;&nbsp;&nbsp;· complications involving the renovation or redevelopment of the real estate property connected to the Project;

&nbsp;&nbsp;&nbsp;&nbsp;· limited availability of mortgage funds or fluctuations in interest rates which may render the sale and refinancing of the real estate
property corresponding to the Project difficult;

&nbsp;&nbsp;&nbsp;&nbsp;· unanticipated increases in real estate taxes and other operating expenses;

&nbsp;&nbsp;&nbsp;&nbsp;· environmental considerations;

&nbsp;&nbsp;&nbsp;&nbsp;· zoning laws and other governmental rules and policies; and

&nbsp;&nbsp;&nbsp;&nbsp;· uninsured losses including possible acts of terrorism or natural disasters.

The risks associated with a particular investment will also vary depending on the type of Loan being financed and the terms negotiated with Borrowers. For example:

&nbsp;&nbsp;&nbsp;&nbsp;· With Loans involving renovations, project completion may be delayed because the necessary renovations may be more extensive than first
anticipated; as work progresses, more of the structure is opened up which may reveal previously unknowable defects or problems.

&nbsp;&nbsp;&nbsp;&nbsp;· With new construction Loans, a fundamental default early in the term could be more detrimental to recovery, since it would leave us
with a lien (on land and an incomplete structure) that could be worth less than the amount needed to make investors whole.

&nbsp;&nbsp;&nbsp;&nbsp;· Where acquisition (either of land or of an existing structure) is part of use of proceeds the acquisition may fall through, causing
the Loan to be abandoned before closing or to be paid off early, as no principal is drawn down after closing. In addition, the purchase
price of the property may increase at the time of acquisition, decreasing the remaining funds available from our Loan which could impact
the Borrower's ability to complete the associated renovations or construction as contemplated.

&nbsp;&nbsp;&nbsp;&nbsp;· Permitting delays could impede a Borrower's ability to timely repay Loans involving renovations or construction.

&nbsp;&nbsp;&nbsp;&nbsp;· Borrowers may use part of the Loan Proceeds to repay an existing loan used to acquire the property. There may be delays in the original
lender releasing the property from any security interest related to the earlier loan in order for us to assume the first lien position
after closing the loan transaction.

&nbsp;&nbsp;&nbsp;&nbsp;· Borrowers may use part of the Loan Proceeds to offset the amount of cash or equity they otherwise would have in the project. This
type of cash out refinancing may be involved in various types of Loans we originate.

&nbsp;&nbsp;&nbsp;&nbsp;· Borrowers may be advanced all or part of the Loan Proceeds before the corresponding LROs are sold. In this case, the Borrower may
begin work on the Project immediately and by the time the corresponding LROs are sold, substantial work may have been completed. This
would effectively reduce the amount of time the LROs may be held, as the Borrower is now closer to its proposed exit than when LROs were
first offered and therefore may be able to prepay the Loan.

&nbsp;&nbsp;&nbsp;&nbsp;· There can be any number of issues with the title to a property. For example, the property may be acquired through a quit claim deed
or a limited warranty deed where there can be no assurances that the Borrower owns the property in question. If the Borrower does not
own the property and we proceed with originating the Loan, our lien will likely be unenforceable. Similarly, although we confirm our senior
lien position on properties by conducting a title search and obtaining title insurance, challenges to the enforceability of our senior
position or title defects may nevertheless arise. We attempt to mitigate these problems by requiring a clean title search and title insurance
before originating any Loan. However, title defects may still be present. Such defects could also result in a determination that we do
not have an enforceable lien on the property. Resolution of these matters could delay our ability to foreclose on the property or pursue
other collection remedies against the Borrower, which could result in the loss of your investment.

***The success of the Project is dependent on the performance of third parties, including the Borrower and its Principal(s), over which we have no control.***

We will issue a commercial loan to the Borrower to fund the Project. The Borrower owns and controls the Project and is responsible for various management functions that are essential to the success of the Project. The Principal(s) of that borrowing entity control and operate it. Poor management on the part of the Borrower, or its Principals, could adversely affect the financial performance of the Project or expose the Project to unanticipated operating risks, which could reduce the Project cash flow and adversely affect the Borrower's ability to repay the Loan.

***We have limited experience in developing real estate projects.***

If the Borrower is unable to repay its obligations under the Loan, we may foreclose on the real estate property. Although we will seek out purchasers for the property, we may have to take an active role in the management of the Project. Prospective investors should consider that we and very few members of our management have previously managed real estate development projects. No assurances can be given that we can operate the Project profitably.

***Credit information may be inaccurate or may not accurately reflect the creditworthiness of the Borrower or its Principals, which may cause you to lose part or all of the Purchase Amount you pay for a LRO.***

In the course of its underwriting, Groundfloor Finance obtains credit information about the Principals of the Borrower from consumer reporting agencies, such as TransUnion, Experian or Equifax. A credit score assigned to a Principal may not reflect the actual creditworthiness of the Borrower or its Principals. (Although the Principal(s) are not personally liable for making payments under the Loan, Groundfloor Finance believes his or her FICO credit score is a relevant factor in understanding the individual practices regarding debt management of the persons who will ultimately be responsible for managing the Project and servicing the debt.) In addition, the information obtained from the credit report is not verified and the credit score of the Principal may be based on outdated, incomplete or inaccurate consumer reporting data. Additionally, there is a risk that, after the underwriting team has completed our credit review, the Principal may have:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· become delinquent in the payment of or defaulted under an outstanding obligation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· taken on additional debt; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· sustained other adverse financial events.

Inaccuracies in the credit information obtained or subsequent events that materially impact the ability to repay the Loan or reduce creditworthiness may increase the risk that the Borrower will default on its Loan, which will increase the risk that the LROs will not be repaid in full.

***Information supplied by Borrowers, including information on the Project Summaries, may be inaccurate or intentionally false.***

Borrowers supply a variety of information that is included in this Offering Circular and the Project Summaries. Much of the information provided by Borrowers during the application and underwriting process is not independently verified, and, although Borrowers represent and warrant in the Loan Agreement as to the accuracy of such information, it may nevertheless be inaccurate or incomplete. For example, there is no independent verification of the information about the financial condition and past business experience of the Borrower and business experience of its Principals, including much of the data contained in the Borrower Summary (Box H) of the Project Summary, the proposed costs of a given construction project or the capabilities, and the experience of any contractors or sub-contractors. Further, the information the Borrowers supply may be inaccurate or intentionally false. Borrowers may misrepresent their intentions for the use of Loan Proceeds, and, if such misrepresentations negatively impact the Borrower's ability to make its payments under the Loan, we may not be able to make corresponding payments under the terms of the LROs. See "Description of the Business of GRE 1 and of Groundfloor Finance—Our Loans to Borrowers— Due Diligence and Authentication" for the commercially reasonable efforts used to verify or authenticate certain information provided in the course of the application and underwriting procedures and representations made by the Borrowers.

Other than as discussed below in "Description of the Business of GRE 1 and of Groundfloor Finance—Our Loans to Borrowers— Due Diligence and Authentication", there is no independent verification of the information provided to us by Borrowers, and such information may be inaccurate or incomplete. If you rely on false, misleading or unverified information supplied by Borrowers in deciding to purchase the LROs, you may lose part or the entire Purchase Amount you pay for the LROs and our reputation may be harmed. Project Summaries and Borrower information available on the Groundfloor Platform and in this Offering Circular with respect to the LROs being offered hereby is subject to Rule 10b-5 of the Exchange Act and to the liability provisions of the Securities Act. Potential investors should note that on occasion courts have taken the position that plaintiffs who have failed to exercise adequate caution in analyzing the risks associated with reliance upon unverified information may be precluded from asserting a claim for misrepresentation. Although we do not believe this would impact our overall liability under Rule 10b-5 of the Exchange Act and the liability provisions of the Securities Act for information provided to you in connection with this Offering, we advise you that your recourse may be limited in the event information that is self-reported and not independently verified turns out to be false or misleading.

***We have an incentive to take on as many Projects as possible, which could impair our ability to devote adequate attention and resources to collection of outstanding Loan Payments.***

All of GRE 1's revenues and a significant portion of Groundfloor Finance's revenues are derived from origination and servicing fees generated through financing of Projects. As a result, we and Groundfloor Finance each have an incentive to finance as many Projects as possible to maximize the amount of origination and servicing fees generated. Increased Project volume increases the demands on management resources and Groundfloor Finance's ability to devote adequate attention and resources to the collection of outstanding Loan Payments. In the event that we (either alone or with Groundfloor Finance and its subsidiaries) take on Project volumes that exceed Groundfloor Finances' ability to service outstanding Loans, our ability to make timely payments on the LROs will suffer.

***We do not take any specific actions to monitor how funds are spent after they have been disbursed to the Borrowers.***

When we finance a Project, our primary assurance that the financing proceeds will be properly spent by the Borrower is the contractual covenants agreed to by the Borrower and the business history and reputation of the Borrower. We typically implement a Draw process for Loans (and always do so for Loans in excess of $50,000 unless an amount greater than $50,000 is needed for the acquisition of a property), which mitigates some risk of mishandling of funds by the Borrower. However, we do not and cannot control how the Loan Proceeds will be used by Borrowers. Should the proceeds of a financing be diverted improperly, the Project might become insolvent, which could cause the purchasers of the corresponding LROs to lose their entire investment.

***We limited experience originating, closing, and servicing loans in Canada. We have limited experience foreclosing on Canadian properties.***

Though we have over four years experience in the United States, we have limited experience originating, closing, and servicing loans in Canada. Loans originated in Canada take substantially the same form as loans originated in the United States, however, the processes and procedures of effecting those loans may differ materially from the United States. Canada has different laws, rules, and regulations for foreclosing on properties or otherwise managing credit risks, which may impact the outcome of loan workouts.

**Risks Related to the Company, to Groundfloor, and the Groundfloor Platform**

***We are also subject to other risks and uncertainties related to engaging in a public offering that may affect our business.***

GRE 1 and Groundfloor Finance (as well as its other subsidiaries that many offer LROs pursuant to Regulation A) are subject to additional risks and uncertainties in connection with engaging in a public offering of the LROs. These risks and uncertainties include:

&nbsp;&nbsp;&nbsp;&nbsp;· the potential for increased scrutiny by federal and state regulatory agencies;

&nbsp;&nbsp;&nbsp;&nbsp;· the greater likelihood of facing civil liability claims for alleged violations of federal and state securities laws;

&nbsp;&nbsp;&nbsp;&nbsp;· the increasing costs connected with managing a growing business and expanding portfolio of Loans;

&nbsp;&nbsp;&nbsp;&nbsp;· the impact of greater media attention, including the possibility of negative commentary of Groundfloor's business model by other
market participants such as traditional financial institutions;

&nbsp;&nbsp;&nbsp;&nbsp;· the costs of qualifying our offerings with federal and state regulators;

&nbsp;&nbsp;&nbsp;&nbsp;· the time commitment for management to qualify our offerings, which takes focus away from operating the business;

&nbsp;&nbsp;&nbsp;&nbsp;· navigating complex and evolving regulatory and competitive environments;

&nbsp;&nbsp;&nbsp;&nbsp;· increasing the number of investors utilizing the Groundfloor Platform;

&nbsp;&nbsp;&nbsp;&nbsp;· increasing the volume of Loans facilitated through the Groundfloor Platform and fees received from Borrowers;

&nbsp;&nbsp;&nbsp;&nbsp;· continuing to develop, maintain and scale the Groundfloor Platform;

&nbsp;&nbsp;&nbsp;&nbsp;· effectively using limited personnel and technology resources;

&nbsp;&nbsp;&nbsp;&nbsp;· effectively maintaining and scaling Groundfloor's financial and risk management controls and procedures;

&nbsp;&nbsp;&nbsp;&nbsp;· maintaining the security of the Groundfloor Platform and the confidentiality of the information provided and utilized across the Groundfloor
Platform; and

&nbsp;&nbsp;&nbsp;&nbsp;· attracting, integrating and retaining an appropriate number of qualified employees.

***Groundfloor Finance will need to raise substantial additional capital to fund future operations, and, if Groundfloor Finance fails to obtain additional funding, GRE 1 and Groundfloor Finance may be unable to continue operations.***

At this early stage in its development, Groundfloor has funded substantially all of its operations with proceeds from private financings from individual investors and venture capital firms. We rely on Groundfloor Finance to operate the Groundfloor Platform, facilitate due diligence and underwriting reviews, coordinate payment to and from investors and developers through the use of various funding accounts, manage Loan advances and to administer, service and collect on the Loans we fund through the offer and sale of LROs. As manager, Groundfloor Finance is also responsible for our day to day operations. To date, Groundfloor has raised funds for operations through multiple common stock, preferred stock, and convertible note fundraising rounds. In 2022, the company raised approximately $9.4 million in new operating capital through a combination of common stock and preferred stock offerings during the year. See "Liquidity and Capital Resources" below for additional detail of the Company's capital raises. To continue the development of its business, Groundfloor Finance will require substantial additional funds. To meet its financing requirements in the future, Groundfloor Finance may raise funds through equity offerings, debt financings or strategic alliances. Raising additional funds may involve agreements or covenants that restrict Groundfloor Finance's business activities and options. Additional funding may not be available to Groundfloor Finance on favorable terms, or at all. If Groundfloor Finance is unable to obtain additional funds, it and GRE 1 may be forced to reduce or terminate our operations.

***Groundfloor Finance has entered into material transactions with our promoters.***

Since inception, Groundfloor Finance has entered into certain material transactions involving its officers, directors and principal shareholders (collectively, the "Promoters"). For instance, certain affiliates and family members of the directors of Groundfloor Finance have participated in the Series Seed Financing, the Bridge Financing, and the Series A Financing (each as defined below). Groundfloor Finance has adopted a policy that a majority of the disinterested Independent Directors of Groundfloor Finance (as defined below) must approve any loan to or on behalf of, or other material affiliated transaction involving, its Promoters. However, Groundfloor Finance has lacked sufficient disinterested Independent Directors to approve the prior material affiliated transactions listed above at the time each was consummated and may choose to enter into transactions in the future for which it lacks sufficient disinterested Independent Directors. See "Interest of Management and Others in Certain Transactions" and "Transactions with Promoters" below.

***Our affiliates may purchase LROs on the Groundfloor Platform.***

The executive officers, directors and 10% stockholders of Groundfloor Finance may have purchased LROs from time to time in the past, and may do so in the future. Purchase of LROs by these affiliates is made simultaneously with and on the same terms and conditions as those provided to other investors in the same series of LROs. Their right to receive LRO Payments and other obligations are the same as all holders of the same series of LROs. These purchases count towards the Purchase Amount required to fully subscribe a given series of LROs. However, these purchases are made for the personal investment accounts of these individuals and not for resale, and are not directed by Groundfloor, GRE 1, or any of the Promoters (of either company), nor are the purchases made for purposes of ensuring the offering is fully subscribed. See "Interest of Management and Others in Certain Transactions—Purchase of LROs by Related Parties." By virtue of their positions with the Company, there is the risk that such purchases could be based on the use of non-public information not available to unaffiliated investors.

***This financing model is a new lending method and the Groundfloor Platform has a limited operating history. Borrowers may not view or treat their obligations to Groundfloor and its affiliates (including the Company) as having the same significance as loans from traditional lending sources, such as bank loans, and the Loans may have a higher risk of default than loans of Borrowers with similar credit scores to other lenders.***

The expected investment return on the LROs depends on Borrowers making payments under their Loans in a timely and complete manner. Borrowers may not view our lending obligations originated on the Groundfloor Platform as having the same significance as other credit obligations arising under more traditional circumstances, such as loans from banks or other commercial financial institutions. If a Borrower neglects, or chooses not to meet, its payment obligations upon which a LRO Payment is dependent, you may not be able to recover any portion of your investment in a LRO.

***If we or Groundfloor Finance were to become subject to a bankruptcy or similar proceeding, the rights of the holders of the LROs could be uncertain, and the recovery, if any, of a holder of a LRO may be substantially delayed and substantially less than the amounts due and to become due on the LRO.***

In the event of a bankruptcy or a similar proceeding by us or Groundfloor Finance, the rights of investors to continue receiving payments on the LROs could be subject to the following risks and uncertainties:

&nbsp;&nbsp;&nbsp;&nbsp;· Borrowers may delay payments to us on account of Loans because of the uncertainties occasioned by a bankruptcy or similar proceeding
of the Company or Groundfloor, even if the Borrowers have no legal right to do so, and such delay could reduce, at least for a time, the
funds that might otherwise be available to pay the LROs corresponding to those Loans.

&nbsp;&nbsp;&nbsp;&nbsp;· In a bankruptcy or similar proceeding of the Company, our obligation to continue making payments on the
LROs would likely be suspended or delayed even if the funds to make such payments were available. Because a bankruptcy or similar proceeding
may take months or years to complete, even if the suspended payments were resumed, the suspension might effectively reduce the value of
any recovery that a holder of a LRO might receive by the time such recovery occurs.

&nbsp;&nbsp;&nbsp;&nbsp;· The LROs are unsecured, and investors do not have a security interest in the corresponding Loan Payments. Accordingly, the holders
of the LROs may be treated as general unsecured creditors and thus be required to share the proceeds of Loan Payments with our other general
unsecured creditors. If such sharing of proceeds is deemed appropriate, those proceeds that are either held by us in the clearing account
at the time of the bankruptcy or similar proceeding of the Company, or not yet received by us from Borrowers at the time of the commencement
of the bankruptcy or similar proceeding, may be at greater risk than those proceeds that are already held by us in the investor account
at the time of the bankruptcy or similar proceeding. To the extent that proceeds of the corresponding member loan would be shared with
other creditors of the Company, any secured or priority rights of such other creditors may cause the proceeds to be distributed to such
other creditors before, or ratably with, any distribution made to you on your LRO.

&nbsp;&nbsp;&nbsp;&nbsp;· In a bankruptcy or similar proceeding of the Company, it is possible that a holder of a LRO could be deemed to have a right of payment
only from proceeds of the corresponding Loan and not from any other assets of the Company, in which case the holder of the LRO may not
be entitled to share the proceeds of such other assets of the Company with other creditors of the Company, whether or not, as described
above, such other creditors would be entitled to share in the proceeds of the Loan corresponding to the LRO. Alternatively, it is possible
that a holder of a LRO could be deemed to have a right of payment from both the Loan corresponding to the LRO and from some or all other
assets of the Company, in which case the holder of the LRO may be entitled to share the proceeds of such other assets of the Company with
other creditors of the Company, whether or not, as described above, such other creditors would be entitled to share in the proceeds of
the Loan corresponding to the LRO. To the extent that proceeds of such other assets would be shared with other creditors of the Company,
any secured or priority rights of such other creditors may cause the proceeds to be distributed to such other creditors before, or ratably
with, any distribution made to you on your LRO.

&nbsp;&nbsp;&nbsp;&nbsp;· If a Borrower has made payments under its Loan to us before the bankruptcy proceedings are commenced and those funds are held in our
clearing account after the commencement of bankruptcy proceedings and have not been used by us to make payments on the LROs, there can
be no assurance that we will be able to use such funds to make payments on the LROs.

&nbsp;&nbsp;&nbsp;&nbsp;· If a bankruptcy proceeding commences after your commitment becomes irrevocable (and funds to purchase the LROs in your Groundfloor
account are set aside for closing), you may not be able to obtain a return of the funds you have committed even if the offering proceeds
have not yet been used to purchase the LROs or to fund the corresponding Loan.

&nbsp;&nbsp;&nbsp;&nbsp;· In a bankruptcy or similar proceeding of the Company, our ability to transfer servicing obligations to a back-up servicer may be limited
and subject to the approval of the bankruptcy court or other presiding authority. The bankruptcy process may delay or prevent the implementation
of back-up servicing, which may impair the collection of Loan Payments to the detriment of the LROs. As Groundfloor Finance acts as our
agent in connection with certain servicing functions, in the event of a Groundfloor Finance bankruptcy or similar proceeding, Groundfloor
Finance's ability to perform those functions may be halted or limited and subject to the approval of the bankruptcy court or other
presiding authority. See the risk titled "If we or Groundfloor Finance were to cease operations or enter into bankruptcy proceedings,
the servicing of the Loans and the LROs would be interrupted or may halt altogether" below for more information on these risks.

***If we or Groundfloor Finance were to cease operations or enter into bankruptcy proceedings, the servicing of the Loans and the LROs would be interrupted or may halt altogether.***

If we or Groundfloor Finance were to become subject to bankruptcy or similar proceedings or if we or Groundfloor Finance ceased operations, the Company, or a bankruptcy trustee on our behalf, might be required to find other ways to service the Loans and the LROs. Such alternatives could result in delays in the disbursement of payments on your LROs or could require payment of significant fees to another company to service the Loans and the LROs. Since we have not entered into any back-up servicing agreements, if we or Groundfloor were to cease operations or otherwise become unable to service the Loans and LROs without transferring such Loans to another entity, the operation of the Groundfloor Platform and the servicing of the Loans and LROs would be interrupted and may halt altogether unless another way to service the Loans and LROs on behalf of investors was secured.

If we or Groundfloor Finance were to file under Chapter 11 of the Bankruptcy Code, it is possible that we would be able to continue to service the Loans during reorganization. If, on the other hand, we were to file under Chapter 7 of the Bankruptcy Code, or if an attempted reorganization under Chapter 11 should fail and the bankruptcy case be converted to Chapter 7, the bankruptcy trustee would have the obligation to administer the bankruptcy estate. As part of such administration, the bankruptcy trustee, subject to bankruptcy court approval, may elect to continue to service the Loans or to transfer the right to such servicing to another entity for a fee. Either option would likely result in delays in the disbursement of payments on your LROs and could require the bankruptcy trustee to pay significant fees to another company to service the Loans and the LROs, ultimately decreasing the amounts available to be paid on corresponding LROs. Alternatively, the bankruptcy trustee may elect to cease servicing functions altogether. As Groundfloor Finance acts as GRE 1's agent in connection with certain servicing functions, the same disruption of the operation of the Groundfloor Platform and the servicing functions likely would occur if Groundfloor Finance were to enter bankruptcy or similar proceedings, even if GRE 1 did not.

In the event that we or Groundfloor Finance were to cease operations or enter into bankruptcy proceedings, recovery by a holder of a LRO may be substantially delayed while back-up servicing is secured, if practicable, or such services halted altogether, and such recovery may be substantially less than the amounts due and to become due on the LRO.

***In a bankruptcy or similar proceeding of the Company or Groundfloor, there may be uncertainty regarding the rights of a holder of a LRO, if any, to access funds in your GRE 1 or Groundfloor account.***

We currently maintain investor accounts with the FBO Servicer "for the benefit of" our investors. This so-called "Investor FBO Account" is a pooled account titled in our name "for the benefit of" the investors who purchase LROs issued by us. We believe that amounts funded by investors into the Investor FBO Account are unlikely to be subject to claims of our creditors other than the investors for whose benefit the funds are held, since beneficial ownership of those funds rests with the investors. However, we have legal title to the Investor FBO Account and the attendant right to administer the Investor FBO Account, each of which would be the property of our bankruptcy estate. As a result, if we became a debtor in a bankruptcy or other similar proceeding, the legal right to administer the funds in the Investor FBO Account would vest with the bankruptcy trustee, debtor in possession or similar representative of the estate. In that case, investors may have to seek a court order lifting the automatic stay or otherwise permitting them to withdraw their funds. Investors may suffer delays in accessing their funds in the Investor FBO Account as a result. Moreover, U.S. bankruptcy courts and courts overseeing similar proceedings have broad powers, and a court could determine that some or all of such funds were beneficially owned by us or otherwise became available to our creditors generally. The preceding risk also applies to funds held in your Groundfloor Investor FBO Account in the event of a Groundfloor bankruptcy or similar proceeding.

There may be further uncertainty in the event of a bankruptcy or similar proceeding of the Company regarding your rights with respect to funds that are set aside in your account pending closing. After you make a commitment to buy LROs, the Purchase Amount remains in one or more of our Investor FBO Accounts but is "blocked" or "frozen" until the LROs are issued and the corresponding Loan is closed, at which time the funds are transferred to the GRE 1 Borrower FBO Account. If the offering for that series of LROs is abandoned prior to issuance, the Purchase Amount is "unblocked" and released to your Groundfloor account. If the Company is the subject of bankruptcy or similar proceedings prior to this release of funds, a bankruptcy or similar court could determine that some or all of such funds are beneficially owned by the Company or otherwise become available to the Company's creditor's generally. If, after return of the funds to the Groundfloor Investor FBO Account, Groundfloor Finance is the subject of bankruptcy or similar proceedings, a bankruptcy or similar court could determine that some or all such funds are beneficially owned by Groundfloor or otherwise became available to Groundfloor's creditors generally.

***In a bankruptcy or similar proceeding of a Borrower, there may be uncertainty regarding our rights, if any, to access on your behalf any remaining unallocated funds in the Borrower's sub-account.***

We deposit the Loan Proceeds not advanced to the Borrower in the GRE 1 Borrower FBO Account. Under normal circumstances, in the event the corresponding Loan is discharged or cancelled before all Draws have been completed, we would return to each holder of the corresponding LROs an amount equal to such holder's pro rata share of any portion of the Loan Proceeds not yet disbursed to the Borrower. This may not occur in the event of the Borrower's bankruptcy or other similar proceeding. We believe that amounts held in a Borrower's sub-account could be subject to claims of such Borrower's creditors in the event of its bankruptcy or other similar proceeding or such funds could be used by a debtor in possession to fund its ongoing operations or reorganization. Although we typically would have the senior lien on the underlying assets, and therefore should have first priority to receive the funds out of the insolvent Borrower's estate arising from that lien, we expect that our ability to disburse funds out of the GRE 1 Borrower FBO Account may be prevented by a court and at a minimum will be significantly delayed while we seek a court order lifting the automatic stay or other such relief permitting us to withdraw the funds on your behalf. Our ability to retrieve such funds may be even more tenuous in the event we have taken a second or junior lien on the underlying assets. As such, investors may never receive or may suffer delays in receiving such funds in the event of a Borrower's bankruptcy or similar proceeding.

***If the security of our investors and Borrowers' confidential information stored in Groundfloor's systems is breached or otherwise subjected to unauthorized access, your secure information may be stolen, our reputation may be harmed, and we may be exposed to liability.***

The Groundfloor Platform stores the Borrowers' and investors' bank information and other personally-identifiable sensitive data. Any accidental or willful security breaches or other unauthorized access could cause your secure information to be accessed, publicly disclosed, or stolen and used for criminal purposes. Security breaches or unauthorized access to secure information could also disrupt our operations and subject us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in the relevant software are exposed and exploited, and, as a result, a third party or disaffected employee obtains unauthorized access to any investor's or Borrower's data, our relationships with our investors will be severely damaged, and we, and Groundfloor Finance, could incur significant liability. Because techniques used to obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until they are launched against a target, we, Groundfloor, and the third-party hosting facilities may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, many states have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause our investors to lose confidence in the effectiveness of our data security measures. Any security breach, whether actual or perceived, would harm our reputation (and that of Groundfloor Finance), and we could lose investors.

***Groundfloor Platform may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions.***

The Groundfloor Platform may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions. If a "hacker" were able to infiltrate the Groundfloor Platform, you would be subject to the increased risk of fraud or Borrower identity theft and may experience losses on, or delays in the recoupment of amounts owed on, a fraudulently induced purchase of a LRO. Additionally, if a hacker were able to access secure files, he or she might be able to gain access to your personal information. While Groundfloor Finance has taken steps to prevent such activity from affecting the Groundfloor Platform, if Groundfloor Finance is unable to prevent such activity, the value of your investment in the LROs could be adversely affected.

***When you commit to purchase a LRO, you may commit funds toward your purchase up to 50 days prior to the time when your LRO is issued.***

Once the Offering Period for a particular series of LROs commences, it will remain open for 30 days (unless it is fully subscribed with irrevocable funding commitments before the end of such period); however, we may extend that period in our sole discretion (with notice to potential investors) up to a maximum of 45 days. Investors' commitments to purchase LROs become irrevocable following expiration of the Withdrawal Period. Commitments to purchase LROs made after expiration of the Withdrawal Period, if any, are irrevocable when authorized and may not be withdrawn. The issuance of the LROs is expected to occur as soon as possible (typically within five days) after the expiration of the Withdrawal Period. During the period between the time of your commitment and the time when your LRO is issued, you may not have access to the funds debited from your funding account or placed in escrow for closing. Because your funds do not earn interest, the delay in issuance of your LRO will have the effect of reducing the effective rate of return on your investment.

***Groundfloor Finance relies on third-party banks and money transfer agents to operate the Groundfloor Platform. If it is unable to continue utilizing these services, our business and ability of Groundfloor Finance to service the Loan may be adversely affected.***

All payments are processed through the Groundfloor Platform. Because Groundfloor Finance is not a bank, it cannot belong to or directly access the Automated Clearing House ("ACH") payment network, and it must rely on third-party payment agents and other FDIC-insured depository institutions to process our transactions, including payments of Loans and remittances to holders of LROs. Groundfloor Finance currently uses the services of Dwolla, Inc. and Wells Fargo for these purposes, but may change vendors at any time without prior notice to investors. Under the ACH rules, if Groundfloor experiences a high rate of reversed transactions (known as "chargebacks"), Groundfloor may be subject to sanctions and potentially disqualified from using the system to process payments.

***Any significant disruption in service on the Groundfloor website or in Groundfloor Finance's computer systems could reduce the attractiveness of the Groundfloor Platform and result in a loss of users.***

If a catastrophic event resulted in a Groundfloor Platform outage and physical data loss, Groundfloor Finance's ability to perform our servicing obligations would be materially and adversely affected. The satisfactory performance, reliability, and availability of Groundfloor Finance's technology and its underlying hosting services infrastructure are critical to its (as well as our) operations, level of customer service, reputation and ability to attract new users and retain existing users. Groundfloor Finance's hosting services infrastructure is provided, owned, and operated by a third party (the "Hosting Provider"). Groundfloor Finance also maintains a backup system at a separate location that is owned and operated by a third party. Groundfloor Finance's Hosting Provider does not guarantee that users' access to the Groundfloor website will be uninterrupted, error-free or secure. Groundfloor Finance's operations depend on our Hosting Provider's ability to protect its and our systems in its facilities against damage or interruption from natural disasters, power or telecommunications failures, air quality, temperature, humidity and other environmental concerns, computer viruses or other attempts to harm our systems, criminal acts and similar events. If Groundfloor Finance's arrangement with its Hosting Provider is terminated, or if there is a lapse of service or damage to its facilities, it could experience interruptions in our service as well as delays and additional expense in arranging new facilities. Any interruptions or delays in our service, whether as a result of Groundfloor Finance's Hosting Provider or other third-party error, its own error, natural disasters or security breaches, whether accidental or willful, could harm Groundfloor Finance's ability to service the Loan or maintain accurate accounts, and could harm our relationships with our users and our reputation. Additionally, in the event of damage or interruption, Groundfloor Finance's insurance policies may not adequately compensate us for any losses that we may incur. Groundfloor Finance's disaster recovery plan has not been tested under actual disaster conditions, and it may not have sufficient capacity to recover all data and services in the event of an outage at a Hosting Provider facility. These factors could prevent us from processing or posting payments on the Loan or the LROs, damage the Groundfloor brand and reputation, divert employees' attention, and cause users to abandon the Groundfloor Platform.

***Events beyond our control may damage our ability to maintain adequate records, maintain the Groundfloor Platform or perform our servicing obligations.***

If a catastrophic event resulted in the Groundfloor Platform outage and physical data loss, our ability to perform our servicing obligations would be materially and adversely affected. Similar events impacting third-party service providers that our operations depend on, such as Groundfloor Finance's Hosting Provider or payment vendor(s), could materially and adversely affect its (and our) operations. Such events could include, but are not limited to, fires, earthquakes, terrorist attacks, natural disasters, computer viruses and telecommunications failures. Groundfloor Finance stores back-up records in offsite facilities located in third-party, off-site locations. If Groundfloor Finance's electronic data storage and back-up storage system or those of its third-party service providers are affected by such events, we cannot guarantee that you would be able to recoup your investment in the LROs.

***Investors will have no control over GRE 1 or Groundfloor Finance and will not be able to influence any related corporate matters.***

The LROs grant no equity interest in GRE 1 or in Groundfloor Finance to purchasers, nor do they give purchasers the ability to vote on or influence any related corporate decisions. As a result, Groundfloor Finance will exercise 100% voting control over all of GRE 1's corporate matters and Groundfloor Finance's shareholders will continue to exercise 100% voting control over all of its corporate matters, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of the Company or our assets.

***The LROs will not restrict Groundfloor Finance's ability to incur additional indebtedness.***

Groundfloor Finance has substantially financed its early operations through the issuance of convertible notes, which converted to shares of Series Seed Preferred Stock pursuant to the terms of the Note Conversion Agreement, dated December 5, 2014. If Groundfloor Finance incurs additional debt after the LROs are issued, it may adversely affect its creditworthiness generally and could result in its financial distress, insolvency or bankruptcy. As discussed above, the financial distress, insolvency or bankruptcy of Groundfloor Finance could impair your ability to receive the payments you expect to receive on your LROs.

***Neither GRE 1 nor Groundfloor Finance is subject to the banking regulations of any state or federal regulatory agency.***

Neither GRE 1 nor Groundfloor Finance is subject to the periodic examinations to which commercial banks, savings banks and other thrift institutions are subject. Consequently, financing decisions and decisions regarding establishing loan loss reserves are not subject to period review by any governmental agency. Moreover, neither we nor Groundfloor Finance are subject to banking regulatory oversight relating to capital, asset quality, management or compliance with applicable laws.

**Risks Related to the Tax Treatment of the LROs**

***The U.S. federal income tax consequences of an investment in the LROs are uncertain.***

There are no statutory provisions, regulations, published rulings, or judicial decisions that directly address the characterization of the LROs or instruments similar to the LROs for U.S. federal income tax purposes. However, although the matter is not free from doubt, GRE 1 intends to treat the LROs as our indebtedness for U.S. federal income tax purposes. As a result of such treatment, the LROs will have OID for U.S. federal income tax purposes because payments on the LROs are dependent on payments on the corresponding Loan. Further, a holder of a LRO, other than a holder that is holding LROs in a tax deferred account such as an IRA, will be required to include the OID in income as ordinary interest income for U.S. federal income tax purposes over the term of the LRO as it accrues (which may be in advance of corresponding installment payments on the LRO), regardless of such holder's regular method of accounting. This characterization is not binding on the IRS, and the IRS may take contrary positions. Any differing treatment of the LROs could significantly affect the amount, timing and character of income, gain or loss in respect of an investment in the LROs. Accordingly, all prospective purchasers of the LROs are advised to consult their own tax advisors regarding the U.S. federal, state, local and non-U.S. tax consequences of the purchase and ownership of the LROs (including any possible differing treatments of the LROs).

***The LROs could be treated as contingent payment debt instruments for U.S. federal income tax purposes.***

The LROs could be subject to Treasury regulations under which they will be treated as contingent payment debt instruments for U.S. federal income tax purposes. Should this occur, you may recognize interest income on the LROs significantly in excess of the effective interest payments received thereon. Also, under these Treasury regulations, a U.S. holder generally will recognize ordinary income, rather than capital gain, on a sale, exchange, conversion, repurchase or redemption of a LRO.

***GRE 1's ability to make payments on a LRO may be affected by our ability to match the timing of our income and deductions for U.S. federal income tax purposes.***

Our ability to make payments on a LRO may be affected by our ability, for U.S. federal income tax purposes, to match the timing of income we receive from a corresponding Loan and the timing of deductions that we may be entitled to in respect of payments made on the LROs that we issue. For example, if the LROs, but not the corresponding Loan, are treated as contingent payment debt instruments for U.S. federal income tax purposes, there could be a potential mismatch in the timing of our income and deductions for U.S. federal income tax purposes, which could affect our ability to make payments on the LROs.

***If the IRS disagrees with our characterization of the LROs for tax purposes, GRE 1's ability to make payments on the LROs could be adversely affected.***

The IRS is not bound by our characterization of the LROs, and it could treat the corresponding Loan as a debt owed to us (with interest received being treated as taxable income to us) but treat the LROs as equity (with interest payments being treated as nondeductible). Were this to occur, we would have taxable income without an offsetting deduction, and the additional tax obligations owed by us would reduce the cash available for payment of the LROs. As a result, we could be unable to fully repay the LROs even if the corresponding Loan Payments were repaid in full.

**Risks Related to Compliance and Regulation**

***The requirements of complying on an ongoing basis with Tier 2 of Regulation A of the Securities Act may strain our resources and divert management's attention.***

Because we are conducting an offering pursuant to Tier 2 of Regulation A of the Securities Act, we will be subject to certain ongoing reporting requirements. Compliance with these rules and regulations will require legal and financial compliance costs, which may impose strain on our operating budget and divert management's time and attention from operational activities. Moreover, as a result of the disclosure of information in this Offering Circular and in other public filings we make, our business operations, operating results and financial condition will become more visible, including to competitors and other third parties.

***If a fundamental change occurs in the information set forth in this Offering Circular, we may be required to suspend offering LROs until a PQA updating such information is qualified by the SEC, which may adversely affect our financial performance.***

This Offering Circular relates to the issuance of LROs pursuant to Tier 2 of Regulation A under the Securities Act. Pursuant to the rules of Regulation A, we are required to file a PQA to reflect any facts or events arising after the qualification date of this Offering Circular (or the most recent PQA hereof) which, individually or in the aggregate, represent a fundamental change in the information set forth herein. We also may be required to suspend ongoing offerings of LROs under this Offering Circular and/or delay offering additional series of LROs until such PQA is qualified by the SEC. If we or other entities affiliated with Groundfloor Finance are required to suspend offerings of LROs for an extended amount of time pending qualification by the SEC, the financial performance of Groundfloor Finance and of GRE 1 could be adversely affected.

***If we or our affiliated companies are required to register under the Investment Company Act or the Investment Advisors Act of 1940, or become subject to the SEC's regulations governing broker-dealers, our ability to conduct our business could be materially and adversely affected.***

The SEC heavily regulates the manner in which "investment companies," "investment advisors," and "broker-dealers" are permitted to conduct their business activities. We believe we have conducted our business in a manner that does not result in the Company or its affiliates being characterized as an investment company, an investment advisor or a broker-dealer, as we do not believe that we engage in any of the activities described under Section 3(a)(1) of the Investment Company Act of 1940 or Section 202(a)(11) or the Investment Advisor's Act of 1940 or any similar provisions under state law, or in the business of (i) effecting transactions in securities for the account of others as described under Section 3(a)(4)(A) of the Exchange Act or any similar provisions under state law or (ii) buying and selling securities for our own account, through a broker or otherwise as described under Section 3(a)(5)(A) of the Exchange Act or any similar provisions under state law. We intend to continue to conduct our business in such manner. If, however, we (or any of our affiliates) are deemed to be an investment company, an investment advisor, or a broker-dealer, we may be required to institute burdensome compliance requirements and our activities may be restricted, which would affect our business to a material degree.

***Our Loan origination and servicing activities are subject to extensive federal, state and local regulation that could adversely impact operations.***

GRE 1, and Groundfloor Finance to the extent it is acting as our agent, must comply with regulatory regimes, including those applicable to mortgage lending transactions, various aspects of which are untested as applied to the Groundfloor Platform. Certain state laws generally regulate interest rates and other charges and require certain disclosures. In addition, other federal and state laws may apply to the origination and servicing of Loans originated through the Groundfloor Platform.

In particular, through the Groundfloor Platform, we may be subject to laws, including but not limited to:

&nbsp;&nbsp;&nbsp;&nbsp;· state laws and regulations that require us to obtain licenses to originate Loans or which may impose requirements related to Loan
disclosures and terms, debt collection and unfair or deceptive business practices; the Equal Credit Opportunity Act and Regulation B promulgated
thereunder, which prohibit creditors from discriminating against credit applicants on the basis of race, color, sex, age, religion, national
origin, marital status, the fact that all or part of the applicant's income derives from any public assistance program or the fact
that the applicant has in good faith exercised any right under the federal Consumer Credit Protection Act or any applicable state law;

&nbsp;&nbsp;&nbsp;&nbsp;· the Bankruptcy Code, which limits the extent to which creditors may seek to enforce debts against parties who have filed for bankruptcy
protection;

&nbsp;&nbsp;&nbsp;&nbsp;· the Electronic Fund Transfer Act and Regulation E promulgated thereunder, which provide guidelines and restrictions on the electronic
transfer of funds from consumers' bank accounts; and

&nbsp;&nbsp;&nbsp;&nbsp;· the Electronic Signatures in Global and National Commerce Act and similar state laws, particularly the Uniform Electronic Transactions
Act, which authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures.

GRE 1 and Groundfloor Finance may not always have been, and may not always be, in compliance with these laws. Compliance with these laws is also costly, time- consuming and limits our operational flexibility.

Failure to comply with these laws and regulatory requirements applicable to this business may, among other things, have a negative impact on GRE 1's and/or Groundfloor Finance's ability to originate and service Loans or maintain the Groundfloor Platform. In addition, any non-compliance could subject GRE 1 and/or Groundfloor Finance to damages, revocation of required licenses, class action lawsuits, administrative enforcement actions, rescission rights held by investors in securities offerings and civil and criminal liability, which may harm the business and the ability to maintain the Groundfloor Platform and may result in Borrowers rescinding their Loans.

Where applicable, GRE 1 and Groundfloor Finance seek to comply with state mortgage licensing, servicing and similar statutes. GRE 1 and Groundfloor Finance are aware that making Loans in certain U.S. jurisdictions may trigger local licensing requirements. GRE 1 and Groundfloor Finance work with local counsel in each jurisdiction in which Loans are financed to determine whether any licenses are required and, to the extent necessary, will seek to obtain such licenses and will comply with the relevant regulatory requirements before facilitating Loans to Borrowers in any such jurisdiction. If GRE 1 and/or Groundfloor Finance are found to not comply with applicable laws, we could lose one or more of our licenses or authorizations or face other sanctions or be required to obtain a license in such jurisdiction, which may have an adverse effect on our ability to continue to facilitate Loans through the Groundfloor Platform, perform servicing obligations or make the Groundfloor Platform available to Borrowers in particular states, which may harm the business.

***If the Groundfloor Platform was found to violate a state's usury laws, we may have to alter our business model and our business could be harmed.***

The interest rates that are charged to Borrowers and that form the basis of payments to investors through the Groundfloor Platform must comply with the usury law of the jurisdiction where we originate each Loan. There is no uniformity among the states on the amount of interest that may be charged on commercial real estate lending. As a result, GRE 1 and Groundfloor Finance must monitor the interest rate limitations imposed by each jurisdiction where we originate Loans to ensure compliance, which reduces operating efficiency and may impact the attractiveness of the Loans offered to investors as well as the ability to apply late charges and penalty and default interest. In addition, if a Borrower were to successfully bring claims against GRE 1 and/or Groundfloor Finance for state usury law violations, and the rate on that Borrower's Loan was greater than that allowed under applicable state law, GRE 1 and/or Groundfloor Finance could be subject to fines and penalties, which could possibly result in a decline in operating results.

***Increased regulatory focus could result in additional burdens on our business.***

The financial industry is becoming more highly regulated. There has been, and may continue to be, a related increase in regulatory scrutiny and investigations of the operations of peer-to-peer or micro-lending platforms as well as trading and other investment activities of alternative investment funds. Increased regulatory scrutiny and investigations may impose additional expenses on Groundfloor Finance and GRE 1, may require the attention of Groundfloor Finance's senior management and may result in fines if Groundfloor Finance or GRE 1 is deemed to have violated any regulations.

***As Internet commerce develops, federal and state governments may adopt new laws to regulate Internet commerce, which may negatively affect our business.***

As Internet commerce continues to evolve, increasing regulation by federal and state governments becomes more likely. The Groundfloor Finance business could be negatively affected by the application of existing laws and regulations or the enactment of new laws applicable to lending. The costs to comply with such laws or regulations could be significant and would increase operating expenses, and we may be required to pass along those costs to our investors in the form of increased fees. In addition, federal and state governmental or regulatory agencies may decide to impose taxes on services provided over the Internet. These taxes could discourage the use of the Internet as a means of commercial financing, which would adversely affect the viability of this business model.

**YOU SHOULD CONSULT WITH YOUR OWN ATTORNEYS, ACCOUNTANTS AND OTHER PROFESSIONAL ADVISORS AS TO THE LEGAL, TAX, ACCOUNTING AND OTHER CONSEQUENCES OF AN INVESTMENT IN THE LROS.**

**PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR NO. 230, BE ADVISED THAT ANY FEDERAL TAX ADVICE IN THIS COMMUNICATION, INCLUDING ANY ATTACHMENTS OR ENCLOSURES, WAS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED BY ANY PERSON OR ENTITY TAXPAYER, FOR THE PURPOSE OF AVOIDING ANY INTERNAL REVENUE CODE PENALTIES THAT MAY BE IMPOSED ON SUCH PERSON OR ENTITY. SUCH ADVICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTION(S) OR MATTER(S) ADDRESSED BY THE WRITTEN ADVICE. EACH PERSON OR ENTITY SHOULD SEEK ADVICE BASED ON ITS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.**

**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS**

This Offering Circular, including the sections entitled "Risk Factors," "Description of the Business of GRE 1 and of Groundfloor Finance," "The LROs Covered by this Offering Circular," "Plan of Distribution" and "Use of Proceeds," contain forward-looking statements. In some cases, you can identify these statements by forward-looking words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "could," "would," "project," "plan," "expect" or the negative or plural of these words or similar expressions. These forward-looking statements include, but are not limited to, statements concerning the Company, its parent, Groundfloor Finance and affiliated companies, risk factors, plans and projections. You should not rely upon forward-looking statements as predictions of future events. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in "Risk Factors." In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Offering Circular may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

Except as required by law, neither GRE 1 nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Offering Circular to conform these statements to actual results or to changes in our expectations.

You should read this Offering Circular, including the Project Summaries beginning on page PS-1 of this Offering Circular and the form of LRO Agreement beginning on page LRO-1 of this Offering Circular, and the documents that we reference in this Offering Circular and have filed with the SEC as exhibits to the Form 1-A of which this Offering Circular is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

**DESCRIPTION OF THE BUSINESS OF GRE 1 AND OF GROUNDFLOOR FINANCE**

**Overview**

***GRE 1 and Groundfloor Finance***

GRE 1 uses the Groundfloor Platform to source financing for real estate development projects. Through the Groundfloor Platform, investors can choose between multiple real estate development investment opportunities (each, a "Project") and developers of the Projects (each, a "Borrower") can obtain financing.

GRE 1 relies on Groundfloor Finance to operate the Groundfloor Platform, facilitate due diligence and underwriting reviews, coordinate payment to and from investors and developers through the use of various funding accounts described below, manage Loan advances and administer, service and collect on the Loans GRE 1 funds through the offer and sale of LROs, on behalf of GRE 1.

The intended focus of the lending program operated by Groundfloor Finance and its affiliated companies, including GRE 1, is the commercial market for lending to developers of residential and small commercial real estate projects owned and occupied by parties other than the Borrower (or its Principal(s)). Proceeds from the Loans typically will be applied toward the Project's acquisition and/or renovation or construction costs. In some circumstances, we may permit a portion of the proceeds from the Loan to be used by the Borrower to offset a portion of the purchase price of the property, works completed, or equity, but such offset will then reduce its amount of "skin-in-the-game" the Borrower would have in the Project (see below under "Description of the Business of GRE 1 and of Groundfloor Finance—Our Loans to Borrowers—Credit Risk and Valuation Assessment—The Grading Algorithm—'Skin-in-the-Game' ").

All of the LROs being offered under this Offering Circular relate to residential real estate Projects. As a result, the discussions of the operations, due diligence and other aspects of this Offering described herein are designed specifically for residential projects.

GRE 1 was formed as a Georgia limited liability company on December 16, 2016. Groundfloor Finance, a Georgia corporation, is GRE 1's sole member and manager and parent company. Groundfloor Finance owns and operates the Groundfloor Platform. Groundfloor Finance began originating real estate loans in Georgia through a subsidiary in November 2013 and transitioned to multi-state operations through the sale of LROs under a Regulation A offering in September 2015. Groundfloor Finance is in the process of transitioning the offerings of LROs to one or more subsidiaries and, following qualification of this Offering Circular, intends to gradually discontinue its direct offerings of LROs, but will continue to host the offerings and solicit Borrowers through the Groundfloor Platform and provide Loan underwriting, origination, servicing, and administration services to GRE 1 and its other subsidiaries conducting offerings.

This Offering Circular relates to the issuance of LROs pursuant to Tier 2 of Regulation A (or available exemptions) under the Securities Act. Each series of LROs corresponds to a different Project financed by a commercial loan from GRE 1 (each, a "Loan"). The specific terms for each series of LROs being offered under this Offering Circular are set forth in the "The LROs Covered by this Offering Circular" below, the Project Summaries beginning on page PS-1, and the form of LRO Agreement beginning on page LRO-1. The amount of the LRO Payments owed to investors is dependent upon, and will not exceed, the amount of the Loan Payments collected on the corresponding Loan. In each case, the Borrower is the borrower with respect to each Loan.

***The Loans and LROs***

Generally, the Loans related to the LROs range between $10,000 and $3,000,000, at interest rates that range, subject to applicable law, between 3% and 26%, and mature six months to five years from the date when the Loan is made. The terms of each series of LROs generally correspond to those of the corresponding Loan. For example, assuming a Borrower wishes to enter into a Loan covering $10,000, with an interest rate of 10% and a 12-month maturity date, the aggregate Purchase Amount of the LROs of the series corresponding to that Loan would be $10,000, with an Expected Rate of Return of 10% per annum, and a final payment date of 12 months from the date of issuance. The specific terms for each series of LROs being offered under this Offering Circular are set forth in "The LROs Covered by this Offering Circular" below, the Project Summaries beginning on page PS-1, and the form of LRO Agreement beginning on page LRO-1.

We may use the proceeds of the sale of the corresponding series of LROs to originate the Loan and, in those circumstances, we would close and fund the corresponding Loan on the original issue date of the LROs. However, in most circumstances, we, Groundfloor Finance, or a subsidiary of Groundfloor Finance may advance Loans prior to the qualification or sale of corresponding series of LROs. See "—How the Groundfloor Platform Operates—Loan Advances."

In addition to issuing the LRO and funding the Loans, we are authorized to administer, service and collect on the Loans. Groundfloor Finance acts as our agent in this respect. The Loan Proceeds remain in the GRE 1 Borrower FBO Account until disbursed pursuant to the terms of the Loan Agreement. Typically amounts are disbursed from the Loan Proceeds, less any fees and expenses included in the Loan Principal, to the Borrower from time to time as Draws. Under limited circumstances, for instance if the Loan Principal is $50,000 or less or when an amount greater than $50,000 is needed for the acquisition of a property, the full amount of the Loan Proceeds will be disbursed to the Borrower on the origination date of the Loan. The Borrower will use the Loan Proceeds to complete the Project, repaying principal and interest (either as a balloon payment at maturity or on a monthly/quarterly basis) to us. Within five business days of our receipt of such amounts, we will make the LRO Payments on the corresponding series of LROs. The LRO Agreement gives us sole discretion in applying amounts we receive from, or for the account of, the Borrower, with respect to the Loan, and we may make LRO Payments out of any funds at our disposal.

It is generally expected that investors would profit from the interest earned on the Loan, as each holder of a LRO will be entitled to an expected return that corresponds to the interest rate applied to the corresponding Loan (including any adjustments that may be made to account for any default, modification, etc.), net of certain fees and expenses. See "—Fees and Related Expenses" below.

We perfect a lien on the real estate and other assets underlying each Project to secure the Loan; however, investors in the corresponding series of LROs will not have any recourse against the Borrower or its Principals. Your recourse against us is limited to the amount of any LRO Payments we owe you (as determined pursuant to the terms of the corresponding LRO Agreement). The specific terms for each series of LROs being offered under this Offering Circular are set forth in the "The LROs Covered by this Offering Circular" below, the Project Summaries beginning on page PS-1, and the form of LRO Agreement beginning on page LRO-1.

Where Groundfloor Finance or one of its affiliates has advanced a Loan and holds that Loan on its own books, Groundfloor Finance or the affiliate may elect to sell the whole Loan or a portion of the Loan to a third party outside of this Offering. Alternatively, Groundfloor Finance or its affiliate may continue to hold the Loan on its own books and service the Loan with its own capital. Groundfloor Finance or one of its affiliates may also choose to offer series of LROs pursuant to a separately qualified offering statement under Regulation A or other exemptions from federal and state securities registration requirements.

**Example LRO and Expected Yield**

By way of illustration, assume we approve an acquisition and construction Loan with the following terms: $100,000 in principal amount, with a 10% interest rate over a 12-month term, and a balloon payment upon maturity. We would offer LROs covering $100,000 in aggregate Purchase Amount, at an Expected Rate of Return of 10%; with the final payment date of 12 months following the original issue date.

If the Borrower elects to include our origination and servicing fees (of $4,000 or 4%) and closing expenses (of $1,000) in the Loan Principal, upon funding of the Loan by investors, the Borrower's FBO Account would be credited with $95,000 (equal to the entire Loan Principal of $100,000 less the $5,000 in fees and expenses, which we retain). Interest on the entire $100,000 would accrue beginning on the original issue date, through the 12-month term of the Loan, and, at the end of that 12-month term (assuming there are no additional fees and expenses incurred by the Company and no prepayment or default by the Borrower), the Borrower would pay us a total of $110,000 (equal to the entire Loan Principal of $100,000, plus $10,000 of accrued interest). We would, within five business days of receipt of these funds, disburse to each holder of the corresponding series of LROs an amount equal to such holder's pro rata share of $110,000 (the total Loan Payment we received from the Borrower).

These payments are made directly into the investors' funding accounts maintained on the Groundfloor Platform. (See "—How the Groundfloor Platform Operates— Investor FBO Accounts" and "—Project Funding and Payment of Expected Yield" below.)

In most cases, the Loan will have been advanced prior to qualification of the corresponding series of LROs. As a result, the Loan would be amended in connection with the closing of the series of LROs to assign the Loan to GRE 1 from Groundfloor Finance or applicable subsidiary and to amend the maturity date to match the term of the corresponding series of LROs (i.e., 12 months in the example above). Interest that accrues on the advanced Loan before the issuance of the corresponding series of LROs is retained by GRE 1; thereafter, there would be no other difference between the original issue date and the payment of the Loan and corresponding series of LROs as described above. See "— How the Groundfloor Platform Operates—Loan Advances" below for more information on the loan advance program.

**Background**

Two types of customers use the Groundfloor Platform: real estate developers who are in need of project financing and retail investors looking for investment opportunities.

Real estate is a trillion dollar industry in the United States.\* Real estate projects are financed through a variety of debt and equity transactions. Groundfloor Finance and its affiliated companies focus on financing real estate projects in the smaller market segments by providing debt financing. The prototypical project is an unoccupied single family or multifamily renovation costing between $10,000 and $3,000,000 over six months to a year, to be sold upon completion. Borrowers are offered term financing for the acquisition and development of real estate projects through the acquisition of land and/or an existing structure, for the purposes of new construction or renovation. In some circumstances, Borrowers may use a portion of the proceeds from the Loan to offset a portion of the purchase price of the property, works completed, or equity, but such offset will then reduce its amount of "skin-in-the-game" the Borrower would have in the Project (see below under "—Our Loans to Borrowers— Credit Risk and Valuation Assessment—The Grading Algorithm—'Skin-in-the-Game' "). Borrowers may also receive Loans (for projects that have completed construction) intended to refinance other term debt or equity.

Groundfloor Finance provides an opportunity for retail investors to gain exposure to real estate investments by creating an investment product backed by secured real estate loans. On a risk adjusted basis, it is Groundfloor Finance's belief (and our belief) that the LROs offered through the Groundfloor Platform provide a competitive potential return for retail investors when compared to more conventional investment products.

***The Groundfloor Financing Model***

The Groundfloor Finance business model serves as an alternative to, or substitute for, traditional sources of capital of financing for real estate projects with the aggregation of capital from investors using the Internet. Historically, real estate developers have utilized many sources of capital to finance projects, including traditional bank loans, equity investments, personal loans or borrowings, etc. Through the Groundfloor Platform, Borrowers are offered an alternative source of capital for real estate development projects, but one that is flexible enough to cover all of the costs associated with a particular project or to work in tandem with more traditional financing arrangements.

We believe that the advantages of our method of real estate financing include:

&nbsp;&nbsp;&nbsp;&nbsp;· lower interest rates for financing of real estate projects;

&nbsp;&nbsp;&nbsp;&nbsp;· attractive returns for investors;

&nbsp;&nbsp;&nbsp;&nbsp;· the opportunity to promote community redevelopment by investing in local real estate projects; and

&nbsp;&nbsp;&nbsp;&nbsp;· growing acceptance of the Internet as an efficient and convenient forum for investment transactions.

***The Real Estate Project Development Process***

A real estate project's timeline can be divided into the following stages: Project Identification, Project Execution, and Project Stabilization or Exit.

<u>Pro</u>j<u>ect Identification</u>. During this phase, a developer must commit working capital to identify potential projects. Typically, projects can involve new construction or rehabilitation of an existing building. During this phase, the developer incurs certain planning and development costs as it undertakes the process of:

&nbsp;&nbsp;&nbsp;&nbsp;· identifying a property to purchase for development or rehabilitation;

&nbsp;&nbsp;&nbsp;&nbsp;· creating a development plan for a given property;

&nbsp;&nbsp;&nbsp;&nbsp;· ensuring the feasibility of the development plan by checking zoning, tax records, undertaking environmental and engineering assessments,
developing a construction plan and budget, etc.;

&nbsp;&nbsp;&nbsp;&nbsp;· engaging contractors for specific aspects of the work that may be outsourced by the developer;

&nbsp;&nbsp;&nbsp;&nbsp;· sourcing suppliers and vendors for materials and services in furtherance of the development plan; and

&nbsp;&nbsp;&nbsp;&nbsp;· preparing information that will be required for a lender to underwrite project financing.

\* *GDP-by-industry*, BUREAU OF EcON. ANALYSTS, <br> http://www.bea.gov/iTable/iTable.cfm?ReqID=51&step=1#reqid=51&step=51&isuri=1&5114=a&5102=15.

<u>Pro</u>j<u>ect Execution</u>. Once a project has been identified, the developer moves into the project execution phase. Financing arrangements may need to be put in place to cover the cost of acquiring the underlying property (such as the land for new construction or land and existing buildings(s) for rehabilitation or renovations).

Typically, real estate developers in the market segment that we address will utilize third-party engineering, procurement and construction services to complete projects. A general contractor, who is responsible for the majority of the work and the work undertaken by any subcontractors, is often engaged to complete the construction and development of a project. Alternatively, a developer may act as general contractor and undertake all or a portion of the work or engage subcontractors to do so. During this phase, the developer needs capital to pay contractors for work, suppliers for materials, and vendors for other goods and services. Construction timelines may vary depending upon the project size, the demand for contractors and other skilled trades, the availability of materials, and the ability of the developer to secure and deploy capital to ensure continued work on the project. The completion of construction is also dependent on inspections by government regulators to ensure projects meet building codes and any other regulations that are applicable in a given jurisdiction.

<u>Pro</u>j<u>ect Stabilization or Exit</u>. Following completion of construction and certification that a completed project meets any applicable codes and regulations, the developer must arrange to repay any development or construction finance that exists on the project. Repayment of existing financing arrangements may also occur before a project is completed, such as when a developer decides to refinance the project to take advantage of more favorable interest rates or for other reasons.

If the project is to be stabilized, the developer may act as the landlord of the property and lease the property to use the rental income to repay financing obligations over time. The developer typically obtains a multi-year mortgage from a bank, and the proceeds of the new mortgage will be used to repay the existing construction loans. Banks may require the developer to find tenants for a completed project, although tenancy is not always a prerequisite for obtaining such financing. This is known as take-out or permanent financing, because the new bank mortgage takes out any construction financing and effectively becomes the primary debt obligation on the underlying property.

Alternatively, the developer may exit the project by selling it. If the developer decides to exit by sale, the property must be marketed. The proceeds of the sale will then be used to repay any financing that remains on the property. A less common exit strategy is for the developer to pay off any land acquisition or construction financing with cash. This cash may come from the sale of other properties in the developer's portfolio or it may be cash on hand.

Refinancing arrangements and property sales are subject to a detailed closing process, whereby current lenders on the property (such as the Company) must release any liens they hold in favor of the new lender or the purchaser. These types of closings can take several weeks to complete.

***Financing Projects through the Groundfloor Platform***

The Groundfloor Platform offers term financing for the acquisition and development of real estate projects in which we (or one of our affiliates) make a Loan to a real estate developer having a repayment term of six months to five years, at an annual fixed interest rate. The proceeds of this Loan may be applied toward the Project's acquisition and/or renovation or construction costs. In some circumstances, we may permit a portion of the proceeds from the Loan to be used as a general credit facility for the business. We may also provide Loans (for projects that have completed construction) intended to refinance other term debt or equity. Where the loan is used to refinance other capital, it will function as bridge financing, it being understood that the Borrower will obtain permanent financing at a later date. We anticipate that bridge financing arrangements will not differ materially from the terms of our acquisition and construction financing arrangements, except with respect to the maturity of the Loan. We expect bridge Loans to mature in three to five years.

To date, the Groundfloor Platform has offered acquisition, construction, rent stabilization, and transactional financing on residential and small commercial real estate projects.

The resulting Loans in all circumstances are secured by a lien covering the real estate and other assets underlying the Project. In most cases, our lien will be senior to the Borrower's other financing obligations. See the Project Summaries beginning on page PS-1 for our lien position for each series of LROs offered under this Offering Circular. We confirm our lien position by conducting a title search of the property and obtaining title insurance on the property in connection with closing of the Loans, requiring the Borrower to represent and warrant in the Loan Agreement that there are no other encumbrances on the property, and through various diligence steps undertaken in the course of our underwriting process. If we are financing a second lien Loan, the Borrower may provide the results of a title search performed, and title insurance obtained, by the first lienholder within a month of the submitted Application in lieu of performing a separate title search and obtaining title insurance. Borrowers typically use cash generated from the sale of a completed project or leasing arrangements, cash which comes from the proceeds of take-out or permanent financing provided by another lender or, less commonly, cash on hand to make payments on the Loan.

The Loan Documents with each Borrower will provide that such Borrower's obligations under the Loan are recourse, which means that, in the event of nonpayment, we may collect any outstanding amount owed for the debt from the Borrower even after we have foreclosed on the collateral securing the debt. Even though the Loan obligations are recourse to the Borrower, in most cases, the Borrower's assets are limited primarily to its interest in the related mortgaged property. Further, our remedies against the Borrower may be limited by state law in certain jurisdictions. For instance, some jurisdictions restrict a mortgagee's right to seek a deficiency against the Borrower in the event the amount realized from a foreclosure sale is insufficient to repay the underlying debt, commonly referred to as anti-deficiency statutes. Moreover, in jurisdictions where deficiency actions are permitted, the burden of proof with respect to the adequacy of the amount realized from the foreclosure is often imposed on the party seeking the deficiency, such that deficiency actions may result in costly and protracted litigation. Further, some jurisdictions continue to apply the common-law doctrine of "election of remedies" pursuant to which a mortgagee must elect either to sue for recovery under the obligation or pursue foreclosure against the property subject to the mortgage lien. While such restrictions can frequently be waived as a matter of contract, the election of remedies doctrine represents a potential defense in certain circumstances. Since the Principals are not obligors under the Loan Documents, we are limited in seeking recourse for non-payment to the borrowing entity itself. If the Borrower fails to make payments on the Loan and our remedy is limited to the value of the property securing the Loan, you may lose some, or all, of the expected yield on your LROs.

***Consideration of the Principal***

The Groundfloor Platform does not offer financing for owner-occupied residential projects, and Loans will not finance any personal, family, or household purpose. All Loans are commercial in nature. Although the Groundfloor Platform only offers loans to legal entities (i.e., the Borrower), due to the nature of the real estate development business and the smaller market segment serviced through the business, the background and experience of the individual(s) who own and operate the borrowing entity (i.e., the Principal(s)) are important factors into the due diligence and underwriting process conducted on our behalf by Groundfloor Finance.

Some Borrowers are large legal entities that have been in existence for many years and have been formed (by a single person, or less frequently, a number of individuals) for the purpose of managing multiple real estate projects. In this situation, the industry experience, performance history and financial position of the Borrower itself may provide significant information to assess for purposes of the due diligence and underwriting process.

It is often the case, however, that a Principal with extensive experience developing real estate properties is simultaneously managing a number of separate projects through multiple legal entities. In this situation, the actual Borrower may have been formed recently for the sole purpose of acquiring and developing the property and the number of years that entity has been in existence, as well as the financial data and number and types of projects that the borrowing entity has completed, is extremely limited.

In other circumstances, this may be the first venture for a Principal in the real estate development industry or the Principal may have limited experience in the type of project being considered. For example, a Principal may have successfully completed a number of small residential remodeling projects (or a "fix and flip"), but is now proposing to engage in extensive renovation or ground up construction projects.

Because of these different possibilities, the due diligence and underwriting process is not limited only to information about the borrowing entity. Irrespective of the history of the borrowing entity, doing so would fail to capture important information (both favorable and unfavorable) about the Principal and his/her other real estate development activities that we and our parent, Groundfloor Finance, believe should be considered in the due diligence and underwriting process. For instance, if we only looked at the history of the Borrower, we may fail to discover that the Principal has filed for personal bankruptcy during the past 12 months, which would be an automatic disqualification under the underwriting procedures. In fact, the goal is to encourage high quality, well-seasoned real estate developers to seek financing through the Groundfloor Platform because their projects are less risky than those sponsored by inexperienced or unsuccessful developers. Failure to give credit to the Principals for their hard work and good performance might cause the due diligence and underwriting process to misjudge the risks associated with the Project.

Thus, in addition to considering the specific information with respect to the Borrower under the Loan, the due diligence and underwriting process also considers the creditworthiness (through a review of FICO scores) and broader experience of the Principal. This includes the Principal's industry experience beyond real estate development per se (such as activities as a real estate broker or as a general contractor of residential projects), as well as the real estate development activities undertaken by the Principal (through the Borrower and any other legal entities used for real estate development activities).

**How the Groundfloor Platform Operates**

***Identification and Posting of Projects on the Groundfloor Platform***

The financing of a Project generally commences with a Principal of a Borrower requesting financing through the Groundfloor Platform. He or she can go to a special landing page on the Groundfloor Platform where he or she may obtain a "Quick Rate Quote" by inputting certain project details into a web-based form. Based on this information, the Groundfloor Platform will provide an estimated interest rate, which represents the minimum interest rate we are prepared to offer. If the Principal is interested in pursuing a Loan through the Groundfloor Platform, he/she then registers with the Groundfloor Platform on behalf of the borrowing entity, agreeing to the Privacy Policy and Terms of Service. The Principal must then complete an on-line application ("Application") on behalf of the borrowing entity so the Project will be assessed and the Loan underwritten prior to being listed on and offered through the Groundfloor Platform. Along with the Application, the borrowing entity must agree to a Master Services Agreement, which obligates it to supply truthful information to us in a timely fashion and outlines the process from Application intake to listing a Project on the Groundfloor Platform.

The Application generally requests the following information from the borrowing entity:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Background information about the borrowing entity, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o name and address;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o business organization type;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o jurisdiction and date of formation (and number of years in business);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o names, contact and background information of all Principals; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o whether the borrowing entity (or its Principals) has ever been subject to a bankruptcy, foreclosed on or involved in adverse litigation
(including any formal action on a lien) with respect to any properties under its control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Select historical and financial information about the borrowing entity, as well as experience and historical information about the
Principal and other entities he or she operates:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Information about the Project, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o legal address and a complete description of the property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o description of the project on an "as-completed basis" (meaning reflecting completion of the proposed repairs, renovations,
enhancements, improvements and/or construction);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o identity of any general contractors;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o sources and uses, market data, blueprints, general contractor agreement, and project budget or Draw schedule;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o description of any environmental risks related to the property (fire, soil erosion, etc.);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o description of insurance held on the property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o description of any existing debt or encumbrances on the property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o amount of cash on hand to cover overruns; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o proof of insurance, title, studies, assessments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Details about the financing being requested, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o type of Project (acquisition, acquisition/rehabilitation, new construction/development, refinance, etc.);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o detail of existing capital in the Project, current revenue and primary source(s) of financing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Loan amount and repayment terms requested;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o estimation of the projected after repair value of the Project (and documentation to support that projection); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o projected start and completion dates and date funding is needed.

Borrowers represent and warrant to GRE 1 in the Loan Agreement that none of the disclosures, statements, projections, materials, assertions or other communications made by them or provided to us contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statement contained herein or therein not misleading.

All information in the Application is collected through the Groundfloor Platform electronically and assessed in detail by Groundfloor Finance's underwriting team on our behalf. See "—Our Loans to Borrowers—Evaluation of Project Applications" below.

Once a significant number of Projects financed are identified, GRE 1 will file a PQA to this offering statement, identifying the corresponding series of LROs to be qualified for offering under Regulation A. Once such PQA is duly qualified, GRE 1 will post on the Groundfloor Platform a Project Summary for each Loan to commence offering the corresponding series of LROs.

From time to time, Groundfloor Finance may engage third parties to assist with the identification of developers and/or real estate development projects that may be suitable for financing through the Groundfloor Platform. Any Loans that result from these arrangements will be negotiated on an arms'-length basis and will be subject to standard diligence and underwriting procedures. Groundfloor Finance has not yet engaged any third parties to assist with the identification of developers and/or real estate development projects.

***Loan Advances***

Groundfloor has implemented a program to originate Loans prior to the completion of sales of the corresponding LROs by advancing the amount of funding needed to close the Loan. The program was enacted as a response to the number of series of LROs that were abandoned following qualification due to the Borrower obtaining the needed capital from alternative sources. Pursuant to this program, Groundfloor originates and advances Loans to Borrowers who have self-reported an immediate need for capital. These originations are typically undertaken by Groundfloor Holdings GA, LLC ("Holdings"), a wholly-owned subsidiary of Groundfloor Finance with no assets (other than the Loans that may be advanced from time to time), employees, or other business functions, although there may be instances that Groundfloor Finance or another affiliated entity will originate the advanced Loan.

The capital for these advances comes primarily from the revolving credit facility with Revolver LLC described below and the ISB Note (as defined below), although Groundfloor reserves the right to fund the advances through other arrangements (such as cash on hand, by entering into additional borrowing arrangements and/or by entering into separate arrangements with third-party originators). Once GRE 1 qualifies and fully subscribes a series of LROs that corresponds to an advanced Loan, all or a portion of the proceeds from the sale of the corresponding series of will be used to repay the advanced amount and the advanced Loan is also assigned to GRE 1.

The program specifically works as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Groundfloor Finance underwrites Loans from its pipeline in the ordinary course and consistent with the stated policies and procedures
described in this Offering Circular. See "—How the Groundfloor Platform Operates" and "—Our Loans to Borrowers."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Once a decision on whether to finance a Loan is made and the terms to apply to the Loan, Groundfloor Finance will consider whether
to advance the Loan. Groundfloor will advance money for Loans that have passed underwriting if one of two conditions are present: (1) a
contract exists to purchase the property within 45 days of the Loan being approved from underwriting;
or (2) the property has already been purchased and is in possession of the Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Groundfloor Finance directly, or a subsidiary of Groundfloor (including Holdings), will (on our behalf) originate Loans and
 advance funds to those Borrowers who meet the conditions outlined above. Holdings (or the entity advancing the Loan) will charge the
 same origination fee (and any servicing and administration fees that may become due prior to assignment of the advanced Loan to GRE
 1) that otherwise GRE 1 would collect (if it had originated the Loan in the first instance). Holdings (or the entity advancing the
 Loan) and the Borrower enter into the same Loan Documents that we would otherwise use in the course of originating Loans. Holdings
 (or the entity advancing the Loan) will take out the same lien on the real estate underlying the Project that we would otherwise
 secure at closing. Interest immediately begins to accrue on the amount advanced; however, the interest earned prior to the original
 issue date of the corresponding LROs is not passed to investors. Instead, upon
repayment of the Loan by the Borrower, GRE 1 will retain all of the interest that had accrued on the advanced Loan between the date it
was originated and the original issue date of the corresponding LROs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Holdings (or the entity advancing the Loan) will often originate these advanced Loans before we seek qualification
of the corresponding series of LROs; however, it may also originate Loans at any time during the offering process, including after such
LROs have been qualified and while such LROs are being offered through the Groundfloor Platform.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· LRO holders receive exactly the same rights and benefits, irrespective of whether the underlying Loan was advanced, and the Offering
of each series of LROs proceeds in the ordinary course irrespective of whether (or when) the corresponding Loan has been advanced. The
LROs are issued once the Offering of the series of LROs is fully subscribed with irrevocable funding commitments. Once this occurs with
respect to an advanced Loan, Holdings (or the entity advancing the Loan) will assign or otherwise transfer the Loan (and the related Loan
Documents) to GRE 1. GRE 1, as successor and assign, will assume Holdings' security interest and lien position in the underlying
Loan and Groundfloor Finance will continue to service the Loan and retain any related Company Fees and Expenses in the ordinary course.
We will also modify the Loan Documents at this point, changing the maturity date to match the full term of the LRO (as stated in the corresponding
Project Summary). This ensures that the advanced Loan and the corresponding LROs mature at the same time and investors are entitled to
the full amount of the expected yield.

GRE 1 will not issue any LROs corresponding to any Loan unless the Offering of the corresponding series of LROs is fully subscribed. In this event (or if for any reason we are unable to qualify the corresponding series of LROs or the offering of such is terminated), the advanced Loan will continue to be held by Holdings (or the entity advancing the Loan), which may elect to sell the Loan to a third party, modify it, or continue to service it as is.

Loan advances are typically funded from one or more lines of credit (such as the credit facility with Revolver, LLC) or borrowing arrangements (such as the ISB Note, as defined below) entered into by Groundfloor Finance or one of its subsidiaries. However, there may also be circumstances that we, Groundfloor Finance or one of its subsidiaries could utilize operating capital for these purposes.

In the case of Loans that are advanced prior to qualification of the corresponding series of LROs, Borrowers may begin work on the Project immediately and, by the time the corresponding LROs are sold, substantial work may have been completed. This would effectively reduce the amount of time the LROs may be held, as the Borrower is now closer to its proposed exit than when LROs were first offered and therefore may be able to prepay the Loan. If the Borrower prepays the Loan as a result, you will receive a lower yield than expected on the LROs purchased.

***Lending in Canada***

Groundfloor Finance intends to establish a new Canadian subsidiary ("NewCo Canada") as a single member LLC, where the member / manager is Groundfloor Finance. It will be formed and domiciled in the province of Alberta. NewCo Canada will originate real estate loans in Canada. The loans will be substantially similar to the type of loans originated or purchased by GRE 1. The loans will be underwritten in the same manner described in this prospectus, and the underwriting and origination decisions will be performed by Groundfloor Finance, as manager of NewCo Canada. The loans will be originated in US dollars, meaning that Canadian borrowers will receive funds in US dollars, at the prevailing exchange rate, and they must repay the loan in US dollars, at the prevailing exchange rate. Canadian borrowers may make their own currency hedging arrangements. GRE 1may elect to purchase these loans for its own books. GRE 1, or the Manager on behalf of GRE 1, will then be responsible for loan servicing and administration, as described in this prospectus. See "Description of Securities, General Terms of the LROs—Administration, Service, Collection, and Enforcement of Loan Documents" below. These loans will be purchased at par, which NewCo Canada and GRE 1have determined to be the fair market value of the loans, meaning NewCo Canada will not earn any income from the sale of loans, and all the proceeds of GRE 1's subsequent sale of LROs will go towards offsetting the purchase price. Because the loans will be originated in US dollars, and because all draws and subsequent repayment will be in US dollars, there is no currency risk for GRE 1, and therefore no currency risk for investors who purchase LROs based on loans originated to Canadian borrowers.

***Information Made Available through the Project Summaries***

<u>Pro</u>j<u>ect Summaries</u>. We prepare a Project Summary that is included in the Offering Circular and will be posted on the Groundfloor Platform for every Loan we intend to finance through the issuance and sale of LROs by GRE 1 to investors through the Groundfloor Platform. The information contained in the Project Summary at commencement of the offering of a particular series of LROs, when read together with the remainder of this Offering Circular and the form of LRO Agreement, includes all of the information that we believe to be necessary in order for an investor to make an informed decision as to whether to invest in a particular series of LROs. The Project Summary will remain unchanged over the course of the Offering Period except that, as the offering of a particular series of LROs progresses, the Project Summary will be updated on the Groundfloor Platform to track the number of investors who have committed to purchase LROs to fund the Loan, the amount left to fund the Loan completely and the number of days left in the Offering Period for the specific Project (including any extension). In addition, if a Loan is advanced after the series of LROs corresponding to such loan has been qualified, but before such LROs have been issued, we will notify investors by email within 48 hours of the advance, and update the Project Summary of the advanced Loan on the Groundfloor Platform within the same time period to reflect the status of the Loan. An offering circular supplement will also be filed with the SEC on EDGAR including the revised Project Summary. The Project Summary as posted on the Groundfloor Platform will also be updated to reflect the satisfaction of any of the closing conditions and to notify investors of the commencement of the Withdrawal Period, the suspension (if any) of this Offering Circular, or the abandonment or withdrawal (if any) of the offering of a particular series of LROs. See "—Project Funding and Payment of Expected Yield—Purchase of LROs" below.

We believe that, in order to make an informed investment decision with respect to a particular series of LROs, an investor needs to have access to the Offering Circular and the information that is summarized in the Project Summary for that particular Project. Our goal is to provide this information to investors through a simple and streamlined disclosure process. At the time the Offering commences, the Project Summary for each series of LROs that we offer to investors will include the information illustrated below. The graphic illustrations set forth in Boxes A-I below are for illustration purposes only. The data reflects a "sample" Project and **does not** reflect the terms of any actual Loan (or corresponding series of LROs) that we are offering through the Groundfloor Platform.

*Box A*

![](tm2310287d1_partimg001.jpg)

*Loan Overview (Box A)*. This information informs investors of the basic terms of the Loan as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the name and address of the Project, the name of the Borrower, as the borrowing entity, and of any of its Principal(s);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the purpose of the Loan (acquisition, renovation, new construction, etc.), the lien position of the Loan (first lien or second
lien), and the total amount of the Loan (i.e., the Loan Principal), which corresponds to the aggregate Purchase Amount of the corresponding
series of LROs being offered;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the final letter grade (A through G) resulting from the Grading Algorithm (described below), the fixed annual interest rate assigned
to the Loan, the projected term to maturity, and repayment terms of the Loan; which correspond to the Expected Rate of Return and final
payment date (plus up to an additional five business days for administrative convenience) of the corresponding series of LROs and provides
investors an understanding of whether to expect periodic LRO Payments or a LRO payment in a lump sum (which is typical of a balloon payment).

The overview will also reflect the amount of the Loan remaining to fund (initially reflected as the full Loan Principal), the number of days left in the offering period (initially reflected as 30 days) and the number of investors committed (initially reflected as 0) to purchase the corresponding series of LROs. As previously discussed, these amounts will be updated on the Groundfloor Platform as the offering progresses.

In addition, when viewed through the Groundfloor Platform, an investor can access the following information through hyperlinks (indicated by blue text on the Project Summaries):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the form of LRO Agreement that investors will agree to if they elect to invest in the series of LROs corresponding to the Loan—the
standard form of LRO Agreement applicable to all series of LROs currently being offered—is included in the Offering Circular;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· a map of the location of the Project; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· a PDF copy of the final Offering Circular and/or applicable PQA (via a link to an SEC "Internal Filing Directory").

*Box B*

![](tm2310287d1_partimg002.jpg)

*Financial Overview (Box B)*. The financial overview presents a graphic illustration of the various financial components of the Project individually, and comparatively, as a whole.

First, the financial overview will reflect the projected valuation of the "as-completed" Project, referred to as the "after repair value" or "ARV." Groundfloor Finance relies on the Valuation Report (as defined below) to determine the ARV for a Project. The financial overview will also illustrate the total amount of debt on the Project, including the Loan the Borrower will receive from us (and its ranking), as well as any additional debt the borrowing entity has on the property, such as a first lien loan (when our Loan is in a second lien position) or any second lien loans we may permit on the Project (which is not customary). The illustration in Box B reflects the scenario where our Loan (of $80,000) will be the only debt on the Project, which currently is the most common structure for our financing arrangements.

Box B also reports the loan to ARV ratio, which is calculated by dividing the total amount of debt on the Project (including the Loan from us and any additional debt on the Project) by the ARV (as determined by the Valuation Report) (the "Loan to ARV Ratio"). As discussed in more detail below (see "—Our Loans to Borrowers—Credit Risk and Valuation Assessment—The Grading Algorithm"), the Loan to ARV Ratio is a significant factor in the Grading Algorithm.

The financial overview also reflects the anticipated amount of the total project costs, both in actual value (in terms of dollars) as well as relative to the total amount of debt on the Project (through the presentation of the ratio of loan to total project costs). "Total project costs" means the total amount of money needed to complete the Project, including all amounts borrowed from us or third parties, plus the "skin-in-the-game," which is the amount of the Borrower's money that is tied up in the Project after completion of our Loan, and any other equity contributed to the Project by parties other than the Borrower. (Groundfloor Finance and its affiliates, including GRE 1 do not typically finance Projects with third-party equity.) Under no circumstances will our Loan exceed the total project costs for a Project as set forth in the applicable Project Summary.

The financial overview also reflects the magnitude of the cushion that is built into the Project. For these purposes, cushion means the difference between the total project costs and the ARV. More cushion means there is greater flexibility in the selling price of the property and thus less risk of default on payment of the Loan. The financial overview also reflects the purchase price of the property and the date the property was purchased. If the Loan will cover acquisition costs or if the property will be purchased after commencement of the Offering of the corresponding series of LROs, the data will reflect the projected purchase price and a purchase date that is to be determined. We present data related to total project cost, cushion and the purchase price to provide investors greater insight into the structure of the overall Project contemplated by the Loan we will finance; however, these items are not among the factors considered as part of the Grading Algorithm.

The financial overview also reflects the "skin-in-the-game" (or how much of the Borrower's money that is tied up in the Project after funding the Loan) in terms of actual dollars contributed and the degree to which that commitment covers or extends beyond the original purchase price of the Project. For example, the illustration in Box B shows that the property was acquired for $44,000 in July 2014 and the Borrower is seeking an $80,000 Loan from us to renovate the property. Total project cost is equal to $124,000, which is projected to result in a Project with an ARV of $175,000. The graphics in Box B illustrate that the Borrower (and its Principal) intends to proceed without contributing any additional cash to complete the renovations and that the entire renovation is being carried by our Loan. The Borrower could put more cash to work in addition to simply contributing the property itself, in which case the purchase price value would be less than the value represented by the "skin-in-the-game" bar, indicating that some of the Borrower's capital is going to work on this Project in addition to our Loan. Alternatively, the Borrower could use some of the Loan to offset a portion of the purchase price of the property, works completed, or equity. In the case where purchase price is being offset, the purchase price value would be greater than the value represented by the "skin-in-the- game" bar and the amount of "skin-in-the-game" credited to the Borrower for purposes of the Grading Algorithm would be reduced by an amount corresponding to the offset, resulting in a lower raw score for the Loan (see below under "Description of the Business of GRE 1 and Groundfloor Finance—Our Loans to Borrowers—Credit Risk and Valuation Assessment—The Grading Algorithm—'Skin-in-the-Game'"). Similarly, if a Borrower is offsetting works completed or equity, we are crediting against capital the Borrower has already put into the Project or property appreciation that has occurred since its acquisition, respectively. In each case, we are using a portion of the Loan Proceeds to refinance value that has already been created before Groundfloor originated the Loan. As discussed in more detail below (see "—Our Loans to Borrowers—Credit Risk and Valuation Assessment—The Grading Algorithm"), the amount of skin-in-the-game in relation to the amount of debt on the Project is a factor impacting the Grading Algorithm.

*Box C*

![](tm2310287d1_partimg003.jpg)

*Grading Factors (Box C)*. We use a graphic illustration to reflect how the Project scored on certain of the factors taken into account when determining the final letter grade through the Grading Algorithm. For example, if a specific factor is rated on an 8 point scale, and the specific factor in question for a particular Project was rated at the 5th level, Box C will show a score of 5 for that particular factor. We present this information so that investors can compare factors across Projects with similar grades and isolate and compare key factors that bear on the Grading Algorithm. Generally speaking, the higher the rating, the better the Loan scores.

*Box D*

![](tm2310287d1_partimg004.jpg)

*Valuation Reports (Box D).* We identify the projected value of the Project (typically reflecting the ARV) and the type of Valuation Report received to support that determination. Prior to determining the letter grade and corresponding interest rate we will apply to a Loan, the underwriting team always reviews materials supporting the projected valuation of the Project as reported by the Borrower in its Application (the "Valuation Report"). Groundfloor Finance accepts four basic types of Valuation Reports: a certified independent appraisal, a broker's price opinion (a "BPO"), a Borrower provided appraisal or a list of comparable properties provided by the Borrower (referred to as Borrower provided comps). As discussed in more detail below, not all Valuation Reports are of the same quality or reliability, which is accounted for in the Grading Algorithm and the grade and corresponding interest rate applied to the Loan. (See "—Credit Risk and Valuation Assessment—The Grading Algorithm—Determination of Raw Score—Quality of Valuation Report").

*Box E*

![](tm2310287d1_partimg005.jpg)

*Property Description (Box E)*. The Project Summary also features a Property Description, showing the property on a map (which is a hyperlink when accessed through the Groundfloor Platform), describing the facts of the property (type of structure, size, location, etc.) and briefly detailing the nature of the Project.

*Box F*

![](tm2310287d1_partimg006.jpg)

*Property Photos (Box F).* We may also include photographs of the property, floor plans, architectural drawings and renderings in Box F. Items of this nature are not required as part of the due diligence and underwriting process and are not material to our decision to fund a Loan. Copies of each picture included on the Project Summaries through the Groundfloor Platform are also included in this Offering Circular, beginning on page PS-1. We include them on the Project Summaries, if available, for informational purposes only. We believe information of this nature may be of interest to visitors to the Groundfloor Platform, as it helps them to visualize and to distinguish different Projects.

*Box G*

![](tm2310287d1_partimg007.jpg)

*Miscellaneous Information (Box G)*. Each Project Summary also identifies the investment risks specific to the Project and identifies any financing conditions that must be satisfied before the Loan will be funded (typically limited only to receipt of a clean title search; it being customary to obtain title insurance at closing of the Loan). The Project Summary also includes information about fees we charge Borrowers, certain cautionary language and a hyperlink (which is active on the Groundfloor Platform) to this Offering Circular and/or the appropriate PQA or supplement covering the corresponding LRO (via a link to a SEC "Internal Filing Directory").

*Box H*

![](tm2310287d1_partimg008.jpg)

*Borrower Summary (Box H)*. Each Project Summary also presents information designed to provide investors certain historical and financial information about the Borrower, as well as its Principal(s) (by reflecting certain historical information about other real estate development businesses the Principal operates). This information, much of which is self-reported and not verified by us or by Groundfloor Finance in the course of its due diligence and underwriting process, is not designed to provide comprehensive disclosure about the Borrower or its Principals. See "Our Loans to Borrowers—Due Diligence and Authentication—Unverified Information" below.

As illustrated in Box H, we provide:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· <u>Information about Borrower</u>:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o *Formation*. We include the name and the date of formation of the borrowing entity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o *Selected Financial Data.* To provide a general snapshot of the financial position of the Borrower, we report the market value
of all of the Borrower's owned properties (as the "value of properties") and the Borrower's then current long
and short term debt (as the "total debt"), each as of the most recently completed quarter (i.e., December 31, 2022).
We also report the number of projects that are available for sale or rental (as the "unsold inventory") and the number of
projects that have been available for sale or rental for six months or more (as the "aged inventory"), each as of the most
recently completed quarter. The value of the unsold inventory as well as any outstanding debt thereon will be reflected in the amounts
reported under value of properties and total debt for the quarter. However, the value of properties and total debt may include amounts
attributable to other properties owned by the Borrower. We also report the following data, in each case with respect to the prior calendar
year (i.e., 2021):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■ the number of real estate projects the borrowing entity successfully completed during the year (through the Groundfloor Platform or
otherwise)—When we refer to a project being "successfully completed," we mean that the property has either been sold
or rent stabilized (it has been rented for at least 75% of the time since the reported completion date);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■ the total revenue earned by the borrowing entity from real estate projects during the year; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;■ the gross margin for the year. Expressed as a percentage, gross margin reflects the excess of total revenue earned by the Borrower
during the year over total project costs for the year. For example, with self-reported revenue of $3,200,000, a self-reported gross margin
of 32% indicates total project costs of about $2,176,000 (with excess revenue of about $1,024,000, or 32% of $3, 200,000). A higher gross
margin suggests there is more cash flowing from projects, which should allow for more cash available to pay down debt.

None of this information reflects the individual financial position of the Principal or that of any other entities that are operated by the Principal. All of this information is self-reported by the Borrower and none of it is verified by GRE 1 or by Groundfloor Finance. See "Our Loans to Borrowers—Due Diligence and Authentication—Unverified Information" below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· <u>Information about the Principal</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o *Focus*. We include the name of the individual and his or her "focus," meaning the type of projects that the Principal
has historically developed. (Information with respect to the Principal's focus is self-reported by the Borrower and is not verified
by us or by Groundfloor Finance.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o *Groundfloor History*. We present information about the performance on loans the Principal has financed through the Groundfloor
Platform. We collect our internal data with respect to all loans we have provided to any entity operated by the Principal (including the
Borrower under the Loan) since Groundfloor Finance began operations and report: (1) the total number of loans funded, (2) the total number of loans that
have been repaid, and (3) performance record with respect to on-time repayment of the loans (reflecting the percentage of the loans
that were repaid on time).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o *Historical Averages*. We also present information reflecting recent past experience of the Principal in the real estate development
industry. We present the average number of real estate development projects that the Principal has successfully completed (either through
the borrowing entity or any other entity he or she operates) over a certain period of time (Box H reflects a three-year reporting period).
We also report the average length of time it took to complete those projects over the same reporting period, the average amount of revenue
earned (in terms of sales price or rental income on a per project basis), and the average total project costs (on a per project basis).
All of this information is self-reported by the Borrower and none of it is independently verified by us or by Groundfloor Finance.

<u>Materials Not Provided to Investors</u>. As discussed in more detail below, when making a determination as to whether to underwrite a particular Loan, Groundfloor Finance (acting on our behalf) considers the information provided by the Borrower with its Application, such as appraisals or comps, zoning applications, permits, environmental studies, proof of insurance, project assessment reports, budget/Draw schedule and material agreements with any general contractors or subcontractors, etc. In the course of its diligence, Groundfloor Finance also collects additional information, such as an independently commissioned appraisal or BPO, automated valuation models, business assurance reports, credit score reports, etc., which are used to assess the Project and proposed Loan and to verify the information provided by the Borrower. Since all of the Loans offered for financing through the Groundfloor Platform satisfy the basic qualifications and financing requirements, investors are not provided access to all of the materials considered in the due diligence and underwriting process. We believe providing access to all of this information would prove overwhelming and confusing to investors. In addition, although financial information (such as balance sheet information) and/or tax returns may be received over the course of the Application and due diligence and underwriting process, we do not provide these materials to investors. These materials may be unreliable and, in many cases do not provide an accurate or complete picture of the financial condition of the Borrower, its Principals or any affiliated entities, such as subsidiaries, parents, or sister companies. This information is not considered over the course of our due diligence and underwriting process or when determining the final letter grade set through the Grading Algorithm. We do not rely on these materials (even when made available) to verify the limited financial information presented in the Project Summaries (discussed above) because these materials have not been independently verified (most financial materials received have not been reviewed or audited and the tax returns prepared without any accountant oversight). In addition, the materials provided may not track the data we report in the Project Summaries. For example, the financial information may cover only some of the entities controlled by the Principal, it may exclude the borrowing entity or may not cover the reporting period we are targeting.

We will not disclose the contact information, financial information (other than the limited financial data reflected on the Project Summaries discussed above), or credit score of the Principals or any other information that may be protected by privacy laws.

*Box I*

![](tm2310287d1_partimg009.jpg)

*Loan Comparison Tool (Box I)*. Investors may access a Loan Comparison Tool through the Groundfloor Platform. The Loan Comparison Tool allows investors to easily compare Projects offered under Regulation A through the Groundfloor Platform side by side, relative to multiple data points. To activate the tool, an investor selects the Projects they want to compare from the general landing page that identifies the Projects that are being offered for investment through the Groundfloor Platform (which may include those that are offered by other subsidiaries of Groundfloor Finance). Then, the investor clicks the Loan Comparison Tool button. A modal then appears that pulls key data about the selected Projects from their corresponding Project Summaries and presents that information in a tabular format (as represented in Box I). The Loan Comparison Tool does not include any of the information reflected in Box H above.

***Investor Onboarding***

You must register on the Groundfloor Platform and create a Groundfloor account before you can purchase any LROs. If you are a natural person, you must be at least 18 years of age and a U.S. resident. You may establish a separate account to make investments from a self-directed IRA or 401(k) account. When registering, you must agree to the Groundfloor Platform terms of service (the "Terms of Service"), including consent to receipt of disclosures electronically, and the Groundfloor Platform privacy policy (the "Privacy Policy"). To create an account, you must provide your name, address, and email address. An entity must provide the name of the entity, its address, and the name and email address of a contact person.

Before you may purchase one or more series of LROs, you must provide your Social Security number or taxpayer identification number and must consent to any applicable tax withholding statements. You must also agree to the rules, limitations, processes and procedures for originating, servicing and collecting Loans and for purchasing LROs through the Groundfloor Platform. These provisions are collectively contained in the Investor Agreement and the terms and conditions attached thereto (the "Terms and Conditions"), the Terms of Service and the Privacy Policy. You must also agree to the terms of the LRO Agreement corresponding to the particular Loan and the series of LROs you want to purchase when making a commitment to purchase such securities. (We refer to the Investor Agreement, including its Terms and Conditions, the Terms of Service, Privacy Statement and any LRO Agreement you may enter into as the "Investment Documents.") We advise each investor to read all of the applicable Investment Documents before purchasing any LROs.

In addition, in connection with purchasing LROs, you must represent that you reside in a state where the LROs are registered or qualified, you satisfy applicable investor suitability requirements, and you have received the Offering Circular, which includes a discussion of the risks associated with the investment in the LROs under the "Risk Factors" section, as well as the PQA covering the LROs being purchased and all other applicable supplements and PQAs to the Offering Statement.

***Investor FBO Accounts***

You must register on the Groundfloor Platform and create a funding account maintained on the Groundfloor Platform before you can purchase any LROs. This funding account is a non-interest bearing demand deposit pooled account currently established at the FBO Servicer, Wells Fargo, "for the benefit of" all Groundfloor Investors (the "Groundfloor Investor FBO Account"). As discussed in more detail below, during the closing process, we also utilize a separate non-interest bearing demand deposit pooled account established "for the benefit of" purchasers of LROs to be issued by GRE 1 (the "GRE 1 Investor FBO Account"). Currently, Wells Fargo acts as the FBO Servicer for the Groundfloor Investor FBO Account and for the GRE 1 Investor FBO Account (collectively, the "Investor FBO Accounts"). We or Groundfloor Finance may change the identity of the FBO Service Provider where any of the Investor FBO Accounts are maintained at any time without prior notice to investors (we will post the name and address of the institution where we maintain the Investor FBO Accounts on the Groundfloor Platform and notify investors by email in the event the institution where any Investor FBO Account is maintained is changed). Investors have no direct relationship with the FBO Servicer in connection with the Investor FBO Accounts. Groundfloor Finance is the owner of the Groundfloor Investor FBO Account and GRE 1 is the owner of the GRE Investor FBO Account. However, each entity disclaims any economic interest in the assets in either of the Investor FBO Accounts and also provides that each investor disclaims any right, title or interest in the assets of any other investor in either Investor FBO Account.

Each Investor FBO Account is FDIC-insured on a "pass through" basis to the individual investors, subject to applicable limits. This means that each investor's balance is protected by FDIC insurance up to the limits established by the FDIC. Other funds that the investor has on deposit with the FBO Servicer, for example, may count against any applicable FDIC insurance limits. While investor funds are comingled with funds from other investors, the funds from each investor are separately accounted for on separate ledgers maintained for GRE 1 and for Groundfloor Finance. None of GRE 1's corporate funds, Groundfloor's corporate funds, or any corporate funds of any of our affiliated companies are ever held or commingled with the assets of investors in the separate Investor FBO Accounts. There are no restrictions on funds held in the funding account, and we, Groundfloor Finance and its affiliated companies disclaim any economic interest in such funds.

Each investor may transfer funds into its Groundfloor account by authorizing an electronic transfer using the ACH network from the investor's designated and verified bank account (or other means that may be permitted by the Funds Transfer Agent (as defined below)) to its funding account. Your pro rata share of any LRO Payments are also deposited directly into your funding account. Currently, Groundfloor Finance has contracted with Dwolla, Inc. to be the funds transfer intermediary among investors, the Groundfloor Platform, and accounts controlled by it any by GRE 1 (the "Funds Transfer Agent"). Groundfloor may change the identity of the Funds Transfer Agent at any time without prior notice to investors. (See "—Project Funding and Payment of Expected Yield—Purchase of LROs" below.)

Each investor can view its cash positions in their funding account (i.e., both Investor FBO Accounts), through an "Investor Dashboard" maintained on the Groundfloor Platform. These website features are effectively virtual sub-accounts. These recordkeeping sub-accounts are purely administrative and reflect balances and transactions concerning the funds in each of the Investor FBO Accounts. The Investor Dashboard allows investors to track and report funds committed to purchase LROs, as well as payments received from us (and other affiliated companies) related to LROs previously purchased, and to withdraw non-binding commitments (prior to expiration of the applicable Withdrawal Period) or uncommitted funds from its Groundfloor account.

Funds of an investor stay in the Groundfloor Investor FBO Account indefinitely unless the investor takes steps to transfer non-irrevocably committed funds out of its funding account. Such funds may include:

· funds in the investor's sub-account never committed to purchase LROs;

· funds committed to the purchase of LROs (before they become irrevocably committed to purchase LROs); or

· payments received related to LROs previously purchased.

Only funds irrevocably committed to purchase LROs are held in the GRE 1 Investor FBO Account.

An investor must transfer funds held in its funding account to its own bank account to utilize the funds in any way other than investment in LROs. Upon request, Groundfloor will cause the Funds Transfer Agent to transfer funds in the Investor FBO Account to an investor's verified bank account by ACH transfer, provided that such funds are not irrevocably committed to the purchase of LROs. (See "Project Funding and Payment of Expected Yield—Purchase of LROs.") An investor may transfer funds out of its Groundfloor account at any time (provided that such funds are not irrevocably committed to the purchase of LROs). Investors may withdraw non-binding commitments at any time before the expiration of the Withdrawal Period by accessing their Investor Dashboard and selecting "request withdrawal". Funds withdrawn before the expiration of the Withdrawal Period will be released and made available in the investor's funding account typically within 48 hours. Investors may withdraw uncommitted funds by accessing their Investor Dashboard on the Groundfloor Platform and selecting the option to move uncommitted funds held in the funding account back to their personal bank account. This transfer typically takes three to five business days to complete.

***Account Servicing***

Groundfloor Finance handles payments to and from the Borrower and payments on LROs to our investors on our behalf. Heavy transaction volume into and out of the various accounts it maintains could increase the risk of bookkeeping and recordkeeping errors. Because payments flow through various financial intermediaries (such as the Funds Transfer Agent and the FBO Servicer), there is an auditable trail of money movement, and, in the case of a bookkeeping error, we believe Groundfloor Finance will be able to recreate transaction histories in order to correct the error. Groundfloor Finance maintains a sub-ledger with respect to each of our accounts that records all movements of funds into and out of each account, which is periodically reconciled with records of bank transaction history, as well as records on the Groundfloor Platform. Groundfloor performs nightly backups of its entire system, including transaction records of the Funds Transfer Agent and FBO account records.

**Our Loans to Borrowers**

***Evaluation of Project Applications***

GRE 1 relies on Groundfloor Finance to make underwriting decisions with respect to the Loans that are being funded through the sale of LROs. There is no guarantee that financing will be made available to Borrowers who apply for Loans through the Groundfloor Platform. Obtaining a "Quick Rate Quote" does not obligate us or Groundfloor Finance to proceed further with any Borrower. Groundfloor may decline an Application and refuse to finance a particular Project in its sole discretion and for any or no reason.

Completed Applications must first pass through Groundfloor's due diligence and underwriting review process. The underwriting review process is similar to what a bank might undertake in determining whether to provide a home equity loan. First, Groundfloor Finance undertakes a preliminary assessment of an Application to confirm that it does not trigger any automatic disqualification conditions and, if not, to determine whether it clears due diligence procedures and satisfies the basic financing requirements. See "— Preliminary Assessment" below. Groundfloor conducts additional analysis on those Applications that pass the preliminary assessment using the proprietary Grading Algorithm to set the minimum pricing terms (interest rate, maturity, repayment schedule, etc.) that we will accept. See "—Credit Risk and Valuation Assessment—The Grading Algorithm" below.

***Preliminary Assessment***

Designed to identify those Projects that meet basic qualifications and financing requirements, the preliminary assessment involves a general review of the information and materials received with the Application as well as supplemental materials Groundfloor may obtain in the course of diligence.

<u>Automatic Disqualification</u>. Currently, Applications are automatically disqualified if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the property is owner occupied (owner-occupied residential projects are not financed and Loans will not finance any personal, family,
or household purpose. All Loans are commercial in nature);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· one or more business assurance reports or public records obtained and reviewed in the course of diligence identifies, that, within
the past 12 months of the date of the Application, either the Borrower or any of its Principals:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o has filed for bankruptcy,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o has had an adverse legal judgment imposed against any property under his/her/its control, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o has any property currently in foreclosure, subject to a foreclosure proceeding or foreclosed upon, or has had a lien that is in the
process of being, or has been, acted upon in a court or other governmental agency;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the borrowing entity is not a U.S. or Canadian domiciled entity, organized in one of the 50 states or 10 provinces and three territories;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· no Principal of the Borrower is domiciled and resident in the U.S. or Canada;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· any Principal of the Borrower is younger than 18 years of age;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· any Principal of the Borrower has been convicted of a felony involving fraud, deceit or dishonesty within five years of the date of
the Application, including, without limitation, racketeering, forgery, embezzlement, obtaining money under false pretenses, larceny, or
conspiracy to defraud;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· any Principal of the Borrower has a FICO credit score of less than 500; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· the proposed loan term is longer than five years.

Where a Borrower is owned or operated by more than one Principal, theses assessments are undertaken with respect to each individual to confirm there are not present any factors that would trigger automatic disqualification of the Application.

<u>The Gradin</u>g <u>Algorithm</u>. After an Application clears the automatic disqualification criteria, the Application is processed through Groundfloor Finance's proprietary credit risk and valuation assessment (which we refer to as the Grading Algorithm) to determine the letter grade and interest rate that will be applied to the Loan. Underwriting sets the terms of the Loan (term, letter grade, interest rate to be applied, repayment schedule, etc.) based off of this Grading Algorithm. See "—Credit Risk and Valuation Assessment—the Grading Algorithm" below.

<u>Underwritin</u>g <u>Criteria and Internal Policies</u>. Finally, Groundfloor Finances considers whether to approve the Application in light of certain underwriting criteria and internal operational policies. These policies reflect Groundfloor's business objectives in light of the needs of the marketplace created on the Groundfloor Platform at a given time and do not impact, and are not related to, the determination of the letter grade or interest rate applied to a particular Loan. Groundfloor Finance (as agent for GRE 1 in certain circumstances) will underwrite any Loan that: (1) is not automatically disqualified; (2) for which the Borrower has a completed Loan Application; (3) is in a jurisdiction in which Groundfloor Finance has decided to lend; (4) is in a geography in which Groundfloor Finance is not over-concentrated; (5) is a property that is desirable to the local market; and (6) for which the Borrower has accepted what Groundfloor Finance views to be appropriate leverage.

Geographic concentration is dependent on the size of the local market. For example, having 10 outstanding Loans in a town of 50,000 may be deemed over concentrated, but having 50 outstanding loans in a major metropolitan area may be deemed acceptable. Likewise, a given property's desirability changes with the local market. An urban starter house may be highly desirable in a fast growing city, but a larger suburban home may be better suited in a more mature locale. Groundfloor Finance's idea of acceptable market concentration and property desirability changes with its assessment of local and macroeconomic conditions. In all Loans, Groundfloor Finance will urge Borrower's to accept lower leverage. This increases the personal expenses of the Borrowers, as they must put their own capital to use. Because not every Borrower accepts this request, Groundfloor Finance will prioritize underwriting and taking to market loans where the Borrower has accepted lower leverage.

The Groundfloor Finance underwriting team meets regularly to assess the current Loan portfolio and pipeline, to make adjustments, as necessary, to underwriting decisions. The members of the underwriting team currently include Groundfloor Finance's CEO, Brian Dally; Executive Vice President, Legal and Regulatory, Nick Bhargava; Director of Underwriting, Patrick Donoghue; and Head of Risk Management, Rich Pulido.

***Due Diligence and Authentication***

Borrowers must represent and warrant to us in the Loan Agreement that none of the disclosures, statements, projections, materials, assertions or other communications made by them or provided to us contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statement contained herein or therein not misleading. Notwithstanding these assurances, through the use of commercially reasonable efforts, Groundfloor Finances take steps on our behalf to verify and authenticate certain information provided and representations made by Borrowers. Licensed attorneys and/or real estate professionals are engaged to assist in the due diligence and closing process. For every Loan underwritten, Groundfloor Finance obtains a completed Application and a signed Master Services Agreement from the Borrower and reviews the materials provided by the Borrower. Various data vendors such as Zillow, CoreLogic, Trulia, Lexis, CDI Credit, Dun & Bradstreet, etc., and other public records are used to verify the information provided , as well as the accuracy of the representations made, by the Borrower (and its Principals) as well as the actual property details. Groundfloor Finance conducts credit, criminal background, bankruptcy and legal judgment searches on the Borrower and its Principals. It obtains business assurance reports and searches state and local records to determine whether an Application triggers any of the automatic disqualification criteria described above. Groundfloor Finance also assesses whether the Borrower or its Principals have any criminal convictions, federal tax liens, judgments, or other encumbrances and have not been party to any adverse litigation relating to their projects or properties. It checks state and local records to verify how long the Borrower has been in business and whether it is in good standing and confirms that the Borrower is actually in possession of the property and the extent to which it has been encumbered. Groundfloor also may obtain proof of insurance and marketability assessments from the Borrower when environmental concerns arise.

Prior to closing, Groundfloor Finance will review a budget/Draw schedule (unless the Loan is for $50,000 or less or when an amount greater than $50,000 is needed for the acquisition of a property) and, at or in connection with closing, obtain evidence of a satisfactory title search and corresponding title insurance on the property covered by the Loans. If we are financing a second lien Loan, the Borrower may provide the results of a title search performed, and title insurance obtained, by the first lienholder within a month of the submitted Application in lieu of performing a separate title search and obtaining title insurance. Decisions as to whether additional information may be sought are made by Groundfloor during the course of its underwriting process.

<u>Valuation Reports</u>. A Valuation Report for each Project is always reviewed prior to determining the letter grade and corresponding interest rate to be applied to a Loan. In the case of a Loan to finance acquisition and/or reconstruction (which is a majority of our Loans), the Valuation Report will reflect an estimate of the projected ARV of the Project. The Valuation Report reflects the projected value of the land if the Loan is to finance ground-up construction. As discussed in more detail below, the valuation of the Project weighs heavily in the Grading Algorithm and the determination of the final letter grade (and thus the minimum interest rate) assigned to a particular Loan. As such, during the course of its underwriting process Groundfloor carefully reviews each Valuation Report received. Groundfloor may refuse to accept a Valuation Report that it finds unsatisfactory, inaccurate or unreliable, in which case, we will not consider financing the related Loan until the deficiencies are remedied or a new Valuation Report is received. The evidence used to calculate the ARV for a given Loan may be made up of a composite of different Valuation Reports of the same type at the discretion of the underwriters. For example, ARV may be determined by utilizing a composite of two or more BPOs, if available. We will not use composites from different types of Valuation Reports.

For Loans under $250,000, Borrowers may choose the type of Valuation Report they want considered in the underwriting process. Groundfloor may commission (at the Borrower's expense) a certified independent appraisal or a BPO on the Project or the Borrower may provide a Borrower provided appraisal or a collection of comparable property listings (or "comps"); however, Groundfloor will always commission a certified independent appraisal for Loans of $250,000 or more.

<u>Reliance on Borrower Provided Comps</u>. Due to the costs associated with the preparation of a certified independent appraisal or a BPO, Borrowers often elect to provide a list of comparable properties to support the projected ARV of a Project. These types of Valuation Reports are viewed as the lowest quality and least reliable of the four types of Valuation Reports accepted. The Grading Algorithm factors in the increased risk associated with these types of Valuation Reports. However, in light of the significance placed on the ARV in determining the letter grade and minimum interest rate applied to the Loan, Groundfloor Finance has established the following set of conditions that must always be satisfied when a Borrower elects to support its Application with Borrower provided comps.

<u>Requirements for Use of Borrower Provided Comps</u>. Borrowers must supply information with respect to no less than three comparable properties (although more than three comps will be accepted) to support the projected ARV claimed by the Borrower. With respect to each comparable property received, Groundfloor first locates the listing of that comparable property from a Multiple Listing Service (or "MLS"), which is a kind of bulletin board that identifies recent local real estate listings. It uses the MLS listing to confirm that the information presented by the Borrower is accurate (i.e., it has not been altered). If the comp information provided by the Borrower is different from what Groundfloor finds in the MLS listing, Groundfloor will not consider financing the related Loan until the inaccuracies are corrected or the Borrower provides Groundfloor with a new comparable property that satisfies our criteria (or a more reliable form of Valuation Report with respect to the Project under consideration).

In limited circumstances, Borrowers may rely on a comparable property for which there is no MLS listing, which can be the case if the comparable property has not been recently listed for sale. In this event, Groundfloor utilizes an online valuation tool called an automated valuation model (or "AVM") to produce a report which is used to verify the comp. The AVM report is a tool often used by banks and other lending institutions in the course of their underwriting procedures. It provides a calculated estimate of a probable selling price of a residential property, even when a home is not for sale, through the analysis of public record data combined with a computerized algorithm. Groundfloor currently obtains AVM reports from Red Bell Real Estate and Clear Capital, but may change vendors at any time without prior notice to investors. Groundfloor uses the AVM report in much the same way as it uses the MLS listing, inasmuch as, if the information provided by the Borrower is inconsistent with respect to the information in the AVM report, Groundfloor will not consider financing the related Loan based off of the flawed information.

Once the information provided by the Borrower with respect to the comparable property has been confirmed through the MLS listing or the AVM report, as the case may be, the comparable property must also:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· be representative of the Project—this means that the comparable property must be of the same scope
as the Project on an as-completed basis. For instance, if as-completed, the Project will be a three bedroom, two bath, single-family residence,
on a half-acre lot, without any special features (like a multi-car garage, in-ground swimming pool, etc.), then the comparable property
generally must be substantially similar to those characteristics;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· be located in the same zip code or, only to the extent available, the same school district as the Project; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· reflect a value not less than 85% of the ARV of the Project as reported by the Borrower. For instance, if the ARV of the Project is
estimated to be $100,000, the MLS listing or the AVM report, as the case may be, for the comparable property must reflect a value of $85,000
or more. Groundfloor would not accept a comparable with less than $85,000 to support the valuation of the Project at an ARV of $100,000.

If any of these conditions are not satisfied, Groundfloor will reject the Application, and not consider financing the Loan until the Borrower provides a new comparable property (that satisfies the criteria) or Groundfloor obtains another form of Valuation Report.

<u>Reliabilit</u>y <u>of Information</u>. When undertaking its diligence, Groundfloor strives to source data from the most reputable and reliable vendors and resources, however, this data may not always be accurate or dependable. For example, Zillow and AVM vendors determine their estimated property valuations through statistical analysis of historical data and current market information. There may be errors in the underlying data used in the calculation of these estimates, which could compromise the reported property valuation. Further, in addition to the risks discussed above specifically with respect to Borrower provided comps, the reliability of the data contained in the Valuation Reports (and any resources used to judge those reports) depends, in part, on the methods used to collect the data, the expertise of the third party that prepared the report, as well as the appropriateness of the valuation approaches and underlying assumptions that have been used to reach the conclusions presented. Although the Valuation Reports received (other than Borrower provided comps) typically are prepared by real estate professionals who are familiar with the market area of the subject Project, they may not reflect the actual value of a particular project. Only market forces will dictate the ultimate value of any real property.

Although Groundfloor uses various valuation resources to provide a backstop comparison to the Borrower provided comps as part of its due diligence process, these typically report the *listing price* or estimated *market value*, as opposed to the proposed *ARV* typically captured by a Valuation Report. As a result, none of those valuation resources offer a direct comparison. Groundfloor's ability to access the reports to backstop the Borrower provided comp can be limited, as some MLS systems restrict access to licensed real estate brokers and Groundfloor must pay additional fees for AVM reports. There are also increased risks with certain valuation resources in that there could be flaws in the mathematical model being implemented. For instance, the model may depend on unreliable or inaccurate data, or fail to test results against other valuation models or actual sales data in the particular market. Care must also be taken to select a vendor that offers tools that are better suited to certain kinds of lending. For example, unlike our current vendor, CoreLogic, which primarily delivers specific valuation data, other AVM vendors, like Desktop Underwriter®, provide additional services, such as document management and benchmarking against federal loan data, which may alter the context of the report.

The Valuation Reports and any AVMs Groundfloor may obtain are generally prepared solely for its use in connection with our Loan underwriting process, so we do not provide them to investors. Neither we nor Groundfloor Finance (or its affiliated companies) play any role in the preparation of any valuation resources or any other materials provided by the Borrower that may be referenced in a Project Summary, and, while we view the data contained in a Valuation Report, MLS listing, AVM report or other valuation resource as helpful, we do not use these materials as the sole basis for a funding decision.

<u>Unverified Information.</u> Other than as discussed above, neither we nor Groundfloor independently verifies the information provided by Borrowers, and while, in connection with the Loan Agreement, Borrowers represent that any information they provide to us is accurate, such information may nevertheless be inaccurate or incomplete. For example, there is no independent verification of the information about the financial condition and past business experience of the Borrower and business experience of its Principals, including much of the data contained in the Borrower Summary (Box H) of the Project Summary, the proposed costs of a given construction project or the capabilities, and the experience of any contractors or sub-contractors. Further, the information the Borrowers supply may be inaccurate or intentionally false. If information provided by Borrowers turns out to be false or misleading, you may lose part or all of the Purchase Amount you pay for a LRO. In general, information available on the Groundfloor Platform and in this Offering Circular with respect to the LROs being offered hereby is subject to Rule 10b-5 of the Exchange Act and to the liability provisions of the Securities Act. Potential investors should note that on occasion courts have taken the position that plaintiffs who have failed to exercise adequate caution in analyzing the risks associated with reliance upon unverified information may be precluded from asserting a claim for misrepresentation. Although we do not believe this would impact our overall liability under Rule 10b-5 of the Exchange Act and the liability provisions of the Securities Act for information provided to you in connection with this Offering, we advise you that your recourse may be limited in the event information that is self-reported and not independently verified turns out to be false or misleading.

***Credit Risk and Valuation Assessment—the Grading Algorithm***

Once Projects pass the preliminary assessment and thus meet the basic qualifications and financing requirements to be funded through the Groundfloor Platform, 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 we 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. In general:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **A** | **B** | **C** | **D** | **E** | **F** | **G** |
| 5.5% | 7.0% | 8.5% | 10% | 13% | 14.5% | 17% |

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Each letter grade corresponds to the minimum fixed interest rate we will offer to a Borrower, subject to applicable law, with respect to a particular Project and the corresponding Loan. At this time, the standard annual fixed interest rates for each letter grade are as follows:

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| | |
|:---|:---|
| **A** | 5.0% |
| **B** | 6.0% |
| **C** | 8.0% |
| **D** | 9.0% |
| **E** | 12.0% |
| **F** | 14.0% |
| **G** | 15.0% |

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The interest rates for a given letter grade represent the floor, or minimum amount, we will offer to a Borrower with respect to a particular Loan, subject to applicable law. If permitted by law, we may agree with a Borrower to increase the actual interest rate that will be paid for a particular Loan to make it more marketable and to help ensure that the Project receives funding. Under no circumstances will we decrease the interest rate charged for a Loan with a given letter grade unless otherwise required to do so by law. If a decrease is required by law, we may elect not to fund the Loan. If we do elect to proceed with the Loan at a lower interest rate, we will notify potential investors that the interest rate is lower than would typically be the case for a Loan of that quality.

<u>The Gradin</u>g <u>Algorithm</u>. The Grading Algorithm was developed by Groundfloor's management team in consultation with outside advisors in light of the general type of residential real estate projects currently financed through the Groundfloor Platform. The algorithm applies a two-step proprietary mathematical formula. Groundfloor assigns a scale to each factor. The higher a Project rates with respect to a particular factor, the better the Loan scores. The higher the score, the lower the interest rate we offered on the Loan.

Representing a quantifiable assessment of the risk profile of a given Project, the Grading Algorithm helps compare and contrast the relative risks of certain quantifiable characteristics across properties. The Grading Algorithm determines a proposed base-line interest rate which reflects the given risk profile of a Project when it is underwritten. The lower the risk profile, the lower the interest rate we will agree to with respect to a particular Loan.

The Grading Algorithm factors in the following indicators that take into account (i) the valuation and strength of a particular Project and (ii) the experience and risk profile of the Borrower:

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| | | | |
|:---|:---|:---|:---|
| **Valuation and Strength of Project** | **Valuation and Strength of Project** | **Experience and Risk Profile of Borrower** | **Experience and Risk Profile of Borrower** |
| · | the Loan to ARV Ratio of the Loan, | · | the experience of the Principal as well as the borrowing entity, |
| · | the quality of the Valuation Report provided to us (supporting the determination of the Loan to ARV Ratio), | · | the Principal's commitment to real estate development, |
| · | the nature of the security interest (first lien or second lien) we obtain for the Loan, and | · | the amount of "skin-in-the-game" committed to the Project, and |
| · | the location of the Project. | · | the credit quality of the Principal(s). |

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As stated above, the Loan to ARV Ratio for the purposes of the Offering is determined by dividing the total amount of debt on the Project (including the Loan from us and any additional debt on the Project) by the ARV (as determined by the Valuation Report). For instance, the Loan to ARV Ratio for a $100,000 loan would be 10% for a property with a $1 million ARV but it would be 50% for a $500,000 ARV.

<u>Determination of Raw Score</u>. First, Groundfloor uses a proprietary mathematical formula to rank the Projects on a scale of 0-100, resulting in a raw score for each Loan we propose to finance. The raw score is determined utilizing a weighted scale that takes into account, to varying degrees, the factors that impact the valuation and strength of the Project (such as the quality of the Valuation Report and the location of the Project) as well as those that reflect the experience and risk profile of the Borrower and its Principals. Each of the factors used to calculate the raw score are described in more detail below in order of their ranking based on weight, from highest weighted (most important) to lowest weighted (least important).

*Quality of Valuation Report* – As discussed in more detail below, the Loan to ARV Ratio represents a significant factor in determining the final letter grade for each Loan. Groundfloor obtains one of four different kinds of Valuation Reports with respect to each Project which is used to calculate the Loan to ARV Ratio; however, not all Valuation Reports are of the same quality or reliability. The reliability of the data contained in those reports depends, in part, on the methods used to collect the data, the expertise of the third party that prepared the report, if any, as well as the appropriateness of the valuation approaches and underlying assumptions that have been used to reach the conclusions presented. For instance, a certified independent appraisal is a report that is prepared by a certified appraiser, who is subject to various professional standards. The appraiser's report has set criteria, and the appraiser will look at specific property characteristics to determine a valuation, adjusted for local market conditions, etc. Compare this with a BPO, which is a report, with no fixed criteria, but which generally assesses a property's value by comparing it against several similar properties in the same market. The BPO may be further adjusted by a documented walk-through of the property. This report is prepared by a licensed realtor in the same jurisdiction as the property, but is generally considered to be less accurate than a report from a certified appraiser. Still, a BPO is generally a more accurate assessment of a property's value than comparable property information because the realtor preparing the report usually has local market expertise and, if not directly familiar with the property in question, is usually familiar with the comparable properties used in the BPO (for example, the realtor may have listed, bought, or sold one of the comparable properties).

The quality of the Valuation Report is assessed on a four-point scale as follows:

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| | |
|:---|:---|
| **Type of Report – Score**<br> (with description) | **Characteristics** |
| **Certified Independent Appraisal – 4** | Highest quality. |
| (This is an independent appraisal that is prepared by a certified appraiser. It is exclusively commissioned to evaluate the Project associated with the specific Application. It is recently prepared (within one month) and is delivered directly to us by the appraiser.) | Most expensive and time consuming to prepare. Prepared by a licensed or certified appraiser. |
| **Broker's Price Opinion – 3** | Good quality. |
| (A BPO is a report that is prepared by a licensed realtor. The realtor generally compares the property to several similar properties in the local market and may make further adjustments based on a site visit or walk-through. It is exclusively commissioned to evaluate the Project associated with the specific Application. It is recently prepared (within two months) and is typically delivered directly to us by the realtor.) | Cheaper and faster to prepare.<br> Prepared by a licensed realtor with local market knowledge. |
| **Borrower Provided Appraisal – 2** | Good quality. Previously prepared. |
| (This is an appraisal that the Borrower commissioned on the property at some point in the past six months prior to the Application date and has on hand. While the appraiser is still subject to the customary professional standards, the appraisal is not commissioned for purposes of our Loan and it may not be as recent, thus the valuation will be less current, and there may be greater risk that changes in the market could negatively impact the valuation.) | Prepared by a licensed or certified appraiser, but not commissioned by us. |
| **Borrower Provided Comps – 1** | Lowest quality. |
| (This is a collection of comparable property listings gathered and prepared by the Borrower. The listing may be from a listing service website or they may be from a book of listing from various real estate agencies.) | No cost, easily prepared.<br> Data collected by Borrower.<br> Highest Risk. |

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Rather than requiring Borrowers to always provide a certified independent appraisal, which is the highest quality but most expensive and time consuming to prepare, the quality of the Valuation Report being provided for each Loan is accounted for through the Grading Algorithm by assigning scores (and thus more points towards the raw score) to the higher quality, more dependable Valuation Reports.

*"Skin-in-the-Game"* – Real estate developers who have a significant amount of their own money tied up in a project, especially relative to the amount they are borrowing, are less likely to default. Thus, the more skin-in-the-game a Borrower has in a Project relative to the amount they are borrowing, the lower the risk of the Project. A Borrower's skin-in-the-game is assessed on a 10-point scale. The higher the ratio of the Borrower's skin-in-the-game to the total amount of debt on the Project, the higher the score and thus more points earned towards the raw score.

*Location* – The location of a Project can impact valuation. For residential properties, lower-risk Projects will be in zip or postal codes representing strong real estate markets. Groundfloor has adopted a proprietary formula for assessing the residential real estate market in a particular zip code. It uses Zillow's Home Value Index, or a comparable home valuation index, as the data set for our analysis. By obtaining the Home Value Index for a given zip or postal code, Groundfloor can compare that zip or postal code to the average home value for the state or province in which that code is located. Zip or postal code home values that are above the state or province's average home value represent stronger real estate markets and therefore less risk. Property locations are assigned to an eight-point scale, based on whether or not a given zip or postal code's average home value is above or below the state or province's average home value (calculated for the most recent month for which data is available).

In awarding points for location, Groundfloor compares the home values in the Project's zip or postal code to home values for the Project's state or province by first calculating the state or province's home value mean (the average price of a home in the state) and standard deviation (this is a measure of dispersion computed as the square root of the summation of the squared difference of each zip or postal code's average home value from the state or province's mean home value divided by the number of zip or postal codes in the state / province) based on all available zip or postal codes in the Project's state. The z-score (the difference in standard deviation units between the average price of a home in the Project's zip / area code and the average price in the Project's state / province) is then calculated for the Project's zip / area code. Points for the location of a particular Project are assigned based on the z-score for the Project's zip / area code, with higher scores being awarded for z-scores that are above a state or province's home value mean, and fewer points for z-scores that are below. Locations are divided into the following eight categories (highest to lowest score):

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| |
|:---|
| **Location – Score** |
| (with description) |
| **Very High Value (z-score > +3) – 8** |
| (The Home Value Index for this zip code is significantly higher than the average home value for the state / province.) |
| **High Value (z-score ≥ +2, but < +3) – 7** |
| (The Home Value Index for this zip code is much higher than the average home value for the state / province.) |
| **Above Average Value (z-score ≥ +1, but < +2) – 6** |
| (The Home Value Index for this zip code is higher than the average home value for the state / province. This is generally a more desirable location.) |
| **Average Value (z-score ≥ +0, but < +1) – 5** |
| (The Home Value Index for this zip code is similar to or slightly above the average home value for the state / province. This is the typical home for the state / province.) |
| **Below Average Value (z-score ≥ -1, but < 0) – 4** |
| (The Home Value Index for this zip code is slightly below the average home value for the state / province.) |
| **Low Value (z-score ≥ -2, but < -1) – 3** |
| (The Home Value Index for this zip code is below the average home value for the state / province.) |
| **Very Low Value (z-score ≥ -3, but < -2) – 2** |
| (The Home Value Index for this zip code is much lower than the average home value for the state / province.) |
| **Lowest Value (z-score < -3) – 1** |
| (The Home Value Index for this zip code is significantly lower than the average home value for the state / province.) |

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Zillow's Home Value Index, or comparable indices, are based on a combination of factors, including sales data. However, as with any third-party data source, there may be inherent problems with Zillow's or other vendor's methodology or data set that could cause our related assessment to be inaccurate.

*Borrower Credit Quality* – Each Loan is rated based on the FICO credit score of the Principals. As entities, the Borrowers, which are the obligors under the Loan Documents, do not have FICO credit scores for Groundfloor to consider in evaluating the Project. Although the Principal(s) are not personally liable for the Loan, we believe his or her FICO credit score is a relevant factor in understanding the individual practices regarding debt management of the persons who will ultimately be responsible for managing the Project and servicing the debt. Lower-risk Borrowers have good credit ratings (typically a FICO credit score above 700) from established credit rating agencies. The higher the FICO credit score, the more points towards the raw score. The minimum credit rating accepted is a FICO credit score of 500. Groundfloor may receive multiple credit scores when there is more than one Principal involved with a Borrower. Groundfloor will always use the lowest FICO credit score to rate any given Loan. We do not disclose any information about the FICO credit scores collected in the course of our underwriting procedures due to privacy concerns.

*Experience* – Lower-risk Borrowers will have significant experience in real estate development (in terms of the number of projects developed) and will have successfully completed projects of a similar type and scope.

Experience is rated on a five-point scale, based on the Borrower's total number of completed projects. A Borrower is only credited for successfully completed projects. The Projects we give credit for must also be similar in type and scope to the Project being financed by the Company. For example, a Borrower who has only completed cosmetic renovations in the past will not be given experience credit if the project being underwritten is new construction.

Recognizing that some individuals move into real estate development after being involved long-term in other relevant industry activities in the real estate industry, credit is assigned for the following activities: (i) licensed real estate brokers will be credited with one successfully completed project for every three properties sold and (ii) general contractors and trades will be credited with one completed project for every two or more successfully completed projects of the type and scope under consideration.

This assessment is based on information that is self-reported by the Borrower, and therefore has not been independently verified. The higher the score, the more points added towards the Project's raw score. The scores for experience are assigned as set forth in the table below, with the higher scores yielding more points added towards the Project's raw score:

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| | |
|:---|:---|
| **Number of Successfully Completed Projects** | **Score** |
| > 4 | 5 |
| 3 | 4 |
| 2 | 3 |
| 1 | 2 |
| 0 | 1 |

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*Commitment* – Borrowers who are in the real estate development business on a full-time basis are also considered to be lower-risk. As such, more points are assigned to those Projects where the Principals are working full-time, rather than pursing real estate development on a part-time basis.

<u>Ratin</u>g <u>Adjustments and Letter Grade</u>. Once the raw score for a particular Loan is determined, the rating is adjusted based on the Loan to ARV Ratio and the quality of the security interest we will obtain in connection with the Loan. This adjustment yields the final letter grade, which reflects the assessment of the overall risk of the loan.

The Loan to ARV Ratio of the Project represents a significant factor in determining the final letter grade set through the Grading Algorithm. Lower-risk Projects will have a higher valuation (based on the Valuation Report provided by the Borrower) than the amount of total debt on the Project. For low risk first lien Projects, the Borrower's Loan to ARV Ratio will be more than 50%. Higher-risk first lien Projects have a Loan to ARV Ratio in excess of 70%. We will not finance properties where the total debt exceeds the reported value of the property if we are expected to hold a second lien on the property.

The Grading Algorithm uses a 10-point inverted scale to score Loan to ARV Ratio. A higher score means lower risk. Every Loan starts with 10 points and points are subtracted as the Loan to ARV Ratio increases. For example, a Loan with a 40% Loan to ARV Ratio will have 4 points subtracted and will be scored a 6. The following table sets forth the rating adjustments imposed on the raw score, based on the loan to ARV score of Loans that are secured by a first lien:

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Rating Adjustments on First Lien Loans** | **Rating Adjustments on First Lien Loans** | **Rating Adjustments on First Lien Loans** | **Rating Adjustments on First Lien Loans** | **Rating Adjustments on First Lien Loans** | **Rating Adjustments on First Lien Loans** | **Rating Adjustments on First Lien Loans** | **Rating Adjustments on First Lien Loans** | **Rating Adjustments on First Lien Loans** | **Rating Adjustments on First Lien Loans** | **Rating Adjustments on First Lien Loans** |
|  | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** |
|  | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** |
|  | ***10*** | ***9*** | ***8*** | ***7*** | ***6*** | ***5*** | ***4*** | ***3*** | ***2*** | ***1*** |
| ***Raw Score*** | **(10%)** | **(20%)** | **(30%)** | **(40%)** | **(50%)** | **(60%)** | **(70%)** | **(80%)** | **(90%)** | **(100%)** |
| 90-100 | A | A | A | A | A | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A | B | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C | C | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C |
| 80-89 | A | A | A | A | B | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B | C | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D | D | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D |
| 70-79 | A | A | A | B | C | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C | D | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E | E | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E |
| 60-69 | A | B | B | C | D | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D | E | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F | F | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F |
| 50-59 | B | C | C | D | E | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E | F | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G | G | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G |
| 40-49 | C | D | D | E | F | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;F | G | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |
| >40 | D | E | E | F | G | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;G |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |

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The following table sets forth the rating adjustments imposed on the raw score, based on the loan to ARV score of loans that are secured by a second lien:

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Rating Adjustments on Second Lien Loans** | **Rating Adjustments on Second Lien Loans** | **Rating Adjustments on Second Lien Loans** | **Rating Adjustments on Second Lien Loans** | **Rating Adjustments on Second Lien Loans** | **Rating Adjustments on Second Lien Loans** | **Rating Adjustments on Second Lien Loans** | **Rating Adjustments on Second Lien Loans** | **Rating Adjustments on Second Lien Loans** | **Rating Adjustments on Second Lien Loans** | **Rating Adjustments on Second Lien Loans** |
|  | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** | ***Loan to ARV Score*** |
|  | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** | **(corresponding Loan to ARV Ratio)** |
|  | ***10*** | ***9*** | ***8*** | ***7*** | ***6*** | ***5*** | ***4*** | ***3*** | ***2*** | ***1*** |
| ***Raw Score*** | **(10%)** | **(20%)** | **(30%)** | **(40%)** | **(50%)** | **(60%)** | **(70%)** | **(80%)** | **(90%)** | **(100%)** |
| 90-100 | A | A | A | B | B | C | D | E |  |  |
| 80-89 | A | B | B | C | C | D | E | F |  |  |
| 70-79 | B | C | C | D | D | E | F | G |  |  |
| 60-69 | C | D | D | E | E | F | G |  |  |  |
| 50-59 | D | E | E | F | F | G |  |  |  |  |
| 40-49 | E | F | F | G | G |  |  |  |  |  |
| >40 | F | G | G |  |  |  |  |  |  |  |

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The smaller the Loan to ARV Ratio, the higher the score. Higher grades are awarded for higher scores. The rating adjustment can have a negative or positive impact on the raw score. For instance, when the Loan to ARV Ratio is significantly high, this means that a larger portion of the value of the property is being leveraged and there is less cushion between the amount borrowed and the projected value of the Project. The smaller cushion leads to greater risk of default. As a result, the loan to ARV score will be low and the raw score will be adjusted downward. With the same concept in mind, when the Loan to ARV Ratio is significantly low, a small portion of the property is being leveraged and there is a larger cushion between the amount borrowed and the projected value. In this circumstance, Groundfloor may increase the final letter grade, despite the Project initially receiving a lower raw score. This reflects lower risk in the case of default because the underlying property value is substantially larger than the credit exposure. In some instances, the Loan to ARV Ratio may be so significant that we will not fund the Loan under any circumstances (which is indicated by the dash (-) in the tables above).

There are maximum Loan to ARV Ratios for certain Project types beyond which Groundfloor will not accept. For all second lien loans, the Loan to ARV Ratio will not exceed 80%. For rehabilitation of an existing structure or construction of a new structure on developed, serviced land, the Loan to ARV Ratio will not exceed 85%. For Loans which are used for the combined acquisition and rehabilitation of an existing structure or the combined acquisition and construction of a new structure on developed, serviced land, Loan to ARV Ratio will not exceed 85%. For Loans to acquire or build raw, unserviced, undeveloped land, the Loan to ARV Ratio will not exceed 100% of the value of the underlying land. In addition to the above, we intend to comply with all real estate statutes and regulations with respect to loan-to-property value ratios, including those set forth in California Business and Professions Code section 10232.3, if applicable.

<u>Presentation of Information in Pro</u>j<u>ect Summaries</u>. Due to the proprietary nature of the Grading Algorithm, we do not disclose to investors the particular weights of the different factors for determining the raw score. However, to help investors assess the underlying data that leads to Groundfloor's underwriting decisions, we identify on the Project Summary how each Loan scored relative to these factors in addition to ordering the discussion above by relative weight for each factor. An investor can also compare the grading factors across multiple Loans using the Loan Comparison Tool. See "—How the Groundfloor Finance Platform Operates—Information Made Available through the Project Summaries."

***Our Loan Arrangements***

The terms of our Loans with the Borrowers are governed by the Loan Documents, including the Loan Agreement, a promissory note, certain mortgage instruments (including a deed of trust or similar security document) and other documents or instruments evidencing or securing the Loan. The exact documentation necessary to complete the Loan may vary on a case-by-case basis. However, our form Loan Agreement and corresponding promissory note are based on standard industry agreements.

Through the Loan Agreement, the borrowing entity makes representations and warranties to us as to the accuracy of any information provided in the course of applying for and receiving funding from GRE 1 through the Groundfloor Platform. We use commercially reasonable efforts to verify or authenticate such representations and warranties made by the borrowing entity. See "—Due Diligence and Authentication" above.

The Loan Agreement structures the terms of the Loan, including the interest rate, the maturity date, the frequency of interest payments, and the budget and/or Draw schedule. These terms are reflected in the corresponding promissory note. When a Loan is subject to a Draw schedule (which is typically the case, but always used for Loans in excess of $50,000 unless an amount greater than $50,000 is needed for the acquisition of a property), the funds of the Loan stay in the GRE 1 Borrower FBO Account, which is an account maintained at FBO Servicer titled in our name "for the benefit of" Groundfloor Borrowers.

Groundfloor Finance manages the draw and payment process with Borrowers on our behalf. The Borrower must submit requests for Draws by providing evidence that certain agreed-upon requirements have been met on a prescribed form to receive Loan funds. The request will contain a list of work that has been done, the amounts owed for such work, and to whom payment is owed for such work. In all cases, unless otherwise waived, the Borrower must submit invoices for the activities outlined in the Borrower's budget as the intended uses of the Loan Proceeds (the "Budgeted Activities") that are the subject of the request. We may, in our sole discretion, add additional evidentiary requirements to the Loan Agreements with first-time Borrowers and less experienced Borrowers. For instance, these Borrowers may need to provide copies of paid receipts, statements of accounts, pictures or video evidence of completed work, certifications by an engineer, architect, or other qualified inspector, construction lien waivers from the Borrower's contractor and from the suppliers (if any) for all Budgeted Activities covered by the request, lien subordination agreements, indemnifications, and endorsement to our title insurance loan policy (or a satisfactory commitment to issue such an endorsement) insuring that, as of the date of the request, our security interest is superior to any liens or potential liens for work performed or materials delivered. Groundfloor may also conduct site visits during the course of the project.

If satisfied with the Draw request and the evidence submitted, Groundfloor will remit payment either to the Borrower or directly to the trades or vendors who are owed payment. Our preference is to pay trades and vendors directly where Draws are used, but our ability to do so is determined by the willingness of the trades or vendors to be directly paid by us. If the trade or vendor expects to be paid in cash, we will instead remit payment to the Borrower, and the Borrower will settle the invoice.

The Loan Agreement contains standard terms and conditions regarding default, bankruptcy, and other non-payment contingencies. A deed of trust, or similar instrument, is entered into by the borrowing entity in conjunction with the execution of the Loan Agreement and is further used to secure our lien position.

Groundfloor holds all Loan Proceeds not advanced to the Borrower on the loan origination date in the GRE 1 Borrower FBO Account, which is a non-interest bearing demand deposit pooled account. All funds to be applied to the remaining Draws for a particular Loan are held in this GRE 1 Borrower FBO Account until so advanced to the Borrower. Borrowers have no direct relationship with FBO Servicer in connection with the GRE 1 Borrower FBO Account. GRE 1 is the owner of the GRE 1 Borrower FBO Account; however, we disclaim any economic interest in the assets in the GRE 1 Borrower FBO Account (other than as may be enforced through its security interest in the underlying Project) and also provides that each Borrower disclaims any right, title or interest in the assets of any other Borrower in the GRE 1 Borrower FBO Account until disbursed. We use a separate collection account (owned and titled in the name of the Company) maintained at FBO Servicer to hold the payments collected from Borrowers. Following receipt of Loan Payments, we promptly use intra-bank transfers to move sufficient funds to cover the corresponding LRO Payments to the appropriate Groundfloor Investor FBO Accounts of the investors in the series of LROs corresponding to the Loan.

We will charge Borrowers origination (which typically range between 2% and 6% of the Loan Principal) and servicing (which typically range between 0.5% and 5% of the Loan Principal) fees, which typically will be included in the total amount of the Loan. In addition, in some circumstances we may charge additional processing fees to the Borrower or deduct a collection fee from any delinquent amounts that we are able to collect before distributing the remainder to holders of LROs. Borrowers are also responsible for paying closing costs (such as brokerage fees or legal expenses) as well as the costs of obtaining the title search and title insurance. The borrowing entity may elect to include these costs in the total amount of the Loan financed through the Groundfloor Platform. Typically, the combined costs of closing, title search, and title insurance range from $500 to $3,500. See "—Fees and Related Expenses."

Loan Payments are secured obligations of the Borrower. Loan Payments are generally secured by a first lien security interest in the assets owned by the borrowing entity related to the specific Project, including the real property itself, any structures or buildings on the property, any materials purchased with Loan Proceeds for Project use and any improvements made thereon. We may agree, in some circumstances, to hold the junior security interest with respect to a particular Loan. For example, we may agree to hold a junior security interest on a new construction loan where a regulated banking institution is the senior secured lender, and where the total amount of debt on the property does not exceed the expected market value. See the Project Summaries beginning on page PS-1 for our lien position for each series of LROs offered under this Offering Circular. For Projects where we take a junior security interest, if any, the terms of that subordinated security interest will be clearly disclosed in this Offering Circular and the corresponding Project Summary. Since the Principals are not obligors under the Loan Documents, we are limited in seeking recourse for non-payment to the Borrower itself. See "—Project Funding and Payment of Expected Yield—Servicing and Collection of Loans Generally" for more information about our collection procedures and policies.

**Project Funding and Payment of Expected Yield**

***Purchase of LROs***

LROs are offered and sold to investors who reside in one of the states or jurisdictions where our offering of the LROs is qualified and who meet applicable suitability requirements. Investors must also have sufficient funds available in their Groundfloor account to make the desired investment.

<u>Postin</u>g <u>of the Listing to the Groundfloor Platform</u>. We will commence the offering of a particular series of LROs promptly after qualification of Offering Circular or a PQA covering such series is qualified by posting on the Groundfloor Platform a separate Project Summary corresponding to each particular Loan and Project. Once the Offering Period for a particular series of LROs commences, it will remain open for 30 days (unless it is fully subscribed with irrevocable funding commitments before the end of such period); however, we may extend that period in our sole discretion (with notice to potential investors) up to a maximum of 45 days. During the Offering Period, information relating to a specific offering and instructions for purchasing the series of LROs corresponding to a particular Project and Loan will be available on the corresponding Project Summary on the Groundfloor Platform.

We issue LROs in denominations of $10 and integral multiples of $10. The aggregate Purchase Amount of all LROs of a particular series will equal the Loan Principal of the corresponding Loan. We offer each series of LROs at 100% of the Loan Principal.

<u>Non-Bindin</u>g <u>Commitments</u>. You may purchase a LRO by opening the Project Summary on the Groundfloor Platform and indicating the Purchase Amount you want to invest (in denominations of $10 and integral multiples of $10), subject to the maximum investment amount, if any, imposed on the offering. You will then be prompted to confirm the "commitment" to purchase such amount of that series of LROs. After such confirmation, the commitment serves as a pre-authorization to debit your Groundfloor account. If you do not have sufficient funds in your Groundfloor account, you will be prompted to link your bank account so the appropriate amount may be transferred to you funding account via ACH.

Funds that have been used to commit to this non-binding commitment remain in your Groundfloor account but are set aside for the indicated purchase. No money is transferred from your Groundfloor account (or the Groundfloor Investor FBO Account) at this stage. The commitments do not represent binding obligations and will not become irrevocable until the expiration of the Withdrawal Period. You may withdraw your non-binding commitments at any time before the expiration of the Withdrawal Period by accessing your Investor Dashboard and selecting "request withdrawal." Funds you withdraw from your Groundfloor Account before the expiration of the Withdrawal Period will be released and made available in the your Groundfloor account typically within 48 hours, after which time you may elect to transfer such funds to your bank account or make a commitment towards a different Project.

<u>The Withdrawal Period</u>. Once (i) we receive sufficient non-binding commitments to fully subscribe the Loan and (ii) all of the financing conditions have been satisfied (other than the completion of the title search and obtaining valid title insurance), we will notify (by email and through a notice on the Project Summary) those investors who have completed non-binding commitments for the Project that they have 48 hours to withdraw their funds (the "Withdrawal Period"). Commitments may be withdrawn prior to the expiration of the Withdrawal Period by accessing the Investor Dashboard and selecting "request withdrawal." Commitments not withdrawn before the expiration of the 48-hour Withdrawal Period will automatically convert into binding and irrevocable commitments to purchase the LROs relating to the corresponding Project and cannot be withdrawn or committed to purchase additional LROs. Commitments to purchase LROs made after expiration of the Withdrawal Period, if any, are irrevocable when authorized and may not be withdrawn.

All funds that are irrevocably committed to purchase LROs are immediately segregated from those held in the Groundfloor Accounts by transferring them into the GRE 1 Investor FBO Account. GRE 1 will hold these funds in the GRE 1 Investor FBO Account until issuance of the LROs.

<u>Issuance of the LROs</u>. GRE 1 will issue the corresponding series of LROs as soon as possible (typically within five days) after the expiration of the Withdrawal Period (and once the offering is fully subscribed with irrevocable funding commitments). The LROs are issued electronically, in "book entry" form, by means of registration of each investor's ownership in our records. Unless previously advanced, the closing and funding of the Loan will occur on the original issue date of the LROs. You will be notified within two business days (by email and through a notice on the Project Summary) when the LROs have been issued. The email notice will include confirmation of the original issue date, final payment date, and extended payment date for such series of LROs (as well as information on how to access the final version of the LRO Agreement through the Groundfloor Platform), an active hyperlink to the uniform resource locator (URL) where the final Offering Statement (which includes the final Offering Circular) may be obtained via EDGAR, and the contact information where a request for a copy of the final Offering Circular can be sent. (You may also access this information on your Investor Dashboard.)

<u>Abandonment and Withdrawn Offerin</u>gs. We may abandon or withdraw an offering of a particular series of LROs at any time prior to issuance. For example, we will abandon the offering of a series of LROs in the event the Borrower withdraws its funding request. We have no way of controlling when in the Offering Period this type of abandonment may occur; however, in all circumstances, we release committed funds within 48 hours of receiving such notice. So, if on day 15 of the Offering Period we receive notice from the Borrower that it is withdrawing the Project, funds committed to the corresponding series of LROs would be returned to investors no later than day 17 of the Offering Period. We may also abandon the offering in the event it is not fully subscribed by the end of the Offering Period. Prior to the enactment of the loan advance program, the majority of the series of LROs that were abandoned by Groundfloor Finance following qualification were due to the Borrower withdrawal—when our underwriting and offering procedures took too long and made it impossible for borrowers to meet internal deadlines (such as a specific date to acquire the underlying property). With the enactment of the loan advance program, we do not expect the rate of abandoned series to be as high in the future for this Offering as compared to prior offerings by Groundfloor Finance. In addition, if we determine prior to issuance of the corresponding series of LROs that the Borrower's financing request contains materially inaccurate information (including unintended inaccuracies, inaccuracies resulting from errors by us, or inaccuracies resulting from changes in a Borrower's financial position, experience, or credit profile or was posted illegally or in violation of any order, writ, injunction or decree of any court or governmental instrumentality, for purposes of fraud or deception, etc.), we would abandon the offering of the corresponding series of LROs.

We will notify you by email if we abandon an offering of one or more series of LROs to which you have made a commitment. In the event we do so, we will promptly (but under no circumstances more than 48 hours after receipt of a withdrawal notice from the Borrower or following our determination to abandon the offering) release all funds (without interest) committed to purchase that series; after which, you may elect to transfer such funds to your bank account or make a commitment to purchase a different series of LROs.

Offerings are typically withdrawn due to the need to correct or modify specific disclosures about the terms of the related series of LROs and the series of LROs that correspond to Loans that are withdrawn are typically re-qualified at a later date. We would withdraw (rather than abandon) an offering of LROs in the event we are required to amend or update material information contained in this Offering Circular or any PQA related to the specific terms of the LROs (or the corresponding Loan). More often than not, we withdraw Loans from an offering before commencing the Offering Period for the corresponding LROs. However, if commitments have been made towards a series that is withdrawn, we will promptly (but under no circumstances more than 48 hours following our determination to withdraw the offering) release all funds (without interest) committed to purchase that series; after which, you may elect to transfer such funds to your bank account or make a commitment to purchase a different series of LROs.

<u>Terminated or Suspended Offerings</u>. We may be required to terminate or suspend ongoing offerings of LROs in the event we are required to amend or update certain material information about GRE 1 and/or Groundfloor Finance contained in this Offering Circular. Although we are permitted to provide updates about our company by filing supplements with the SEC, any facts or events arising after qualification which, individually or in the aggregate, represent a fundamental change in the information set forth in these disclosures may only be updated or revised though filing and qualifying a new Offering Statement or a PQA with the SEC. Thus, in the event we are unable to use a supplement to update our disclosures adequately for these fundamental changes (such as to update outdated factual information), we may be forced to terminate or suspend our offerings. Similarly, we may be required suspend offerings to address comments that may be raised by the SEC during the offering process.

<u>Makin</u>g <u>Commitments through Groundfloor Accounts</u>. You fund commitments through your Groundfloor funding account or by direct ACH transfer from your bank account to your Groundfloor account.

You fund your Groundfloor account by linking your bank account and transferring money via ACH transfer, as provided by our Funds Transfer Agent. For example, when you register for an account and then elect to purchase a LRO, you will first be prompted to link your bank account and transfer funds to your Groundfloor account in order to complete the purchase. Groundfloor may allow, to the extent permitted by applicable law, you to fund your Groundfloor account through other means, such as PayPal, BitPay, Google Wallet, or other online payment systems. If a funds transfer is required before completion of a commitment, the commitment will be completed as one action if there are sufficient funds in the bank account. Neither we nor Groundfloor is responsible for any fees you may be charged by your banking institution as a result of any transaction involving your Groundfloor accounts, including in which there are insufficient funds available to complete the transaction.

Once you confirm the non-binding purchase order for a particular series of LROs, the funds allocated for such investment are set aside in your funding account. Commitments made prior to the expiration of the Withdrawal Period may be withdrawn at any time. Commitments made after expiration of the Withdrawal Period, if any, are irrevocable when authorized and may not be withdrawn. If you have insufficient funds in your funding account when making a commitment, you will be prompted to fund your Groundfloor account with the difference via ACH transfer.

Commitments not otherwise withdrawn or made after the expiration of the Withdrawal Period are irrevocable and the funds immediately transferred to the GRE 1 Investor FBO Account. Irrevocably committed funds may not be withdrawn from your funding account or committed to other Projects, unless we abandon or withdraw the offering of the series of LROs (or terminate or suspend our offering generally), each as described above.

***Servicing and Collection of Loans Generally***

Following the sale of LROs and the funding of the corresponding Loan, Groundfloor Finance will begin servicing the Loan on our behalf. The LRO Agreements gives us (and our agents) broad powers in administering, servicing, collecting and enforcing the Loan. See "—Remedies" below. The LRO Agreement generally permits us (and our agents) to take certain actions when administering, servicing, collecting and enforcing the Loans (such as to give or withhold extensions, waivers, etc. or to change the payment date or reduce the principal amount or the rate of interests owed), without your consent, provided that we have reasonably and prudently determined that such action will not be materially adverse to the holders of the LROs. In addition, in undertaking this broad authority to administer, service, collect and enforce the Loans, we and Groundfloor Finance (as our agent) are required to use commercially reasonable efforts prior to the extended payment date to pursue, either directly or through our representatives, (i) the collection of any amounts owing to us under the Loan Documents (to the extent constituting Loan Payments) and (ii) the exercise of our remedies upon a breach or default under the Loan Documents or in order to avoid the occurrence thereof, in each case, to the extent warranted in our business judgment and consistent with reasonable commercial standards of fair dealing and in accordance with industry standards customary for loans of the same general type and character as the Loans in order to maximize the amount of LRO Payments to be made under the terms of the LRO. We refer to these requirements, generally, as our "servicing standards set forth in the LRO Agreement." See "General Terms of the LROs—Administration, Service, Collection, and Enforcement of Loan Documents" below.

Our obligation to make any LRO Payments will automatically terminate (and the LRO shall be of no further force or effect) once all of the Purchase Amount of, and Accrued Return earned on, the LRO through the date of payment is paid in full. Due to our ability to prepay the Loan (and in light of these broad powers to administer, service, collect and enforce a Loan, particularly in the context of a Borrower default), our payment obligation may be satisfied by making LRO Payments to investors of an amount that may be more or less than the expected yield, on a date different than originally specified.

Notwithstanding our broad powers, in circumstances other than Borrower default or prepayment, the modification of a term of a Loan (e.g., a reduction in the interest rate charged on the Loan) could be deemed to be a material modification of the terms of the corresponding series of LROs. In such instance, it is possible that the modified series of LROs would constitute a new security under the Securities Act and under applicable State securities laws. Before implementing any modification to the terms of a Loan (other than in circumstances involving Borrower default or prepayment) that would cause the corresponding series of Securities (as modified) to constitute a new security, we will be required to either register the offer of the modified LRO under Section 5 of the Securities Act and under applicable State securities laws or find an exemption from such registration requirements.

<u>Administration and Servicin</u>g <u>Logistics</u>. Groundfloor Finance has set up an automated accounting system to track payments received from the Borrower. Groundfloor Finance (as our agent) is responsible for billing, payment collection, debt status tracking, and all other tasks required to efficiently service the Loan. Loan Payments by the Borrower are handled by debiting its bank account by ACH transfer or by wiring funds where the Loan Agreement allows for balloon payments or non-amortizing payments. If the Borrower elects to pay by check, we reserve the right to charge the Borrower for any check processing fees we incur. We retain all of any check processing and other processing fees we receive to cover costs. Each time a payment request is denied due to insufficient funds in the Borrower's account or for any other reason, we may assess (and retain) an unsuccessful payment fee to the Borrower to cover any costs that result therefrom. See "—Fees and Related Expenses."

Groundfloor services payments with respect to the outstanding LROs on our behalf. LRO Payments will be made within five business days of receipt by us of Loan Payments with respect to the corresponding Loan. The LRO Agreement gives us sole discretion in applying amounts we receive from, or for the account of, the Borrower, with respect to the corresponding Loan. We may make LRO Payments out of any funds at our disposal directly to the investor's funding account. Investors may not request that these payments be made directly to their bank account. We provide reports and other investor communications via electronic communication through email or by posting updates on the Groundfloor Platform. (See "—Investment Documents" below.)

<u>Remedies</u>. In the event a Borrower fails to make payment within 15 days of the due date, such failure constitutes a default, and we have the option to pursue various remedies. We can charge a late charge equal to the lesser of (i) 4% of the amount of the unpaid payment or (ii) the maximum amount permitted to be charged under applicable law. We could also apply a default rate equal to the lesser of (x) 20% per annum or (y) the maximum rate permitted to be charged under applicable law, and/or pursue various remedies made available to us under the Loan Documents, at law or in equity. Late charges and the default rate are applied to the outstanding amount then owed and calculated from the original date the payment was due. The LRO Agreement characterizes late charges and default interest as Collection Proceeds, thus our obligation to make LRO Payments includes amounts equal to any late charges and/or default interest, as applicable, we may receive with respect to the corresponding Loan prior to the extended payment date (in each case, less any Collection Costs we (or our agents) incur). See "—Fees and Related Expenses" below for more information.

When a Borrower fails to make payment within 15 days of the due date, such failure constitutes a default and our current policy is: first, to impose the late charge; then, if the amounts remain overdue after an additional 30 days (or 45 days after the scheduled payment date or maturity date, as the case may be), we will begin to charge default interest and Groundfloor Finance (acting on our behalf) will promptly begin taking steps in accordance with the servicing standards set forth in the LRO Agreement to remedy the default (as discussed below). We may deviate from this policy, subject to the servicing standards set forth in the LRO Agreement, depending on the circumstances of the missed payment. When making a decision to exercise remedies (including whether to put the Borrower in default), we (and Groundfloor Finance acting on our behalf) will act in accordance with the servicing standards set forth in the LRO Agreement. Many factors are taken into consideration, such as payment history, general credit worthiness, the prospects of repayment, the current status of the project, the amount of addition time needed and cost involved (in each case if any) to complete the project, whether there is other collateral that may be pledged to secure obligations, the value of the collateral, the applicable real estate market, whether the value of the collateral is likely to decrease or increase, the time and costs involved to foreclose and dispose of the collateral, and the costs to maintain the collateral.

In addition we have the option to increase the interest rate applied to the Loan where circumstances allow, subject to applicable law and the servicing standards set forth in the LRO Agreement, as a penalty in the event of an extension or modification. Acting on our behalf, Groundfloor uses its discretion in accordance with the servicing standards set forth in the LRO Agreement when determining whether to apply penalty interest to a modification (separate and apart from late charges and/or default interest that may already be imposed), and it makes a determination about whether to apply a penalty (and the amount, if any) on a case-by-case basis. In many cases the penalty rate is set lower than the applicable late charge to encourage Borrowers who are in default to pursue an extension or modification before missing a payment or continued default. As a result, based on current policy (which Groundfloor may deviate from in its sole discretion, subject to the servicing standards set forth in the LRO Agreement), when extending the Loan, the penalty rate is typically set based on the length of the extension. If the extension is for one month, typically no penalty interest is charged. If the extension is for two months, typically penalty interest of 1%, is charged and, if it is extended for three months or more, typically penalty interest of 2% is charged. (In all instances, the penalty charged is subject to applicable law.) If the Borrower has previously requested an extension, typically the penalty interest is 2%. Groundfloor Finance will not grant an extension beyond six months in any instance. All other material modifications (such as changing the payment schedule, etc.) are typically subject to penalty interest of 1%. The LRO Agreement characterizes penalty interest as Collection Proceeds, thus our obligation to make LRO Payments includes any such amounts we may receive with respect to the corresponding Loan prior to the extended payment date (less any Collection Costs). See "—Fees and Related Expenses" below for more information.

Acting on our behalf, Groundfloor may also in its sole discretion and subject to the servicing standards set forth in the LRO Agreement decide to do a "workout" with the Borrower (either before or after a missed payment). This may include modifying the loan terms to change the payment date, reduce the principal amount or rate of interest, change the time or manner of making Loan Payments, or amend any other material Loan term. Any such modification would be done in strict compliance with the servicing standards set forth in the LRO Agreement. The modifications contemplated during a "workout" would be made, common to loan servicing practices, where a reasonable forbearance or extension of time for payment to be received would prevent a Borrower from defaulting entirely on the Loan or filing bankruptcy. The LRO Agreement characterizes payments of reduced principal or interest on the Loan as Collection Proceeds, thus our obligation to make LRO Payments includes any such amounts we may receive with respect to the corresponding Loan prior to the extended payment date (in each case, less any Collection Costs). See "—Fees and Related Expenses" below for more information. We may charge the Borrower (and retain) a loan modification fee in connection with any modification of the Loan. Whether we charge a modification fee (and the amount of such fee) will vary based on the modification, the complexity and time involved to negotiate and document the modification, the increased burden or administration required to service the modified Loan, and other facts and circumstance that may exist at the time of the modification.

Finally, acting on our behalf, Groundfloor may, in its sole discretion in accordance with the servicing standards set forth in the LRO Agreement, seek to remedy a default by taking steps to exercise our security interest and take possession of the assets of the Project. This typically would involve, among other things, foreclosing on any real property pledged as the security interest. In order to recover amounts due under the Loan, when we are able to take possession of the underlying asset, we would sell the Project assets and repay the LRO out of the proceeds of the sale. Alternatively, rather than taking possession of the assets, we may elect to assign or sell our rights to the Loan to a third party (potentially at a discount or "below par") for payment of all or some of the outstanding amounts owed by the Borrower. The LRO Agreement characterizes the amounts we may receive as a result of these activities as Collection Proceeds, thus our obligation to make LRO Payments includes amounts equal to any such payments we may receive with respect to the corresponding Loan prior to the extended payment date (in each case, less any Collection Costs). See "—Fees and Related Expenses" below for more information. See "General Terms of the LROs—Collection Proceeds, Costs, and Expenses" below for more information.

When making a decision to exercise remedies (including whether to put the Borrower in fundamental default and pursue foreclosure or similar collection remedies or to waive penalties that have accrued), Groundfloor will act in accordance with the servicing standards set forth in the LRO Agreement and, in the course of its assessment of how to proceed, it will consider various factors such as payment history, general credit worthiness, the prospects of repayment (particularly without loss of principal or of expected return), the current status of the Project, the further time needed and cost (in each case if any) to complete the Project, whether there is other collateral that may be pledged to secure obligations, the value of the collateral, the applicable real estate market, whether the value of the collateral is likely to decrease or increase, the time and costs involved to foreclose and dispose of the collateral, and the costs to maintain the collateral.

The normal collection process changes in the event of the bankruptcy of the Borrower and, potentially, of the Principal (which also constitutes a Borrower default). When we receive notice of the bankruptcy, as required by law, Groundfloor (acting as our agent) will cease any and all automatic payments on the Loan and defer any other collection activity. We will put a freeze on any funds held in the GRE 1 Borrower FBO Account on behalf of such Borrower. If we are in a senior secured position, Groundfloor (acting as our agent) will execute our rights to the fullest extent to recover funds in any subsequent bankruptcy proceeding, which may include the filing of a proof of claim and attempts to obtain relief from stay to foreclose on the assets that secure the Loan. We may pursue additional relief beyond the proof of claim, depending upon certain factors including our view of the costs and benefits to us of any proposed action. Notwithstanding our security interest, in the event of the Borrower's bankruptcy, if the Borrower has other creditors senior to the Company, the bankruptcy court may refuse to grant relief from stay to enable us to foreclose on the Borrower's assets, including funds that are set aside in the Borrower's sub- account in the GRE 1 Borrower FBO Account. Moreover, if an existing mortgage lender to the Borrower has foreclosed on the Borrower's property, our agents may be unable to gain access to the premises to take possession of any underlying materials which may be part of our security interest. The LRO Agreement characterizes all amounts received prior to or in connection with a Borrower bankruptcy as Collection Proceeds, thus our obligation to make LRO Payments includes any such amounts we may receive with respect to the corresponding Loan prior to the extended payment date (less any Collection Costs). See "—Fees and Related Expenses" below for more information.

<u>Status of Loans.</u> Our obligation to make LRO Payments is limited, in all circumstances, to an amount equal to the holder's pro rata share of the amount of Loan Payments, if any, actually received on the corresponding Loan. Investors who have purchased LROs are able to monitor the payment status of the corresponding Loan as "Current," "Late" (followed by the number of days late), "Repaid," "Defaulted" or "Written-Off" through the Investor Dashboard, but cannot participate in or otherwise intervene in the collection or enforcement process. We generally characterize the collection status of our Loans as:

&nbsp;&nbsp;&nbsp;&nbsp;· repaid
 (i.e., all Loan Payment obligations have been made),

&nbsp;&nbsp;&nbsp;&nbsp;· "current"
 (i.e., no events of default have occurred, all payment obligations have been met or none
 are yet triggered),

&nbsp;&nbsp;&nbsp;&nbsp;· subject
 to "workout" (i.e., there has been one or more payment defaults on the Loan and
 we have negotiated a modification of the original terms that does not amount to a fundamental
 default), which may delay payment to the holders of the corresponding LROs (as is the case
 with an extension) or result in such holders receiving less than the original Expected Return
 (as would be the case if we agreed to reduce the interest owed on the Loan),

&nbsp;&nbsp;&nbsp;&nbsp;· subject
 to a "fundamental default" (i.e., where a loan has defaulted and it is more likely
 than not that we will not be able to collect 100% of the principal amount of the Loan by
 the Extended Payment Date of the corresponding LRO), or

&nbsp;&nbsp;&nbsp;&nbsp;· "written
 off" (i.e., we have determined that all or a portion of the Loan has been uncollectable).

For instance, any default tied to a bankruptcy (or pending bankruptcy or placing into receivership) of the Borrower is deemed to be a fundamental default. In addition, a fundamental default would occur when the Borrower has entered into a payment default (i.e., failed to make a payment when due) and, due to circumstances surrounding the Project and relative to the Borrower, Groundfloor (acting on our behalf) must either (1) modify the Loan in a manner that reduces the principal amount below 100%, (2) put the property into foreclosure, (3) sell the note, or (4) pursue other remedies, in each case that would reasonably be expected to result in less than full payment of the original principal amount of the loan by the Extended Payment Date. We do not consider a payment default, either by itself or in combination with one or more extensions or other work-out arrangements that contemplates full repayment of the original principal amount of the Loan, to amount to a fundamental default.

**Fees and Related Expenses**

The LRO Agreement provides that, subject to the application of Loan Payments received as Collection Proceeds and our ability to prepay the LRO, we will pay to each holder of a LRO the Purchase Amount of, and the Accrued Return earned on, the LRO through the date of payment as LRO Payments. Our obligation to make LRO Payments is limited, in all circumstances, to an amount equal to the holder's pro rata share of the amount of Loan Payments, if any, actually received on the corresponding Loan. For these purposes, LRO Payments include all payments or prepayments of principal and interest under the Loan as well as amounts received, whether prior to or in connection with a Borrower bankruptcy or in connection with any exercise of our powers to administer, service, collect and enforce the terms of the Loan or of the Loan Documents, including, without limitation, amounts received (i) as late charges and default or penalty interest, or as payment of any principal or accrued interest on the Loan that may be reduced, or (ii) in connection with the enforcement of any security interest in the assets pledged to secure the Loan, or (iii) in connection with a sale of our rights, title and interest under the Loan Documents, in each case net of any Company Fees and Expenses (as defined below), Collection Costs (as defined below), loan modification fees, and fees deducted by a backup or successor servicer (the categorization of all such items to be determined by us or our agent in a manner consistent with the Loan Documents (collectively, the "Collection Proceeds").

For all Loans, Borrowers are charged an origination fee and a servicing fee. The origination fee (which typically ranges, between 2% and 6% of the principal loan amount requested by the Borrower) are charged by the Groundfloor entity that originates the Loan (either as an advance or upon issuance of the LROs). In most instances, the origination fees are included in the total amount of the Loan financed through the Groundfloor Platform. Less frequently, a Borrower will directly pay the origination fee at closing. Borrowers are also responsible for paying closing costs (such as brokerage fees or legal expenses) as well as the costs of obtaining the title search and title insurance. The Borrower may elect to include these costs in the total amount of the Loan financed through the Groundfloor Platform or may directly pay these expenses at closing. Typically, the combined costs of closing, title search, and title insurance range from $500 to $3,500. All of these fees and reimbursements are retained by us or by the Groundfloor entity that originates the Loan. None are included in the amount of LRO Payments distributed to investors.

We also charge fees in connection with servicing and administering the Loan Documents. Servicing fees (which typically range between 0.5% and 5%) are collected with payment of every draw or upon repayment of the Loan. Administrative fees also include check processing and servicing or administrative fees incurred in connection with facilitating Draw payments, upon repayment of the Loan and/or other disbursements of loan proceeds and fees imposed on us or our agent in respect of a Loan when our payment request is denied for any reason, including, but not limited to, non-sufficient funds in the Borrower's bank account or the closing of such bank account. (We refer to these fees, as well as the origination fees retained by us or our affiliates as the "Company Fees and Expenses"). Unless otherwise paid by the Borrower, we typically deduct these Company Fees and Expenses from undrawn Loan Proceeds; however, if insufficient Loan Proceeds remain available to cover those amounts, we will invoice the Borrower directly for those fees and expenses. LRO Payments do not include amounts equal to any Company Fees and Expenses.

We do not currently charge any prepayment fees or penalties. We currently do not incur fees or expenses in connection with the engagement of a backup or successor servicer. In the event we do incur such fees and expenses in the future, we would retain any reimbursements received from Borrowers to cover such fees and expenses or may reduce LRO Payments by such amounts.

We may charge the Borrower (and retain) a fee in connection with an extension or modification of the Loan. Whether we charge a modification fee (and the amount of such fee) will vary based on the modification, the complexity and time involved to negotiate and document the modification, the increased burden or administration required to service the modified Loan, and other facts and circumstance that may exist at the time of the modification. See "—Project Funding and Payment of Expected Yield—Servicing and Collection of Loans Generally." We typically deduct modification fees from undrawn Loan Proceeds; however, if insufficient Loan Proceeds remain available to cover the loan modification fee, we invoice the Borrower directly for these expenses. LRO Payments do not include loan modification fees.

In the event a Borrower fails to make payment on a due date, we have the option to pursue various remedies, including imposing a late charge or charging interest at a default rate. In addition, we may increase the interest rate applied to the Loan, subject to applicable law, as a penalty in the event of an extension or modification. See "—Project Funding and Payment of Expected Yield —Servicing and Collection of Loans Generally." LRO Payments include amounts equal to any late charges, default interest and/or penalty interest received with respect to the corresponding Loan prior to the extended payment date.

Any and all Collection Proceeds received will be applied (i) first, to all costs and expenses of any nature whatsoever incurred by us or our agents for the maintenance, preservation, defense, protection, sale, other disposition, collection and enforcement of the Loan Documents, including without limitation court costs and reasonable attorneys' fees, expenses (including those associated with the defense or any related action, claim or demand) and disbursements (the "Collection Costs"), (ii) second, to any earned and unpaid Accrued Return owed on the LRO, and (iii) third, to the Purchase Amount of the LRO then outstanding. We will pay each holder of a series of LROs an amount equal to such holder's pro rata share of the Collection Proceeds (net of Collection Costs) secured with respect to the corresponding Loan prior to the extended payment date. Payment of amounts corresponding to certain Collection Proceeds (such as late charges, default interest or penalty interest charged on the Loan) could automatically increase the total amount of the LRO Payments owed to you under the terms of the LRO Agreement. Prepayment of the LRO and payment of amounts corresponding to other types of Collection Proceeds (such as amounts resulting from any reduction in outstanding principal and accrued interest on the Loan, we (or our agent (may agree to, or of amounts received in connection with the enforcement of any security interest in the assets pledged to secure the Loan, or in connection with a sale of our rights, title and interest under the Loan Documents) or, if we (or our agent) elects to write-off the Loan, could automatically decrease the total amount of the LRO Payments owed to you under the terms of the LRO. See "General Terms of the LROs —Collection Proceeds, Costs, and Expenses" below.

The chart below summarizes the current treatment of the various fees charged and expenses incurred in connection with underwriting and loan administration services.

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| | | |
|:---|:---|:---|
| **Type of Fee** | **Amount of Fee/Expense** | **Application of Fees** |
| Origination Fees | Typically ranging from 2% to 6% | Charged to each Borrower and retained by the entity originating the Loan. Fee is typically included in total amount of the Loan funded on the Groundfloor Platform or paid directly by the Borrower at closing. |
| Servicing Fees | Variable (typically ranging from 0.5% to 5%) | Charged to each Borrower and retained by GRE 1 (unless the originating entity is in the position to service the Loan at the time the fee is charged). Fee is levied with each draw or upon repayment of full Loan Principal. |
| Closing Expenses | $500 to $3,500 | Charged to the Borrower and retained by entity originating the Loan. Fee is typically included in total amount of the Loan funded on the Groundfloor Platform or paid directly by the Borrower at closing. |
| Check Processing Fee | Up to $15 | Fees would be paid by the Borrower and retained by GRE 1. |
| Non-Sufficient Funds | $15 to $35 | Fees would be paid by the Borrower and retained by GRE 1. |
| Loan Modification Fees | Variable | Fees paid by the Borrower and retained by GRE 1. |

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**Collection Proceeds and Collection Costs**

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| | | |
|:---|:---|:---|
| Penalty Interest Rate | Variable. Typically, up to an additional 2%, subject to applicable law | Additional interest paid by the Borrower. Corresponding amounts, less Collection Costs, are included in LRO Payments. |
| Late Charge | The lesser of 4% or the maximum amount permitted to be charged under applicable law | Late charge is paid by the Borrower. Corresponding amounts, less Collection Costs, are included in LRO Payments. |
| Default Rate | The lesser of 20% or the maximum rate permitted to be charged, less Collection Costs | Additional interest paid by the Borrower. Corresponding amounts, less Collection Costs, are included in LRO Payments. |
| Other Collection Proceeds | Variable | Corresponding amounts, less Collection Costs, are included in LRO Payments. |
| Collection Costs | Variable | Expenses paid and retained by GRE 1 (or its agent) out of the Collection Proceeds. |

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***Investors***

Investors are not charged investors fees in connection with the Offering or any service fees with respect to LRO Payments to them. Groundfloor does not currently charge investors any fees for the use of the Groundfloor Platform.

The Fund Transfer Agent charges Groundfloor fees for the use of its services. These fees are not passed through to investors. We are not responsible for any fees investors may be charged by their banking institution as a result of any transaction in which there are insufficient funds available to complete the transaction. These fees are typically charged to the investor directly by the banking institution; however, we reserve the right to pass through to the investor any fees we are charged as a result.

**Investment Documents**

When registering on the Groundfloor Platform you must agree to the Terms of Service and Privacy Policy. At the time you make a commitment to purchase a series of LROs, you must agree to the Investor Agreement, including the Terms and Conditions, and the LRO Agreement relating to that particular series of LROs. The Investor Agreement, together with the Terms and Conditions, governs the general rights and obligations in connection with investing in LROs through the Groundfloor Platform. The LRO Agreement governs the offer and sale of a particular series of LROs as well as the legal structure of the security and the specific rights and obligations of purchasers of that series of LROs and GRE 1. The provisions of the Investor Agreement and the LRO Agreement should be read in conjunction with each other; however, the LRO Agreement supersedes the terms of the Investor Agreement in the event of any inconsistency between the two agreements. See "General Terms of the LROs" for a more detailed discussion of the terms of the LRO Agreement.

The Investor Agreement limits your right to collect or attempt to collect from any Borrower or from its Principals, directly or through any third party, any amount owing under any of your LROs or on any of the Loan Payments on the Loan that corresponds to your series of LROs.

You also consent in both the Terms of Service (with Groundfloor Finance) and the Investor Agreement (with GRE 1) to receive electronically all documents, communications, notices, contracts, prospectuses, Offering Circulars (including supplements and PQAs), and agreements, including any IRS Form 1099, arising from or relating in any way to your or our rights, obligations or services under the Investor Agreement, any LRO Agreement you may enter into and use of the Groundfloor Platform (each, a "Disclosure"). Any Disclosures will be provided to you electronically, either on the Groundfloor Platform or via electronic mail to the verified email address provided. Disclosures may be made available in HTML (regular web hypertext) or as a Portable Digital Format or "PDF" file. You consent to receive Disclosures and transact business electronically (including creation of legally binding and enforceable agreements utilizing electronic records and signatures), and our agreement to do so, applies to any transactions to which such Disclosures relate. The Investor Agreement sets out a procedure for withdrawing your consent.

In the Investor Agreement, you acknowledge that the LROs are intended to be debt instruments issued by the Company that have original issue discount ("OID") for U.S. federal income tax purposes and you agree not to take any position inconsistent with that treatment of the LROs for tax, accounting, or other purposes, unless required by law. You also acknowledge that the LROs will be subject to the OID rules of the Internal Revenue Code, as described below under "Federal Tax Aspects—Taxation of the LROs in General" and "Federal Tax Aspects—Taxation of Payments on the LROs."

***Acknowledgements, Representations, and Warranties in the Investor Agreement***

The Investor Agreement describes the limitations on payments on the LROs, and you acknowledge that, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;· you are prepared to bear the risk of loss of your entire Purchase Amount;

&nbsp;&nbsp;&nbsp;&nbsp;· payment on the LROs, if any, depends entirely on the receipt of Loan Payments by us in respect to the corresponding Loan;

&nbsp;&nbsp;&nbsp;&nbsp;· we do not warrant or guarantee in any manner that you will receive all or any portion of the LRO Payments you expect to receive or
that you will realize any particular or expected rate of return; and

&nbsp;&nbsp;&nbsp;&nbsp;· we do not make any representations as to a Borrower's ability to pay (or that of its Principal(s)) and do not act as a guarantor
of any corresponding Loan Payments.

Under the Investor Agreement, you represent and warrant to us that, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;· you meet all minimum financial suitability standards and any maximum investment limits established for the Groundfloor Platform, as
then in effect, for residents of the state in which you reside and you agree to provide us with any additional documentation as we may
require to verify such compliance;

&nbsp;&nbsp;&nbsp;&nbsp;· you acknowledge that the LROs will not be listed on any securities exchange, there will be no trading platform for the LROs, any transfer
or trading of LROs must be conducted in accordance with federal and applicable state securities laws, any investment in the LROs will
be highly illiquid and you should be prepared to hold the LROs until our payment obligations thereunder terminate;

&nbsp;&nbsp;&nbsp;&nbsp;· you have complied in all material respects with applicable federal, state and local laws in connection with your execution and performance
of your obligations under the Investor Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;· you have the power to enter into and perform your obligations under the Investor Agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;· if you are a person who, in the ordinary course of business, regularly participates in credit transactions, you have considered the
application of the Equal Credit Opportunity Act and Regulation B promulgated thereunder, and any applicable state or local laws, regulations,
rules or ordinances concerning credit discrimination, in determining whether to invest in the LROs (as limited obligations of the
Company).

You also acknowledge and agree that the purchase and sale of the LROs is an arms'-length transaction and that we are not acting as your agent or fiduciary nor do we assume any advisory or fiduciary responsibility in favor of you in connection with the LROs or the corresponding Loan Payments and that you have consulted your own legal, accounting, regulatory and tax advisors to the extent you have deemed appropriate.

Under the Investor Agreement, we represent and warrant to you that, among other things, we have complied in all material respects with applicable federal, state and local laws in connection with the offer and sale of the LROs.

***Prohibited Activities***

By agreeing to the terms of the Investor Agreement, you also covenant and agree that, in connection with any funding requests, LROs, Loan Payments or other transactions involving or potentially involving your investment in LROs through the Groundfloor Platform, you will not:

&nbsp;&nbsp;&nbsp;&nbsp;· take any action on your own to collect, or attempt to collect from any Borrower or its Principals, directly or through any third party,
any amount owing under any of your LROs or on any of the Loan Payments that correspond to your LROs;

&nbsp;&nbsp;&nbsp;&nbsp;· bring a lawsuit or other legal proceeding against any Borrower, its Principals or any other party on any Loan Documents;

&nbsp;&nbsp;&nbsp;&nbsp;· contact the Borrower or its Principals with respect to any Loan;

&nbsp;&nbsp;&nbsp;&nbsp;· contact any collection agency or law firm to which any Loan has been referred for collection;

&nbsp;&nbsp;&nbsp;&nbsp;· violate any applicable federal, state or local laws; or

&nbsp;&nbsp;&nbsp;&nbsp;· undertake any other action in breach of the terms of the applicable LRO Agreement.

***Indemnification***

By executing the Investor Agreement, you also agree to indemnify, defend, protect and hold harmless the Groundfloor Parties against all Losses based upon or arising out of (1) any material breach of any obligation you undertake in the Investor Agreement or in any other Investment Document, including but not limited to your obligation to comply with applicable laws; or (2) your acts and omissions and your representations (and those of your employees, agents or representatives) relating to the Groundfloor Parties. Except with respect to Losses based upon or arising out of any inaccuracy in or breach of certain fundamental representations you make to us (as set forth in Section 8 of the Investor Agreement) or of your covenant not to violate applicable laws (as contained in Section 9(e) of the Investor Agreement), your liability to us will be limited to an amount equal to the aggregate LRO Payments due under any LROs you hold. We may, among other remedies we can pursue, collect against Losses by off-setting amounts owed to you as LRO Payments. Your obligation to indemnify us survives termination of Investor Agreement, any LRO Agreement and any other Investment Document, regardless of the reason for termination.

However, to the extent that any indemnification provision in the Investor Agreement purports to include indemnification for liabilities arising under the Securities Act, you should be aware that in the SEC's opinion such indemnification is contrary to public policy and therefore unenforceable.

***Servicing under the Investor Agreement***

The Investor Agreement provides that we (or our agent) will service all LROs and all Loans both before and after default. In servicing such obligations, we may, in our discretion, utilize affiliated or unaffiliated third-party loan servicers, repossessors, collection agencies or other agents or contractors. The Investor Agreement states that the terms of the LRO Agreement govern our rights and obligations with respect to actions to administer, service, collect and enforce a particular Loan. (See "General Terms of the LROs— Administration, Service, Collection, and Enforcement of Loan Documents" below.)

***Modifications of the Investment Documents***

You authorize us to correct obvious clerical errors appearing in information you provide to us, without notice to you, although we undertake no obligation to identify or correct such errors. We will not otherwise change, modify or alter the terms and provisions of any of the Investment Documents during the Offering Period. After completion of this Offering, we may (without giving prior notice to you) change any term or provision of the Investor Agreement, the Terms and Conditions, the Terms of Service, Privacy Policy, form of LRO Agreement (as it applies to future offerings) and the Groundfloor Platform. We will give you notice (by email) of material changes to such materials.

**Marketing**

Investors are attracted to Groundfloor Finance's website, www.groundfloor.com, through a variety of sources. The main marketing channels used are online channels, such as search keyword advertising, ad units on social media platforms; website banner ads; online videos hosted on media sites, on our own website, and on social networks; print media; and radio media. Groundfloor and its founders also maintain an active presence on prominent personal and professional online social networking communities, such as Facebook, LinkedIn, and Twitter. Advertising messages and online content encourage the public to learn more about our business and the Groundfloor Platform. Visitors to the Groundfloor website are encouraged to join the Groundfloor investor community by registering for an account, which is the first step in being able to invest in the Projects. Communications with community members by email and via the Groundfloor website provide information about micro-lending in real estate, developments with the Groundfloor website, company and industry news, and specifics about the investment process. Communications about specific investment opportunities or Projects available on the Groundfloor Platform are restricted in order to comply with state and federal securities regulation. Groundfloor conducts customer surveys to determine the level of investor satisfaction and to identify issues investors are having with the products and services it offers. Surveys are usually distributed by email. Groundfloor representatives will call customers at their request if they require information about the business and any investment opportunities on the Groundfloor Platform.

**Technology and Data Security**

***Overview***

Groundfloor operates its website and services through a cloud-based platform. Groundfloor owns, operates and maintains elements of this system, but significant portions are operated by third parties that Groundfloor does not control. In particular, the website and database supporting services are hosted by Heroku, Inc. ("Heroku"). Heroku provides a redundant, distributed and scalable hosting environment. Groundfloor also leverages other industry partners, including Amazon Web Services ("AWS"). AWS provides a suite of auxiliary services Groundfloor uses to supplement the website. In particular, AWS provides image and document storage, distributed domain name system and bulk email services. Groundfloor pays a monthly subscription fee for both services, which are subject to click-wrap, standard form agreements. Both Heroku and AWS have the right to terminate these agreements for cause and, should they do so, the Groundfloor business will be materially impacted because its website or critical components of its website (and thus, the Groundfloor Platform) will cease to operate until Groundfloor can find an alternative service provider. Groundfloor backs up all customer data daily and replicate within a cloud infrastructure via an encrypted connection. Both Heroku and AWS have backup copies of the data Groundfloor uploads to them, which is stored in many redundant locations around the world. Groundfloor continuously monitors the performance and availability of the Groundfloor Platform by leveraging independent third parties with checkpoints from around the world. Groundfloor aims to provide maximum uptime for our visitors by leveraging cloud infrastructure and through independent monitoring.

Groundfloor has built a highly scalable, multi-tier, redundant marketplace for investors and real estate developers. All code that makes up the website and supporting services is stored using industry best practices and leading version control provider Github, Inc. ("Github"). Groundfloor pays Github a monthly subscription fee for this service and, should Github terminate its agreement for cause, the Groundfloor business would be materially impacted because it no longer has infrastructure through which to develop its code base. Groundfloor would have to find an alternative provider. Groundfloor leverages Github's features and agile development practices to collaborate and build our product in a rapid, scalable and repeatable way.

Payment information and transactions are processed and recorded by the Funds Transfer Agent. All of the communications with the Funds Transfer Agent and other banking institutions occur over a 128 bit Secure Sockets Layer ("SSL") encrypted connection. Payment methods are tokenized and stored on the Funds Transfer Agent's Industry compliant infrastructure. Sensitive customer information is encrypted before it is stored within Groundfloor's relational database along with other customer, accounting and investing records. The Funds Transfer Agent and FBO Servicer keep a record of all funds that go into or out of the various Groundfloor accounts held with such entity. Groundfloor keep records of the same on our behalf in the Groundfloor Platform database. Groundfloor periodically reconciles the two sets of data to ensure accounting accuracy.

***Data Integrity and Scalability***

Communication to and from the Groundfloor Platform is transferred via the SSL protocol and a 128-bit SSL key provided by GoDaddy.com using the latest SHA-2 (2048- bit encryption) cryptographic algorithms. Information provided by investors is stored in a cloud-provided PostgreSQL relational database. Sensitive information acquired from our investors is encrypted before saving to our database using RSA 2048-bit symmetric-encryption keys. Private and public keys are stored in separate locations for maximum privacy and keys can be rotated every 12 months to conform with today's top security practices. Only our manager and Groundfloor's officers have access to customer data, and employees must request credentials to access this data and may only do so in the course of their duties.

The main database for groundfloor.com is backed up at least once a day and stored offsite. All source code and production keys are stored in multiple locations to ensure no single point of failure. Groundfloor controls access to data and systems and leverage multiple security mechanisms to reduce the chance of a security breach. All access measures and accounts are reviewed every six months. All shared accounts are required to have a password change every six months to ensure a secure controlled environment.

**Competition**

There are a number of existing online investment platforms, of which the leading platforms are offered by LendingClub and Prosper Marketplace. While LendingClub and Prosper Marketplace have a national presence, they are not able to transact business with lenders in all U.S. States, and neither of these platforms focuses specifically on funding real estate projects.

In the real estate space itself, there are four leading platforms, Lending Home, Realty Mogul, and Patch of Land, all of which are based in California, and Fundrise, based in Washington, D.C. Lending Home and Patch of Land compete directly in our space, providing short-term and mid-term loans for renovation projects but exclusively serve accredited and institutional investors. Realty Mogul provides equity real estate investment opportunities for mid to large projects but exclusively serves accredited investors. Fundrise provides equity, debt and REIT investment opportunities in real estate and serves both accredited and unaccredited investors, but focuses on mid-tier developers doing seven to eight figure projects.

In general, we face competition from existing financial institutions that lend to real estate developers, such as banks and specialty lenders (also known as hard money lenders). The commercial lending market for real estate lending in general and lending to single-family, multi-family, and small commercial projects in particular is competitive and rapidly changing. We expect competition to persist and intensify in the future, which could harm Groundfloor's ability to increase volume on the Groundfloor Platform. If the Groundfloor financing model achieves broad success, additional competitors are likely to enter the market. The crowdfunding provisions enacted in Title III of the JOBS Act and the Regulation "A+" provisions enacted in Title IV of the JOBS Act are likely to lower the barriers to entry for financial services platforms and may draw a significant number of competitors into the marketplace.

Increased competition could result in reduced volumes, reduced fees or the failure of the Groundfloor Platform to achieve or maintain more widespread market acceptance, any of which could harm our business. If any of the principal competitors or any major financial institution decided to compete vigorously for our customers, our ability to compete effectively could be significantly compromised and our operating results could be harmed. Most of our current or potential competitors have significantly more financial, technical, marketing and other resources than we have available and may be able to devote greater resources to the development, promotion, sale and support of their platforms and distribution channels. Our competitors may also have longer operating histories, more extensive customer bases, greater brand recognition and broader customer relationships. These competitors may be better able to develop new products, to respond more quickly to new technologies and to undertake more extensive marketing campaigns. Our industry is driven by constant innovation. If we or Groundfloor Finance are unable to stay competitive and innovative, the demand for the products and services we offer through the Groundfloor Platform could stagnate or substantially decline.

**Government Regulation**

***U.S. State and Federal Securities Laws***

The LROs offered hereby are "securities," as defined in the Securities Act and state securities laws. The Securities Act provides, among other things, that no sale of any securities may be made except pursuant to a registration statement that has been filed with the SEC and has become effective, unless such sale (or the security sold) is specifically exempted from registration. State securities laws have analogous provisions.

The Securities being offered hereby have not been registered under the Securities Act. Neither the SEC nor any state securities commission or regulatory authority approved, passed upon or endorsed the merits of this Offering. The Offering and proposed sale of Securities described herein shall be made pursuant to an exemption from registration with the SEC pursuant to Tier 2 of Regulation A and shall only be offered in states in which the registration of the offer and sale of the securities has been duly qualified.

***Equal Credit Opportunity Act***

The federal Equal Credit Opportunity Act ("ECOA") and the regulation issued by the Federal Reserve Board implementing the ECOA, Regulation B, prohibit discrimination in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age (with certain limited exceptions), because all or part of the applicant's income derives from any public assistance program, or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act. We comply with the ECOA's nondiscrimination requirements.

***Electronic Fund Transfer Act and NACHA Rules***

The federal Electronic Fund Transfer Act ("EFTA") and Regulation E, which implements it, provide guidelines and restrictions on the electronic transfer of funds from consumers' bank accounts. In addition transfers performed by ACH electronic transfers are subject to detailed timing and notification rules and guidelines administered by NACHA. Most transfers of funds in connection with the origination and repayment of the Loans are performed by ACH. Groundfloor obtains necessary electronic authorization from Borrowers and investors for such transfers in compliance with such rules. Transfers of funds through the Groundfloor Platform are executed by Dwolla, Inc. (our Funds Transfer Agent) and conform to the EFTA, its regulations and NACHA guidelines. Groundfloor may change the identity of our Funds Transfer Agent at any time without prior notice to you.

***Electronic Signatures in Global and National Commerce Act/Uniform Electronic Transactions Act***

The federal Electronic Signatures in Global and National Commerce Act ("E-SIGN") and similar state laws, particularly the Uniform Electronic Transactions Act ("UETA"), authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures. E-SIGN and UETA require businesses that want to use electronic records or signatures in consumer transactions to obtain the consumer's consent to receive information electronically. When a Borrower or potential investor registers on the Groundfloor Platform, both we and Groundfloor obtain his or her consent to transact business electronically and maintain electronic records in compliance with E-SIGN and UETA requirements.

***Lending and Usury Regulation***

We must comply with regulatory regimes, including those applicable to mortgage lending transactions, various aspects of which are untested as applied to the Groundfloor Platform. Certain state laws generally regulate interest rates and other charges we can impose and require certain disclosures. In addition, other federal and state laws may apply to the origination and servicing of Loans originated through the Groundfloor Platform. We believe we structure our Loans to Borrowers in accordance with licensing or other requirements applicable to us and to Groundfloor. To that end, we do not make Loans to finance owner-occupied residential projects, which may include a building with a limited number of residential "units." We also require that Borrowers represent to us that the property will not be used as a residence by the Borrower and that the proceeds of the requested Loan will be used for business purposes and not for personal, family or household purposes. We may also adjust the interest rates charged on Loans to comply with applicable usury restrictions. If necessary, we (and Groundfloor, if necessary) obtain required licenses in a particular jurisdiction before facilitating Loans in such jurisdiction, or, if we determine not to obtain such license, we will not originate Loans in that particular jurisdiction.

The financial industry is becoming more highly regulated. There has been, and may continue to be, a related increase in regulatory scrutiny and investigations of the operations of peer-to-peer or micro-lending platforms as well as trading and other investment activities of alternative investment funds. Increased regulatory scrutiny and investigations of this nature may impose additional expenses on us and on Groundfloor Finance, may require the attention of Groundfloor's senior management and may result in fines if we or it are deemed to have violated any regulations

***Foreign Laws and Regulations***

Groundfloor does not permit non-U.S. residents to register as members on the Groundfloor Platform, and neither we nor Groundfloor operates outside the United States. Therefore, we are not subject to foreign laws or regulations. Groundfloor operates a wholly owned subsidiary in Canada for the sole purpose of originating, closing, and servicing loan in Canada.

**Employees**

GRE 1 does not have any employees. As of March 6, 2023, Groundfloor Finance had 85 full-time employees and no part-time employees.

**Properties**

As of March 6, 2023, our Company did not own any property. Our headquarters are located in Atlanta, Georgia, shared with Groundfloor Finance, which currently leases office space under a month-to-month lease.

**Legal Proceedings**

As of March 6, 2023, neither GRE 1 nor Groundfloor Finance was a party to any material legal proceedings. GRE 1 and Groundfloor Finance is from time to time party to certain other legal actions in the ordinary course of our business, including foreclosure actions on Loans we have originated and other legal proceedings related to resolving Borrower defaults. We believe these actions are routine in nature and incidental to the operation of our business.

On December 21, 2016, Groundfloor Finance was informed by the securities regulatory authorities in certain states that its initial registration statement on Form U-1 for the sale of LROs in such states had expired on December 15, 2016. Between December 15, 2016 and December 21, 2016, Groundfloor Finance sold and issued three series of LROs pursuant to Post-Qualification Amendment No. 37 to Groundfloor Offering Statement on Form 1- A, dated December 8, 2015 and originally qualified on December 15, 2015. Because the original Form U-1 registering such LROs with applicable state securities regulators had expired prior to the issue and sale of the LROs, Groundfloor Finance refunded the outstanding LROs in full on January 11, 2017. Groundfloor subsequently offered and sold three new series of LROs covered under the revised Form U-1 dated December 21, 2016 relating to the same Loans pursuant to Post-Qualification Amendment No. 39 to the Offering Statement.

**CAPITALIZATION**

***GRE 1***

In accordance with the Company's Operating Agreement, the Company's parent, Groundfloor Finance, is obligated to contribute cash of $100 to the Company but has no further obligations to make any further capital contributions to the Company. The Company has recorded this contribution as member's contribution receivable as of December 31, 2016. Groundfloor is GRE 1's sole member and manager.

***Groundfloor Finance***

The following tables reflect Groundfloor's capitalization as of December 31, 2022 (audited) and December 31, 2021 (audited). The tables are not adjusted to reflect any subsequent stock splits, stock dividends, recapitalizations or refinancings or the subsequent closings of any financings.

The historical data in the tables is derived from and should be read in conjunction with Groundfloor's consolidated financial statements included in this Offering Circular. You should also read this table in conjunction with the section entitled "Management Discussion and Analysis."

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| | | |
|:---|:---|:---|
|  | **Amounts<br> Outstanding as of<br> December 31, 2022** | **Amounts<br> Outstanding as of<br> December 31, 2021** |
| **Stockholders' equity (deficit):** |  |  |
| &nbsp;&nbsp;&nbsp;Common stock, no par value | $14867107 | $11895593 |
| &nbsp;&nbsp;&nbsp;Preferred stock, no par value | 22820952 | 15001009 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 5776928 | 3310258 |
| &nbsp;&nbsp;&nbsp;Less: Stock subscription receivable | (560) | (560) |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (35574099) | (30203181) |
| &nbsp;&nbsp;&nbsp;Company's stockholders' equity (deficit) | 7890328 | 3119 |
| &nbsp;&nbsp;&nbsp;Non-controlling interest in consolidated VIE | 1588250 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total stockholders' equity (deficit)** | $**9478578** | $**3119** |

---

 **MANAGEMENT**

**GRE 1 Employees**

GRE 1 does not have any employees. We provide various information about the management of Groundfloor Finance, our parent and sole member and manager.

**Directors, Executive Officers and Significant Employees**

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| | | | |
|:---|:---|:---|:---|
| **Name** | **Position** | **Age** | **Term of Office** |
| **Executive Officers:** |  |  |  |
| Brian Dally | President and CEO, and Director | 49 | January 2013 |
| Nick Bhargava | Executive Vice President, Legal and Regulatory, Acting Chief Financial Officer and Secretary | 36 | January 2013 |
| **Directors:** |  |  |  |
| Bruce Boehm | Director (independent) | 67 | December 2014 |
| Nick Bhargava | Director | 36 | January 2013 |
| Brian Dally | Director | 49 | January 2013 |
| Lucas Timberlake | Director | 33 | November 2019 |
| Yair Goldfinger | Director | 50 | January 2022 |
| Richard Tuley Jr. | Director (independent) | 50 | December 2014 |
| **Significant Employees:** |  |  |  |
| Patrick Donoghue | Director of Lending Operations | 46 | March 2016 |
| Richard Pulido | Senior Vice President and Head of Lending and Risk Management | 60 | December 2016 |
| Chris Schmitt | Vice President of Software | 46 | February 2014 |

---

**Biographies of Directors, Executive Officers and Significant Employees**

*Nick Bhargava* (36) is a co-founder of the Company, has served on our Board of Directors and as its Secretary since our inception. Mr. Bhargava was also named Executive Vice President, Legal and Regulatory in July 2014. Mr. Bhargava completed a Practicum with SciQuest Inc. from January 2012 to May 2012 where he was responsible for reviewing and editing the company's federal securities filings and sales contracts. Previous to that, he served as a Regulatory Analyst for the Financial Services Roundtable from May 2011 to August 2011, where he reviewed and analyzed legislation and regulation, particularly the Dodd-Frank Wall Street Reform and Consumer Protection Act rulemakings. From May 2010 to August 2010, Mr. Bhargava served as an Honors Intern in Trading and Markets with the SEC, at which he was tasked with researching and analyzing the May 6, 2010 Flash Crash in addition to reviewing proposed rules, comments on proposed rules and SRO filings. As an Enforcement Intern with the Financial Industry Regulatory Authority from May 2009 to August 2009, Mr. Bhargava was responsible for developing enforcement actions against broker-dealers. Prior to these positions, Mr. Bhargava worked as a Trader for TD Waterhouse Inc. from September 2006 to February 2008 and had responsibility for taking and executing trade orders for equities and equity options for high value accounts. Mr. Bhargava received his LLM from Duke University School of Law in 2012, a JD from American University in 2011, and a BS in Biological Sciences and Business from University of Alberta in 2006.

*Bruce Boehm* (67) has served on our Board of Directors since December 2014. Mr. Boehm is an active angel investor in the Raleigh-Durham area and advisor to several specialty investment funds. During his career, he has been a director for more than 35 publicly and privately held companies. From 1992 to 1996, he created and directed the Masters of Engineering Management Project at the University of Canterbury in Christchurch, New Zealand. Prior to 1992, he was a General Partner of U.S. Venture Partners in Menlo Park, California, with responsibility for a portfolio of approximately 20 healthcare and technology investments. Prior to 1982, he was employed by several Silicon Valley and Route 128 companies as an engineer and project manager. Mr. Boehm received a BS from MIT in 1975 and a MS and MBA from Stanford University in 1982. Mr. Boehm qualifies as an independent director under the NASAA Statement of Policy Regarding Corporate Securities Definitions.

*Brian Dally* (49) is a co-founder of the Company, has served on our Board of Directors and as our President and Chief Executive Officer since the Company's inception. Prior to forming the Company, he served as the Chief Instigator of Fomentum Consulting, LLC beginning in September 2012, responsible for consulting for technology companies in the area of marketing, customer acquisition, and product development. As the Senior Vice President and General Manager of Republic Wireless, a division of Bandwidth.com, from January 2010 to September 2012, Mr. Dally led the successful formation and launch of the company's mobile division, including managing over 60 individuals and achieving a $60 million revenue run-rate before the end of the first year of operation. From May 2008 to January 2009, Mr. Dally served as the Principal at Peripatetic Ventures Corp., a management consulting firm for high-growth technology company clients, where he assisted clients to develop partnerships to execute new product strategies and cultivate potential customer relationships in addition to conducting buyer needs research, analyzing competition, and crafting positioning and messaging. Mr. Dally has also held officer-level positions with Cecure Gaming LTD, a consumer poker and casino games service for mobile phones, and Motricity Inc., a mobile platform for entertainment and applications. Mr. Dally received a JD from Harvard Law School in June 1999, a MBA from Harvard Business School in 1999, and a BA in Political & Social Thought from the University of Virginia in 1993.

*Patrick Donoghue* (46) has served as our Director of Lending Operations since March 2016, previously serving in this role on a contract basis. Prior to this, Mr. Donoghue served as Senior Associate for RevitaLending from May 2015 to January 2016, where he worked to optimize the firm's capital market structure and proliferate the loan growth model. Previously serving as Vice President of Wholesale Operations for ACC Mortgage from Mary 2014 until Mary 2015, Mr. Donoghue managed the entire loan process for a significant broker channel reviewing and funding private money loan transactions. Mr. Donoghue has been active in the private lending space since 2006 underwriting, originating and servicing private money loans. Prior to this, Mr. Donoghue served as production manager and originator for various mortgage companies and began his career as a Branch Manager for the United States Senate FCU. Mr. Donoghue graduated from Edinboro University of Pennsylvania with a B.A. in Psychology in 1997.

Lucas Timberlake (33) has served on our Board of Directors since November 2019. Mr. Timberlake has over 10 years of financial services experience in a variety of capacities, including venture capital, private equity, and investment banking. Currently, Mr. Timberlake is a Partner with Fintech Ventures Fund, a financial technology-focused investment firm, since 2015. Since assuming his current role, Mr. Timberlake has held several board director positions with technology-enabled lending companies in the small business and real estate lending sectors, and currently serves on the board of directors for IOU Financial. Previously, Mr. Timberlake was part of the investment team with Antarctica Capital, an international private equity firm focusing on real assets and insurance opportunities. Mr. Timberlake began his career as an investment banking analyst with Bank of America Merrill Lynch. Mr. Timberlake holds a Bachelor of Arts in Economics and Political Science from Columbia College of Columbia University.

Yair Goldfinger (50) has served on the Board of Directors at Groundfloor since 2022. He is a Co-Founder of AppCard and serves as its Chief Executive Officer. He serves as Board Member at Undoit Medical. He is a serial entrepreneur and active angel investor. At 26, he co-founded ICQ, the world's first Internet-wide instant messaging service, which was acquired by AOL (NYSE:AOL). In 2001, Yair co-founded Dotomi, an online advertising technology company that focuses on creating personal, relevant, and timely one-to-one messaging between marketers and their customers. Dotomi was acquired by ValueClick (NASDAK:VCLK). Yair holds a B.Sc. in math and computer science from Tel-Aviv University and holds several patents in the field of instant messaging. In 2005, he received the Wharton Infosys Business Transformation Award, and in 2009, he was chosen by the World Economic Forum as a Young Global Leader. He also served as Board Member at Silent Communication.

*Richard Pulido* (60) has served as our Senior Vice President and Head of Lending and Risk Management since December of 2016. Prior to joining the Company, he had a 27-year career with Prudential Financial in commercial real estate investment spanning asset management, development, portfolio management and capital markets assignments. Mr. Pulido's last assignment was building a Secondary Market unit to address demand for floating rate mortgage product. Starting the group in 2013, he built an approximately $1 billion book by December 2015. Between 1996 and 2012, Mr. Pulido was in the Debt Asset Management team, including 12 years as National Head of Special Servicing. Mr. Pulido successfully led the team through the credit cycle, at one point tripling head count and office count to properly address portfolio issues. During this period, he also expanded the group's scope beyond life company assets to include CMBS, Agency and third-party accounts. Concurrent with his special servicing responsibilities, for several years Mr. Pulido also led the Portfolio Management team responsible for quality rating and valuing the commercial mortgage portfolio. Additional achievements included implementing the engagement of an offshore vendor to provide supporting analytical work and defending the proprietary credit rating model to regulators, auditors and rating agencies. Mr. Pulido had previous assignments in equity asset management and development in Los Angeles and Chicago, where he began his Prudential career. Prior to his real estate career, Mr. Pulido was a Systems Engineer with Northrop Corp. in California. Mr. Pulido received his MBA from The University of Chicago Booth School of Business in 1988 and his BS in System Science and Mathematics from the University of California, Los Angeles in 1983.

*Chris Schmitt* (46) has served as our Vice President of Software since February of 2014, previously serving as our lead developer on a contract basis. Prior to joining the Company, he served as Senior Program Manager for Bandwidth.com beginning in January 2012, where he lead multiple teams in efforts to coordinate the release of products, created and implemented a new Beta program to improve product quality, and worked with senior management to define tasks and priorities for his teams. Mr. Schmitt served as the IT Manager of Bandwidth.com from September 2011 to January 2012, and in this role he managed a group of five developers on day-to-day operations of building and maintaining the website and back office and launch night of republic wireless including a massive scaling effort on Amazon's EC<sub>2</sub> services to handle peak web traffic. As Senior Borrower for Bandwidth.com from October 2010 to September 2011, Mr. Schmitt's responsibilities included organizing and acting as the team lead for the Broadband division. Also in this role, he took the division from an excel-based back office to an online back office through multiple integration, rebuilt the online customer portal with many enhanced features and reconstructed the back end to make it more scalable to meet future demand, and built a distributed ping-based product leveraging Amazon EC<sub>2</sub> services from multiple regions to compete with other industry participants. Mr. Schmitt served as Senior Database Administrator for Credit Suisse from August 2009 to October 2010, where he acted as a primary database administrator for over 100 servers and worked with support groups to help improve communication and processes. Mr. Schmitt also operated his own consulting firm, TreadPath Software, LLC, from August 2007 to October 2010. Mr. Schmitt received a BA in Computer Information Systems from Roger Williams University in 1997.

*Richard ("Rick") Tuley Jr.* (50) has served on our Board of Directors since December 2014. Mr. Tuley is an experienced real estate entrepreneur and business operator. He currently serves as the managing broker of Richard Tuley Realty, Inc., a real estate brokerage firm specializing in residential and commercial investment sales and property management which was founded in 1982. Mr. Tuley has been a licensed broker since 1992 and assumed full firm management in 2009. In addition, Mr. Tuley serves as President of Destiny Development Corporation, a Georgia-based general contracting firm founded in 2001. Destiny specializes in upscale custom and speculative residential construction and remodeling. Mr. Tuley is responsible for firm strategy, securing mortgage capital and making investment decisions. He is a third generation home builder, whose father founded two home building companies in Atlanta, Georgia. Mr. Tuley has over 25 years of experience in new home construction, lot and land development for multiple Fortune 500 companies, retail development, residential redevelopment, property management and long-term investing. Mr. Tuley is also an angel investor. He previously worked for the real estate team within Ernst & Young's entrepreneurial services group. He was also a senior associate in Leveraged Finance and the Financial Sponsors Coverage groups at UBS and a principal with Katalyst Venture Partners in New York. Between real estate and Wall Street, Mr. Tuley has been involved in well over $1 billion in transactions during his career. Mr. Tuley earned his undergraduate degree from Georgia Tech in 1992 and his MBA from Harvard Business School in 1999. Mr. Tuley qualifies as an independent director under the NASAA Statement of Policy Regarding Corporate Securities Definitions (collectively with Mr. Boehm, the "Independent Directors").

**Compensation of Our Management**

Compensation of our executive officers for the 2022 fiscal year was as follows:

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| | | | |
|:---|:---|:---|:---|
| **Name** | **Cash <br> Compensation<br> ($)** | **Other <br> compensation<br> ($)** | **Total <br> compensation <br> ($)** |
| Brian Dally | $220000 | N/A | $220000 |
| Nick Bhargava | $180000 | N/A | $180000 |

---

As of the date of this Offering Circular, the Company has not compensated its outside directors for their service on our Board of Directors. Notwithstanding the foregoing sentence, Bruce Boehm and Richard Tuley, Jr. were each granted options to purchase 8,000 shares of Groundfloor Finance common stock as compensation for their service on the Board of Directors during 2015. If exercised, such options will not represent five or more percent of any class of securities. The option grants to Bruce Boehm and Richard Tuley, Jr. solely serve as service compensation and is customary for companies in our industry in order to attract and retain qualified directors. In the future, we may implement an outside director compensation program that includes grants of cash and/or equity-based awards.

**Employment Agreements**

Except as described below, we have entered into employment agreements with each of our officers and significant employees in the form of offer letters. Each offer letter provides for "at will" employment and sets forth the compensation arrangements for the officer. The offer letters do not provide for any arrangements for payments or benefits upon termination of employment in specified circumstances, including following a change in control.

***Employment Agreement with Brian Dally, President and CEO***

We entered into an Executive Employment Agreement with Brian Dally on November 14, 2014. The agreement automatically renews on a year-to-year basis unless otherwise terminated as provided therein, and has automatically renewed for an additional one year term that ends on December 31, 2023. The agreement provides that Mr. Dally will receive a base salary, which is currently $220,000 The agreement also provides that, on or immediately after the three-month anniversary of the closing of such an equity financing, our Compensation Committee shall consider the establishment of an incentive bonus in which Mr. Dally will be eligible to participate. Mr. Dally is entitled to up to 25 business days of paid time off in each full calendar year and to receive reimbursement for all of his reasonable business expenses incurred in performing his services to us pursuant to the agreement. The agreement also provides that Mr. Dally will be entitled to severance of 12 months of his annual base salary following a Termination Without Cause or Resignation with Good Reason (each as defined in the agreement) in addition to any base salary owed through the effective date of such termination, payment for accrued unused PTO, any bonus to which Mr. Dally is entitled for a preceding period but unpaid as of the date of termination, and continued participation in Groundfloor benefit plans for 12 months. In consideration for us entering into the agreement, Mr. Dally agreed to be bound by certain non-competition and non-solicitation/interference/non-disparagement provisions during the term of the agreement and for 12 months following his termination.

***Employment Agreement with Nick Bhargava, Executive Vice President, Legal and Regulatory***

We entered into an Executive Employment Agreement with Nick Bhargava on November 14, 2014. The agreement automatically renews on a year-to-year basis unless otherwise terminated as provided therein, and has automatically renewed for an additional one year term that ends on December 31, 2023. The agreement provides that Mr. Bhargava will receive a base salary, which is currently $180,000. The agreement also provides that, on or immediately after the three-month anniversary of the closing of such an equity financing, our Compensation Committee shall consider the establishment of an incentive bonus in which Mr. Bhargava will be eligible to participate. Mr. Bhargava is entitled to up to 25 business days of paid time off in each full calendar year and to receive reimbursement for all of his reasonable business expenses incurred in performing his services to us pursuant to the agreement. The agreement also provides that Mr. Bhargava will be entitled to severance of 12 months of his annual base salary following a Termination Without Cause or Resignation with Good Reason (each as defined in the agreement) in addition to any base salary owed through the effective date of such termination, payment for accrued unused PTO, any bonus to which Mr. Bhargava is entitled for a preceding period but unpaid as of the date of termination, and continued participation in Groundfloor benefit plans for 12 months. In consideration for us entering into the agreement, Mr. Bhargava agreed to be bound by certain non-competition and non-solicitation/interference/non- disparagement provisions during the term of the agreement and for 12 months following his termination.

**Lack of Separate Representation**

The attorneys, accountants and other professionals who perform services for us do not represent investors, and no other counsel or professionals have been retained to represent the interests of investors who purchase LROs.

**PRINCIPAL SHAREHOLDERS**

**GRE 1 Capital Stock**

Groundfloor Finance is the sole member and manager of GRE 1.

**Groundfloor Finance Capital Stock**

The table below sets forth information as of December 31, 2022 with respect to ownership of our common stock (on the basis of total shares outstanding as well as with respect to shares deemed to be beneficially owned, including shares issuable upon exercise of outstanding stock options and upon conversion of outstanding preferred stock) and of our preferred stock (on the basis of each individual series as well as total shares outstanding) by (i) each of our executive officers for fiscal year 2022 who beneficially owns 10% or more of the outstanding shares of any class of capital stock, (ii) each person or entity who beneficially owns 10% or more of the outstanding shares of each class (or series within a class) of capital stock, and (iii) all of our current directors and executive officers as a group. Except as otherwise noted, the mailing address for each shareholder is 600 Peachtree Street, Suite 810, c/o Groundfloor Finance Inc., Atlanta, GA 30308. All of the outstanding stock options have been issued pursuant to the Groundfloor Finance Inc. 2013 Stock Option Plan (the "2013 Plan"). Except for options granted pursuant to this stock option plan and the preemptive rights under the Investors' Rights Agreement (as defined below), no options, warrants or other rights to purchase our securities are held by any person.

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **Common Stock** | **Common Stock** | **Common Stock** | **Common Stock** | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** | **Preferred Stock** |
| <br>**Name and<br> Address of<br> Beneficial<br> Owner** | **Outstanding<br> Shares** | **% of<br> Class** | **Total<br> Beneficially<br> Owned<br> Shares** | **% of<br> Class** | **Shares<br> of<br> Series<br> Seed** | **% of<br> Series<br> Seed** | **Shares<br> of<br> Series<br> A** | **% of<br> Series A** |
| Brian Dally | 609506 | 23.4 | 609506 | 18.2 |  |  |  |  |
| Nick Bhargava | 538700 | 20.7 | 538700 | 16.1 |  |  |  |  |
| Lucas Timberlake(1) |  |  |  |  |  |  | 635277 | 85.0 |
| Yair Goldfinger(2) | 60765 | 2.3 | 111765 | 3.3 |  |  |  |  |
| **Directors and Executive Officers as a Group (6 persons)** | 1208971 | 46.5 | 1263971 | 37.7 |  |  | 635277 | 85.0 |

---

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| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Name and<br> Address of<br> Beneficial<br> Owner** | **Shares of Series B** | **% of<br> Series B** | **Shares of Series<br> B-2** | **% of<br> Series B-2** | **Shares<br> of<br> Series<br> B-3** | **% of<br> Series<br> B-3** | **Preferred Outstanding** | **% of<br> Class** |
| Brian Dally | – |  |  |  | – |  |  |  |
| Nick Bhargava | – |  |  |  | – |  |  |  |
| Lucas Timberlake(9) | – |  |  |  | – |  | 635277 | 32.0 |
| Yair Goldfinger(10) | – |  | 189270 | 100.0 | – |  | 189270 | 9.5 |
| **Directors and Executive Officers as a Group (6 persons)** | – |  | 189270 | 100.0 | – |  | 824547 | 41.5 |

---

1 Includes shares held by FinTech Ventures Fund, LLLP ("FinTech Ventures"), for which Mr. Timberlake holds voting and dispositive power through FinTech Ventures' general partner, qWave Capital LLC. The address for FinTech Ventures is 3445 Stratford Road, Suite 3902, Atlanta, Georgia 30326.

2 Includes shares held by MDO Ventures JS LLC ("MDO Ventures"), for which Mr. Goldfinger holds voting and dispositive power. The address for MDO Ventures is 135 E. Martin Street, Suite 201, Raleigh, North Carolina 27601.

**INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS**

Please see "Description of the Business of GRE 1 and of Groundfloor Finance" above for a description of the proposed transactions between GRE 1 and its sole member and manager, Groundfloor Finance. Below is a description of transactions between Groundfloor Finance and its management and other affiliates.

**General Note Regarding Certain Transactions**

We note that we have determined that the terms of certain transactions discussed below were as favorable to Groundfloor as those generally available from unaffiliated third parties; however, Groundfloor lacked sufficient disinterested independent directors to approve the transaction at the time it was carried out. Groundfloor Finance has pre- existing, substantive relationships with numerous sophisticated private investors across the Southeast, and particularly in the Atlanta, Georgia and the Raleigh-Durham, North Carolina areas. Groundfloor Finance marketed the potential terms for transactions described below with such private investors and confirmed that transactions with unaffiliated third parties were not available on terms as favorable to Groundfloor Finance as the terms of the financings it entered into (as described below). Further, the Series Seed Financing and the Series A Financing were each led by private investors affiliated with Messrs. Goldfinger and Kouzmine, respectively, each of whom are seasoned investors who were not affiliated with Groundfloor Finance prior to the applicable financing.

**Series Seed Financing**

Certain affiliates and family members of members of the Groundfloor Finance Board participated in the Series Seed Initial Closing (before appointment to our Board) and Subsequent Closings of the Series Seed Financing (each as defined below). The table below includes the amount of such participation for each such purchaser:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Director or<br> Affiliate** | **Aggregate<br> Shares of Series<br> Seed Stock** | **Initial Closing<br> Purchase <br> Amount** | **Subsequent <br> Closings <br> Purchase<br> Amount** | **Conversion of<br> Outstanding <br> Convertible <br> Promissory<br> Note** | **Total Purchase<br> Price** |
| MDO Ventures JS LLC(1) | 90384 | $150000 | $50000 | $208044.44 | $408044.44 |
| Nancy Luberoff(2) | 28691 | $30000 | $30000 | $68037.78 | $128047.78 |

---

&nbsp;&nbsp;&nbsp;&nbsp;(1) MDO Ventures JS LLC is an affiliate of Mr. Goldfinger, a member of our Board.

&nbsp;&nbsp;&nbsp;&nbsp;(2) Mrs. Luberoff is the wife of Mr. Boehm, a member of our Board.

The terms of the transaction were as favorable to Groundfloor as those generally available from unaffiliated third parties. Groundfloor lacked sufficient disinterested independent directors at the time of the Series Seed Initial Closing to approve the transaction. The Subsequent Closings were approved by the Groundfloor Finance Board, including all of the disinterested independent directors.

**Bridge Note Financing**

During November 2015, Groundfloor Finance entered into promissory notes (the "2015 Bridge Notes") with investors for total proceeds of $250,000 (the "2015 Bridge Financing"). 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 $4,250,000. The 2015 Bridge Notes and all accrued but unpaid interest thereunder were cancelled as consideration for shares of Series A Preferred Stock in connection with the Series A Initial Closing (as defined below). Certain affiliates and family members of members of the Board purchased notes in the offering. The table below includes the note principal amount for each such purchaser:

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| | |
|:---|:---|
| **Director or Affiliate** | **Note Principal<br> Amount** |
| MDO Ventures JS LLC(1) | $25000 |
| Nancy Luberoff(2) | $25000 |
| Richard Tuley Realty, Inc.(3) | $25000 |

---

(1) MDO Ventures JS LLC is an affiliate of Mr. Goldfinger,
a member of our Board.

(2) Mrs. Luberoff is the wife of Mr. Boehm, a member of our Board.

(3) Richard Tuley Realty, Inc. is an affiliate of Mr. Tuley, a member of our Board.

The terms of the transaction were as favorable to Groundfloor as those generally available from unaffiliated third parties. Groundfloor lacked sufficient disinterested independent directors to approve the transaction at the time it was carried out.

**Series A Financing**

On November 24, 2015 (the "Series A Initial Closing"), Groundfloor Finance issued an aggregate of 708,110 shares of our Series A Preferred Stock for aggregate consideration of approximately $4,737,298 pursuant to that certain Series A Preferred Stock Purchase Agreement (the "Series A Purchase Agreement"), dated November 24, 2015 among the Company and the investors named therein (the "Series A Investors"). Pursuant to the Series A Purchase Agreement, Groundfloor Finance issued and sold an additional 39,263 shares of Series A Preferred Stock in subsequent closings through December 4, 2015 (collectively, the "Series A Subsequent Closings" and together with the Series A Initial Closing, the "Series A Financing").

Certain affiliates and family members of members of the Groundfloor Finance Board participated in the Series A Financing by accepting shares of Series A Preferred Stock as consideration for the cancellation of the outstanding principal and payment of accrued interest under the 2015 Bridge Notes. The table below includes the shares of Series A Preferred Stock for each such purchaser:

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| | | | | |
|:---|:---|:---|:---|:---|
| **Director or Affiliate** | **Aggregate<br> Shares of Series<br> A Preferred<br> Stock** | **Cancellation<br> of Bridge<br> Note<br> Principal** | **Payment of<br> Accrued<br> Bridge Note<br> Interest** | **Total Purchase<br> Price** |
| MDO Ventures JS LLC(1) | 3750 | $25000 | $90.41 | $25090.41 |
| Nancy Luberoff(2) | 3754 | $25000 | $115.07 | $25115.07 |
| Richard Tuley Realty, Inc.(3) | 3751 | $25000 | $98.63 | $25099.63 |

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(1) MDO Ventures JS LLC is an affiliate of Mr. Goldfinger, a member of our Board.

(2) Mrs. Luberoff is the wife of Mr. Boehm, a member of our Board.

(3) Richard Tuley Realty, Inc. is an affiliate of Mr. Tuley, a member of our Board.

The terms of the transaction were as favorable to Groundfloor as those generally available from unaffiliated third parties. Groundfloor lacked sufficient disinterested independent directors to approve the transaction at the time it was carried out.

In connection with the Series A Financing, Groundfloor Finance entered into an Amended and Restated Investors' Rights Agreement (as amended and restated, the "Investors' Rights Agreement") and a Voting Agreement with the holders of our preferred stock and a Right of First Refusal and Co-sale Agreement with the Series A Investors.

The Investors' Rights Agreement, among other things: (i) grants Groundfloor preferred stockholders specified registration rights with respect to shares of our common stock, including shares of common stock issued or issuable upon conversion of the shares of preferred stock held by them; (ii) obligates Groundfloor to deliver periodic financial statements to certain of the stockholders who are parties to the Investors' Rights Agreement; and (iii) grants a preemptive right with respect to the holder's pro rata share of any equity securities, or rights, options or warrants to purchase such equity securities, or securities convertible or exchangeable into such equity securities, offered by Groundfloor in the future subject to certain customary exceptions, to the stockholders who are parties to the Investors' Rights Agreement.

The Voting Agreement, among other things, provides for the voting of shares with respect to the size and constituency of our Board of Directors. Pursuant to the Voting Agreement, Mr. Kouzmine was designated to serve as the designee of FinTech Ventures and Mr. Goldfinger was designated to continue serve on our Board as the designee of Mr. Goldfinger, MDO Ventures JS LLC, and their affiliates. The holders of a majority of Groundfloor common stock and Messrs. Dally and Bhargava have the right to designate the third and fourth members of the Board of Directors, respectively, which continue to be Messrs. Dally and Bhargava. The final two members of the Board of Directors shall be individuals chosen by the remaining members of the Board as independent directors, which continue to be Messrs. Boehm and Tuley.

The Right of First Refusal and Co-sale Agreement, among other things, grants the Series A Investors rights of first refusal and co-sale with respect to proposed transfers of Groundfloor securities by specified stockholders and grants Groundfloor rights of first refusal with respect to proposed transfers of Groundfloor securities by specified stockholders.

Pursuant to Article VII Section 4 of the Groundfloor Finance Bylaws, a shareholder who desires to transfer Groundfloor shares must first make a written offer to Groundfloor to purchase the shares at the same price per share and upon the same terms and conditions offered by a bona fide prospective purchaser of such shares. In connection with the Initial A Closing, Groundfloor also entered into a letter agreement with the Series A Investors to waive this right of first refusal in favor of Groundfloor for future transfers by the Series A Investors.

**ISB Note**

On January 11, 2017, Groundfloor Finance entered into a promissory note and security agreement (the "ISB Note") in favor of ISB Development Corp., an affiliate of Mr. Kouzmine ("ISB"), for a principal sum of $1,000,000. Groundfloor Finance paid to ISB an origination fee of $10,000 concurrently with the funding by ISB of the principal of the ISB Note. The ISB Note incurs interest at the rate of 8% per annum, calculated on the basis of a 360-day year for the actual number of days elapsed. Groundfloor Finance subsequently entered into an amendment to the ISB Note extending the repayment schedule in return for a $5,000 amendment fee. The ISB Note, as amended, must be repaid as follows: (i) $250,000, plus any accrued but unpaid interest thereon, is due and payable on June 30, 2017, (ii) $250,000, plus any accrued but unpaid interest thereon, is due and payable on September 30, 2017, and (iii) any remaining outstanding principal amount, plus any remaining accrued but unpaid interest, is due and payable on December 31, 2017. As of the date of this Offering Circular, the principal sum of $1,000,000 remains outstanding.

The ISB Note is subject to customary event of default provisions. As collateral security for the ISB Note, Groundfloor Finance 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; (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 Groundfloor Finance or one of its subsidiaries, including GRE 1; and (iii) the equity interest in any subsidiary formed by Groundfloor Finance for the sole purpose of issuing Loans and corresponding series of LROs such as GRE 1.

Groundfloor Finance entered into the ISB Note for the purpose of using the proceeds for its loan advance program (see "Description of the Business of GRE 1 and of Groundfloor Finance—How the Groundfloor Platform Operates—Loan Advances" above), but may use the proceeds for other purposes in its sole discretion.

The terms of the transaction were unanimously approved by Groundfloor Finance's disinterested independent directors (in addition to the remaining members of the board) and were as favorable to Groundfloor Finance as those generally available from unaffiliated third parties.

**Issuance of Secured Promissory Notes**

Starting in November 2018 and continuing through December 31, 2022, 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, 2022, was $65.5 million.

Starting in January 2021 and continuing through December 31, 2022, 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, 2022, was $44.3 million.

**Purchase of LROs by Related Parties**

Groundfloor Finance executive officers, directors and 10% stockholders have purchased LROs and, prior to September 2015, Georgia Notes, from time to time in the past. Such purchases have not exceeded 50% of a single series of LROs or Georgia Notes, as applicable, for any individual executive officer, director, or 10% stockholder and the Board of Directors has approved a policy that future investments in LROs by such parties shall not exceed $50,000 in a single series of LROs, whether issued by Groundfloor Finance, GRE 1, or another affiliate. Their right to receive LRO Payments and other obligations are the same as all holders of the same series of LROs. These purchases count towards the Purchase Amount required to fully subscribe a given series of LROs. However, these purchases are made for the personal investment accounts of these individuals and not for resale, and are not directed by Groundfloor, GRE 1, or any of the Promoters (of either company), nor are the purchases made for purposes of ensuring the offering is fully subscribed. Their right to receive LRO Payments and other obligations are the same as all holders of the same series of LROs.

**TRANSACTIONS WITH PROMOTERS**

A majority of the Groundfloor Finance Independent Directors that do not have an interest in the transaction must approve any loan or other material affiliated transaction involving our Promoters. We and our affiliates have never made and, except for Loans that pass through the Groundfloor underwriting process, approved by a majority of Groundfloor's disinterested Independent Directors, and covered by a duly qualified offering statement, do not intend to make, loans to, or loan guarantees on behalf of, the Promoters. Further, except as discussed above, we and our affiliates have not engaged in and do not intend to engage in material transactions with the Promoters.

Any material affiliated transactions entered into by us in the future will be made on terms that are no less favorable than those that can be obtained from unaffiliated third parties. In addition, all future material affiliated transactions, and any forgiveness of loans, will be subject to approval by a majority of Groundfloor's Independent Directors, in accordance with Groundfloor Finance's Policy Regarding Transactions with Promoters.

In making the representations above, Groundfloor's officers, directors, and counsel (i) considered their diligence and assured that there is a reasonable basis for such representations, and (ii) considered whether to embody the representations in our charter or bylaws.

**MANAGEMENT DISCUSSION AND ANALYSIS**

*You should read the following discussion in conjunction with our financial statements and the related notes and the section entitled "Description of the Business of GRE 1 and of Groundfloor Finance" elsewhere in this Offering Circular. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including but not limited to those discussed in the section entitled "Risk Factors" and elsewhere in this Offering Circular.*

**Overview**

Groundfloor Finance maintains and operates the Groundfloor Platform for use by Groundfloor Finance and its subsidiaries, including GRE 1, to provide real estate development investment opportunities to the public. Originally formed as Fomentum Labs LLC, a North Carolina limited liability company, in January 2013, Groundfloor Finance converted into a North Carolina corporation on July 26, 2013 under the name GROUNDFLOOR Inc. Effective August 5, 2014, Groundfloor Finance changed the domiciliary state of the corporation to Georgia under the name Groundfloor Finance Inc.

**LRO Program**

Groundfloor Finance began offering LROs through the Groundfloor Platform in September 2015 pursuant to an offering statement (File No. 024-10440) that was qualified on August 31, 2015. Groundfloor Finance subsequently qualified two additional offering statements: the second (File No. 024-10488) was qualified on October 29, 2015 and the third (File No. 024-10496) was qualified on December 15, 2015. Beginning in mid-January 2016, Groundfloor Finance began qualifying additional series of LROs through PQAs to the offering statement qualified on December 15, 2015. Groundfloor Finance (or its affiliates) may from time to time elect to offer and sell LROs pursuant to other exemptions from federal and state registration requirements. From May through June 2017, Groundfloor Real Estate 1, LLC ("GRE 1"), a wholly-owned subsidiary of Groundfloor Finance, offered LROs through the Groundfloor Platform pursuant to an offering statement (File No. 024-10670) that was qualified that same month. In January 2018, Groundfloor Finance's offering circular (File No. 024-024-10753) was qualified by the SEC under Tier 2 of Regulation A (the "LRO Offering Circular"), 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. 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. 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 expects to expand the number of states in which Groundfloor offers and sells LROs during the next 12 month

***Status of LROs Across Groundfloor Entities***

**Table 1:**

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| Total Loans Currently Repaid 03/06/2023 | A | B | C | D | E | F | G |
| Loans Paid at or Before Maturity (1) | 114 | 368 | 1159 | 503 | 57 | 3 | - |
| Loans Paid Following Workout (2) | 86 | 299 | 986 | 291 | 18 | - | - |
| Loans Paid Following Fundamental Default (3) | 2 | 25 | 77 | 29 | 4 | - | - |

---

(1) Loans paid at or before maturity have paid in full with all interest due through the date of repayment.

(2) Loans paid following workout have paid in full, past the dated maturity, but with all interest due through the date of repayment.

(3) Loans paid after fundamental default have paid without full interest, partial principal, and / or full principal loss.

Other than the defaults referenced above, Groundfloor is not aware of any adverse business developments that have occurred in the course of its operations.

***GRE 1***

**Results of Operations**

**Summary Financial Information**

The consolidated statements of operations data set forth below with respect to the fiscal years ended December 31, 2022 and December 31, 2021 are derived from, and are qualified by reference to, the consolidated financial statements included in this Offering Circular and should be read in conjunction with those financial statements and notes thereto.

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Loan servicing revenue | $- | $- |
| Net interest income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 11065000 | 5027548 |
| &nbsp;&nbsp;&nbsp;Interest expense | (11065000) | (5027548) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | - | - |
| Net revenue |  |  |
| &nbsp;&nbsp;&nbsp;Cost of revenue | - | - |
| Gross profit |  |  |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | - | - |
| Total operating expenses | - | - |
| Income from operations |  |  |
| Net (loss) income | $- | $- |

---

Our consolidated financial statements for the years ended December 31, 2022 and December 31, 2021 include a going concern note from our auditors. Since Groundfloor's inception, Groundfloor has financed its operations through debt and equity financings. Groundfloor intends to continue financing its activities and working capital needs largely from private financing from individual investors and venture capital firms until such time that funds provided by operations are sufficient to fund working capital requirements.

*Net Revenue*

Net revenue for the years ended December 31, 2022, and 2021 was $0 and $0, respectively. The Company serviced 833 and 591 developer loans during the years ended December 31, 2022, and 2021, respectively. Loan servicing revenue are fees incurred in servicing the developer's loan.

*Gross Profit*

Gross profit for the years ended December 31, 2022, and 2021 was $0 and $0, respectively.

*General and Administrative Expense*

General and administrative expense for the years ended December 31, 2022, and 2021 were $0 and $0, respectively. General and administrative expenses consists primarily of management fees charged by Parent in reimbursement of servicing costs paid by Parent. In the current year no servicing costs were incurred by Parent on behalf of the Company.

*Net Income*

Net income for the years ended December 31, 2022, and 2021 was $0 and $0, respectively.

**Liquidity and Capital Resources**

The audited Financial Statements included herein have been prepared assuming that Parent will continue as a going concern; however, the conditions discussed below raise substantial doubt about our Parent's and our ability to continue as a going concern. The audited 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 Parent be unable to continue as a going concern.

The Company has retained earnings as of December 31, 2022, and 2021, of $0 and $0, respectively. Since our inception, the Company has financed its operations through debt and equity financing from various sources. The Company is dependent upon raising additional capital or seeking additional equity financing to fund its 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 year<br> ended<br> December 31,<br> 2022** | **For the year<br> Ended<br> December 31,<br> 2021** |
| Operating activities | $- | $- |
| Investing activities | 5893100 | (35510460) |
| Financing activities | (5893100) | 35510460 |
| **Net (decrease) in cash** | $**-** | $- |

---

Net cash provided by (used in) operating activities for the years ended December 31, 2022, and 2021 was $0 and $0, respectively. Net cash used in operating activities includes loan servicing costs.

Net cash provided by (used in) investing activities for the years ended December 31, 2022, and 2021, was $5.9 million and $(35.5) million, respectively. Net cash provided by (used in) investing activities primarily represents proceeds disbursed to purchase loans to developers offset but repayments of loans to developers and proceeds from sales of properties held for sale.

Net cash provided by (used in) financing activities for the years ended December 31, 2022, and 2021, was $(5.9) million and $35.5 million, respectively. Net cash provided by (used in) financing activities primarily represents proceeds from the issuance of LROs to investors through the Groundfloor Platform offset by repayments of LROs to investors.

**Results of Operations**

**Summary Financial Information**

The consolidated statements of operations data set forth below with respect to the fiscal years ended December 31, 2022 and December 31, 2021 are derived from, and are qualified by reference to, the audited Financial Statements and should be read in conjunction with those financial statements and notes thereto.

***Fiscal Year Ended December 31, 2022 and 2021***

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Loan servicing revenue | $- | $- |
| Net interest income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 11065000 | 5027548 |
| &nbsp;&nbsp;&nbsp;Interest expense | (11065000) | (5027548) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | - | - |
| Net revenue |  |  |
| &nbsp;&nbsp;&nbsp;Cost of revenue | - | - |
| Gross profit |  |  |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | - | - |
| Total operating expenses | - | - |
| Income from operations |  |  |
| Net (loss) income | $- | $- |

---

Our consolidated financial statements for the year ended December 31, 2022 include a going concern note from our auditors. Since Groundfloor's inception, Groundfloor has financed its operations through debt and equity financings. Groundfloor intends to continue financing its activities and working capital needs largely from private financing from individual investors and venture capital firms until such time that funds provided by operations are sufficient to fund working capital requirements.

*Net Revenue*

Net revenue for the years ended December 31, 2022, and 2021 was $0 and $0, respectively. The Company serviced 833 and 591 developer loans during the years ended December 31, 2022, and 2021, respectively. Loan servicing revenue are fees incurred in servicing the developer's loan.

*Gross Profit*

Gross profit for the years ended December 31, 2022, and 2021 was $0 and $0, respectively.

*General and Administrative Expense*

General and administrative expense for the years ended December 31, 2022, and 2021 were $0 and $0, respectively. General and administrative expenses consists primarily of management fees charged by Parent in reimbursement of servicing costs paid by Parent. In the current year no servicing costs were incurred by Parent on behalf of the Company.

*Net Income*

Net income for the years ended December 31, 2022, and 2021 was $0 and $0, respectively.

**Liquidity and Capital Resources**

The consolidated financial statements included in this Offering Circular 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 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, 2022, and 2021, and has an accumulated deficit as of December 31, 2022 of $35.6 million. Since our inception, Groundfloor has financed our operations through debt and equity financing from various sources. Groundfloor is 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> 2022** | **For the twelve**<br>**months ended<br> December 31,<br> 2021** |
| Operating activities | $(8999571) | $(3079871) |
| Investing activities | (68643496) | (113830996) |
| Financing activities | 79467255 | 118123645 |
| &nbsp;&nbsp;&nbsp;**Net increase in cash** | $**1824188** | $**1212778** |

---

Net cash flows used in operating activities for the twelve months ended December 31, 2022, and 2021 was $9.0 million $3.1, 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 used in investing activities for the twelve months ended December 31, 2022, and 2021 was $68.6 million and $113.8 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, 2022, and 2021 was $79.5 million and $118.1 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 Finance***

**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, 2014. Fomentum Labs LLC changed its name to Groundfloor LLC on April 26, 2014, and converted into a North Carolina corporation on July 26, 2014. In connection with this conversion, all equity interests in Groundfloor LLC were converted into shares of our common stock. Effective August 5, 2015, Groundfloor changed its domiciliary state to Georgia under the name Groundfloor Finance Inc. The audited condensed consolidated financial statements include Groundfloor's wholly-owned subsidiaries, including Groundfloor GA (as defined below), which was created for the purpose of financing real estate properties in Georgia, Holdings, which was created for the purpose of facilitating our loan advance program by entering into the Revolver, and GRE 1, which sold and issued LROs through the Groundfloor Platform from May to July 2017.

**Summary Financial Information of Groundfloor Finance**

The audited condensed statements of operations data set forth below with respect to the twelve months ended December 31, 2022 and December 31, 2021 are derived from, and are qualified by reference to, the audited condensed consolidated financial statements included in this Offering Circular and should be read in conjunction with those audited condensed consolidated financial statements and notes thereto.

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Non-interest revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Origination fees | $11162166 | $4769504 |
| &nbsp;&nbsp;&nbsp;Loan servicing revenue | 3200879 | 2887096 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest revenue | 14363045 | 7656600 |
| Net interest income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 28234268 | 15731444 |
| &nbsp;&nbsp;&nbsp;Interest expense | (20804590) | (12167945) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 7429678 | 3563499 |
| Revenue | 21792723 | 11220099 |
| &nbsp;&nbsp;&nbsp;Cost of revenue | (2040488) | (1363150) |
| Gross profit | 19752235 | 9856949 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 9181673 | 4417525 |
| &nbsp;&nbsp;&nbsp;Sales and customer support | 4487185 | 3404287 |
| &nbsp;&nbsp;&nbsp;Development | 4282870 | 1638327 |
| &nbsp;&nbsp;&nbsp;Regulatory | 674149 | 378911 |
| &nbsp;&nbsp;&nbsp;Marketing and promotions | 4915342 | 4251831 |
| Total operating expenses | 23541219 | 14090881 |
| Loss from operations | (3788984) | (4233932) |
| Other (expense) income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense on corporate debt instruments | (840684) | (543942) |
| &nbsp;&nbsp;&nbsp;Gain on loan extinguishment | 829000 | 829100 |
| Total other (expense) income, net | (11684) | 285158 |
| Net loss | (3800668) | (3948774) |
| Less: Net income attributable to non-controlling interest in consolidation VIE | 1570250 | - |
| Net loss attributable to Groundfloor Finance, Inc. | $(5370918) | $(3948774) |

---

***Funding Loan Advances***

To date, Groundfloor has entered convertible notes and executed secured promissory notes in order to facilitate Loan advances.

In November 2016, Groundfloor 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). As of December 31, 2018 the capacity is $5.5 million and the maturity date is April 4, 2019 and is extendable for another additional year. The Company has given a corporate guaranty to Revolver Capital, now ACM Alamosa DA LLC, as additional support for the credit facility. ACM Alamosa DA LLC will also have a lien on the general assets of Holdings—which is made up exclusively of Loans that Holdings has originated. However, only Holdings, and its successors and assigns, are identified as a secured party in any documentation used to secure the advanced Loans. At no point will Holdings hold (or provide ACM Alamosa DA LLC a securities interest in) any Loan for which LROs have been issued.

When Holdings is not able to draw sufficient funds from this credit facility fast enough, Groundfloor may elect to provide Holdings with a short term, non-interest bearing, full recourse loan using its operational capital to fund advances.

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 principal outstanding as of June 30, 2019 was $1.7 million.

**2019 Subordinated Convertible Notes**

From September 2019 to December 2019, Groundfloor 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 Groundfloor by consolidation, merger, change of majority ownership, or sale or other disposition of all or substantially all of the assets of Groundfloor (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, Groundfloor determined that the 2019 Subordinated Convertible Notes contain a beneficial conversion feature. Groundfloor 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 year ended December 31, 2021, respectively, approximately $126,386 was amortized to "Interest expense on corporate debt instruments" in the Consolidated Statements of Operations.

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. Groundfloor 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 shares 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, Groundfloor 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 on the 2019 Subordinated Convertible Notes, net of an unamortized discount of approximately $0, was outstanding as of December 31, 2021. Accrued interest on the 2019 Subordinated Convertible Notes, presented within "Accounts payable and accrued expenses" in Groundfloor's Consolidated Balance Sheets, was approximately $0 as of December 31, 2021. The interest expense related to the 2019 Subordinated Convertible Notes for the year ended December 31, 2021, was $208,000 and included within "Interest expense on corporate debt instruments".

**2021 Subordinated Convertible Notes**

From August 2021 to November 2021, Groundfloor 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 Groundfloor by consolidation, merger, change of majority ownership, or sale or other disposition of all or substantially all of the assets of Groundfloor (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. Because of the contractual right of noteholders to convert their holdings to common stock at a discount to fair value, Groundfloor determined that the 2021 Subordinated Convertible Notes contain a beneficial conversion feature. Groundfloor 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 years ended December 31, 2022, and 2021, respectively, approximately $348,147 and $64,700 was amortized to "Interest expense on corporate debt instruments" in the Consolidated Statements of Operations.

In 2022, certain holders of 2021 Subordinated Convertible Notes converted their holdings into common stock. Pursuant to these terms, Noteholders converted $1,261,170 in principal and approximately $81,410 in accrued interest into 48,394 shares of common stock at a conversion price of $27.74, a 10% discount to the per share price of common stock at the time of conversion.

Principal of $3,738,830 and $5,000,000 on the 2021 Convertible Notes, net of an unamortized discount of approximately $142,636 and $490,783 was outstanding as of December 31, 2022, and 2021, respectively. Accrued interest on the 2021 Subordinated Convertible Notes, presented within "Accounts payable and accrued expenses" in Groundfloor's Consolidated Balance Sheets, was approximately $534,771 and $123,600 as of December 31, 2022, and 2021, respectively. The related interest expense of $492,537 and $123,600 is included within "Interest expense on corporate debt instruments" for the years ended December 31, 2022, and 2021, respectively.

**2021 Promissory Notes**

On August 30, 2021, Groundfloor 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 Groundfloor 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 Groundfloor 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, 2022, and 2021, Groundfloor entered into various secured promissory notes, (the "GROUNDFLOOR Notes"), with accredited Investors. The GROUNDFLOOR Notes are used for the purpose of Groundfloor 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 2 LLC, a wholly owned subsidiary of Groundfloor Finance, Inc. As collateral security for GROUNDFLOOR Notes, Groundfloor granted first priority security interest in all the loan assets of its wholly owned subsidiary, Groundfloor Real Estate 2 LLC, subject to certain exceptions.

During the years ended December 31, 2022, and 2021, respectively, there were 97 and 69 notes entered into with stated interest rates ranging from 2.0% to 14.0% and with terms ranging from 30 days to 24 months. The principal sum of $43,135,300 and $46,096,000 remains outstanding as of December 31, 2022, and 2021, respectively, and is presented in "Short-term notes payable" on Groundfloor's Consolidated Balance Sheets. The principal sum of $22,325,700 and $0 remains outstanding as of December 31, 2022, and 2021, respectively, and is presented in "Long-term notes payable" on Groundfloor's Consolidated Balance Sheets.

Interest expense incurred on GROUNDFLOOR Notes, presented with in "Interest expense" on Groundfloor's Consolidated Statement of Operations, was $4,507,391 and $2,167,211 for the years ended December 31, 2022, and 2021, respectively. Accrued interest on the GROUNDFLOOR Notes, presented within "Accrued interest on limited recourse obligations" in Groundfloor's Consolidated Balance Sheets, was approximately $65,400 and $352,100 at December 31, 2022 and 2021, respectively.

**Stairs Notes**

During the years ended December 31, 2022, and 2021, Groundfloor entered into various secured promissory notes, (the "Stairs Notes"), with Investors. 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 Groundfloor; rather, the Stairs Notes are general obligations of Groundfloor, and the proceeds thereof will be used primarily 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. As collateral security for Stairs Notes, Groundfloor granted first priority security interest in all the loan assets of its wholly owned subsidiary, Groundfloor Yield LLC, subject to certain exceptions.

During the years ended December 31, 2022, and 2021, there were a total of 1,017 and 368 notes, respectively, entered into, each with a stated interest rate of 4-6% and term of 5 days. The principal sum of $44,325,580 and $20,985,800 remained outstanding as of December 31, 2022, and 2021, respectively, and is presented in "Short-term notes payable" on Groundfloor's Consolidated Balance Sheets.

Interest paid to Stairs investors totaled $2,064,918 and $142,500 for the years ended December 31, 2022 and 2021, respectively and is presented within "Interest expense" on Groundfloor's Consolidated Statement of Operations.

***Financial Position and Operating History***

In connection with their audit for the year ended December 31, 2022, Groundfloor's auditors raised substantial doubt about its ability to continue as a going concern due to Groundfloor's losses and cash outflows from operations. To strengthen its financial position, Groundfloor has 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 $5.3 million for the twelve months ended December 31, 2022. 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 its 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 this Offering Circular will not be used to directly finance Groundfloor's 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 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 2023. 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, Groundfloor has raised funds for operations through multiple common stock, preferred stock, and convertible note fundraising rounds. In 2022, the company raised approximately $9.4 million in new operating capital through a combination of common stock and preferred stock offerings during the year. See "Liquidity and Capital Resources" below for additional detail of the Company's capital raises.

**Results of Operations**

***Twelve Months Ended December 31, 2022, and 2021***

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| | | |
|:---|:---|:---|
|  | **Twelve Months Ended December 31,** | **Twelve Months Ended December 31,** |
|  | **2022** | **2021** |
| Non-interest revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Origination fees | $11162166 | $4769504 |
| &nbsp;&nbsp;&nbsp;Loan servicing revenue | 3200879 | 2887096 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest revenue | 14363045 | 7656600 |
| Net interest income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 28234268 | 15731444 |
| &nbsp;&nbsp;&nbsp;Interest expense | (20804590) | (12167945) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 7429678 | 3563499 |
| Net revenue | 21792723 | 11220099 |
| &nbsp;&nbsp;&nbsp;Cost of revenue | (2040488) | (1363150) |
| Gross profit | 19752235 | 9856949 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 9181673 | 4417525 |
| &nbsp;&nbsp;&nbsp;Sales and customer support | 4487185 | 3404287 |
| &nbsp;&nbsp;&nbsp;Development | 4282870 | 1638327 |
| &nbsp;&nbsp;&nbsp;Regulatory | 674149 | 378911 |
| &nbsp;&nbsp;&nbsp;Marketing and promotions | 4915342 | 4251831 |
| Total operating expenses | 23541219 | 14090881 |
| Loss from operations | (3788984) | (4233932) |
| Other income (expense): |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense on corporate debt instruments | (840684) | (543942) |
| &nbsp;&nbsp;&nbsp;Gain on loan extinguishment | 829000 | 829100 |
| Total other income | (11684) | 285158 |
| Net income (loss) | (3880668) | (3948774) |
| Less: Net income attributable to non-controlling interest in consolidated VIE | 1570250 | - |
| Net loss | $(5370918) | $(3948774) |

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Groundfloor's audited condensed consolidated financial statements for the year ended December 31, 2022 include a going concern note from its auditors. Since Groundfloor's inception, Groundfloor has financed its operations through debt and equity financings. Groundfloor intends to continue financing its activities and working capital needs largely from private financing from individual investors and venture capital firms until such time that funds provided by operations are sufficient to fund working capital requirements.

*Net Revenue*

Net revenue for the twelve months ended December 31, 2022, and 2021 was $21.8 million and $11.2 million, respectively, an increase of $10.6 million or 94%. Groundfloor facilitated the origination of 1,167 and 1,118 developer loans during the twelve months ended December 31, 2022 and 2021, 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, 2022, and 2021 was $19.8 million and $9.9 million, respectively, an increase of $9.9 million or 100%. The increase in gross profit was due to an increase in origination and servicing revenues, as Groundfloor originated a greater amount of loans in both units and total loan volume relative to the prior year, combined with an increase in net interest income. 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, 2022, and 2021, were $9.2 million and $4.4 million, respectively, an increase of $4.8 million or 108%. 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 both employee and non-employee compensation costs and professional fees. 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, 2022, and 2021, were $4.5 million and $3.4 million, respectively, an increase of $1.1 million or 32%. Sales and customer support expense consists primarily of employee compensation cost and asset management costs. The increase was primarily due to the increase in compensation related to headcount growth experienced in the lending operations, asset management, and sales departments, combined with an increase in asset management servicing costs. 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, 2022, and 2021, were $4.3 million and $1.6 million, respectively, an increase of $2.6 million or 161%. 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, 2022, and 2021, were $0.7 million and $0.4 million, respectively, and increase of $0.3 million or 78%. Regulatory expense primarily consists of legal fees and compensation cost required to maintain SEC and other regulatory compliance. The increase was primarily attributable to an increase in stock-based compensation expense for regulatory employees. 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, 2022, and 2021, were $4.9 million and $4.3 million, respectively, an increase of $0.7 million or 16%. 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 Groundfloor launching an extensive online marketing campaign aimed to increase investor acquisition. The increase in investor marking spend in the current year was an initiative executed by Management to drive increased investing activity on the Groundfloor platform and to acquire new investors.

*Interest Expense*

Interest expense for the twelve months ended December 31, 2022, and 2021, excluding interest paid on limited recourse obligations, GROUNDFLOOR Notes and Yield Notes, was $0.8 million and $0.5 million, respectively, an increase of $0.3 million or 55%. Interest expense related to the 2019 Subordinated Convertible Notes of $0 and $0.3 million was recognized during the twelve months ended December 31, 2022, and 2021, respectively. Interest expense related to the 2021 Subordinated Convertibles Notes of $0.8 million and $0.2 million was recognized during the twelve months ended December 31, 2022, and 2021, respectively.

*Net Loss*

Net loss for the twelve months ended December 31, 2022, and 2021 was $5.3 million and $3.9 million, respectively, an increase in net loss of $1.3 million or 33%. The increase in the net loss was primarily attributable to an increase in operating costs from $14.1 million to $23.5 million, or 67%.

**Liquidity and Capital Resources**

The audited condensed consolidated financial statements included in this Offering Circular 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 condensed 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, 2022, and 2021, and has an accumulated deficit as of December 31, 2022, of $35.6 million. Since our inception, Groundfloor has financed our operations through debt and equity financing from various sources. Groundfloor is 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.

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| | | |
|:---|:---|:---|
|  | **For the twelve<br> months ended<br> December 31,<br> 2022** | **For the twelve<br> months ended<br> December 31,<br> 2021** |
| Operating activities | $(8999571) | $(3079871) |
| Investing activities | (68643496) | (113830996) |
| Financing activities | 79467255 | 118123645 |
| &nbsp;&nbsp;&nbsp;**Net increase in cash** | $**1824188** | $**1212778** |

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Net cash flows used in operating activities for the twelve months ended December 31, 2022, and 2021 was $9.0 million $3.1, 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 used in investing activities for the twelve months ended December 31, 2022, and 2021 was $68.6 million and $113.8 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, 2022, and 2021 was $79.5 million and $118.1 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.

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.

From September 2019 to December 2019, Groundfloor 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 was due and payable on the earlier of August 30, 2021, or the consummation of a sale of Groundfloor by consolidation, merger, change of majority ownership, or sale or other disposition of all or substantially all of the assets of Groundfloor (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, Groundfloor determined that the 2019 Subordinated Convertible Notes contain a beneficial conversion feature. Groundfloor 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, Groundfloor 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. Groundfloor 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, Groundfloor received gross proceeds of approximately $0.5 million in exchange for the issuance of 30,794 shares of common stock.

In April 2020, Groundfloor obtained an $829,100 loan ("First PPP Loan") under the Paycheck Protection Program ("PPP"). Groundfloor 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, Groundfloor applied for forgiveness of the First PPP Loan with the Secretary of the Treasury and Small Business Administration (SBA). In March 2021, Groundfloor received notice that the request for forgiveness was approved, and our First PPP Loan principal and interest were deemed paid in full.

In July 2020, Groundfloor launched an offering of 548,546 shares of Series B Preferred Stock at $18.23 per share ("Series B Preferred Stock Offering"). The offering closed July 2021. As a result of the offering, Groundfloor has received gross proceeds of approximately $6.7 million in exchange for the issuance of 396,724 shares of Series B preferred stock as of December 31, 2022.

In April 2021, Groundfloor obtained a new loan under the PPP ("Second PPP Loan") for $829,000 and used the proceeds consistent with the First PPP Loan. In January 2022, Groundfloor applied for forgiveness of the Second PPP Loan with the SBA. In May 2022, Groundfloor received notice that the request for forgiveness was approved, and our Second PPP Loan principal and interest were deemed paid in full.

During 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, Groundfloor 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 August 2021, Groundfloor 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 Groundfloor raises at least an aggregate $4.0 million of new cash from any debt or financing closing after September 1, 2021. In December 2021, as a result of cash financing received from other debt instruments, and pursuant the 2021 Promissory Note purchase agreement Groundfloor repaid all principle and accrued interest.

In November 2021, Groundfloor 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.

From August 2021 to November 2021, Groundfloor 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 Groundfloor by consolidation, merger, change of majority ownership, or sale or other disposition of all or substantially all of the assets of Groundfloor (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, Groundfloor determined that the 2021 Subordinated Convertible Notes contain a beneficial conversion feature. Groundfloor 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 January 2022, Groundfloor 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, Groundfloor has received gross proceeds of approximately $5.8 million in exchange for the issuance of 189,270 shares of Series B-2 Stock from a single, third-party investor. In conjunction with the purchase of shares of Groundfloor's newly issued Series B-2 Preferred Stock, the third-party investor executed an additional purchase of 60,765 shares of Groundfloor's common stock through direct, secondary transfer of shares owned by existing shareholders.

In January 2022, certain existing shareholders converted 14,758 shares of Series Seed stock, with a cost basis of $5.205 per share, into 14,758 shares of Groundfloor's common stock. These shares of Series Seed converted into common stock, were then transferred by the shareholder to an independent third-party investor through direct, secondary transfer of the shares, as discussed in above.

Accordingly, the common stock transfers between existing shareholders and the third-party investor did not result in any cash proceeds received or issuance costs incurred by Groundfloor. As such, the transfer of shares between the existing shareholders and third-party investor resulted in no impact to Groundfloor's gross capitalization at December 31, 2022.

In January 2022, in conjunction with the Series B-2 Preferred stock issuance, Groundfloor issued warrants to purchase 30,000 shares of Groundfloor's common stock at an exercise price of $19.20 per share. The warrants were exercisable immediately at $19.20 with a contractual term of fifteen years.

In March 2022, Groundfloor 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 "2022 Common Stock Offering"). Participation in the 2022 Common Stock Offering was limited to existing shareholders. Groundfloor offered shares of common stock at $30.82 per share. As a result of the offering, Groundfloor received gross proceeds of approximately $1.5 million in exchange for the issuance of 49,700 shares of common stock.

In April 2022, Groundfloor issued warrants to purchase 21,000 shares of Groundfloor's common stock at an exercise price of $19.20 per share. The warrants were exercisable immediately at $19.20 with a contractual term of fifteen years.

In August 2022, Groundfloor further amended and restated its article of incorporation to increase the authorized number of Preferred Stock shares to 2,231,457 and to designate 230,000 of the newly authorized shares as Series B-3 Preferred Stock ("Series B-3 Stock"). The offering closed November 2022. Pursuant to this offering, Groundfloor has received gross proceeds of approximately $2.3 million in exchange for the issuance of 52,265 shares of Series B-3 Stock.

During the 2022, certain holders of 2021 Subordinated Convertible Notes converted their holdings into common stock, at the discretion of the noteholder. Pursuant to the terms of the contractual agreement, Noteholders converted approximately $1.26 million in principal and $0.08 million in accrued interest into 48,394 shares of common stock at a conversion price of $27.74, a 10% discount to the per share price of common stock at the time of conversion.

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.

**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 2023. 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.

**Off-Balance Sheet Arrangements**

We did not maintain any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities, nor do we have any commitment or intent to provide funding to any such entities.

**GENERAL TERMS OF THE LROS**

GRE 1 will issue the LROs in distinct series, each corresponding to a Project and Loan described in more detail in "The LROs Covered by this Offering Circular" below, the Project Summaries beginning on page PS-1, and the form of LRO Agreement beginning on page LRO-1. LROs will be issued in denominations of $10 and integral multiples of $10. Your rights and obligations as a holder of LROs and our rights and obligations with respect thereto are governed by the Investor Agreement and, more particularly, the LRO Agreement (which also governs the purchase and sale of the LROs). A copy of the standard form of LRO Agreement begins on page LRO-1 of this Offering Circular. The LRO Agreement applicable to each particular series of LROs being offered hereby is available by hyperlink through the Groundfloor Platform on the corresponding Project Summary.

**LRO Payments and Term**

On each LRO in a series, GRE 1 will pay to each holder thereof the Purchase Amount and the Accrued Return earned thereon. Our obligation to make such LRO Payments is limited, in all circumstances, to an amount equal to the holder's pro rata share of the amount of Loan Payments, if any, actually received on the corresponding Loan. Payment on each series of LROs will be dependent upon our receipt of Loan Payments in connection with the corresponding Loan. We will make LRO Payments within five business days of receipt of the corresponding Loan Payments. The LRO Agreement gives us sole discretion in applying amounts we receive from, or for the account of, the Borrower, with respect to the corresponding Loan, and we may make LRO Payments out of any funds at our disposal.

We may prepay the LROs at any time without penalty and our payment obligation may be satisfied by making LRO Payments to investors of an amount that may be more or less than the expected yield, on a date different than originally specified. If, as a result of any prepayment, all of the Purchase Amount of, and Accrued Return earned on, the LRO through the date of payment have been paid in full, our obligation to make any LRO Payments thereunder will automatically terminate (and the corresponding LRO shall be of no further force or effect). We will prepay a given series of LROs as and when a Borrower on the corresponding Loan makes a full payment of principal and accrued interest to us ahead of the maturity on the corresponding Loan.

Subject to the servicing standards set forth in the LRO Agreement, we have the power to modify the terms of the Loan in connection with our administration, servicing, collection and enforcement of the Loan, which could impact our obligation to make payments to you and, in some instances, could result in the loss of your entire investment. All LRO Payments will be made directly to your funding account and will be made in U.S. dollars. All U.S. dollar amounts used in or resulting from the calculation of amounts due in respect of the LRO may be rounded to the nearest cent (with one-half cent being rounded upward). The LRO is not payable at your option. Any taxes due and payable on any LRO Payments are your sole responsibility; you agree to reimburse us promptly for any such taxes paid by us.

Our obligation to make LRO Payments automatically terminates (and the corresponding LRO shall be of no further force or effect) on the final payment date, which is the maturity date of the corresponding Loan, assuming the entire Purchase Amount and Accrued Return earned thereon have been paid to the holder at that time. Our obligation to make LRO Payments is automatically extended (up to a maximum of two years) if such amounts were not paid on the final payment date (or, for administrative convenience, within five business days thereof). In such case, our obligation to make LRO Payments on such series of LROs will terminate on the earlier of (i) the date on which the remaining Purchase Amount of, or Accrued Return earned on, the LRO through the date of payment has been paid in full, (ii) the date on which all available Collection Proceeds have been applied and the holder's pro rata share thereof paid as LRO Payments in accordance with the terms of the LRO Agreement, or (iii) the extended payment date. We will not have to make any further LRO Payments (irrespective of whether the expected yield on the LRO has been paid in full), after the extended payment date.

Since LRO Payments are conditioned upon the receipt by the Company of Loan Payments on the corresponding Loan, the anticipated repayment schedule of the LROs generally reflects that of the corresponding Loan, which, like the LRO, is subject to prepayment without penalty. The repayment schedule for the Loans will vary by Project; however, typically, repayment is made either as a balloon payment at maturity or interest only on a monthly/quarterly basis, with the principal amount paid at maturity.

**Relationship of the Parties**

The LRO Agreement sets forth the relationship between you and the Company with respect to each series of LROs you are purchasing. Our duties to you are limited to those obligations explicitly set forth in the Investment Agreement and the LRO Agreement, and we assume no other duties, fiduciary or otherwise, to you.

Pursuant to the terms of the LRO Agreement, you and we agree that (i) we (or one of our affiliates) may have advanced funds to originate the Loan prior to the Original Issue Date and may sell additional LROs of the series relating to the Loan from time to time; (ii) you will be considered the legal and equitable owner of the LRO governed by the LRO Agreement for all purposes; (iii) you will look only to the Company for payment of the Purchase Amount and any Accrued Return earned on the LRO; and (iv) you have no interest in any property of the Company (including any of its affiliates), the Borrower or its Principals taken as security or guaranty for the Loan or in any property in our possession or control, which other property may secure the Loan.

Further, neither we (nor any of our agents) will incur liability by acting upon any notice, consent, certificate, or other instrument or writing believed by us (or our agent) to be genuine and signed by or sent by the proper party.

By entering into the LRO Agreement, you also expressly waive and release, as a condition of and as part of the consideration for the issuance of the LRO, any recourse under or upon any obligation, covenant or agreement contained in the LRO Agreement, or because of any obligations evidenced therein, against any incorporator, or against any past, present or future member or manager or any shareholder, officer or director, as such, of any member or manager of the Company, either directly or through the Company, under any rule of law, statute (other than applicable federal securities laws) or constitutional provision or by the enforcement of any assessment or penalty or otherwise.

**Events of Default**

You will have no recourse against us (or any of our affiliates) under the LRO Agreement unless, and then only to the extent that an Event of Default (as defined below) has occurred and is continuing. In no event will Groundfloor Finance, in its capacity as servicer, nor any of its officers or affiliates have any liability for any amounts due in connection with the LROs or the corresponding Loans. An "Event of Default" will be deemed to occur if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) we fail to comply with our payment obligations set forth in the LRO Agreement and such failure continues for a period of 60 days after
receipt by the Company of notice from you;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) we fail to comply with any of our agreements in the Investor Agreement or the LRO Agreement (other than those referred to in paragraph
(1) above and other than a covenant or warranty, the breach of which is specifically discussed below) and such failure continues
for 60 days after receipt by the Company of notice from you, provided, however, that, if we proceed to take curative action which, if
begun and prosecuted with due diligence, cannot be completed within a period of 60 days, then such period shall be increased to such extent
as shall be necessary to enable us diligently to complete such curative action;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) a court of competent jurisdiction enters (a) a decree or order for relief in respect of the Company in an involuntary case or
proceeding under any applicable bankruptcy law or (b) a decree or order adjudging the Company bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of our property,
or ordering the wind up or liquidation of our affairs, and any such decree or order for relief shall continue to be in effect, or any
such other decree or order shall be unstayed and in effect, for a period of 60 consecutive days; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) (a) we commence a voluntary case or proceeding under any applicable bankruptcy law or any other case or proceeding to be adjudicated
bankrupt or insolvent, (b) we consent to the entry of a decree or order for relief in respect of the Company in an involuntary case
or proceeding under any applicable bankruptcy law or to the commencement of any bankruptcy or insolvency case or proceeding against it,
(c) we file a petition or answer or consent seeking reorganization or substantially comparable relief under any applicable federal
or state law, or (d) we (i) consent to the filing of such petition by, the appointment of, or taking possession by, a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property or
(ii) make an assignment for the benefit of creditors.

If an Event of Default specified in paragraph (1) or paragraph (2) above occurs and is continuing, upon your notification to us, the outstanding and unpaid Purchase Amount (or portion thereof) of the LRO, and all unpaid Accrued Return earned thereon, will become and be immediately due and payable, subject in each case to certain limitations set forth in the LRO Agreement, notwithstanding any other provision of the LRO Agreement. A default under paragraph (1) or (2) above is not an Event of Default until you notify us of the default and we do not cure such default within the time specified in paragraph (1) or (2) above after receipt of such notice.

If an Event of Default specified in paragraph (3) or paragraph (4) above occurs and is continuing, the outstanding and unpaid Purchase Amount (or portion thereof) of the LRO Agreement, and all unpaid Accrued Return earned thereon, will become and be immediately due and payable without any declaration or other act on your part, notwithstanding any other provision of the LRO Agreement. You, by notice to us, may rescind acceleration and its consequences if (i) the rescission would not conflict with any judgment or decree, and (ii) all Events of Default specified in paragraph (3) or paragraph (4) have been cured or waived. No such rescission shall affect any subsequent Event of Default or impair any right consequent thereto. There will be no automatic acceleration of the outstanding and unpaid Purchase Amount (or portion thereof) of the LRO, or any unpaid Accrued Return earned thereon, upon the occurrence of an Event of Default other than an Event of Default specified in paragraph (3) or paragraph (4).

**Ranking**

The LROs will not be contractually senior or contractually subordinated to any indebtedness of the Company. The LROs will be unsecured special, limited obligations of GRE 1 only. Holders of the LROs do not have a security interest in the corresponding Loans or the proceeds of those corresponding Loans, or in any assets of the Company (or of Groundfloor Finance or its subsidiaries), or of any Borrower or of its Principal(s). Investing in LROs is not without risk, and actual receipt of the expected yield in the time frame specified is not guaranteed. 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. We may prepay the LROs at any time without penalty and our payment obligation may be satisfied by making LRO Payments to investors of an amount that may be more or less than the expected yield, on a date different than originally specified. See "Risk Factors—You may receive a different return on your investment than originally expected and could suffer a complete loss of your investment."

You will not have any recourse against us unless, and then only to the extent that, we have failed to pay your LRO Payment when due or have otherwise breached a covenant of the LRO Agreement. We will be obligated to make payments on the LROs only if and to the extent we receive Loan Payments on the corresponding Loan. We will pay to each holder of the corresponding series of LROs an amount equal to such holder's pro rata share of amounts. Loan Payments will be secured by the assets of the corresponding Project.

In the event of a bankruptcy or similar proceeding of the Company, the relative rights of the holder of a LRO as compared to the holders of our other unsecured indebtedness with respect to payment from the proceeds of the Loan repayment or other assets of the Company is uncertain. See "Risk Factors— Risks Related to the Company and the Groundfloor Platform—If we were to become subject to a bankruptcy or similar proceeding. . ." and "Risk Factors—In a bankruptcy or similar proceeding of the Company. . . ."

**Unsecured Obligations**

The LROs are unsecured limited obligations of the Company. We perfect a lien on the real estate and other assets underlying the Project to secure the Borrower's payment obligations to us; however, the LROs are unsecured, and you as a holder of a LRO will not have a security interest in the corresponding Loans or the proceeds of those corresponding Loans, or in any assets of the Company (or of Groundfloor Finance or its subsidiaries), or of any Borrower or of its Principal(s). Further, you will not have any recourse against the Borrower or its Principals. Your recourse against us is limited to the amount of any LRO Payments we owe you (as determined pursuant to the terms of the corresponding LRO Agreement). Investing in LROs is not without risk, and actual receipt of the expected yield in the time frame specified is not guaranteed. 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.

**Abandonment**

We may abandon an offering of a particular series of LROs at any time prior to issuance. If we abandon an offering of a particular series of LROs, we will promptly (but under no circumstances more than 48 hours following receipt of a withdrawal notice from the Borrower or our determination to abandon the offering) release all funds (without interest) committed to purchase that series; after which, you may elect to transfer such funds to your bank account or make a commitment to purchase a different series of LROs.

**Withdrawn Offerings**

We may withdraw an offering of a particular series of LROs at any time prior to its issuance. Offerings are typically withdrawn due to the need to correct or modify specific disclosures about the terms of the related series of LROs and the series of LROs that correspond to Loans that are withdrawn are typically re-qualified at a later date. More often than not, we withdraw Loans from an offering before commencing the Offering Period for the corresponding LROs. However, if commitments have been made towards a series that is withdrawn, we will promptly release all funds (without interest) committed to purchase that series; after which, you may elect to transfer such funds to your bank account or make a commitment to purchase a different series of LROs.

**Prepayments**

Generally, outside of the context of a Borrower default, we will only prepay a series of LROs if the Borrower prepay the corresponding Loan. Our obligation to make any LRO Payments will automatically terminate (and the corresponding LRO shall be of no further force or effect) once all of the Purchase Amount of, and Accrued Return earned on, any LRO through the date of payment is paid in full.

**Representations and Warranties**

Under the LRO Agreement, you will represent and warrant to us that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• you are purchasing the LROs for your own account;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• based on your overall investment objectives, portfolio structure and financial situation, you can bear the economic risk of an investment
in the LROs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• (as of the date of the LRO Agreement and as of the date you have committed to purchase the LROs) you have received a copy of the Offering
Circular (including all applicable supplements and PQAs) with respect to the LROs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• after acknowledging that the purchase of the LROs involves various risks, including, but not limited to, the risk that you may lose
your entire investment and the other the risks outlined in this Offering Circular (including all applicable supplements and PQAs), you
are able to bear any loss associated with an investment in the LROs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• you meet any applicable residency or minimum financial suitability requirements applicable to the Offering, as outlined in the Offering
Circular and have abided by any maximum investment limits applicable to the Offering, as set forth in the Offering Circular (including
all applicable supplements and PQAs) (and you agree to provide any additional documentation reasonably requested by the Company (or its
agents), or as may be required by the SEC or the securities administrator of any state, to confirm that you meet and have satisfied such
offering limits);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• you acknowledge our recommendation that you consult with your own attorneys, accountants and other processional advisors as to the
legal, tax, accounting and other consequences of an investment in the LROs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• you acknowledge that neither we nor any of our affiliates has made any representation regarding the proper characterization of the
LROs for purposes of determining your authority to invest in the LROs; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• you acknowledge that the LROs will not be listed on any securities exchange, that there will be no trading platform or secondary market
for the LROs, that any trading of LROs must be conducted in accordance with federal and applicable state securities laws and that you
should be prepared to hold the LROs through maturity.

You further warrant and represent to us, as of the date of the LRO Agreement and as of any date that you commit to purchase LROs, that (1) you have the power to enter into and perform your obligations under the LRO Agreement; (2) the LRO Agreement has been duly authorized, executed and delivered by you; and (3) in connection with the LRO Agreement you have complied in all material respects with applicable federal, state and local laws. In addition, if you are a corporation, partnership, limited liability company or other entity (each, an "institution"), the institution warrants and represents that (w) the individual executing the LRO Agreement on behalf of the institution has all necessary power and authority to execute and perform the LRO Agreement on the institution's behalf; (x) the execution and performance of the LRO Agreement will not violate any provision in the institution's charter documents, by-laws, indenture of trust or partnership agreement, or other constituent agreement or instrument governing the institution's formation or administration; and (y) the execution and performance of the LRO Agreement will not constitute or result in a breach or default under, or conflict with, any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any agreement or other undertaking to which the institution is a party or by which it is bound.

The Company represents and warrants to you that the Company has the power to enter into the LRO Agreement and each applicable Loan Document and that the Company has taken all action necessary to authorize its execution and delivery of the LRO Agreement and each applicable Loan Document and the performance of its obligations thereunder. Except for the representations and warranties contained in this Offering Circular (including all applicable supplements and PQAs), the LRO Agreement and the Investor Agreement, neither we nor any other person has made or makes any other express or implied representations or warranty, either written or oral, on behalf of the Company with respect to the LROs.

**Notice of Loan Default**

All transactions under the Loan Documents are handled in the ordinary course of business in accordance with customary practices. We will use commercially reasonable efforts to give you notice of any event of default under the Loan Documents of which we have received written notice from the Borrower or of which we have actual knowledge and which, in our judgment, materially affects the ability of the Borrower to make payments thereunder; provided that neither we nor any of our members and managers, and the officers, directors, shareholders, employees and agents of its members and managers will be liable for any failure to give any such notice. Our failure to give any such notice shall not affect any of your duties and obligations under the LRO Agreement.

**Administration, Service, Collection, and Enforcement of Loan Documents**

Notwithstanding these broad powers, you and we acknowledge in the LRO Agreement that, in circumstances other than Borrower default or prepayment, the modification of a term of the corresponding Loan could be deemed to be a material modification of the terms of your LRO. In such instance, it is possible that the modified series of LROs would constitute a new security under the Securities Act and under applicable State securities laws. You and we acknowledge in the LRO Agreement that, before implementing any modification to the terms of the corresponding Loan (other than in circumstances involving Borrower default or prepayment) that would cause your LROs (as modified) to constitute a new security, the Company will be required to either register the offer of the modified LRO under Section 5 of the Securities Act and under applicable State securities laws or find an exemption from such registration requirements.

**Collection Proceeds, Costs, and Expenses**

Subject to the application of Loan Payments received as Collection Proceeds and our ability to prepay the LRO, we are obligated to pay to each holder of a LRO the Purchase Amount and the Accrued Return earned thereon as LRO Payments. Our obligation to make LRO Payments is limited, in all circumstances, to an amount equal to the holder's pro rata share of the amount of Loan Payments, if any, actually received on the corresponding Loan. For these purposes, the LRO Agreement also specifies that LRO Payments include "Collection Proceeds," which includes amounts received in connection with any exercise of the Company's powers to administer, service, collect and enforce the terms of the Loan or of the Loan Documents including, without limitation amounts received (i) as late charges and default or penalty interest, or as payment of any principal or accrued interest on the Loan that may be reduced, or (ii) in connection with the enforcement of any security interest in the assets pledged to secure the Loan, or (iii) in connection with a sale of the Company's rights, title and interest under the Loan Documents. The LRO Agreement provides that any and all Collection Proceeds we receive will be applied (x) first, to all Collection Costs, (y) second, to earned and unpaid Accrued Return owed on the LRO, and (z) third, to the Purchase Amount of the LRO then outstanding.

As a result, we are required to pay each holder of a series of LROs an amount equal to such holder's pro rata share of the Collection Proceeds (net of Collection Costs) secured with respect to the corresponding Loan prior to the extended payment date. However, you and we agree, and you expressly acknowledge in the LRO Agreement, that the exercise by us (or our agents) of our powers to administer, service and enforce the terms of the Loan and the Loan Documents, (1) could have the effect (without any further action on your part) of adjusting the total amount of the LRO Payments owed to you and (2) that such adjustment shall not, in and of itself, give rise to an "Event of Default" under the terms of the LRO Agreement. Without limiting the foregoing, you and we and expressly acknowledge that payment of amounts corresponding to the amount of certain Collection Proceeds (such as late charges, default interest or penalty interest charged on the Loan) could automatically *<u>increase</u>* the total amount of the LRO Payments owed to you under the terms of the LRO, and prepayment by the Company of the LRO, payment of amounts corresponding to other types of Collection Proceeds (such as amounts resulting from any reduction in outstanding principal and accrued interest on the Loan, we (or our agent) may agree to, or of amounts received by us in connection with the enforcement of any security interest in the assets pledged to secure the Loan, or in connection with a sale of our rights, title and interest under the Loan Documents) or, if we (or our agent) elects to write-off the Loan, could automatically *<u>decrease</u>* the total amount of the LRO Payments owed to you under the terms of the LRO. If, in connection with our powers to administer, service, collect and enforce the terms of the Loan and the Loan Documents, we (or our agents) take action that would materially impact the amount or timing of the LRO Payments owed to you under the LRO Agreement, we will promptly notify you (by email) thereof and of the impact such action will or is expected to have on your right to receive LRO Payments thereunder. Furthermore, in circumstances other than Borrower default or prepayment, the modification of a term of a Loan (e.g., a reduction in the interest rate charged on the Loan) could be deemed to be a material modification of the terms of the corresponding series of LROs. In such instance, it is possible that the modified series of LROs would constitute a new security under the Securities Act and under applicable State securities laws. Before implementing any modification to the terms of a Loan (other than in circumstances involving Borrower default or prepayment) that would cause the corresponding series of LROs (as modified) to constitute a new security, the Company will be required to either register the offer of the modified LRO under Section 5 of the Securities Act and under applicable State securities laws or find an exemption from such registration requirements.

**Denominations, Form, and Registration**

We will issue the LROs only in registered form and only in electronic form and, other than the LRO Agreement, you will not receive a physical instrument. This means that each LRO will be stored on the Groundfloor Platform. You can view a record of the LROs you own and the form of your LRO Agreement online and print copies for your records by visiting your secure, password-protected webpage (referred to as the "Investor Dashboard" in the "My Account" section of the Groundfloor Platform). You will be required to hold your LROs through the Groundfloor Platform's electronic LRO register.

We will treat the investors in whose names the LROs are registered as the owners thereof for the purpose of receiving payments and for all other purposes whatsoever with respect to the LROs.

**No Public Market**

The LROs do not contain any provision restricting their transferability, other than the requirements that any transfer be conducted consistent with applicable law, any transferee to register as an investor with us, and such transferee agrees to the terms of the Investor Agreement and the LRO Agreement governing such series of LROs. However, the LROs will not be listed on any securities exchange, nor do we have plans to establish any kind of trading platform to assist investors who wish to sell their LROs. There is no public market for the LROs, and none is expected to develop. Accordingly, you may be required to hold your LROs to maturity. Certain states, including California and Texas, also impose additional statutory restrictions on secondary trading of the LROs purchased in the Offering, which may further restrict the transferability of the LROs. Prospective investors are urged to consult their own legal advisors with respect to secondary trading in the LROs.

**THE LROS COVERED BY THIS OFFERING CIRCULAR**

This Offering Circular relates only to the offer and sale of the separate series of LROs corresponding to the Projects for which GRE 1 extends Loans. Each series of LRO is denominated by the corresponding Project's name. The table below identifies series of LROs being offered pursuant to this Offering Circular and the Purchase Amount for each such series. Additional terms and details applicable to a particular series of LROs are reflected on the corresponding Project Summary beginning on page PS-1 of this Offering Circular. The Project Summaries can also be accessed on the Groundfloor Platform.

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| | |
|:---|:---|
| **Series of LROs/Project** | **Aggregate Purchase<br> Amount/Loan Principal** |
| 6420 N. 42<sup>nd</sup> Street, Tampa, Florida 33610 | $152460 |
| **Total** | $152460 |

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**PLAN OF DISTRIBUTION**

***Overview***

We offer each series of LROs at 100% of the Loan Principal. GRE 1 will only offer and sell the LROs through the Groundfloor Platform, which is owned and operated by Groundfloor Finance. We are not using a selling agent or finder in connection with this Offering. We will use our website as an online portal and information management tool in connection with the Offering. The final Offering Circular (or PQA) and the specific form of LRO Agreements corresponding to each series of LROs being offered hereby will be furnished to prospective investors and will be available for viewing and download through the Groundfloor Platform 24 hours per day, seven days per week as an electronic PDF file via a hyperlink on each Project Summary. Before committing to purchase LROs, each investor will consent to receive the final Offering Circular (or PQA), in addition to other Disclosures, electronically.

We will commence the offering of each series of LROs promptly after the date this Offering Circular is qualified by posting on the Groundfloor Platform a separate landing page corresponding to each particular Loan and Project. The offering of each series of LROs covered by this Offering Circular will remain open until the earlier of (i) 30 days, unless extended, or (ii) the date the Offering of a particular series of LROs is fully subscribed with irrevocable funding commitments; 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.

A commitment to purchase LROs becomes irrevocable following expiration of the Withdrawal Period. Commitments to purchase LROs made after expiration of the Withdrawal Period, if any, are irrevocable when authorized and may not be withdrawn. Unless previously advanced, the closing and funding of the Loan will occur on the original issue date of the LROs. If the offering of a series of LROs is withdrawn or abandoned before the end of the Offering Period, we will notify investors and promptly release committed funds and make them available in their funding accounts.

***State Law Exemption and Offerings to "Qualified Purchasers"***

The LROs are being offered and sold only to "qualified purchasers" (as defined in Regulation A under the Securities Act of 1933). As a Tier 2 offering pursuant to Regulation A under the Securities Act, this offering will be exempt from state "Blue Sky" law review, subject to certain state filing requirements and anti- fraud provisions, to the extent that the LROs are offered and sold only to "qualified purchasers". "Qualified purchasers" include: (i) "accredited investors" under Rule 501(a) of Regulation D and (ii) all other investors so long as their investment in the LROs does not represent more than 10% of the greater of their annual income or net worth (for natural persons), or 10% of the greater of annual revenue or net assets at fiscal year-end (for non- natural persons). Accordingly, we reserve the right to reject any investor's subscription in whole or in part for any reason, including if we determine in our sole and absolute discretion that such investor is not a "qualified purchaser" for purposes of Regulation A.

***Subscribing for the LROs***

In order to subscribe to purchase the LROs, a prospective investor must electronically sign and deliver the Investor Agreement, including the Terms and Conditions, must agree to the Terms of Service, and the Privacy Policy, and must electronically sign and deliver the LRO Agreement relating to that particular series of LROs. While the specific form of LRO Agreement corresponding to each series of LROs being offered hereby will be furnished and available as set forth above, at the time a prospective investor makes a non-binding commitment for a particular series of LROs, we will provide (by hyperlink) a PDF copy of the LRO Agreement that is applicable to such investor's particular investment. This version of the LRO Agreement will reflect the terms of the investor's proposed investment (including the Purchase Amount and Accrued Return earned thereon); however, the original issue date, final payment date and extended payment date will be reflected as "to be determined," since those dates are dependent upon the original issue date. Following the issuance of the LROs and without any action on the part of any investor, we will (i) revise the LRO Agreement to identify the actual original issue date, final payment date and extended payment date, (ii) notify investors who purchased the LROs (by email) of such change, and (iii) make available to such investors a copy of the LRO Agreement (as revised) through the Investor Dashboard on the Groundfloor Platform.

We reserve the right to reject any investor's subscription or commitment in whole or in part for any reason. If the Offering terminates or if any prospective investor's subscription or commitment is rejected, all funds received from such investors will be released and made available in such investor's funding account without interest or deduction.

Investors will be notified within two business days (by email and through a notice on the Project Summary) that the Loan has been funded and the LROs have been issued. The email notice will include confirmation of the original issue date, final payment date, and extended payment date for such series of LROs (as well as information on how to access the final version of the LRO Agreement through the Groundfloor Platform), an active hyperlink to the URL where the final Offering Statement (which includes the final Offering Circular) may be obtained via EDGAR, and the contact information where a request for a copy of the final Offering Circular can be sent.

In addition to this Offering Circular, subject to limitations imposed by applicable securities laws, we may use additional advertising, sales and other promotional materials in connection with the Groundfloor Platform. These materials may include public advertisements and audio-visual materials, in each case only as authorized by us. Although these materials will not contain information in conflict with the information provided by this Offering Circular and will be prepared with a view to presenting a balanced discussion of risk and reward with respect to the LROs, these materials will not give a complete understanding of this Offering, the Company or the LROs and are not to be considered part of this Offering Circular. All written offers will include an active hyperlink to a PDF copy of the final Offering Circular. This Offering is made only by means of this Offering Circular, and prospective investors must read and rely on the information provided in this Offering Circular in connection with their decision to invest in the LROs.

***Advertising, Sales and other Promotional Materials***

In addition to this offering circular, subject to limitations imposed by applicable securities laws, we expect to use additional advertising, sales and other promotional materials in connection with this offering to better understand possible demand for the LROs. These "test-the-waters" materials may include information relating to our Company, this offering, the past performance of our loan transactions, articles and publications concerning small business lending, or public advertisements and audio-visual materials, in each case only as authorized by us. All such materials will contain disclaimers required by, and be disseminated in a fashion permitted by, Regulation A. Although these materials will not contain information in conflict with the information provided by this offering circular and will be prepared with a view to presenting a balanced discussion of risk and reward with respect to our LROs, these materials will not give a complete understanding of this offering, us or our LROs and are not to be considered part of this offering circular. This offering is made only by means of this offering circular and prospective investors must read and rely on the information provided in this offering circular in connection with their decision to invest in our LROs. To be clear, all investors will be furnished with a copy of a current offering circular before or at the time of all written offers.

**USE OF PROCEEDS**

Generally, we, Groundfloor Finance, or a subsidiary of Groundfloor Finance, will advance Loans prior to the qualification or sale of corresponding series of LROs. If we subsequently qualify and fully subscribe a series of LROs that corresponds to an advanced loan, a portion of the proceeds will be used to repay the advanced amount. If the Loan has not been advanced, we will use the proceeds of the sale of the corresponding series of LROs to originate the Loan and will close and fund the corresponding Loan on the original issue date of the LROs.

The table below lists the Projects covered by this Offering Circular for which we are offering separate series of LROs. Each series of LROs is denominated by the corresponding Project's name.

---

| | |
|:---|:---|
| **Series of LROs/Project** | **Aggregate Purchase<br> Amount/Loan Principal** |
| 6420 N. 42<sup>nd</sup> Street, Tampa, Florida 33610 | $152460 |
| **Total** | $152460 |

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Groundfloor Finance (or its agents) will administer, service, collect and enforce each Loan. Upon completion of the offering of a particular series of LROs by GRE 1, the Loan Proceeds of the corresponding Loan not advanced to Borrowers remain in the GRE 1 Borrower FBO Account until disbursed pursuant to the terms of the underlying Loan Agreement. We do not earn interest on the amounts held in the GRE 1 Borrower FBO accounts that are not distributed to Borrowers. We typically disburse amounts to the Borrower from time to time as Draws in accordance with the budget and/or Draw schedule outlined in the underlying Loan Agreement.

Other than any fees and expenses owed to us by the Borrower at closing (to the extent such fees and expenses have been included in the Loan Principal), we will not use the proceeds of the offering of a series of LROs for any purpose other than to fund the corresponding Loan (including fees capitalized into the Loan and retained by us as described in "Description of the Business of GRE 1 and of Groundfloor Finance—Fees and Related Expenses" above), unless the Loan was subject to an advance as outlined above.

**FEDERAL TAX ASPECTS**

The following discussion sets forth the material U.S. federal income tax considerations generally applicable to purchasers of the LROs. This discussion is based on the Internal Revenue Code, Treasury regulations promulgated thereunder ("Treasury Regulations"), administrative pronouncements of the U.S. Internal Revenue Service ("IRS") and judicial decisions, all as currently in effect and all of which are subject to change and to different interpretations. Changes to any of the foregoing authorities could apply on a retroactive basis and could affect the U.S. federal income tax consequences described below.

This discussion does not address all of the U.S. federal income tax considerations that may be relevant to a particular LRO holder's circumstances and does not discuss any aspect of U.S. federal tax law other than income taxation or any state, local or non-U.S. tax consequences of the purchase, ownership and disposition of the LROs. This discussion applies only to investors who hold the LROs as capital assets within the meaning of the Internal Revenue Code (generally, property held for investment). This discussion does not address U.S. federal income tax considerations applicable to LRO holders that may be subject to special tax rules, such as:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• securities dealers or brokers, or traders in securities electing mark-to-market treatment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• banks, thrifts or other financial institutions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• insurance companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• regulated investment companies or real estate investment trusts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• tax-exempt organizations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• persons holding LROs as part of a "straddle," "hedge," "synthetic security" or "conversion
transaction" for U.S. federal income tax purposes, or as part of some other integrated investment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• partnerships or other pass-through entities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• persons subject to the alternative minimum tax;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• certain former citizens or residents of the United States;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• non-U.S. Holders (as defined below); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• "U.S. Holders" (as defined below) whose functional currency is not the U.S. dollar.

As used herein, a "U.S. Holder" is a beneficial owner of LROs that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (iii) an estate whose income is subject to U.S. federal income tax regardless of its source, or (iv) a trust if (a) a United States court has the authority to exercise primary supervision over the administration of the trust and one or more U.S. persons (as defined under the Internal Revenue Code) are authorized to control all substantial decisions of the trust or (b) it has a valid election in place to be treated as a U.S. person. A "Non-U.S. Holder" is any beneficial owner of a LRO that, for U.S. federal income tax purposes, is not a U.S. Holder and that is not a partnership (or other entity treated as a partnership for U.S. federal income tax purposes).

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds LROs, the U.S. federal income tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. A partnership holding LROs, and partners in such a partnership, should consult their own tax advisors with regard to the U.S. federal income tax consequences of the purchase, ownership and disposition of the LROs by the partnership.

THIS DISCUSSION OF THE MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE LROS IS NOT INTENDED TO BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR PERSON. ACCORDINGLY, ALL PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE LROS BASED ON THEIR PARTICULAR CIRCUMSTANCES.

**Taxation of the LROs in General**

There are no statutory provisions, regulations, published rulings, or judicial decisions that directly address the characterization of the LROs or instruments similar to the LROs for U.S. federal income tax purposes. However, although the matter is not free from doubt, we intend to treat the LROs as our or Groundfloor Finance's debt instruments that have original issue discount ("OID") for U.S. federal income tax purposes. Where required, we or Groundfloor Finance intend to file information returns with the IRS in accordance with such treatment unless there is a change or clarification in the law, by regulation or otherwise, that would require a different characterization of the LROs.

You should be aware, however, that the IRS is not bound by our characterization of the LROs, and the IRS or a court may take a different position with respect to the LROs' proper characterization. For example, the IRS could determine that, in substance, each LRO holder owns a proportionate interest in the corresponding Loan for U.S. federal income tax purposes or, for example, the IRS could instead treat the LROs as a different financial instrument (including an equity interest or a derivative financial instrument). Any different characterization could significantly affect the amount, timing, and character of income, gain or loss recognized in respect of a LRO. For example, if the LROs are treated as our or Groundfloor Finance's equity, (i) we or Groundfloor Finance would be subject to U.S. federal income tax on income, including interest, accrued on the corresponding Loan but would not be entitled to deduct interest or OID on the LROs, and (ii) payments on the LROs would be treated by the holder for U.S. federal income tax purposes as dividends (that may be ineligible for reduced rates of U.S. federal income taxation or the dividends-received deduction) to the extent of our or Groundfloor Finance's earnings and profits as computed for U.S. federal income tax purposes.

***A different characterization may significantly reduce the amount available to pay on the LROs. You are strongly advised to consult your own tax advisor regarding the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership, and disposition of the LROs (including any possible differing treatments of the LROs).***

**The following discussion assumes that the LROs will be treated as our or Groundfloor Finance's debt instruments that have OID for U.S. federal income tax purposes. Unless otherwise specified, the following discussion assumes that the LROs will not be subject to the rules governing contingent payment debt instruments.**

**Taxation of Payments on the LROs**

Unless you are holding the LROs in a tax deferred account, such as an IRA, you will generally be required to accrue OID income as ordinary interest income for U.S. federal income tax purposes, regardless of your regular method of tax accounting. If you hold a LRO with a final payment date that is more than one year after original issue date of the LRO, you will be required to accrue OID income as ordinary interest income under a "constant yield method." Under this treatment, if a payment on a LRO is not made in accordance with the payment schedule in respect of the corresponding Loan (for example, because of a late payment on the corresponding Loan), you will be required to include an amount of OID in taxable income as interest even if you have not received the actual payment from the corresponding Loan.

The Treasury Regulations governing OID provide special rules for determining the amount and accrual of OID for debt instruments that provide for one or more alternative payment schedules applicable upon the occurrence of contingencies. If the timing and amounts of the payments that comprise each payment schedule are known as of the issue date and, based on all the facts and circumstances as of the issue date, a single payment schedule for a debt instrument, including the stated payment schedule, is significantly more likely than not to occur, the amount and accrual of OID is determined based on that payment schedule. In addition, under the applicable Treasury Regulations, remote and/or incidental contingencies may generally be ignored. A contingency relating to the amount of a payment is incidental if, under all reasonably expected market conditions, the potential amount of the payment is insignificant relative to the total expected amount of the remaining payments on the debt instrument. A contingency relating to the timing of a payment is incidental if, under all reasonably expected market conditions, the potential difference in the timing of the payment is insignificant.

The LROs provide for one or more alternative payment schedules because we are obligated to make payments on a LRO only to the extent that we receive payments on the corresponding Loan. The payment schedule for each LRO provides for payments of principal and interest on the LRO in accordance with the payment schedule for the corresponding Loan. In addition to scheduled payments, we will prepay a LRO to the extent that a Borrower prepays the Loan corresponding to the LRO, and we will pay late fees (if any) collected on a corresponding Loan to the holders of the corresponding LRO. Notwithstanding such contingencies, we intend to use the payment schedule of a LRO to determine the amount and accrual of OID on the LRO because we believe that a LRO is significantly more likely than not to be paid in accordance with such payment schedule and/or the likelihood of nonpayment, prepayment or late payment on the Loan corresponding to such LRO will be remote or incidental. If in the future we determine that the previous sentence does not apply to a LRO, we anticipate that we will be required to determine the amount and accrual of OID for such LRO pursuant to the rules applicable to contingent payment debt instruments, which are described below, and we shall so notify you.

OID on a LRO will equal the excess of the LRO's "stated redemption price at maturity" over its "issue price." The stated redemption price at maturity of a LRO includes all payments of the Purchase Amount and Accrued Return earned on the LRO under the payment schedule of the LRO. The issue price of a LRO will generally equal the Purchase Amount of a LRO.

The amount of OID includible in income for a taxable year is the sum of the "daily portions" of OID with respect to the LRO for each day during the taxable year in which the holder held the LRO. The daily portion of OID is determined by allocating to each day of any accrual period within a taxable year a pro rata portion of an amount equal to the product of such LRO's adjusted issue price at the beginning of the accrual period and its yield to maturity (properly adjusted for the length of the period). We intend to use 30-day accrual periods. The adjusted issue price of a LRO at the beginning of any accrual period should be its issue price, increased by the aggregate amount of OID previously accrued with respect to the LRO and decreased by any payments of Purchase Amount and Accrued Return previously made on the LRO. A LRO's yield to maturity should be the discount rate that, when used to compute the present value of all payments of the Purchase Amount and Accrued Return to be made on the LRO under the payment schedule of the LRO, produces an amount equal to the issue price of such LRO.

Cash payments of the Purchase Amount and Accrued Return under the payment schedule on the LROs will not be separately included in income, but rather will be treated first as payments of previously accrued but unpaid OID and then as payments of Purchase Amount.

**Sale, Retirement or Other Taxable Disposition of LROs**

Upon the sale, retirement or other taxable disposition of a LRO, you generally will recognize gain or loss equal to the difference, if any, between the amount realized upon the sale, retirement or other taxable disposition and your adjusted tax basis in the LRO. In general, your adjusted tax basis in the LRO will equal your cost for the LRO, increased by any OID and market discount previously included in gross income by you, as discussed below, and reduced by any payments previously received by you in respect of the LRO.

Except as discussed below with respect to a LRO subject to rules governing market discount or contingent payment debt instruments, your gain or loss on the taxable disposition of the LRO generally will be long-term capital gain or loss if the LRO has been held for more than one year and short term otherwise. The deductibility of capital losses is subject to limitations.

**Prepayments**

If we prepay a LRO in full, the LRO will be treated as retired, and, as described above, you will generally have gain or loss equal to the difference, if any, between the amounts realized upon the retirement and your adjusted tax basis in the LRO. If we prepay a LRO in part, a portion of the LRO will be treated as retired. Generally, for purposes of determining (i) your gain or loss attributable to the portion of the LRO retired and (ii) your OID accruals on the portion of the LRO remaining outstanding, the adjusted issue price, your adjusted tax basis, and the accrued but unpaid OID of the LRO, determined immediately before the prepayment, will be allocated between the two portions of the LRO based on the portion of the LRO that is treated as retired. The yield to maturity of a LRO is not affected by a partial prepayment.

**Late Payments**

As discussed above, an amount equal to any late charges collected on the Loan corresponding to your LRO will generally be paid to you. In such case, any amounts equal to late charges paid to you should be taxable as ordinary income at the time such amounts are paid or accrued in accordance with your regular method of accounting for U.S. federal income tax purposes.

**Nonpayment of Loan Corresponding to LRO – Automatic Extension**

In the event that we do not make scheduled payments on a LRO as a result of nonpayment by the Borrower on the corresponding Loan, you must continue to accrue and include OID on a LRO in taxable income until the termination of the LROs. Solely for purposes of the OID rules, the LRO may be treated as retired and reissued on the scheduled payment date for an amount equal to the LRO's adjusted issue price on that date. As a result of such reissuance, the amount and accrual of OID on the LRO may change. At the time of the deemed reissuance, due to nonpayment by the Borrower, we may not be able to conclude that it is significantly more likely than not that the LRO will be paid in accordance with one payment schedule and/or that the likelihood of future nonpayment, prepayment, or late payment by the Borrower on the Loan corresponding to such LRO will be remote or incidental. Accordingly, the LRO may become subject to the contingent payment debt instrument rules (which are discussed in more detail below). In addition, in the event that the term of a LRO is extended past the corresponding Loan's original maturity date because amounts remain due and payable by the Borrower on the Loan corresponding to the LRO, the LRO likely will be treated as reissued and become subject to the contingent payment debt instrument rules. If we determine that a LRO is subject to the contingent payment debt instrument rules as a result of such a reissuance, we will notify you and provide the projected payment schedule and comparable yield.

If collection on a LRO becomes doubtful, you may be able to stop accruing OID on the LRO. Under current IRS guidance, it is not clear whether you may stop accruing OID if scheduled payments on a LRO are not made. You should consult your own tax advisor regarding the accrual and inclusion of OID in income when collection on a LRO becomes doubtful.

**Losses as a Result of Worthlessness**

In the event that a LRO becomes wholly worthless, if you are an individual and you did not acquire the LRO as part of your trade or business, you should generally be entitled to deduct your loss on the LRO as a short-term capital loss in the taxable year the LRO becomes wholly worthless. The portion of your loss attributable to accrued but unpaid OID may be deductible as an ordinary loss, although such treatment is not entirely free from doubt. Under Section 166 of the Code, if you are a corporation, or if you are an individual and you acquired your LRO as part of a trade or business, you should generally be entitled to deduct any loss sustained during the taxable year on account of a LRO becoming wholly or partially worthless as an ordinary loss. You should consult your own tax advisor regarding the character and timing of losses attributable to LROs that become worthless in whole or in part.

**Potential Characterization as Contingent Payment Debt Instruments**

Although we believe our intended treatment of a LRO as our (or Groundfloor Finance's) debt instrument that is not subject to the contingent payment debt instrument rules is reasonable, our position is not binding on the IRS or the courts, and we cannot predict what the IRS or a court would ultimately decide with respect to the proper U.S. federal income tax treatment of the LROs. Accordingly, there exists a risk that the IRS or a court could determine that the LROs are "contingent payment debt instruments" because payments on the LROs are linked to performance on the corresponding Loan. If the LROs are characterized as contingent payment debt instruments, or, in the future, if we conclude that a LRO is subject to the contingent payment debt instrument rules, the LROs would be subject to special rules applicable to contingent payment debt instruments. If these rules were to apply, you would generally be required to accrue interest income under the noncontingent bond method. Under this method, interest would be taken into account whether or not the amount of any payment was fixed or determinable in the taxable year. The amount of interest that would be taken into account would generally be determined based on a hypothetical noncontingent bond, which is based on a "comparable yield" (generally, a hypothetical yield to be applied to determine interest accruals with respect to the LRO, and which can be no less than the applicable federal rate) and a "projected payment schedule" (generally, a series of projected payments, the amount and timing of which would produce a yield to maturity on that LRO equal to the comparable yield). Based on the comparable yield and the projected payment schedule, you will generally be required to accrue as OID the sum of the daily portions of interest for each day in the taxable year that you held the LRO, adjusted to reflect the difference, if any, between the actual and projected amount of any contingent payments on the LRO. The daily portions of interest are determined by allocating to each day in an accrual period the ratable portion of interest that accrues in such accrual period. The amount of interest you may accrue under this method could be higher or lower than the stated interest rate on the Loan corresponding to your LROs. In addition, any gain recognized on the sale, exchange or retirement of your LRO will generally be treated as ordinary interest income, and any loss will be treated as ordinary loss to the extent of prior OID inclusions, and then as capital loss thereafter.

**Short-Term LRO**

The following discussion applies to LROs in which the LRO's final payment date is one year or less from the LRO's date of issue ("Short-Term LROs"). There are special rules that address the U.S. federal income taxation of Short-Term LROs of which you should be aware. These rules are not entirely clear in all situations. Accordingly, you are strongly advised to consult your own tax advisor with regard to the U.S. federal income tax consequences of the purchase, ownership and disposition of Short-Term LROs.

In general, the Treasury Regulations provide that, in the case of a debt instrument with a maturity of one year or less, no payments of interest are considered qualified stated interest. This means that a Short-Term LRO is treated as having OID equal to the excess of the total payments on the obligation over its issue price. In general, if you are a cash method taxpayer, you should not be required to recognize interest income until actual or constructive receipt of payment, unless you elect to accrue OID in income on a current basis under either a straight-line or a constant yield method. If you do not elect to currently include accrued OID in income, you will not be allowed to deduct any of the interest paid or accrued on any indebtedness incurred or maintained to purchase or carry the LRO (in an amount not exceeding the deferred income), and instead you will be required to defer deductions for such interest until the deferred income is realized upon the termination of the LRO or its earlier disposition in a taxable transaction. Notwithstanding the foregoing, if you elect to include accrued OID in income on a current basis, the limitation on the deductibility of interest will not apply. Upon disposition of a Short-Term LRO, you will be required to characterize some or all of the gain realized on a sale, exchange or retirement of the LRO as ordinary income. The amount characterized as ordinary income upon such disposition will generally equal an amount of OID that would have accrued under a straight-line basis or, if you so elect, an amount of OID that would have accrued under a constant yield method. If you are an accrual method taxpayer, you will generally be required to accrue OID in income on a current basis on either a straight-line basis or, at your election, under the constant yield method based on daily compounding. In addition, while there are special rules that address the U.S. federal income taxation of notes that have a maturity of more than one year and that provide for one or more contingent payments, those rules generally do not apply to short-term obligations. Accordingly, the U.S. federal income taxation of short-term obligations that provide for contingent payments is not entirely clear. You should consult your own tax advisor regarding the U.S. federal income tax consequences if Short-Term LROs are considered short-term obligations that provide for U.S. contingent payments.

**Backup Withholding and Reporting**

We or Groundfloor Finance will be required to report information to the IRS on certain payments on the LROs (including interest and discount) and on proceeds of the sale of the LROs if you are not an exempt recipient (such as a corporation). In addition, backup withholding (currently at a 28% rate) may apply to payments made to you if (i) you do not furnish or you have failed to provide your correct taxpayer identification number, (ii) we or Groundfloor Finance have been instructed by the IRS to backup withhold because of under-reporting (generally meaning that the IRS has determined and notified you that you have failed to report any reportable dividend and interest payments required to be shown on a tax return for a taxable year), or (iii) in certain circumstances, you have failed to comply with applicable certification requirements or otherwise establish an exemption from backup withholding.

Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against your U.S. federal income tax liability provided that the required information is furnished to the IRS on a timely basis. You should consult your tax advisor regarding the application of information reporting and backup withholding rules in your particular situation, the availability of an exemption, and the procedure for obtaining such an exemption, if applicable.

**LEGAL MATTERS**

Groundfloor Finance and GRE 1 have been advised regarding legal matters concerning this offering by Manatt, Phelps & Phillips, LLP, New York, New York. Groundfloor Finance and GRE 1 have received an opinion from Robbins Ross Alloy Belinfante Littlefield LLC, Atlanta, Georgia regarding the validity of the LROs to be offered pursuant to Georgia law.

**EXPERTS**

No experts were employed on a contingent basis or otherwise, nor have they any material interest in the issuer or any of its affiliated companies, their members or their agents.

**PART III — EXHIBITS**

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **<u>Exhibit</u>**<br> **<u>Number</u>** | **<u>Exhibit Description</u>**<br> **<u>(hyperlink)</u>** | **<u>Filed</u>**<br> **<u>Herewith</u>** | **<u>Form</u>** | **<u>File No</u>** | **<u>Exhibit</u>** | **<u>Filing Date</u>** |
| [2.1](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-1.htm) | [GRE 1 Articles of Organization](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-1.htm) |  | [1-A/A](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-1.htm) | [024-10671](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-1.htm) | [2.1](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-1.htm) | [January 25, 2017](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-1.htm) |
| [2.2](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-2.htm) | [GRE 1 Operating Agreement](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-2.htm) |  | [1-A/A](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-2.htm) | [024-10671](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-2.htm) | [2.2](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-2.htm) | [January 25, 2017](https://www.sec.gov/Archives/edgar/data/1694600/000114420417003822/v457328_ex2-2.htm) |
| [2.3](tm2310287d1_ex2-3.htm) | [Groundfloor Finance Inc. Fifth Amended and Restated Articles of Incorporation](tm2310287d1_ex2-3.htm) | [X](tm2310287d1_ex2-3.htm) |  |  |  |  |
| [2.4](https://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) | [Groundfloor Finance Inc. Bylaws](https://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) |  | [1-A/A](https://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) | [024-10440](https://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) | [2.2](https://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) | [July 1, 2015](https://www.sec.gov/Archives/edgar/data/1588504/000114420415040446/v414062_ex2-2.htm) |
| [3.1](tm2310287d1_ex3-1.htm) | [Form of Investor Agreement](tm2310287d1_ex3-1.htm) | [X](tm2310287d1_ex3-1.htm) |  |  |  |  |
| [3.2](https://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) | [Amended and Restated Investors' Rights Agreement](https://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) |  | [1-A/A](https://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) | [024-10496](https://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) | [3.1](https://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) | [November 25, 2015](https://www.sec.gov/Archives/edgar/data/1588504/000114420415068048/v425525_ex3-1.htm) |
| [4.1](tm2310287d1_ex4-1.htm) | [Standard Form of LRO Agreement](tm2310287d1_ex4-1.htm) | [X](tm2310287d1_ex4-1.htm) |  |  |  |  |
| [6.1](tm2310287d1_ex6-1.htm) | [Form of Loan Agreement](tm2310287d1_ex6-1.htm) | [X](tm2310287d1_ex6-1.htm) |  |  |  |  |
| [6.2](tm2310287d1_ex6-2.htm) | [Form of Promissory Note](tm2310287d1_ex6-2.htm) | [X](tm2310287d1_ex6-2.htm) |  |  |  |  |
| [10.1](https://www.sec.gov/Archives/edgar/data/1588504/000114420417054870/tv477914_partiiandiii.htm#poa) | [Power of attorney (Groundfloor Finance)](https://www.sec.gov/Archives/edgar/data/1588504/000114420417054870/tv477914_partiiandiii.htm#poa) |  | [1-A](https://www.sec.gov/Archives/edgar/data/1588504/000114420417054870/tv477914_partiiandiii.htm#poa) | [024-10758](https://www.sec.gov/Archives/edgar/data/1588504/000114420417054870/tv477914_partiiandiii.htm#poa) | [10.1](https://www.sec.gov/Archives/edgar/data/1588504/000114420417054870/tv477914_partiiandiii.htm#poa) | [October 30, 2017](https://www.sec.gov/Archives/edgar/data/1588504/000114420417054870/tv477914_partiiandiii.htm#poa) |
| [11.1](tm2310287d1_ex11-1.htm) | [Consent of Cherry Bekaert LLP](tm2310287d1_ex11-1.htm) | [X](tm2310287d1_ex11-1.htm) |  |  |  |  |
| [11.2](tm2310287d1_ex12-1.htm) | [Consent of Robbins Ross Alloy Belinfante Littlefield LLC (included as part of Exhibit 12.1)](tm2310287d1_ex12-1.htm) |  |  |  |  |  |
| [12.1](tm2310287d1_ex12-1.htm) | [Opinion of Robbins Ross Alloy Belinfante Littlefield LLC](tm2310287d1_ex12-1.htm) |  |  |  |  |  |

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**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 March 24, 2023.

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| | |
|:---|:---|
| Groundfloor Real Estate 1, LLC | Groundfloor Real Estate 1, LLC |
| **By: Groundfloor Finance Inc., its manager** | **By: Groundfloor Finance Inc., its manager** |
| 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 |
| <br> /s/ Brian Dally | <br> President, Chief Executive Officer of Groundfloor | <br> March 24, 2023 |
| **Brian Dally** | Finance Inc. (Principal Executive Officer) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;/s/ Nick Bhargava | Executive Vice President, Secretary, and Acting | March 24, 2023 |
| **Nick Bhargava** | Chief Financial Officer of Groundfloor Finance Inc. (Principal Financial Officer and Principal Accounting Officer) |  |

---

---

| | |
|:---|:---|
| \*By: | /s/ Nick Bhargava |

---

Nick Bhargava <br> Attorney-in-fact

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 March 24, 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.

---

| | | |
|:---|:---|:---|
| **Name and Signature** | **Title** | **Date** |
| /s/ Brian Dally | President, Chief Executive Officer of Groundfloor Finance Inc.<br> (Principal Executive Officer) | March 24, 2023 |
| Brian Dally | President, Chief Executive Officer of Groundfloor Finance Inc.<br> (Principal Executive Officer) | March 24, 2023 |
| /s/ Nick Bhargava | Executive Vice President, Secretary, and Acting Chief Financial Officer of Groundfloor Finance Inc. (Principal Financial Officer and Principal Accounting Officer) | March 24, 2023 |
| Nick Bhargava | Executive Vice President, Secretary, and Acting Chief Financial Officer of Groundfloor Finance Inc. (Principal Financial Officer and Principal Accounting Officer) | March 24, 2023 |
| \* | <br> Director | March 24, 2023 |
| Lucas Timberlake | <br> Director | March 24, 2023 |
| \* | <br> Director | March 24, 2023 |
| Bruce Boehm | <br> Director | March 24, 2023 |
| \* | <br> Director | March 24, 2023 |
| Yair Goldfinger | <br> Director | March 24, 2023 |
| \* | <br> Director | March 24, 2023 |
| Richard Tuley Jr. | <br> Director | March 24, 2023 |

---

---

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

---

**GROUNDFLOOR REAL ESTATE 1, LLC**

**Condensed Financial Statements**

**December 31, 2022 and December 31, 2021**

**GROUNDFLOOR REAL ESTATE 1, LLC**

**Table of Contents**

---

| | |
|:---|:---|
| **Condensed Financial Statements** |  |
| [Condensed Balance Sheets (audited) as of December 31, 2022 and December 31, 2021](#I_001) | [F-1](#I_001) |
| [Condensed Statements of Operations for the twelve months ended December 31, 2022 and December 31, 2021](#I_002) | [F-2](#I_002) |
| [Condensed Statements of Member's (Deficit) Equity for the twelve months ended December 31, 2022 and December 31, 2021](#I_003) | [F-3](#I_003) |
| [Condensed Statements of Cash Flows for the twelve months ended December 31, 2022 and December 31, 2021](#I_004) | [F-4](#I_004) |
| [Notes to Condensed Financial Statements](#I_005) | [F-5](#I_005) |

---

&nbsp;&nbsp; **GROUNDFLOOR REAL ESTATE 1, LLC**<br>Balance Sheets<br>

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| &nbsp;&nbsp;&nbsp;**Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash | $- | $- |
| &nbsp;&nbsp;&nbsp;Loans to developers | 66428210 | 73813150 |
| &nbsp;&nbsp;&nbsp; Allowance on loans to developers | (1455352) | (454119) |
| &nbsp;&nbsp;&nbsp;Interest receivable on loans to developers | 5164787 | 2740440 |
| &nbsp;&nbsp;&nbsp;Other real estate owned | 1964026 | 640960 |
| Total current assets | 72101671 | 76740431 |
| Total assets | $72101671 | $76740431 |
| &nbsp;&nbsp;&nbsp;**Liabilities and Member's Equity (Deficit)** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accrued interest on limited recourse obligations | $5164787 | $2740440 |
| &nbsp;&nbsp;&nbsp;Limited recourse obligations | 68561010 | 74454110 |
| &nbsp;&nbsp;&nbsp; Allowance on limited recourse obligations | (1624126) | (454119) |
| Total current liabilities | 72101671 | 76740431 |
| Total liabilities | 72101671 | 76740431 |
| Member's equity (deficit): |  |  |
| &nbsp;&nbsp;&nbsp;Member's capital | 100 | 100 |
| &nbsp;&nbsp;&nbsp;Member's deficit | (100) | (100) |
| &nbsp;&nbsp;&nbsp;Accumulated deficit |  |  |
| Total member's equity (deficit) |  |  |
| Total liabilities and member's equity (deficit) | $72101671 | $76740431 |

---

*See accompanying notes to condensed financial statements*

**GROUNDFLOOR REAL ESTATE 1, LLC**

Statements of Operations

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Loan servicing revenue | $- | $- |
| Net interest income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 11065000 | 5027548 |
| &nbsp;&nbsp;&nbsp;Interest expense | (11065000) | (5027548) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income |  |  |
| Net revenue |  |  |
| &nbsp;&nbsp;&nbsp;Cost of revenue |  |  |
| Gross profit |  |  |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative |  |  |
| Total operating expenses |  |  |
| Income (loss) from operations |  |  |
| Net (loss) income | $- | $- |

---

*See accompanying notes to financial statements*

**GROUNDFLOOR REAL ESTATE 1, LLC**

Condensed Statements of Member's (Deficit) Equity

---

| | | | | |
|:---|:---|:---|:---|:---|
|  |<br>Member's<br>Capital | Member's<br>Contribution<br>Receivable | (Accumulated <br> deficit)<br>Retained<br>Earnings | Total <br> Member's<br>(Deficit)<br>Equity |
| Member's deficit as of December 31, 2022 (audited) | $100 | $(100) | $- | $- |
| Member contributions |  |  |  |  |
| Net income | - | - | - | - |
| Member's equity as of December 31, 2021 (audited) | $100 | $(100) | $- | $- |
| Net income | - | - | - | - |
| Member's equity as of December 31, 2022 (audited) | $100 | $(100) | $- | $- |

---

*See accompanying notes to condensed financial statements*

**GROUNDFLOOR REAL ESTATE 1, LLC**

Condensed Statements of Cash Flows

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| **Cash flows from operating activities** |  |  |
| Net (loss) income | $- | $- |
| Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Interest receivable on loans to developers | (2424347) | (1638191) |
| &nbsp;&nbsp;&nbsp;Accrued interest on limited recourse obligations | 2424347 | 1638191 |
| Net cash provided by (used in) operating activities | - | - |
| **Cash flows from investing activities** |  |  |
| Loan payments to developers | (86494630) | (73686330) |
| Repayments of loans from developers | 91746770 | 37732030 |
| Proceeds from sale of other real estate held for sale | 640960 | 443840 |
| Net cash flows provided by (used in) investing activities | 5893100 | (35510460) |
| **Cash flows from financing activities** |  |  |
| Proceeds from limited recourse obligations | 86494630 | 73686330 |
| Repayments of limited recourse obligations | (92387730) | (38175870) |
| Net cash flows provided by (used in) financing activities | (5893100) | 35510460 |
| Net (decrease) increase in cash |  |  |
| **Cash as of beginning of the year** |  |  |
| **Cash as of end of the year** | $- | $- |
| **Supplemental disclosure of noncash investing and financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Loans to developers transferred to other real estate owned | $2132800 | $1084800 |
| &nbsp;&nbsp;&nbsp;Write-down of interest receivable on loans to developers and accrued interest on limited recourse obligations | 123985 | 42087 |
| &nbsp;&nbsp;&nbsp;Increase in allowance for loans to developers | 1001233 | 34177 |
| &nbsp;&nbsp;&nbsp;Increase in allowance for limited recourse obligations | 1170007 | 34177 |

---

*See accompanying notes to condensed financial statements*

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Condensed Financial Statements

**NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Basis of Presentation**

GROUNDFLOOR Real Estate 1, LLC (the "Company"), a Georgia limited liability company formed on December 16, 2016. The Company is a wholly-owned subsidiary of GROUNDFLOOR Finance Inc. ("GROUNDFLOOR"), a Georgia corporation.

**Description of Business**

GROUNDFLOOR Real Estate 1 LLC was created for the purpose of financing real estate projects. GROUNDFLOOR Real Estate 1's primary business is the sale of limited recourse obligations ("LROs").

GROUNDFLOOR has developed an online investment platform designed to crowdsource financing for real estate development projects, which GROUNDFLOOR utilizes to provide investment opportunities to investors. With this online investment platform, investors are able to choose between multiple real estate development investment opportunities, and developers of the projects are able to obtain financing. GROUNDFLOOR believes this method of financing real estate has many advantages including reduced project origination and financing costs, lower interest rates for real estate development financing, and attractive returns for investors. GROUNDFLOOR will identify which loans it seeks to originate, and will sell LROs which correspond to those loans.

**Basis of Accounting and Liquidity**

The Company's 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. The accompanying financial statements have been prepared on a basis which assumes that the Company will continue as a going concern. The Company has earned limited revenue 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 to fund product development and sales and marketing.

Management intends to fund operations by capital obtained from GROUNDFLOOR. However, there are no assurances that the Company can be successful in obtaining the additional capital or such financing will be on terms favorable or acceptable to the Company or GROUNDFLOOR. These matters raise substantial doubt about the ability of the Company to continue as a going concern.

The financial statements do not include any adjustments that might result from the outcome of uncertainties described in the financial statements. In addition, the 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 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 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 "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 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.

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Condensed Financial Statements

**NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

**Loan Servicing Revenue**

The 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.

**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 LROs 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 Financial Statements, "Limited recourse obligations" refers to LROs. LROs are the Company's currently registered securities.

"Interest income" recorded on "Loans to developers" was $11,065,000 and $5,027,548 for years ended December 31, 2022, and 2021, respectively. Additionally, "Interest expense" incurred on "Limited recourse obligations" was $11,065,000 and $5,027,548 for the years ended December 31, 2022, and 2021, 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, 2022, and 2021. 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.

**Loans to Developers and Limited Recourse Obligations**

"Loans to developers" and the corresponding "Limited recourse obligations" used to fund the Loans are originally recorded at outstanding principal. The interest rate associated with a Loan is the same as the interest rate associated with the corresponding LROs.

The Company's obligation to pay principal and interest on an 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's lien may be senior or junior to the Borrower's other financing obligations. The Company is not responsible for repaying "Limited recourse obligations" associated with uncollectable "Loans to developers". Amounts collected related to a Loan default are returned to the Investors based on their pro rata portion of the corresponding LROs, if applicable, less collection costs incurred by the Company.

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

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Condensed Financial Statements

**NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

**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 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 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 as each is earned and accrued over the same period. 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.

The Company has accrued "Interest receivable on loans to developers" of $5,164,787 and $2,740,440 and "Accrued interest on limited recourse obligations" of $5,164,787 and $2,740,440 as of December 31, 2022, and 2021, 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**

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.

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.

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Condensed Financial Statements

**NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)**

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 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 LROs. The allowance calculated for loans is accordingly applied as the reserve for LROs. The allowance for expected credit losses on "Loans to developers" is presented separately on the Company's Balance Sheet as "Allowance for loans to developers" and has a balance of $1,455,352 and $454,119 as of December 31, 2022, and 2021, respectively. The allowance for "Limited recourse obligations" is presented separately on the Company's Balance Sheet as "Allowance for limited recourse obligations" and has a balance of $1,624,126 and $454,119 as of December 31, 2022, and 2021, 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 cost to sell. 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.

**Income Taxes**

As a limited liability company, the Company is not a taxpaying entity for federal income tax purposes. Accordingly, its taxable income or losses are allocated to its member based on the provisions of the operating agreement and are included in the members' income tax returns. The financial statements, therefore, do not include a provision for income taxes. Similar provisions apply for state income tax purposes.

Management has assessed the effect of the guidance provided by U.S. GAAP on accounting for uncertainty in income taxes. Management has evaluated all tax positions that could have a significant effect on the financial statements and determined the Company had no uncertain income tax positions at December 31, 2022 and 2021.

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Condensed Financial Statements

---

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

---

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 Financial Statements. The Company adopted ASU 2019-12 on the effective date of January 1, 2022. The amendments were applied on a prospective basis and the adoption did not have a significant impact on the Company's financial results or the Financial Statements contained herein.

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 are 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 Financial Statements.

In March 2022, the FASB issued Accounting Standards Update 2022-02, *Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures*. The amendments in this update eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, *Receivables—Troubled Debt Restructurings by Creditors*, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. For public business entities, the amendments in this update require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, *Financial Instruments—Credit Losses—Measured at Amortized Cost*. or entities that have adopted the amendments in Update 2016-13, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact that the implementation of this standard will have on the Company's Financial Statements.

**NOTE 3: LOANS TO DEVELOPERS AND ALLOWANCE FOR EXPECTED CREDIT LOSSES**

The Company purchases notes that provide financing to borrowers for real estate-related loans. Real estate loans include loans for unoccupied single family or multifamily renovations costing between $30,000 and $2,000,000 over six months to a year.

The following table presents the carrying amount of "Loans to developers, net" by performance state as of December 31, 2022, and 2021, respectively:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Loan Performance State: |  |  |
| &nbsp;&nbsp;&nbsp;Current | $16935550 | $48773280 |
| &nbsp;&nbsp;&nbsp;Workout | 40335070 | 21395620 |
| &nbsp;&nbsp;&nbsp;Fundamental Default | 9157590 | 3644250 |
| Amortized Cost as of December 31 | $66428210 | $73813150 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses | (1455352) | (454119) |
| Carrying Amount as of December 31 | $64972858 | $73359031 |

---

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Condensed Financial Statements

**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.

The following tables present analyses of the allowance for credit losses by portfolio segment for the years ended December 31, 2022, and 2021:

---

| | |
|:---|:---|
|  | **Balance** |
| Allowance for loan losses, December 31, 2021 | $454119 |
| Loan allowance charged off | (316791) |
| Provision for losses | 1318024 |
| Recoveries | - |
| Allowance for loan losses, December 31, 2022 | $1455352 |

---

---

| | |
|:---|:---|
|  | **Balance** |
| Allowance for loan losses, December 31, 2020 | $419942 |
| Cumulative change in accounting principal (Note 2) | - |
| Allowance for loan losses, January 1, 2021 (adjusted for change in accounting estimate) | 419942 |
| Loan allowance charged off | (13067) |
| Provision for losses | 47245 |
| Recoveries | - |
| Allowance for loan losses, December 31, 2021 | $454119 |

---

**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.

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Condensed Financial Statements

**NOTE 3: LOANS TO DEVELOPERS AND ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)**

The following table presents "Loans to developers" carrying amount of our loan portfolio by portfolio segment and vintage of origination as of December 31, 2022:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **December 31, 2022** |
|  | **2022** | **2021** | **2020** | **2019** | **Total** |
| Loan grades: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;A | $306790 | $2720910 | $- | $- | $3027700 |
| &nbsp;&nbsp;&nbsp;B | 1645760 | 3715100 | 148000 |  | 5508860 |
| &nbsp;&nbsp;&nbsp;C | 12077750 | 29610430 | 1401180 |  | 43291560 |
| &nbsp;&nbsp;&nbsp;D | 5118900 | 5744130 | 504570 | 202200 | 11606640 |
| &nbsp;&nbsp;&nbsp;E | 1315.710 | 1677740 |  | 239040 | 2993450 |
| &nbsp;&nbsp;&nbsp;F |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;G | - | - | - | - | - |
| Amortized Cost | $20464910 | $43468310 | $2053750 | $441240 | $66428210 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses |  |  |  |  | (1455352) |
| Carrying Amount |  |  |  |  | $64972858 |

---

**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 LROs.

All credit quality indicators were updated as of December 31, 2022.

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, 2022:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **December 31, 2022** |
|  | **2022** | **2021** | **2020** | **2019** | **Total** |
| Loan grades: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $15339460 | $1596090 | $- | $- | $16935550 |
| &nbsp;&nbsp;&nbsp;Workout | 5125450 | 34472420 | 737200 |  | 40335070 |
| &nbsp;&nbsp;&nbsp;Fundamental Default | - | 7399800 | 1316550 | 441240 | 9157590 |
| Amortized Cost | $20464910 | $43468310 | $2053750 | $441240 | $66428210 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses |  |  |  |  | (1455352) |
| Carrying Amount |  |  |  |  | $64972858 |

---

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Condensed Financial Statements

**NOTE 3: LOANS TO DEVELOPERS AND ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)**

**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, 2022, the Company placed Loans of approximately $23,185,000 recorded to "Loans to developers" on nonaccrual status. The Company has written off approximately $124,000 of interest receivable in the current period.

The following table presents an aging analysis of past due Loans as of December 31, 2022, and 2021:

---

| | | | |
|:---|:---|:---|:---|
|  | **Carrying Amount** | **Allowance for Loan <br> Losses** | **Loans to Developers, <br> net** |
| Aging schedule: |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $16827940 | $117791 | $167101499 |
| &nbsp;&nbsp;&nbsp;Less than 90 days past due | 16083220 | 279374 | 15803846 |
| &nbsp;&nbsp;&nbsp;More than 90 days past due | 33517050 | 1058187 | 32458863 |
| Total as of December 31, 2022 | $66428210 | $1455352 | $64972858 |

---

---

| | | | |
|:---|:---|:---|:---|
|  | **Carrying Amount** | **Allowance for Loan <br> Losses** | **Loans to Developers, <br> net** |
| Aging schedule: |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $49287530 | $197879 | $49089651 |
| &nbsp;&nbsp;&nbsp;Less than 90 days past due | 15129920 | 64248 | 15065672 |
| &nbsp;&nbsp;&nbsp;More than 90 days past due | 9395700 | 191992 | 9203708 |
| Total as of December 31, 2021 | $73813150 | $454119 | $73359031 |

---

The following is a summary of information pertaining to nonaccrual loans as of December 31, 2022:

---

| | |
|:---|:---|
|  | **Balance** |
| Nonaccrual loans | $23184970 |
| Interest income recognized on Nonaccrual loans | $834893 |

---

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Condensed Financial Statements

**NOTE 3: LOANS TO DEVELOPERS AND ALLOWANCE FOR EXPECTED CREDIT LOSSES (continued)**

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

---

| | |
|:---|:---|
|  | **Balance** |
| Nonaccrual loans | $9590800 |
| Interest income recognized on Nonaccrual loans | $1087130 |

---

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Condensed Financial Statements

---

| | |
|:---|:---|
| **NOTE 4:** | **OTHER REAL ESTATE OWNED** |

---

"Other real estate owned" in the Company's Balance Sheet was $1,964,026 and $640,960 at December 31, 2022, and 2021, respectively. During the years ended December 31, 2022, and 2021, the Company transferred $2,132,800 and $1,084,800 from "Loans to developers" to "Other real estate owned", respectively. 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 Statements of Operation from this transfer. The Company recorded a decrease of approximately $169,000 to "Loans to developers" and an offsetting decrease to "Limited recourse obligations".

---

| | |
|:---|:---|
| **NOTE 5:** | **RELATED PARTY ARRANGEMENTS** |

---

**GROUNDFLOOR Finance Inc.**

GROUNDFLOOR will receive fees and compensation in connection with the Company's Offering, and the servicing and sale of the Company's LROs.

The Company will also reimburse GROUNDFLOOR for actual expenses incurred on behalf of the Company in connection with the servicing of a Loan, to the extent not reimbursed by the borrower. The Company will reimburse GROUNDFLOOR for out-of-pocket expenses paid to third parties in connection with providing services to the Company. This does not include GROUNDFLOOR's overhead, employee costs borne by GROUNDFLOOR, utilities or technology costs. For the years ended December 31, 2022, and 2021, GROUNDFLOOR incurred $0 and $0 of costs on the Company's behalf. No such costs were due and payable to GROUNDFLOOR as of December 31, 2022, and 2021, respectively.

**GROUNDFLOOR GA Holdings LLC**

GROUNDFLOOR GA Holdings LLC may close and fund a Loan prior to its being acquired by the Company. The ability to warehouse Loans allows us the flexibility to deploy the offering proceeds as funds are raised. The Company then will acquire such LROs at a price equal to the fair market value of the Loan (including reimbursements for servicing fees and accrued interest, if any), so there is no mark-up (or mark-down) at the time of purchase.

---

| | |
|:---|:---|
| **NOTE 6:** | **COMMITMENTS AND CONTINGENCIES** |

---

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 financial position or results of operations.

---

| | |
|:---|:---|
| **NOTE 7:** | **SUBSEQUENT EVENTS** |

---

Subsequent events were evaluated through March 8, 2023, the date the Financial Statements were available to be issued. Based on this evaluation, it was determined that no subsequent events occurred that require recognition or disclosure in the financial statements.

**GROUNDFLOOR REAL ESTATE 1, LLC**

**Table of Contents**

---

| | |
|:---|:---|
| **Financial Statements** |  |
| [**Inde** **pendent Auditors' Report**](#jj_001) | [F-1](#jj_001) |
| [Balance Sheets as of December 31, 2022 and 2021](#jj_002) | [F-3](#jj_002) |
| [Statements of Operations for the years ended December 31, 2022 and 2021](#jj_003) | [F-4](#jj_003) |
| [Statements of Member's Equity (Deficit) for the years ended December 31, 2022 and 2021](#jj_004) | [F-5](#jj_004) |
| [Statements of Cash Flows for the years ended December 31, 2022 and 2021](#PR_011) | [F-6](#PR_011) |
| [Notes to Financial Statements](#PR_012) | [F-7](#PR_012) |

---

![](tm2310287d1_partis10img001.jpg)

**Report of Independent Auditor**

To the Board of Directors

Groundfloor Real Estate 1, LLC

Atlanta, Georgia

**Opinion**

We have audited the accompanying financial statements of Groundfloor Real Estate 1, LLC (the "Company"), which comprise the balance sheets as of December 31, 2022, and 2021 and the related statements of operations, member's (deficit) equity, and cash flows for the years then ended, and the related notes to the financial statements.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and 2021, and the results of its operations and 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 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 Financial Statements**

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

In preparing the 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 financial statements are available to be issued.

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

Our objectives are to obtain reasonable assurance about whether the 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 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 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
 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 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 financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the 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 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.

![](tm2310287d1_partis10img002.jpg)

Atlanta, Georgia

March 8, 2023

**GROUNDFLOOR REAL ESTATE 1, LLC**

Balance Sheets

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash | $- | $- |
| &nbsp;&nbsp;&nbsp;Loans to developers | 66428210 | 73813150 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance on loans to developers | (1455352) | (454119) |
| &nbsp;&nbsp;&nbsp;Interest receivable on loans to developers | 5164787 | 2740440 |
| &nbsp;&nbsp;&nbsp;Other real estate owned | 1964026 | 640960 |
| Total current assets | 72101671 | 76740431 |
| Total assets | $72101671 | $76740431 |
| **Liabilities and Member's Equity (Deficit)** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accrued interest on limited recourse obligations | $5164787 | $2740440 |
| &nbsp;&nbsp;&nbsp;Limited recourse obligations | 68561010 | 74454110 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance on limited recourse obligations | (1624126) | (454119) |
| Total current liabilities | 72101671 | 76740431 |
| Total liabilities | 72101671 | 76740431 |
| Member's equity (deficit): |  |  |
| &nbsp;&nbsp;&nbsp;Member's capital | 100 | 100 |
| &nbsp;&nbsp;&nbsp;Member's deficit | (100) | (100) |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | - | - |
| Total member's equity (deficit) | - | - |
| Total liabilities and member's equity (deficit) | $72101671 | $76740431 |

---

*See accompanying notes to financial statements*

**GROUNDFLOOR REAL ESTATE 1, LLC**

**Statements of Operations**

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Loan servicing revenue | $- | $- |
| Net interest income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 11065000 | 5027548 |
| &nbsp;&nbsp;&nbsp;Interest expense | (11065000) | (5027548) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | - | - |
| Net revenue |  |  |
| &nbsp;&nbsp;&nbsp;Cost of revenue | - | - |
| Gross profit |  |  |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | - | - |
| Total operating expenses | - | - |
| Income (loss) from operations |  |  |
| Net (loss) income | $- | $- |

---

See accompanying notes to financial statements

**GROUNDFLOOR REAL ESTATE 1, LLC**

Statements of Member's (Deficit) Equity

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Member's <br> Capital** | **Member's<br> Contribution<br> Receivable** | **(Accumulated<br> deficit)<br> Retained<br> Earnings** | **Total <br> Member's<br> (Deficit) <br> Equity** |
| Member's deficit as of December 31, 2022 | $100 | $(100) | $(1050) | $(1050) |
| Member contributions |  |  |  |  |
| Net income | - | - | 1050 | 1050 |
| Member's equity as of December 31, 2021 | 100 | (100) | - | - |
| Net income | - | - | - | - |
| Member's equity as of December 31, 2022 | $100 | $(100) | $- | $- |

---

*See accompanying notes to financial statements*

**GROUNDFLOOR REAL ESTATE 1, LLC**

**Statements of Cash Flows**

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| **Cash flows from operating activities** |  |  |
| Net (loss) income | $- | $- |
| Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest receivable on loans to developers | (2424347) | (1638191) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accrued interest on limited recourse obligations | 2424347 | 1638191 |
| Net cash provided by (used in) operating activities | - | - |
| **Cash flows from investing activities** |  |  |
| Loan payments to developers | (86494630) | (73686330) |
| Repayments of loans from developers | 91746770 | 37732030 |
| Proceeds from sale of other real estate held for sale | 640960 | 443840 |
| Net cash flows provided by (used in) investing activities | 5893100 | (35510460) |
| **Cash flows from financing activities** |  |  |
| Proceeds from limited recourse obligations | 86494630 | 73686330 |
| Repayments of limited recourse obligations | (92387730) | (38175870) |
| Net cash flows provided by (used in) financing activities | (5893100) | 35510460 |
| Net (decrease) increase in cash |  |  |
| **Cash as of beginning of the year** |  |  |
| **Cash as of end of the year** | $- | $- |
| **Supplemental disclosure of noncash investing and financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Loans to developers transferred to other real estate owned | $2132800 | $1084800 |
| &nbsp;&nbsp;&nbsp;Write-down of interest receivable on loans to developers and accrued interest on limited recourse obligations | 123985 | 42087 |
| &nbsp;&nbsp;&nbsp;Increase in allowance for loans to developers | 1001233 | 34177 |
| &nbsp;&nbsp;&nbsp;Increase in allowance for limited recourse obligations | 1170007 | 34177 |

---

*See accompanying notes to financial statements*

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Financial Statements

---

| | |
|:---|:---|
| **NOTE 1:** | **SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES** |

---

**Basis of Presentation**

GROUNDFLOOR Real Estate 1, LLC (the "Company"), a Georgia limited liability company formed on December 16, 2016. The Company is a wholly-owned subsidiary of GROUNDFLOOR Finance Inc. ("GROUNDFLOOR"), a Georgia corporation.

**Description of Business**

GROUNDFLOOR Real Estate 1 LLC was created for the purpose of financing real estate projects. GROUNDFLOOR Real Estate 1's primary business is the sale of limited recourse obligations ("LROs").

GROUNDFLOOR has developed an online investment platform designed to crowdsource financing for real estate development projects, which GROUNDFLOOR utilizes to provide investment opportunities to investors. With this online investment platform, investors are able to choose between multiple real estate development investment opportunities, and developers of the projects are able to obtain financing. GROUNDFLOOR believes this method of financing real estate has many advantages including reduced project origination and financing costs, lower interest rates for real estate development financing, and attractive returns for investors. GROUNDFLOOR will identify which loans it seeks to originate, and will sell LROs which correspond to those loans.

**Basis of Accounting and Liquidity**

The Company's 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. The accompanying financial statements have been prepared on a basis which assumes that the Company will continue as a going concern. The Company has earned limited revenue 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 to fund product development and sales and marketing.

Management intends to fund operations by capital obtained from GROUNDFLOOR. However, there are no assurances that the Company can be successful in obtaining the additional capital or such financing will be on terms favorable or acceptable to the Company or GROUNDFLOOR. These matters raise substantial doubt about the ability of the Company to continue as a going concern.

The financial statements do not include any adjustments that might result from the outcome of uncertainties described in the financial statements. In addition, the 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 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 Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Financial Statements

**Revenue Recognition**

Revenue primarily results from fees earned on the loans to the Developers (the "Loans"). Fees include "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 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.

**Loan Servicing Revenue**

The 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.

**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 LROs 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 Financial Statements, "Limited recourse obligations" refers to LROs. LROs are the Company's currently registered securities.

"Interest income" recorded on "Loans to developers" was $11,065,000 and $5,027,548 for years ended December 31, 2022, and 2021, respectively. Additionally, "Interest expense" incurred on "Limited recourse obligations" was $11,065,000 and $5,027,548 for the years ended December 31, 2022, and 2021, 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, 2022, and 2021. 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.

**Loans to Developers and Limited Recourse Obligations**

"Loans to developers" and the corresponding "Limited recourse obligations" used to fund the Loans are originally recorded at outstanding principal. The interest rate associated with a Loan is the same as the interest rate associated with the corresponding LROs.

The Company's obligation to pay principal and interest on an 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's lien may be senior or junior to the Borrower's other financing obligations. The Company is not responsible for repaying "Limited recourse obligations" associated with uncollectable "Loans to developers". Amounts collected related to a Loan default are returned to the Investors based on their pro rata portion of the corresponding LROs, if applicable, less collection costs incurred by the Company.

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

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Financial Statements

**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 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 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 as each is earned and accrued over the same period. 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.

The Company has accrued "Interest receivable on loans to developers" of $5,164,787 and $2,740,440 and "Accrued interest on limited recourse obligations" of $5,164,787 and $2,740,440 as of December 31, 2022, and 2021, 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**

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.

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.

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Financial Statements

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 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 LROs. The allowance calculated for loans is accordingly applied as the reserve for LROs. The allowance for expected credit losses on "Loans to developers" is presented separately on the Company's Balance Sheet as "Allowance for loans to developers" and has a balance of $1,455,352 and $454,119 as of December 31, 2022, and 2021, respectively. The allowance for "Limited recourse obligations" is presented separately on the Company's Balance Sheet as "Allowance for limited recourse obligations" and has a balance of $1,624,126 and $454,119 as of December 31, 2022, and 2021, 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 cost to sell. 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.

**Income Taxes**

As a limited liability company, the Company is not a taxpaying entity for federal income tax purposes. Accordingly, its taxable income or losses are allocated to its member based on the provisions of the operating agreement and are included in the members' income tax returns. The financial statements, therefore, do not include a provision for income taxes. Similar provisions apply for state income tax purposes.

Management has assessed the effect of the guidance provided by U.S. GAAP on accounting for uncertainty in income taxes. Management has evaluated all tax positions that could have a significant effect on the financial statements and determined the Company had no uncertain income tax positions at December 31, 2022 and 2021.

---

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

---

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 Financial Statements. The Company adopted ASU 2019-12 on the effective date of January 1, 2022. The amendments were applied on a prospective basis and the adoption did not have a significant impact on the Company's financial results or the Financial Statements contained herein.

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to 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 are 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 Financial Statements.

In March 2022, the FASB issued Accounting Standards Update 2022-02, *Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures*. The amendments in this update eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, *Receivables—Troubled Debt Restructurings by Creditors*, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. For public business entities, the amendments in this update require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, *Financial Instruments—Credit Losses—Measured at Amortized Cost*. or entities that have adopted the amendments in Update 2016-13, the amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact that the implementation of this standard will have on the Company's Financial Statements.

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Financial Statements

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

---

The Company purchases notes that provide financing to borrowers for real estate-related loans. Real estate loans include loans for unoccupied single family or multifamily renovations costing between $30,000 and $2,000,000 over six months to a year.

The following table presents the carrying amount of "Loans to developers, net" by performance state as of December 31, 2022, and 2021, respectively:

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Loan Performance State: |  |  |
| &nbsp;&nbsp;&nbsp;Current | $16935550 | $48773280 |
| &nbsp;&nbsp;&nbsp;Workout | 40335070 | 21395620 |
| &nbsp;&nbsp;&nbsp;Fundamental Default | 9157590 | 3644250 |
| Amortized Cost as of December 31 | $66428210 | $73813150 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses | (1455352) | (454119) |
| Carrying Amount as of December 31 | $64972858 | $73359031 |

---

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Financial Statements

**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.

The following tables present analyses of the allowance for credit losses by portfolio segment for the years ended December 31, 2022, and 2021:

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| | |
|:---|:---|
|  | **Balance** |
| Allowance for loan losses, December 31, 2021 | $454119 |
| Loan allowance charged off | (316791) |
| Provision for losses | 1318024 |
| Recoveries | - |
| Allowance for loan losses, December 31, 2022 | $1455352 |

---

---

| | |
|:---|:---|
|  | **Balance** |
| Allowance for loan losses, December 31, 2020 | $419942 |
| Cumulative change in accounting principal (Note 2) | - |
| Allowance for loan losses, January 1, 2021 (adjusted for change in accounting estimate) | 419942 |
| Loan allowance charged off | (13067) |
| Provision for losses | 47245 |
| Recoveries | - |
| Allowance for loan losses, December 31, 2021 | $454119 |

---

**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.

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Financial Statements

The following table presents "Loans to developers" carrying amount of our loan portfolio by portfolio segment and vintage of origination as of December 31, 2022:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **December 31, 2022** |
|  | **2022** | **2021** | **2020** | **2019** | **Total** |
| Loan grades: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;A | $306790 | $2720910 | $- | $- | $3027700 |
| &nbsp;&nbsp;&nbsp;B | 1645760 | 3715100 | 148000 |  | 5508860 |
| &nbsp;&nbsp;&nbsp;C | 12077750 | 29610430 | 1401180 |  | 43291560 |
| &nbsp;&nbsp;&nbsp;D | 5118900 | 5744130 | 504570 | 202200 | 11606640 |
| &nbsp;&nbsp;&nbsp;E | 1315.710 | 1677740 |  | 239040 | 2993450 |
| &nbsp;&nbsp;&nbsp;F |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;G | - | - | - | - | - |
| Amortized Cost | $20464910 | $43468310 | $2053750 | $441240 | $66428210 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses |  |  |  |  | (1455352) |
| Carrying Amount |  |  |  |  | $64972858 |

---

**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 LROs.

All credit quality indicators were updated as of December 31, 2022.

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, 2022:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **December 31, 2022** |
|  | **2022** | **2021** | **2020** | **2019** | **Total** |
| Loan grades: |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $15339460 | $1596090 | $- | $- | $16935550 |
| &nbsp;&nbsp;&nbsp;Workout | 5125450 | 34472420 | 737200 |  | 40335070 |
| &nbsp;&nbsp;&nbsp;Fundamental Default | - | 7399800 | 1316550 | 441240 | 9157590 |
| Amortized Cost | $20464910 | $43468310 | $2053750 | $441240 | $66428210 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses |  |  |  |  | (1455352) |
| Carrying Amount |  |  |  |  | $64972858 |

---

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Financial Statements

**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, 2022, the Company placed Loans of approximately $23,185,000 recorded to "Loans to developers" on nonaccrual status. The Company has written off approximately $124,000 of interest receivable in the current period.

The following table presents an aging analysis of past due Loans as of December 31, 2022, and 2021:

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| | | | |
|:---|:---|:---|:---|
|  | **Carrying Amount** | **Allowance for Loan<br> Losses** | **Loans to Developers, <br> net** |
| Aging schedule: |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $16827940 | $117791 | $167101499 |
| &nbsp;&nbsp;&nbsp;Less than 90 days past due | 16083220 | 279374 | 15803846 |
| &nbsp;&nbsp;&nbsp;More than 90 days past due | 33517050 | 1058187 | 32458863 |
| Total as of December 31, 2022 | $66428210 | $1455352 | $64972858 |

---

---

| | | | |
|:---|:---|:---|:---|
|  | **Carrying Amount** | **Allowance for Loan<br> Losses** | **Loans to Developers, <br> net** |
| Aging schedule: |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $49287530 | $197879 | $49089651 |
| &nbsp;&nbsp;&nbsp;Less than 90 days past due | 15129920 | 64248 | 15065672 |
| &nbsp;&nbsp;&nbsp;More than 90 days past due | 9395700 | 191992 | 9203708 |
| Total as of December 31, 2021 | $73813150 | $454119 | $73359031 |

---

The following is a summary of information pertaining to nonaccrual loans as of December 31, 2022:

---

| | |
|:---|:---|
|  | **Balance** |
| Nonaccrual loans | $23184970 |
| Interest income recognized on Nonaccrual loans | $834893 |

---

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Financial Statements

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

---

| | |
|:---|:---|
|  | **Balance** |
| Nonaccrual loans | $9590800 |
| Interest income recognized on Nonaccrual loans | $1087130 |

---

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Financial Statements

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| | |
|:---|:---|
| **NOTE 4:** | **OTHER REAL ESTATE OWNED** |

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"Other real estate owned" in the Company's Balance Sheet was $1,964,026 and $640,960 at December 31, 2022, and 2021, respectively. During the years ended December 31, 2022, and 2021, the Company transferred $2,132,800 and $1,084,800 from "Loans to developers" to "Other real estate owned", respectively. 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 Statements of Operation from this transfer. The Company recorded a decrease of approximately $169,000 to "Loans to developers" and an offsetting decrease to "Limited recourse obligations". $35,054 to "Loans to developers, net" and an offsetting decrease to "Limited recourse obligations, net".

---

| | |
|:---|:---|
| **NOTE 5:** | **RELATED PARTY ARRANGEMENTS** |

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**GROUNDFLOOR Finance Inc.**

GROUNDFLOOR will receive fees and compensation in connection with the Company's Offering, and the servicing and sale of the Company's LROs.

The Company will also reimburse GROUNDFLOOR for actual expenses incurred on behalf of the Company in connection with the servicing of a Loan, to the extent not reimbursed by the borrower. The Company will reimburse GROUNDFLOOR for out-of-pocket expenses paid to third parties in connection with providing services to the Company. This does not include GROUNDFLOOR's overhead, employee costs borne by GROUNDFLOOR, utilities or technology costs. For the years ended December 31, 2022, and 2021, GROUNDFLOOR incurred $0 and $0 of costs on the Company's behalf. No such costs were due and payable to GROUNDFLOOR as of December 31, 2022, and 2021, respectively.

**GROUNDFLOOR GA Holdings LLC**

GROUNDFLOOR GA Holdings LLC may close and fund a Loan prior to its being acquired by the Company. The ability to warehouse Loans allows us the flexibility to deploy the offering proceeds as funds are raised. The Company then will acquire such LROs at a price equal to the fair market value of the Loan (including reimbursements for servicing fees and accrued interest, if any), so there is no mark-up (or mark-down) at the time of purchase.

---

| | |
|:---|:---|
| **NOTE 6:** | **COMMITMENTS AND CONTINGENCIES** |

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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 financial position or results of operations.

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| | |
|:---|:---|
| **NOTE 7:** | **SUBSEQUENT EVENTS** |

---

Subsequent events were evaluated through March 8, 2023, the date the Financial Statements were available to be issued. Based on this evaluation, it was determined that no subsequent events occurred that require recognition or disclosure in the financial statements.

**GROUNDFLOOR FINANCE INC.**

**AND SUBSIDIARIES**

**Condensed Consolidated Financial Statements**

**December 31, 2022 and 2021**

**GROUNDFLOOR REAL ESTATE 1, LLC**

Notes to Financial Statements

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

**Table of Contents**

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| | |
|:---|:---|
| **Condensed Consolidated Financial Statements (audited)** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Condensed Consolidated Balance Sheets](#f11_001) | [F-1](#f11_001) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Condensed Consolidated Statements of Operations](#f11_002) | [F-2](#f11_002) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Condensed Consolidated Statements of Stockholders' Deficit](#Kalai_001) | [F-3](#Kalai_001) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;[Condensed Consolidated Statements of Cash Flows](#Kalai_002) | [F-4](#Kalai_002) |
| [Notes to Condensed Consolidated Financial Statements](#Kalai_003) | [F-5](#Kalai_003) |

---

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Condensed Consolidated Balance Sheets

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **December 31,<br> 2022** | **December 31,<br> 2021** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash <sup>(1)</sup> | $4466138 | $2641950 |
| &nbsp;&nbsp;&nbsp;Loans to developers <sup>(1)</sup> | 240494116 | 176431710 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for loans to developers <sup>(1)</sup> | (6046819) | (3164650) |
| &nbsp;&nbsp;&nbsp;Interest receivable on loans to developers <sup>(1)</sup> | 21646364 | 11790202 |
| &nbsp;&nbsp;&nbsp;Other current assets | 5503935 | 3580237 |
| Total current assets | 266063734 | 191279449 |
| &nbsp;&nbsp;&nbsp;Property, equipment, software, website, and intangible assets, net | 3086790 | 1645617 |
| &nbsp;&nbsp;&nbsp;Other assets | 71302 | 71302 |
| Total assets | $269221826 | $192996368 |
| **Liabilities and Stockholders' Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses <sup>(1)</sup> | $4335534 | $5147829 |
| &nbsp;&nbsp;&nbsp;Limited recourse obligations | 139296385 | 111982315 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for limited recourse obligations | (7363829) | (3636146) |
| &nbsp;&nbsp;&nbsp;Accrued interest on limited recourse obligations | 10068526 | 6943896 |
| &nbsp;&nbsp;&nbsp;Short-term notes payable | 87460880 | 67911273 |
| &nbsp;&nbsp;&nbsp;Convertible notes, net of discount of $142,636 and $490,783 | 3596195 | 4509217 |
| Total current liabilities | 237393691 | 192858384 |
| &nbsp;&nbsp;&nbsp;Long-term notes payable | 22325700 |  |
| &nbsp;&nbsp;&nbsp;Other liabilities | 23857 | 134865 |
| Total liabilities | 259743248 | 192993249 |
| Commitments and contingencies (See Note 13) |  |  |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;Series B-2 convertible preferred stock, no par, 243,348 shares designated, 189,270 shares issued and outstanding (liquidation preference of $5,833,301) | 5754564 |  |
| &nbsp;&nbsp;&nbsp;Series B convertible preferred stock, no par, 441,940 shares designated, 441,940 shares issued and outstanding (liquidation preference of $8,056,566) | 7429483 | 7429483 |
| &nbsp;&nbsp;&nbsp;Series A convertible preferred stock, no par, 747,373 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, 568,796 shares designated, 554,038 shares issued and outstanding (liquidation preference of $2,883,678) | 2537150 | 2609091 |
| &nbsp;&nbsp;&nbsp;Series B-3 convertible preferred stock, no par, 230,000 shares designated, 52,265 shares issued and outstanding (liquidation preference of $2,294,434) | 2137320 |  |
| &nbsp;&nbsp;&nbsp;Common stock, no par, 30,000,000 shares authorized, 2,345,402 issued and outstanding | 14867107 | 11895593 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 5776928 | 3310258 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (35574099) | (30203181) |
| &nbsp;&nbsp;&nbsp;Stock subscription receivable | (560) | (560) |
| &nbsp;&nbsp;&nbsp;Company's stockholders' equity | 7890328 | 3119 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-controlling interest in consolidated variable interest entities | 1588250 | - |
| Total stockholders' equity | 9478578 | 3119 |
| Total liabilities and stockholders' equity | $269221826 | $192996368 |

---

*(1) Includes amounts of the consolidated variable interest entity (VIE), presented separately in Note 3 below.*

*See accompanying notes to condensed consolidated financial statements*

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Condensed Consolidated Statements of Operations

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Non-interest revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Origination fees | $11162166 | $4769504 |
| &nbsp;&nbsp;&nbsp;Loan servicing revenue | 3200879 | 2887096 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest revenue | 14363045 | 7656600 |
| Net interest income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 28234268 | 15731444 |
| &nbsp;&nbsp;&nbsp;Interest expense | (20804590) | (12167945) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 7429678 | 3563499 |
| Revenue | 21792723 | 11220099 |
| &nbsp;&nbsp;&nbsp;Cost of revenue | (2040488) | (1363150) |
| Gross profit | 19752235 | 9856949 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 9181673 | 4417525 |
| &nbsp;&nbsp;&nbsp;Sales and customer support | 4487185 | 3404287 |
| &nbsp;&nbsp;&nbsp;Development | 4282870 | 1638327 |
| &nbsp;&nbsp;&nbsp;Regulatory | 674149 | 378911 |
| &nbsp;&nbsp;&nbsp;Marketing and promotions | 4915342 | 4251831 |
| Total operating expenses | 23541219 | 14090881 |
| Loss from operations | (3788984) | (4233932) |
| Other (expense) income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense on corporate debt instruments | (840684) | (543942) |
| &nbsp;&nbsp;&nbsp;Gain on loan extinguishment | 829000 | 829100 |
| Total other (expense) income, net | (11684) | 285158 |
| Net loss | (3800668) | (3948774) |
| Less: Net income attributable to non-controlling interest in consolidation VIE | 1570250 | - |
| Net loss attributable to Groundfloor Finance, Inc. | $(5370918) | $(3948774) |

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**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Consolidated Statements of Stockholders' Equity (Deficit)

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Convertible | Convertible | Convertible | Convertible | Convertible | Convertible | Convertible | Convertible | Convertible | Convertible |
|  | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock |
|  | Series B-2 | Series B-2 | Series A | Series A | Series B | Series B | Series Seed | Series Seed | Series B-3 | Series B-3 |
|  | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount |
| Stockholders' equity (deficit) as of December 31, 2020 |  | $- | 747373 | $4962435 | 188036 | $3145092 | 568796 | $2609091 |  | $- |
| Issuance of Series B preferred shares, net of offering costs |  |  |  |  | 236976 | 3975794 |  |  |  |  |
| Conversion of convertible notes |  |  |  |  | 16928 | 308597 |  |  |  |  |
| Exercise of stock options |  |  |  |  |  |  |  |  |  |  |
| Share-based compensation expense |  |  |  |  |  |  |  |  |  |  |
| Conversion of Warrants |  |  |  |  |  |  |  |  |  |  |
| Beneficial conversion feature |  |  |  |  |  |  |  |  |  |  |
| Net loss | - | - | - | - | - | - | - | - | - | - |
| Stockholders' equity as of December 31, 2021 | - | $- | 747373 | $4962435 | 441940 | $7429483 | 568796 | $2609091 | - | $- |
| Issuance of Series B-2 preferred shares, net of offering costs | 189270 | 5754564 |  |  |  |  |  |  |  |  |
| Issuance of Series B-3 preferred shares, net of offering costs |  |  |  |  |  |  |  |  | 52265 | 2137320 |
| Issuance in the 2022 Common Stock Offering, net of offering costs |  |  |  |  |  |  |  |  |  |  |
| Conversion of convertible notes |  |  |  |  |  |  |  |  |  |  |
| Exercise of stock options and warrants |  |  |  |  |  |  |  |  |  |  |
| Conversion of Series Seed Shares to Common Stock |  |  |  |  |  |  | (14758) | (71941) |  |  |
| Issuance of restricted stock units |  |  |  |  |  |  |  |  |  |  |
| Share-based compensation expense |  |  |  |  |  |  |  |  |  |  |
| Increase in non-controlling interest related to initial consolidation of VIE |  |  |  |  |  |  |  |  |  |  |
| Net loss | - | - | - | - | - | - | - | - | - | - |
| Stockholders' equity as of December 31, 2022 | 189270 | $5754564 | 747373 | $4962435 | 441940 | $7429483 | 554038 | $2537150 | 52265 | $2137320 |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Common Stock | Common Stock | | | | | | |
|  | Shares | Amount |<br>Additional<br>Paid-in<br>Capital |<br>Accumulated<br>Deficit |<br>Stock<br>Subscription<br>Receivable | Company<br>Stockholders'<br>Equity<br>(Deficit) | Non-Controlling<br>Interest in<br>Consolidated<br>VIE | Total<br>Stockholders'<br>Equity<br>(Deficit) |
| Stockholders' equity (deficit) as of December 31, 2020 | 2165923 | $11596087 | $2336551 | $(26254407) | $(560) | $(1605711) | $- | $(1605711) |
| Issuance of Series B preferred shares, net of offering costs |  |  |  |  |  | 3975794 |  | 3975794 |
| Conversion of convertible notes | 11222 | 183325 |  |  |  | 491922 |  | 491922 |
| Exercise of stock options | 7825 | 68180 |  |  |  | 68180 |  | 68180 |
| Share-based compensation expense |  |  | 418151 |  |  | 418151 |  | 418151 |
| Conversion of Warrants | 7175 | 48001 |  |  |  | 48001 |  | 48001 |
| Beneficial conversion feature |  |  | 555556 |  |  | 555556 |  | 555556 |
| Net loss | - | - | - | (3948774) | - | (3948774) | - | (3948774) |
| Stockholders' equity as of December 31, 2021 | 2192145 | $11895593 | $3310258 | $(30203181) | $(560) | $3119 | $- | $3119 |
| Issuance of Series B-2 preferred shares, net of offering costs |  |  |  |  |  | 5754564 |  | 5754564 |
| Issuance of Series B-3 preferred shares, net of offering costs |  |  |  |  |  | 2137320 |  | 2137320 |
| Issuance in the 2022 Common Stock Offering, net of offering costs | 49700 | 1531754 |  |  |  | 1531754 |  | 1531754 |
| Conversion of convertible notes | 48394 | 1342579 |  |  |  | 1342579 |  | 1342579 |
| Exercise of stock options and warrants | 33461 | 25240 |  |  |  | 25240 |  | 25240 |
| Conversion of Series Seed Shares to Common Stock | 14758 | 71941 |  |  |  |  |  |  |
| Issuance of restricted stock units | 6944 |  |  |  |  |  |  |  |
| Share-based compensation expense |  |  | 2466670 |  |  | 2466670 |  | 2466670 |
| Increase in non-controlling interest related to initial consolidation of VIE |  |  |  |  |  |  | 18000 | 18000 |
| Net loss | - | - | - | (5370918) | - | (5370918) | 1570250 | (3800668) |
| Stockholders' equity as of December 31, 2022 | 2345402 | $14867107 | $5776928 | $(35574099) | $(560) | $7890328 | $1588250 | $9478578 |

---

*See accompanying notes to consolidated financial statements*

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Condensed Consolidated Statements of Cash Flows

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| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| **Cash flows from operating activities** |  |  |
| Net loss | $(3800668) | $(3948774) |
| Adjustments to reconcile net loss to net cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 1226991 | 760380 |
| &nbsp;&nbsp;&nbsp;Share-based compensation | 2466670 | 418151 |
| &nbsp;&nbsp;&nbsp;Noncash interest expense | 348147 | 191125 |
| &nbsp;&nbsp;&nbsp;(Gain) Loss on sale of real estate owned |  | (96000) |
| &nbsp;&nbsp;&nbsp;Origination of loans held for sale |  | (3201856) |
| &nbsp;&nbsp;&nbsp;Proceeds from sales of loans held for sale |  | 5524200 |
| &nbsp;&nbsp;&nbsp;Gain on forgiveness of PPP loan | (829000) | (829100) |
| Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Other assets | (838287) | (719370) |
| &nbsp;&nbsp;&nbsp;Interest receivable on loans to developers | (9856162) | (8244747) |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | (841892) | 2954208 |
| &nbsp;&nbsp;&nbsp;Accrued interest on limited recourse obligations | 3124630 | 4111912 |
| Net cash flows from operating activities | (8999571) | (3079871) |
| **Cash flows from investing activities** |  |  |
| Loan payments to developers | (266090771) | (198289297) |
| Repayments of loans from developers | 197068620 | 81885591 |
| Proceeds from sale of properties held for sale | 2995188 | 3767091 |
| Payments of software and website development costs | (2668163) | (1247488) |
| Purchases of computer equipment and furniture and fixtures |  | (101933) |
| Other investing activities | 21630 | 155040 |
| Cash received from initial consolidation of VIE | 30000 | - |
| Net cash flows from investing activities | (68643496) | (113830996) |
| **Cash flows from financing activities** |  |  |
| Proceeds from limited recourse obligations | 187412229 | 142331517 |
| Repayments of limited recourse obligations | (160098160) | (79937095) |
| Proceeds from GROUNDFLOOR Notes | 151536470 | 106252110 |
| Repayments on GROUNDFLOOR Notes | (132171910) | (79133490) |
| Proceeds from Stairs Notes | 23339748 | 20985833 |
| 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 |
| Proceeds from issuance of Series B-2 convertible preferred stock, net of offering costs | 5754564 |  |
| Proceeds from issuance of Series B-3 convertible preferred stock, net of offering costs | 2137320 |  |
| Proceeds from issuance of common stock, net of offering costs | 1531754 |  |
| Proceeds from loan under Paycheck Protection Program |  | 829000 |
| Proceeds from the exercise of stock options and warrants | 25240 | 116181 |
| Net cash flows from financing activities | 79467255 | 118123645 |
| Net increase (decrease) in cash | 1824188 | 1212778 |
| **Cash as of beginning of the year** | 2641950 | 1429172 |
| **Cash as of end of the year** | $4466138 | $2641950 |
| **Supplemental cash flow disclosures:** |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid for interest | $7050256 | $2788431 |

---

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| **Supplemental disclosure of noncash investing and financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Loans to developers transferred to other real estate owned | $4960000 | $4239270 |
| &nbsp;&nbsp;&nbsp;Write-down of loans to developers and limited recourse obligations | 367699 | 544595 |
| &nbsp;&nbsp;&nbsp;Write-down of interest receivable on loans to developers and accrued interest on limited recourse obligations | 751351 | 190897 |
| &nbsp;&nbsp;&nbsp;Noncash exercise of warrants | 52442 |  |
| &nbsp;&nbsp;&nbsp;Cashless vesting of restricted stock | 133325 |  |
| &nbsp;&nbsp;&nbsp;Conversion of convertible notes payable and accrued interest into common stock or Series B convertible preferred stock | 1342580 | 491922 |
| &nbsp;&nbsp;&nbsp;Increase (decrease) in allowance for loan to developers | 2882169 | (195350) |
| &nbsp;&nbsp;&nbsp;Increase (decrease) in allowance for limited recourse obligations | 3727683 | (668296) |

---

*See accompanying notes to condensed consolidated financial statements*

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed 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 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 and Groundfloor Holdings GA, LLC are 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

**Basis of Presentation and Liquidity**

The Company's Consolidated Financial Statements include the results of 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"), along with the amounts related to variable interest entities ("VIEs") for which Groundfloor is the primary beneficiary. The non-controlling interests as of December 31, 2022 represents the outside owner's interest in the Company's consolidated VIE. 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

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.

**Consolidation of Variable Interest Entities**

The determination of whether to consolidate a Variable Interest Entity ("VIE") in which the Company holds a variable interest requires a significant amount of analysis and judgment regarding whether we are the primary beneficiary of the VIE due to our holding a controlling financial interest in the VIE. A controlling financial interest in a VIE exists if we have both the power to direct the VIE's activities that most significantly affect the VIE's economic performance and a potentially significant economic interest in the VIE. The determination of whether an entity is a VIE considers factors, such as (i) whether the entity's equity investment at risk is insufficient to allow the entity to finance its activities without additional subordinated financial support and (ii) whether a holder's equity investment at risk lacks any of the following characteristics of a controlling financial interest: the direct or indirect ability through voting rights or similar rights to make decisions about a legal entity's activities that have a significant effect on the entity's success, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the legal entity. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE.

**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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

**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, 2022, and 2021.

**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 LROs (if issued by Groundfloor Finance Inc.) or Investor Georgia Notes (if issued by Groundfloor GA) 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 LROs and Georgia Notes. LROs are the Company's currently registered securities. Georgia Notes are securities that the Company has issued through its previously registered Georgia-exclusive securities offering, which has since been terminated. Both LROs and Georgia Notes represent similar obligations of the Company.

"Interest income" recorded on "Loans to developers" was $28,234,268 and $15,731,444 for year ended December 31, 2022, and 2021, respectively. Additionally, "Interest expense" incurred on "Limited recourse obligations" was $14,029,886 and $9,728,837 for the year ended December 31, 2022, and 2021, 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, 2022, and 2021. 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 $30,463,000 and $17,834,000, as of December 31, 2022, and 2021, respectively. These funds are netted against gross balances of approximately $169,760,000 and $126,181,000 as of December 31, 2022, and 2021, respectively, on the accompanying Consolidated Balance Sheets.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

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

The Company's obligation to pay principal and interest on an LRO or Georgia Note 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 LROs or Georgia Notes, if applicable, less collection costs incurred by the Company.

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 are presented within "Short-term notes payable" and "Long-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.

**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".

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

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

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.

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 4 – 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 LROs or Georgia Notes, 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 LROs or Georgia Notes. The allowance calculated for Loans is accordingly applied as the reserve for LROs and Georgia Notes.

Refer to Note 4 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. The other real estate owned balance is presented within "Other Current Assets" on the Company's Consolidated Balance Sheet and has a balance of approximately $4,120,000 and $3,01,000 as of December 31, 2022, and 2021, respectively.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

**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 $1,129,000 and $648,000 in expense related to amortization of software development costs for the years ended December 31, 2022, and 2021, 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 |

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**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, 2022, and 2021.

**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, 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.

For the year ended December 31, 2022, offering costs of approximately $78,698 and $157,082 incurred in connection with the issuance of Series B-2 preferred stock and Series B-3 preferred stock, respectively, were deferred and charged against the gross proceeds of the offering in stockholders' equity.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

**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 $3,120,552 and $3,522,000 as of December 31, 2022, and 2021, 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 $3,237,430 and $2,944,000 in advertising costs during the years ended December 31, 2022, and 2021, 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 $456,400 and $411,700 in rent expense for office facilities during the years ended December 31, 2022, and 2021, 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

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

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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. The guidance in these pronouncements was effective for the Company for the year ended December 31, 2022.

During 2022, the Company evaluated the impact of adopting ASC Topic 842, *Leases* ("ASC 842") and determined the impact to be immaterial on the overall consolidated financial results and Consolidated Financial Statements of the Company. As such, we have elected not to apply the recognition requirements under ASC 842 and have not recognized an ROU asset or liability on the Company's Consolidated Balance Sheet as of December 31, 2022. The Company continues to recognize the expense related to this lease on a straight-line basis over the remaining lease term, presented within the Consolidated Statement of Operations at December 31, 2022.

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 adopted ASU 2019-12 on the effective date of January 1, 2022. The amendments were applied on a prospective basis and the adoption did not have a significant impact on the Company's financial results or the Consolidated Financial Statements contained herein.

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.

In March 2022, the FASB issued Accounting Standards Update 2022-02, *Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures*. The amendments in this update eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, *Receivables—Troubled Debt Restructurings by Creditors*, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. For public business entities, the amendments in this update require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, *Financial Instruments—Credit Losses—Measured at Amortized Cost*, or entities that have adopted the amendments in Update 2016-13. The amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact that the implementation of this standard will have on the Company's Consolidated Financial Statements.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

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| | |
|:---|:---|
| **NOTE 3:** | **VARIABLE INTERST ENTITIES** |

---

In November 2021, the Company entered into a limited liability company agreement with two independent third parties, to form a joint venture, Groundfloor Jacksonville, LLC ("Jacksonville JV" or "JV"). The joint venture was formed to scale origination and investor activity in the fix-and-flip/buy-and-hold sector of the Jacksonville, Florida market by increasing the production of existing loan products offered by Groundfloor and its Affiliates and potentially developing new equity products.

On January 1, 2022, the Jacksonville JV commenced operations and the initial cash contributions were received from each the Initial Members of the Jacksonville JV, in proportion to their relative Membership Interest in the JV.

At the time of the initial cash contribution by the Members of the Jacksonville JV, the Company conducted an analysis to determine whether the Jacksonville JV is a VIE, and if a VIE, an evaluation of whether the Company is the primary beneficiary. Under the provisions of *ASC 810, Consolidation*, we have determined that the Jacksonville JV is a VIE and the Company is the primary beneficiary, based on the power to direct the activities that most significantly impact the entity's economic performance. As such, the Company is required to consolidate the assets, liabilities, income and expenses of the Jacksonville JV within the accompanying Condensed Consolidated Financial Statements with a non-controlling interest for the third-party ownership of the joint venture's membership interests.

Accordingly, the Company accounted for the initial consolidation of the joint venture investment in accordance with the provisions of *ASC 805, Business Combinations*. At that time, the fair value of the Jacksonville JV's net assets was $30,000. As such, no gain or loss was recognized by the Company upon initial consolidation as the fair value of the net assets of the Jacksonville JV was equal to the Members initial cash contribution amounts.

The following table presents the assets and liabilities of the Jacksonville JV, included in the Condensed Consolidated Balance Sheet as of December 31, 2022. The assets and liabilities presented below include only the third-party assets and liabilities of the consolidated VIE and excludes any intercompany balances, which were eliminated upon consolidation.

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| | |
|:---|:---|
|  | **December 31,** |
|  | **2022** |
| **Assets:** |  |
| &nbsp;&nbsp;&nbsp;Cash | $301988 |
| &nbsp;&nbsp;&nbsp;Loans to developers | 43624441 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for loans to developers | (729196) |
| &nbsp;&nbsp;&nbsp;Interest receivable on loans to developers | 3040727 |
| &nbsp;&nbsp;&nbsp;Other current assets | 236000 |
| Total assets | $46473960 |
| Liabilities: |  |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | 16595 |
| Total liabilities | $16595 |

---

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

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| | |
|:---|:---|
| **NOTE 4:** | **LOANS TO DEVELOPERS AND ALLOWANCE FOR EXPECTED CREDIT LOSSES** |

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The Company provides financing to Developers 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, with maturities ranging from six to eighteen months.

The following table presents the carrying amount of "Loans to developers, net" by performance state as of December 31, 2022, and 2021, respectively:

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Loan Performance State: |  |  |
| &nbsp;&nbsp;&nbsp;Current | $141405942 | $131203243 |
| &nbsp;&nbsp;&nbsp;Workout | 82872431 | 37190846 |
| &nbsp;&nbsp;&nbsp;Fundamental Default | 16215743 | 8037621 |
| Amortized Cost | $240494116 | $176431710 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses | (6046819) | (3164650) |
| Carrying amount as of December 31 | $234447297 | $173267060 |

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**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 increased from December 31, 2021, to December 31, 2022. The increase is driven by management's historical loss performance and assessment of microeconomic and macroeconomic conditions as of December 31, 2022.

The following tables present analyses of the allowance for credit losses by portfolio segment for the years ended December 31, 2022, and 2021:

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| | |
|:---|:---|
|  | **Balance** |
| Allowance for loan losses, December 31, 2021 | $3164650 |
| Loan allowance charged off | (1046142) |
| Provision for losses | 3928311 |
| Recoveries | - |
| Allowance for loan losses, December 31, 2022 | $6046819 |

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---

| | |
|:---|:---|
|  | **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 |

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**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

**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, 2022:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** |
|  | **2022** | **2021** | **2020** | **2019** | **2018** | **Total** |
| Loan grades: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;A | $2447948 | $2314653 | $- | $147470 | $- | $4910071 |
| &nbsp;&nbsp;&nbsp;B | 18118004 | 4768365 | 554335 | 71880 |  | 23512584 |
| &nbsp;&nbsp;&nbsp;C | 98564962 | 42869379 | 987227 | 1101636 | 1613325 | 145136530 |
| &nbsp;&nbsp;&nbsp;D | 47388678 | 8732696 | 965420 | 114902 | 79642 | 57281338 |
| &nbsp;&nbsp;&nbsp;E | 7358108 | 2162509 |  | 132976 |  | 9653593 |
| &nbsp;&nbsp;&nbsp;F |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;G | - | - | - | - | - | - |
| Amortized Cost | $173877700 | $60847602 | $2506982 | $1568864 | $1692967 | $240494116 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses |  |  |  |  |  | (6046819) |
| Carrying Amount as of December 31, 2022 |  |  |  |  |  | $234447297 |

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**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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

*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 LROs or Georgia Notes.

All credit quality indicators were updated as of December 31, 2022.

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, 2022:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | |
|  | **2022** | **2021** | **2020** | **2019** | **2018** |<br>**Total** |
| Loan performance state: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $137395704 | $4010238 | $- | $- | $- | $141405942 |
| &nbsp;&nbsp;&nbsp;Workout | 36481996 | 44828887 | 1516547 |  |  | 82872431 |
| &nbsp;&nbsp;&nbsp;Fundamental Default | - | 12008477 | 945435 | 1568864 | 1692967 | 16215743 |
| Amortized Cost | $173877700 | $60847602 | $2506982 | $1568864 | $1692967 | $240494116 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses |  |  |  |  |  | (6046819) |
| Carrying Amount as of December 31, 2022 |  |  |  |  |  | $234447297 |

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**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, 2022, the Company placed Loans of approximately $35,673,000 recorded to "Loans to developers" on nonaccrual status. The Company has written off approximately $635,000 of interest receivable in the current period.

The following table presents an aging analysis of past due Loans as of December 31, 2022, and 2021:

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| | | | |
|:---|:---|:---|:---|
|  | **Amortized<br> Cost** | **Allowance for<br> Loan Losses** | **Loans to<br> Developers, Net** |
| Aging schedule: |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $143472561 | $1455837 | $142016724 |
| &nbsp;&nbsp;&nbsp;Less than 90 days past due | 41160208 | 812196 | 40348012 |
| &nbsp;&nbsp;&nbsp;More than 90 days past due | 55861347 | 3778786 | 52082561 |
| Total as of December 31, 2022 | $240494116 | $6046819 | $234447297 |

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---

| | | | |
|:---|:---|:---|:---|
|  | **Amortized<br> Cost** | **Allowance for<br> Loan Losses** | **Loans to<br> Developers, 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 |

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**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

The following is a summary of information pertaining to nonaccrual loans as of December 31, 2022:

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| | |
|:---|:---|
|  | **Balance** |
| Nonaccrual loans | $35672783 |
| Interest income recognized on nonaccrual loans | $5714335 |

---

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

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

---

---

| | |
|:---|:---|
| **NOTE 5:** | **OTHER CURRENT ASSETS** |

---

"Other current assets" as of December 31, 2022, and 2021, consists of the following:

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| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Other real estate owned (1) | $4120463 | $3001421 |
| Due from related party (2) | 285300 | 318988 |
| Other | 1098172 | 259828 |
| Other current assets | $5503935 | $3580237 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) During the year ended December 31, 2022, the Company transferred $4,960,000 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 $1,150,000 to "Loans to developers" and an
offsetting decrease to "Limited recourse obligations".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Loan and accrued interest receivable from related parties. Refer to Note 12 – Related Party Transactions.

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| | |
|:---|:---|
| **NOTE 6:** | **PROPERTY, EQUIPMENT, SOFTWARE, WEBSITE AND INTANGIBLE ASSETS, NET** |

---

"Property, equipment, software, website development costs, and intangible assets, net" at December 31, 2022 and 2021, consists of the following:

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| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Software and website development costs | $6349726 | $3681563 |
| Computer equipment | 169645 | 169645 |
| Leasehold improvements | 29942 | 29942 |
| Furniture and fixtures | 212251 | 212251 |
| Office equipment | 44748 | 44747 |
| Domain names | 30000 | 30000 |
| Total property, equipment, software, website and intangible assets | 6836312 | 4168148 |
| Less: accumulated depreciation and amortization | (3749522) | (2522531) |
| Property, equipment, software, website and intangible assets, net | $3086790 | $1645617 |

---

Depreciation and amortization expense on "Property, equipment, intangible assets, software, and website development costs, net" for the years ended December 31, 2022, and 2021 was approximately $1,226,991 and $732,000, 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

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| | |
|:---|:---|
| **NOTE 7:** | **ACCOUNTS PAYABLE AND ACCRUED EXPENSES** |

---

"Accounts payable and accrued expenses" at December 31, 2022 and 2021, consists of the following:

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| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Deferred loan origination fees | $3120552 | $3522017 |
| Accrued interest expense (1) | 534771 | 123643 |
| Trade accounts payable | 557751 | 1103984 |
| Accrued employee compensation | 107626 | 383315 |
| Other | 14834 | 14870 |
| Accounts payable and accrued expenses | $4335534 | $5147829 |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) "Accrued interest expense"
 includes interest related to corporate debt instruments as described in Note 8.

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| | |
|:---|:---|
| **NOTE 8:** | **DEBT** |

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**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 year ended December 31, 2021, respectively, approximately $126,386 was amortized to "Interest expense on corporate debt instruments" in the Consolidated Statements of Operations.

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 shares 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

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 on the 2019 Subordinated Convertible Notes, net of an unamortized discount of approximately $0, was outstanding as of December 31, 2021. 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 as of December 31, 2021. The interest expense related to the 2019 Subordinated Convertible Notes for the year ended December 31, 2021, was $208,000 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. 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 years ended December 31, 2022, and 2021, respectively, approximately $348,147 and $64,700 was amortized to "Interest expense on corporate debt instruments" in the Consolidated Statements of Operations.

In 2022, certain holders of 2021 Subordinated Convertible Notes converted their holdings into common stock. Pursuant to these terms, Noteholders converted $1,261,170 in principal and approximately $81,410 in accrued interest into 48,394 shares of common stock at a conversion price of $27.74, a 10% discount to the per share price of common stock at the time of conversion.

Principal of $3,738,830 and $5,000,000 on the 2021 Convertible Notes, net of an unamortized discount of approximately $142,636 and $490,783 was outstanding as of December 31, 2022, and 2021, respectively. Accrued interest on the 2021 Subordinated Convertible Notes, presented within "Accounts payable and accrued expenses" in the Company's Consolidated Balance Sheets, was approximately $534,771 and $123,600 as of December 31, 2022, and 2021, respectively. The related interest expense of $492,537 and $123,600 is included within "Interest expense on corporate debt instruments" for the years ended December 31, 2022, and 2021, respectively.

**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 FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

**GROUNDFLOOR Notes**

During the years ended December 31, 2022, and 2021, 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 2 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 2 LLC, subject to certain exceptions.

During the years ended December 31, 2022, and 2021, respectively, there were 97 and 69 notes entered into with stated interest rates ranging from 2.0% to 14.0% and with terms ranging from 30 days to 24 months. The principal sum of $43,135,300 and $46,096,000 remains outstanding as of December 31, 2022, and 2021, respectively, and is presented in "Short-term notes payable" on the Company's Consolidated Balance Sheets. The principal sum of $22,325,700 and $0 remains outstanding as of December 31, 2022, and 2021, respectively, and is presented in "Long-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 $4,507,391 and $2,167,211 for the years ended December 31, 2022, and 2021, respectively. Accrued interest on the GROUNDFLOOR Notes, presented within "Accrued interest on limited recourse obligations" in the Company's Consolidated Balance Sheets, was approximately $65,400 and $352,100 at December 31, 2022 and 2021, respectively.

**Stairs Notes**

During the years ended December 31, 2022, and 2021, the Company entered into various secured promissory notes, (the "Stairs Notes"), with Investors. 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 originate, buy, and service loans for the purpose of building, buying, or rehabilitating single family and multifamily structures, or buying land, for commercial purposes. As collateral security for Stairs Notes, the Company granted first priority security interest in all the loan assets of its wholly owned subsidiary, Groundfloor Yield LLC, subject to certain exceptions.

During the years ended December 31, 2022, and 2021, there were a total of 1,017 and 368 notes, respectively, entered into, each with a stated interest rate of 4-6% and term of 5 days. The principal sum of $44,325,580 and $20,985,800 remained outstanding as of December 31, 2022, and 2021, respectively, and is presented in "Short-term notes payable" on the Company's Consolidated Balance Sheets.

Interest paid to Stairs investors totaled $2,064,918 and $142,500 for the years ended December 31, 2022 and 2021, respectively and is presented within "Interest expense" on the Company's Consolidated Statement of Operations.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

**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 at 2021, 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. In May 2022, the Company received notice that our request for forgiveness was approved, and our Second PPP Loan principal and interest were deemed paid in full. Upon the forgiveness of our obligations of the Second PPP Loan promissory note, a gain was recognized of $829,000 in "Other income (expense)" on the Consolidated Statement of Operations for the year ended December 31, 2022.

The Company's Second PPP Loan balance, presented within "Short-term notes payable" in the Company's Consolidated Balance Sheets, was $0 and $829,000 as of December 31, 2022, and 2021, respectively.

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| | |
|:---|:---|
| **NOTE 9:** | **STOCKHOLDERS' Equity (Deficit)** |

---

**Capital Structure**

***Authorized Shares*** - As of December 31, 2022, the Company is authorized to issue 30,000,000 shares of no par value common stock and 20,000,000 shares of no par value preferred stock. The preferred stock has been designated as Series B-2 Preferred Stock (the "Series B-2), consisting of 243,348 shares, Series A Preferred Stock (the "Series A"), consisting of 747,373 shares, Series B Preferred Stock (the "Series B"), consisting of 441,940 shares, Series Seed Preferred Stock (the "Series Seed"), consisting of 568,796 shares, Series B-3 Preferred Stock (the "Series B-3"), consisting of 230,000 shares, (collectively, "Preferred Stock").

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

**Common Stock Transactions**

In 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 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 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 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.

In 2022, the third-party investor, in conjunction with the purchase of shares of the Company's newly issued Series B-2 Preferred Stock, executed an additional purchase of 60,765 shares of the Company's common stock through direct, secondary transfer of shares owned by existing shareholders. Accordingly, the common stock transfers between existing shareholders and the third-party investor did not result in any cash proceeds received or issuance costs incurred by the Company. As such, the transfer of shares between the existing shareholders and third-party investor resulted in no impact to the Company's gross capitalization at December 31, 2022.

In 2022, 14,758 shares of Series Seed were converted to common stock.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

In 2022, 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 "2022 Common Stock Offering"). Participation in the 2022 Common Stock Offering was limited to existing shareholders. The Company offered shares of common stock at $30.82 per share. As a result of the offering, the Company received gross proceeds of approximately $1,531,724 in exchange for the issuance of 49,700 shares of common stock.

**Preferred Stock Transactions**

***Series B-2***

In 2022, the Company received gross proceeds of $5,833,262 in exchange for the issuance of 396,724 shares of Series B-2 Preferred Stock ("Series B-2 Preferred Stock"), presented net of offering costs of $78,698 in the Consolidated Balance Sheets as a component of stockholders' equity.

***Series B***

In 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 8.

***Series A***

In 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-3***

In 2022, the Company launched an offering of 230,000 shares of Series B-3 Preferred Stock at $43.90 per share ("Series B-3 Preferred Stock Offering"). Since the launch of the offering, the Company has offered its Series B-3 Preferred Stock on a continuous basis directly the online platform utilized by Wefunder Portal LLC located at <u>www.wefunder.com</u>, to both accredited and non-accredited investors.

The offering closed November 2022. As a result of the offering, the Company has, as of December 31, 2022, received gross proceeds of approximately $2,294,402 in exchange for the issuance of 52,265 shares of Series B-3 Preferred Stock, presented net of offering costs of $157,082 in the Consolidated Balance Sheets as a component of stockholders' equity.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

The following is a summary of the rights and privileges of the Preferred Stockholders as of December 31, 2022, and 2021.

***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 B-2 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 Series B, Series A, Series Seed, Series B-3 or common stock, an amount per share equal to the greater of: i) the Series A original issue price of $30.82 per share, plus any dividends declared but unpaid, and ii) such amount per share as would have been payable had all shares of Series B-2 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 B-2 the full amount to which they shall be entitled, then all of the available assets shall be distributed to the holders of the Series B-2 pro rata in accordance with their ownership thereof.

After payment in full of the Series B-2 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 B 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 B the full amount to which they shall be entitled, then all of the available assets shall be distributed to the holders of the Series B pro rata in accordance with their ownership thereof.

After payment in full of the Series B preference amount, the Series A stockholders are entitled to a liquidation preference equal to the greater of: i) the Series A original issue price of $6.69 per share, plus any dividends declared but unpaid, or 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.

After payment in full of the Series Seed preference amount, the Series B-3 stockholders are entitled to a liquidation preference equal to the greater of: i) the Series B-3 original issue price of $43.90 per share, plus any dividends declared but unpaid, or ii) such amount per share as would have been payable had all shares of Series B-3 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 B-3 the full amount to which they shall be entitled, then all of the available assets shall be distributed to the holders of the Series B-3 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

***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 B-2, Series B, Series A, Series Seed, and Series B-3 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 B-2, Series B, Series A, Series Seed, and Series B-3 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.

---

| | |
|:---|:---|
| **NOTE 10:** | **stock options and warrants** |

---

**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 950,000 shares of common stock for issuance under the Plan. Of these shares, 183,987 shares are available for future stock option grants as of December 31, 2022.

In January 2022, the Company amended 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.

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.

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, 2022, and 2021.

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

---

| | | |
|:---|:---|:---|
| **For the Year Ended December 31, 2022** | **Non-<br> Employees** | **Employees** |
| Estimated dividend yield | -% | -% |
| Expected stock price volatility | 55.0% | 50.0% |
| Risk-free interest rate | 1.8 – 2.7% | 1.7 – 4.3% |
| Expected life of options (in years) | 10.0 | 6.25 |
| Weighted-average fair value per share | $18.99 | $14.89 |

---

---

| | | |
|:---|:---|:---|
| **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 |

---

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

The following summarizes the stock option activity for the years ended December 31, 2022, and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **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, 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 |  |  |
| Exercised | (1967) | 12.76 |  |  |
| Terminated | (56738) | 26.62 |  |  |
| Granted | 371234 | 22.55 |  |  |
| Outstanding as of December 31, 2022 | 729465 | $15.13 | 7.1 | $20985000 |
| Exercisable as of December 31, 2022 | 439806 | 10.77 | 5.7 | 14569000 |
| Expected to vest after December 31, 2022 | 289659 | $21.77 | 9.1 | $6363000 |

---

The following table summarizes certain information about all stock options outstanding as of December 31, 2022:

---

| | | | |
|:---|:---|:---|:---|
| **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 | 1 | 64000 |
| 1.87 | 36000 | 2.6 | 36000 |
| 2.40 | 68367 | 4.3 | 68367 |
| 3.99 | 10000 | 1.8 | 10000 |
| 10.00 | 19975 | 5.6 | 19725 |
| 12.00 | 32251 | 6 | 32251 |
| 15.00 | 25437 | 6.6 | 22469 |
| 17.50 | 83839 | 7.9 | 70569 |
| 19.20 | 334544 | 9 | 113584 |
| 30.82 | 42802 | 9.5 | 2841 |
| 43.90 | 12500 | 9.9 | - |
|  | 729465 |  | 439806 |

---

As of December 31, 2022, there was approximately $1,341,400 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 2.0 years. The total intrinsic value of stock option awards exercised was approximately $59,012 during the fiscal year ended December 31, 2022.

The Company recorded approximately $46,050 and $32,200 in non-employee and $470,587 and $372,300 in employee share-based compensation expense during 2022 and 2021, respectively**.**

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

**Performance-Based Grants**

During 2021, the Company granted performance-based awards to employees that entitled the recipients to earn up to 162,500 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. As of December 31, 2022, there are 54,200 eligible performance-based awards, which are expected to be exercised by management and are included as granted in the option activity table above.

The grant date fair value of the options was calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $19.20 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 1.24%, (iv) a weighted average estimated term of 6.01 years, (v) volatility of 50%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $502,800, or $9.28 per option.

Compensation expense of $170,100 and $29,700 was recognized for performance awards granted in 2022 and 2021, respectively. The total unrecognized compensation cost related to performance awards was $303,000 and $473,100 at December 31, 2022, and 2021, respectively, and the weighted-average period over which this expense will be recognized is 2.5 years.

**Equity Incentive Plan**

In February 2022, the Company issued stock options to certain employees, which contained an early-exercise provision, whereby the options were exercisable immediately by the holder upon issuance. Pursuant to the terms of the stock-option agreement, certain of the employees elected to participate in the early exercise option to purchase shares of the Company's common stock. The Company issued 224,000 shares of common stock, at a per share price of $19.20, to the employees who elected to participate in the early exercise.

Shares of common stock issued upon the early exercise of options are not considered outstanding, for accounting purposes, as the grantee is not yet entitled to the rewards of share ownership. As such, the shares of common stock resulting from the early exercise are not shown as outstanding on the face of the Company's Consolidated Balance Sheet and are excluded from earnings (loss) per share until the satisfaction of the vesting conditions have been met.

The shares of common stock were purchased by each employee in exchange for a promissory note (the "Note"), which accrues interest at the rate of 1.4% per annum and is partially collateralized by the assets of the employee (the notes are 50% recourse and 50% non-recourse). Although the promissory note was issued as partially recourse, the Note must be accounted for as non-recourse in its entirety as the recourse provisions of the Note are not aligned with a corresponding percentage of the underlying shares.

Accordingly, the Company has accounted for the combination of the issuance of promissory notes to employees in exchange for shares of common stock as a stock option for accounting purposes, as the substance is similar to the grant of an option. While the shares of common stock purchased by the employees in exchange for a promissory note are considered legally issued, the shares are not deemed, for accounting purposes, outstanding until all of the options are fully vested and the outstanding principal and accrued interest due on the note is repaid in full.

The grant date fair value of the options was calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $19.20 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 1.68%, (iv) a weighted average estimated term of 6.04 years, (v) volatility of 50%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $2,270,000, or $9.38 per option.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

During the year ended December 31, 2022, 96,665 of the outstanding shares vested and the Company recognized approximately $623,600 of stock-based compensation expense related to the early exercise of these options.

At December 31, 2022, the unrecognized stock-based compensation cost related to the unvested shares was approximately $1,474,500, which will be recognized over a weighted-average remaining vesting period of 2.2 years.

**Restricted Stock**

In October 2021, an employee purchased 34,720 shares of common stock (the "Restricted 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 Restricted Stock 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 0.86% 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.

During the year-ended December 31, 2021, the grant date fair value of the Restricted Stock was calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $19.20 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 1.2%, (iv) a weighted average estimated term of 6.25 years, (v) volatility of 50%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $325,700, or $9.38 per option.

During the year-ended December 31, 2022, 8,680 shares of Restricted Stock vested and $133,333 of the Promissory Note was forgiven. The forgiveness of the Promissory Note resulted in a fair value remeasurement of the Restricted Stock issuance.

At remeasurement the grant date fair value of the Restricted Stock was calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $43.90 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 4.2%, (iv) a weighted average estimated term of 5.5 years, (v) volatility of 50%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $872,200, or $31.40 per option.

Compensation expense of $184,500 and $13,600 was recognized for Restricted Stock awards during the years ended December 31, 2022, and 2021, respectively. The total unrecognized compensation cost related to Restricted Stock awards was $832,800 at December 31, 2022 and the weighted-average period over which this expense will be recognized is 1.3 years.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

**Warrants**

The Company has 62,324 and 45,550 warrants issued and outstanding, for the purchase of common stock, at December 31, 2022 and 2021, respectively. The Company recognized expense of approximately $971,000 and $0 related to amortization of warrant discounts for the years ended December 31, 2022, and 2021, respectively.

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.

In January 2022, in conjunction with the Series B-2 Preferred stock issuance, the Company issued warrants to purchase 30,000 shares of the Company's common stock at an exercise price of $19.20 per share. The warrants were exercisable immediately at $19.20 with a contractual term of fifteen years. The fair value of the warrants were calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $19.20 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 1.93%, (iv) an estimated term of 15 years, (v) volatility of 55%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $433,705, or $14.46 per warrant.

In April 2022, the Company issued warrants to purchase 21,000 shares of the Company's common stock at an exercise price of $19.20 per share. The warrants were exercisable immediately at $19.20 with a contractual term of fifteen years. The fair value of the warrants was calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $30.82 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 1.93%, (iv) an estimated term of 15 years, (v) volatility of 55%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $537,298, or $25.59 per warrant.

In February 2022, 30,300 outstanding warrants from the Company's warrants were exercised for the purchase of common stock at a price of $2.71 per share as a noncash exercise. This conversion is presented as an increase to "Common Stock" as of December 31, 2022.

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| | |
|:---|:---|
| **NOTE 11:** | **INCOME TAXES** |

---

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, 2022.

For tax years beginning on or after January 1, 2022, the Tax Act eliminates the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and 15 years for research activities performed outside the United States pursuant to Section 174 of the Code. For the year ended December 31, 2022, the Company has capitalized $4.67 million of research and development expenses. This has resulted in an increase in the DTA associated with capitalized research and development expense by $1.08 million as of December 31, 2022.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

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, 2022, and 2021, are as follows:

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| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Deferred income tax assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Net operating loss carryforwards | $7465000 | $6951000 |
| &nbsp;&nbsp;&nbsp;Capitalized research and development expense | 1076000 |  |
| &nbsp;&nbsp;&nbsp;Share-based compensation | 613000 | 154000 |
| &nbsp;&nbsp;&nbsp;Research and development credit carryforward | 439000 | 256000 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 38000 | 38000 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 28000 | 98000 |
| &nbsp;&nbsp;&nbsp;Valuation allowance | (9659000) | (7497000) |
|  | $- | $- |

---

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 $2,162,000 and $859,000, respectively, during the years ended December 31, 2022, and 2021.

As of December 31, 2022, the Company has federal and state net operating loss carryforwards of approximately $29,683,000 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 2022 and 2021 as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **2022** | **2022** | **2021** | **2021** |
|  | **Amount** | **% of Pre-Tax<br> Earnings** | **Amount** | **% of Pre-Tax<br> Earnings** |
| Income tax expense (benefit) at statutory rate | $(1128000) | (21.0)% | $(829000) | (21.0)% |
| State taxes (net of federal benefit) | (246000) | (4.6)% | (184000) | (4.7)% |
| Non-taxable income | (174000) | (3.2)% | (174000) | (4.4) |
| Non-deductible expenses | 177000 | 3.3% | 447000 | 11.3% |
| True-up adjustment for deferred items | (791000) | (14.7)% | (119000) | (3.0)% |
| Change in valuation allowance | 2162000 | 40.3% | 859000 | 21.8% |
| 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, 2022, and 2021, the Company had no accrual related to uncertain tax positions.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Condensed Consolidated Financial Statements

---

| | |
|:---|:---|
| **NOTE 12:** | **RELATED PARTY TRANSACTIONS** |

---

**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, 2022, and 2021, 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 $285,300 and $318,000, 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, and the related party loan receivable and accrued interest balance was repaid in full by the employee as of December 31, 2021.

---

| | |
|:---|:---|
| **NOTE 13:** | **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 $442,200 and $411,000 as a component of "General and administrative" in the Consolidated Statements of Operations for the years ended December 31, 2022, and 2021, respectively.

As of December 31, 2022, the approximate amounts of the annual future minimum lease payments under noncancelable operating leases obligations are as follows:

---

| | |
|:---|:---|
|  | **Balance** |
| Years ending December 31, |  |
| &nbsp;&nbsp;&nbsp;2023 | $445679 |
| &nbsp;&nbsp;&nbsp;2024 | 151754 |
| &nbsp;&nbsp;&nbsp;2025 |  |
| &nbsp;&nbsp;&nbsp;2026 | - |
|  | $597433 |

---

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 14:** | **SUBSEQUENT EVENTS** |

---

Subsequent events were evaluated through March 6, 2023, the date the Consolidated Financial Statements were available to be issued. Based on this evaluation, it was determined that subsequent events have occurred that require disclosure in the consolidated financial statements.

In February 2023, the Company commenced an offering of Common Stock to existing shareholders via the Groundfloor platform. Pursuant to this offering, from February 15, 2023, through the issuance date of these consolidated financial statements, the Company has received gross proceeds of $532,946 in exchange for the issuance of 12,140 shares of the Company's Common Stock.

**GROUNDFLOOR FINANCE INC. <br> AND SUBSIDIARIES**

**Consolidated Financial Statements**

**December 31, 2022 and 2021**

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

**Table of Contents**

December 31, 2022 and 2021

---

| | |
|:---|:---|
| **Consolidated Financial Statements** |  |
| [**Inde** **pendent Auditors' Report**](#Kalai_004) | [F-3](#Kalai_004) |
| [Consolidated Balance Sheets](#Kalai_005) | [F-5](#Kalai_005) |
| [Consolidated Statements of Operations](#PR_013) | [F-6](#PR_013) |
| [Consolidated Statements of Stockholders' Equity (Deficit)](#PR_014) | [F-7](#PR_014) |
| [Consolidated Statements of Cash Flows](#PR_015) | [F-8](#PR_015) |
| [Notes to Consolidated Financial Statements](#PR_016) | [F-9](#PR_016) |

---

![](tm2310287d1_img001.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, 2022 and 2021 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, 2022 and 2021, 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 audits 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.

![](tm2310287d1_img002.jpg)

Atlanta, Georgia

March 6, 2023

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Consolidated Balance Sheets

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **December 31, 2022** | **December 31** |
| **Assets** | | |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;Cash <sup>(1)</sup> | $4466138 | $2641950 |
| &nbsp;&nbsp;&nbsp;Loans to developers <sup>(1)</sup> | 240494116 | 176431710 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for loans to developers <sup>(1)</sup> | (6046819) | (3164650) |
| &nbsp;&nbsp;&nbsp;Interest receivable on loans to developers <sup>(1)</sup> | 21646364 | 11790202 |
| &nbsp;&nbsp;&nbsp;Other current assets | 5503935 | 3580237 |
| Total current assets | 266063734 | 191279449 |
| &nbsp;&nbsp;&nbsp;Property, equipment, software, website, and intangible assets, net | 3086790 | 1645617 |
| &nbsp;&nbsp;&nbsp;Other assets | 71302 | 71302 |
| Total assets | $269221826 | $192996368 |
| **Liabilities and Stockholders' Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses <sup>(1)</sup> | $4335534 | $5147829 |
| &nbsp;&nbsp;&nbsp;Limited recourse obligations | 139296385 | 111982315 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for limited recourse obligations | (7363829) | (3636146) |
| &nbsp;&nbsp;&nbsp;Accrued interest on limited recourse obligations | 10068526 | 6943896 |
| &nbsp;&nbsp;&nbsp;Short-term notes payable | 87460880 | 67911273 |
| &nbsp;&nbsp;&nbsp;Convertible notes, net of discount of $142,636 and $490,783 | 3596195 | 4509217 |
| Total current liabilities | 237393691 | 192858384 |
| &nbsp;&nbsp;&nbsp;Long-term notes payable | 22325700 |  |
| &nbsp;&nbsp;&nbsp;Other liabilities | 23857 | 134865 |
| Total liabilities | 259743248 | 192993249 |
| Commitments and contingencies (See Note 13) |  |  |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;Series B-2 convertible preferred stock, no par, 243,348 shares designated, 189,270 shares issued and outstanding (liquidation preference of $5,833,301) | 5754564 |  |
| &nbsp;&nbsp;&nbsp;Series B convertible preferred stock, no par, 441,940 shares designated, 441,940 shares issued and outstanding (liquidation preference of $8,056,566) | 7429483 | 7429483 |
| &nbsp;&nbsp;&nbsp;Series A convertible preferred stock, no par, 747,373 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, 568,796 shares designated, 554,038 shares issued and outstanding (liquidation preference of $2,883,678) | 2537150 | 2609091 |
| &nbsp;&nbsp;&nbsp;Series B-3 convertible preferred stock, no par, 230,000 shares designated, 52,265 shares issued and outstanding (liquidation preference of $2,294,434) | 2137320 |  |
| &nbsp;&nbsp;&nbsp;Common stock, no par, 30,000,000 shares authorized, 2,345,402 issued and outstanding | 14867107 | 11895593 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 5776928 | 3310258 |
| &nbsp;&nbsp;&nbsp;Accumulated deficit | (35574099) | (30203181) |
| &nbsp;&nbsp;&nbsp;Stock subscription receivable | (560) | (560) |
| &nbsp;&nbsp;&nbsp;Company's stockholders' equity | 7890328 | 3119 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Non-controlling interest in consolidated variable interest entities | 1588250 | - |
| Total stockholders' equity | 9478578 | 3119 |
| Total liabilities and stockholders' equity | $269221826 | $192996368 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Includes amounts of the consolidated variable interest entity (VIE),
 presented separately in Note 3 below.

*See accompanying notes to consolidated financial statements*

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Consolidated Statements of Operations

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Non-interest revenue: |  |  |
| &nbsp;&nbsp;&nbsp;Origination fees | $11162166 | $4769504 |
| &nbsp;&nbsp;&nbsp;Loan servicing revenue | 3200879 | 2887096 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest revenue | 14363045 | 7656600 |
| Net interest income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest income | 28234268 | 15731444 |
| &nbsp;&nbsp;&nbsp;Interest expense | (20804590) | (12167945) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 7429678 | 3563499 |
| Revenue | 21792723 | 11220099 |
| &nbsp;&nbsp;&nbsp;Cost of revenue | (2040488) | (1363150) |
| Gross profit | 19752235 | 9856949 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;General and administrative | 9181673 | 4417525 |
| &nbsp;&nbsp;&nbsp;Sales and customer support | 4487185 | 3404287 |
| &nbsp;&nbsp;&nbsp;Development | 4282870 | 1638327 |
| &nbsp;&nbsp;&nbsp;Regulatory | 674149 | 378911 |
| &nbsp;&nbsp;&nbsp;Marketing and promotions | 4915342 | 4251831 |
| &nbsp;&nbsp;&nbsp;Total operating expenses | 23541219 | 14090881 |
| Loss from operations | (3788984) | (4233932) |
| Other (expense) income: |  |  |
| &nbsp;&nbsp;&nbsp;Interest expense on corporate debt instruments | (840684) | (543942) |
| &nbsp;&nbsp;&nbsp;Gain on loan extinguishment | 829000 | 829100 |
| Total other (expense) income, net | (11684) | 285158 |
| Net loss | (3800668) | (3948774) |
| Less: Net income attributable to non-controlling interest in consolidation VIE | 1570250 | - |
| Net loss attributable to Groundfloor Finance, Inc. | $(5370918) | $(3948774) |

---

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Consolidated Statements of Stockholders' (Deficit) Equity

---

| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Convertible | Convertible | Convertible | Convertible | Convertible | Convertible | Convertible | Convertible | Convertible | Convertible |
|  | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock | Preferred Stock |
|  | Series B-2 | Series B-2 | Series A | Series A | Series B | Series B | Series Seed | Series Seed | Series B-3 | Series B-3 |
|  | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount |
| Stockholders' equity (deficit) as of December 31, 2020 |  | $- | 747373 | $4962435 | 188036 | $3145092 | 568796 | $2609091 |  | $- |
| Issuance of Series B preferred shares, net of offering costs |  |  |  |  | 236976 | 3975794 |  |  |  |  |
| Conversion of convertible notes |  |  |  |  | 16928 | 308597 |  |  |  |  |
| Exercise of stock options |  |  |  |  |  |  |  |  |  |  |
| Share-based compensation expense |  |  |  |  |  |  |  |  |  |  |
| Conversion of Warrants |  |  |  |  |  |  |  |  |  |  |
| Beneficial conversion feature |  |  |  |  |  |  |  |  |  |  |
| Net loss | - | - | - | - | - | - | - | - | - | - |
| Stockholders' equity as of December 31, 2021 | - | $- | 747373 | $4962435 | 441940 | $7429483 | 568796 | $2609091 | - | $- |
| Issuance of Series B-2 preferred shares, net of offering costs | 189270 | 5754564 |  |  |  |  |  |  |  |  |
| Issuance of Series B-3 preferred shares, net of offering costs |  |  |  |  |  |  |  |  | 52265 | 2137320 |
| Issuance in the 2022 Common Stock Offering, net of offering costs |  |  |  |  |  |  |  |  |  |  |
| Conversion of convertible notes |  |  |  |  |  |  |  |  |  |  |
| Exercise of stock options and warrants |  |  |  |  |  |  |  |  |  |  |
| Conversion of Series Seed Shares to Common Stock |  |  |  |  |  |  | (14758) | (71941) |  |  |
| Issuance of restricted stock units |  |  |  |  |  |  |  |  |  |  |
| Share-based compensation expense |  |  |  |  |  |  |  |  |  |  |
| Increase in non-controlling interest related to initial consolidation of VIE |  |  |  |  |  |  |  |  |  |  |
| Net loss | - | - | - | - | - | - | - | - | - | - |
| Stockholders' equity as of December 31, 2022 | 189270 | $5754564 | 747373 | $4962435 | 441940 | $7429483 | 554038 | $2537150 | 52265 | $2137320 |

---

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | Common Stock | Common Stock | | | | | | |
|  | Shares | Amount |<br>Additional<br>Paid-in<br>Capital |<br>Accumulated<br>Deficit |<br>Stock<br>Subscription<br>Receivable | Company<br>Stockholders'<br>Equity<br>(Deficit) | Non-Controlling<br>Interest in<br>Consolidated<br>VIE | Total<br>Stockholders'<br>Equity<br>(Deficit) |
| Stockholders' equity (deficit) as of December 31, 2020 | 2165923 | $11596087 | $2336551 | $(26254407) | $(560) | $(1605711) | $- | $(1605711) |
| Issuance of Series B preferred shares, net of offering costs |  |  |  |  |  | 3975794 |  | 3975794 |
| Conversion of convertible notes | 11222 | 183325 |  |  |  | 491922 |  | 491922 |
| Exercise of stock options | 7825 | 68180 |  |  |  | 68180 |  | 68180 |
| Share-based compensation expense |  |  | 418151 |  |  | 418151 |  | 418151 |
| Conversion of Warrants | 7175 | 48001 |  |  |  | 48001 |  | 48001 |
| Beneficial conversion feature |  |  | 555556 |  |  | 555556 |  | 555556 |
| Net loss | - | - | - | (3948774) | - | (3948774) | - | (3948774) |
| Stockholders' equity as of December 31, 2021 | 2192145 | $11895593 | $3310258 | $(30203181) | $(560) | $3119 | $- | $3119 |
| Issuance of Series B-2 preferred shares, net of offering costs |  |  |  |  |  | 5754564 |  | 5754564 |
| Issuance of Series B-3 preferred shares, net of offering costs |  |  |  |  |  | 2137320 |  | 2137320 |
| Issuance in the 2022 Common Stock Offering, net of offering costs | 49700 | 1531754 |  |  |  | 1531754 |  | 1531754 |
| Conversion of convertible notes | 48394 | 1342579 |  |  |  | 1342579 |  | 1342579 |
| Exercise of stock options and warrants | 33461 | 25240 |  |  |  | 25240 |  | 25240 |
| Conversion of Series Seed Shares to Common Stock | 14758 | 71941 |  |  |  |  |  |  |
| Issuance of restricted stock units | 6944 |  |  |  |  |  |  |  |
| Share-based compensation expense |  |  | 2466670 |  |  | 2466670 |  | 2466670 |
| Increase in non-controlling interest related to initial consolidation of VIE |  |  |  |  |  |  | 18000 | 18000 |
| Net loss | - | - | - | (5370918) | - | (5370918) | 1570250 | (3800668) |
| Stockholders' equity as of December 31, 2022 | 2345402 | $14867107 | $5776928 | $(35574099) | $(560) | $7890328 | $1588250 | $9478578 |

---

*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,** |
|  | **2022** | **2021** |
| **Cash flows from operating activities** |  |  |
| Net loss | $(3800668) | $(3948774) |
| Adjustments to reconcile net loss to net cash flows from operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 1226991 | 760380 |
| &nbsp;&nbsp;&nbsp;Share-based compensation | 2466670 | 418151 |
| &nbsp;&nbsp;&nbsp;Noncash interest expense | 348147 | 191125 |
| &nbsp;&nbsp;&nbsp;(Gain) Loss on sale of real estate owned |  | (96000) |
| &nbsp;&nbsp;&nbsp;Origination of loans held for sale |  | (3201856) |
| &nbsp;&nbsp;&nbsp;Proceeds from sales of loans held for sale |  | 5524200 |
| &nbsp;&nbsp;&nbsp;Gain on forgiveness of PPP loan | (829000) | (829100) |
| Changes in operating assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Other assets | (838287) | (719370) |
| &nbsp;&nbsp;&nbsp;Interest receivable on loans to developers | (9856162) | (8244747) |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | (841892) | 2954208 |
| &nbsp;&nbsp;&nbsp;Accrued interest on limited recourse obligations | 3124630 | 4111912 |
| Net cash flows from operating activities | (8999571) | (3079871) |
| **Cash flows from investing activities** |  |  |
| Loan payments to developers | (266090771) | (198289297) |
| Repayments of loans from developers | 197068620 | 81885591 |
| Proceeds from sale of properties held for sale | 2995188 | 3767091 |
| Payments of software and website development costs | (2668163) | (1247488) |
| Purchases of computer equipment and furniture and fixtures |  | (101933) |
| Other investing activities | 21630 | 155040 |
| Cash received from initial consolidation of VIE | 30000 | - |
| Net cash flows from investing activities | (68643496) | (113830996) |
| **Cash flows from financing activities** |  |  |
| Proceeds from limited recourse obligations | 187412229 | 142331517 |
| Repayments of limited recourse obligations | (160098160) | (79937095) |
| Proceeds from GROUNDFLOOR Notes | 151536470 | 106252110 |
| Repayments on GROUNDFLOOR Notes | (132171910) | (79133490) |
| Proceeds from Stairs Notes | 23339748 | 20985833 |
| 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 |
| Proceeds from issuance of Series B-2 convertible preferred stock, net of offering costs | 5754564 |  |
| Proceeds from issuance of Series B-3 convertible preferred stock, net of offering costs | 2137320 |  |
| Proceeds from issuance of common stock, net of offering costs | 1531754 |  |
| Proceeds from loan under Paycheck Protection Program |  | 829000 |
| Proceeds from the exercise of stock options and warrants | 25240 | 116181 |
| Net cash flows from financing activities | 79467255 | 118123645 |
| Net increase (decrease) in cash | 1824188 | 1212778 |
| **Cash as of beginning of the year** | 2641950 | 1429172 |
| **Cash as of end of the year** | $4466138 | $2641950 |
| **Supplemental cash flow disclosures:** |  |  |
| &nbsp;&nbsp;&nbsp;Cash paid for interest | $7050256 | $2788431 |

---

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| **Supplemental disclosure of noncash investing and financing activities:** |  |  |
| &nbsp;&nbsp;&nbsp;Loans to developers transferred to other real estate owned | $4960000 | $4239270 |
| &nbsp;&nbsp;&nbsp;Write-down of loans to developers and limited recourse obligations | 367699 | 544595 |
| &nbsp;&nbsp;&nbsp;Write-down of interest receivable on loans to developers and accrued interest on limited recourse obligations | 751351 | 190897 |
| &nbsp;&nbsp;&nbsp;Noncash exercise of warrants | 52442 |  |
| &nbsp;&nbsp;&nbsp;Cashless vesting of restricted stock | 133325 |  |
| &nbsp;&nbsp;&nbsp;Conversion of convertible notes payable and accrued interest into common stock or Series B convertible preferred stock | 1342580 | 491922 |
| &nbsp;&nbsp;&nbsp;Increase (decrease) in allowance for loan to developers | 2882169 | (195350) |
| &nbsp;&nbsp;&nbsp;Increase (decrease) in allowance for limited recourse obligations | 3727683 | (668296) |

---

*See accompanying notes to consolidated financial statements*

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

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 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 and Groundfloor Holdings GA, LLC are 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

**Basis of Presentation and Liquidity**

The Company's Consolidated Financial Statements include the results of 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"), along with the amounts related to variable interest entities ("VIEs") for which Groundfloor is the primary beneficiary. The non-controlling interests as of December 31, 2022 represents the outside owner's interest in the Company's consolidated VIE. 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

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.

**Consolidation of Variable Interest Entities**

The determination of whether to consolidate a Variable Interest Entity ("VIE") in which the Company holds a variable interest requires a significant amount of analysis and judgment regarding whether we are the primary beneficiary of the VIE due to our holding a controlling financial interest in the VIE. A controlling financial interest in a VIE exists if we have both the power to direct the VIE's activities that most significantly affect the VIE's economic performance and a potentially significant economic interest in the VIE. The determination of whether an entity is a VIE considers factors, such as (i) whether the entity's equity investment at risk is insufficient to allow the entity to finance its activities without additional subordinated financial support and (ii) whether a holder's equity investment at risk lacks any of the following characteristics of a controlling financial interest: the direct or indirect ability through voting rights or similar rights to make decisions about a legal entity's activities that have a significant effect on the entity's success, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the legal entity. The Company is required to reconsider its evaluation of whether to consolidate a VIE each reporting period, based upon changes in the facts and circumstances pertaining to the VIE.

**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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

**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, 2022, and 2021.

**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 LROs (if issued by Groundfloor Finance Inc.) or Investor Georgia Notes (if issued by Groundfloor GA) 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 LROs and Georgia Notes. LROs are the Company's currently registered securities. Georgia Notes are securities that the Company has issued through its previously registered Georgia-exclusive securities offering, which has since been terminated. Both LROs and Georgia Notes represent similar obligations of the Company.

"Interest income" recorded on "Loans to developers" was $28,234,268 and $15,731,444 for year ended December 31, 2022, and 2021, respectively. Additionally, "Interest expense" incurred on "Limited recourse obligations" was $14,029,886 and $9,728,837 for the year ended December 31, 2022, and 2021, 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, 2022, and 2021. 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 $30,463,000 and $17,834,000, as of December 31, 2022, and 2021, respectively. These funds are netted against gross balances of approximately $169,760,000 and $126,181,000 as of December 31, 2022, and 2021, respectively, on the accompanying Consolidated Balance Sheets.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

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

The Company's obligation to pay principal and interest on an LRO or Georgia Note 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 LROs or Georgia Notes, if applicable, less collection costs incurred by the Company.

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 are presented within "Short-term notes payable" and "Long-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.

**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".

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

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

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.

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 4 – 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 LROs or Georgia Notes, 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 LROs or Georgia Notes. The allowance calculated for Loans is accordingly applied as the reserve for LROs and Georgia Notes.

Refer to Note 4 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. The other real estate owned balance is presented within "Other Current Assets" on the Company's Consolidated Balance Sheet and has a balance of approximately $4,120,000 and $3,01,000 as of December 31, 2022, and 2021, respectively.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

**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 $1,129,000 and $648,000 in expense related to amortization of software development costs for the years ended December 31, 2022, and 2021, 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:

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

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**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, 2022, and 2021.

**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, 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.

For the year ended December 31, 2022, offering costs of approximately $78,698 and $157,082 incurred in connection with the issuance of Series B-2 preferred stock and Series B-3 preferred stock, respectively, were deferred and charged against the gross proceeds of the offering in stockholders' equity.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

**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 $3,120,552 and $3,522,000 as of December 31, 2022, and 2021, 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 $3,237,430 and $2,944,000 in advertising costs during the years ended December 31, 2022, and 2021, 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 $456,400 and $411,700 in rent expense for office facilities during the years ended December 31, 2022, and 2021, 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

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

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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. The guidance in these pronouncements was effective for the Company for the year ended December 31, 2022.

During 2022, the Company evaluated the impact of adopting ASC Topic 842, *Leases* ("ASC 842") and determined the impact to be immaterial on the overall consolidated financial results and Consolidated Financial Statements of the Company. As such, we have elected not to apply the recognition requirements under ASC 842 and have not recognized an ROU asset or liability on the Company's Consolidated Balance Sheet as of December 31, 2022. The Company continues to recognize the expense related to this lease on a straight-line basis over the remaining lease term, presented within the Consolidated Statement of Operations at December 31, 2022.

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 adopted ASU 2019-12 on the effective date of January 1, 2022. The amendments were applied on a prospective basis and the adoption did not have a significant impact on the Company's financial results or the Consolidated Financial Statements contained herein.

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.

In March 2022, the FASB issued Accounting Standards Update 2022-02, *Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures*. The amendments in this update eliminate the accounting guidance for TDRs by creditors in Subtopic 310-40, *Receivables—Troubled Debt Restructurings by Creditors*, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. For public business entities, the amendments in this update require that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, *Financial Instruments—Credit Losses—Measured at Amortized Cost*, or entities that have adopted the amendments in Update 2016-13. The amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact that the implementation of this standard will have on the Company's Consolidated Financial Statements.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

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|:---|:---|
| **NOTE 3:** | **VARIABLE INTERST ENTITIES** |

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In November 2021, the Company entered into a limited liability company agreement with two independent third parties, to form a joint venture, Groundfloor Jacksonville, LLC ("Jacksonville JV" or "JV"). The joint venture was formed to scale origination and investor activity in the fix-and-flip/buy-and-hold sector of the Jacksonville, Florida market by increasing the production of existing loan products offered by Groundfloor and its Affiliates and potentially developing new equity products.

On January 1, 2022, the Jacksonville JV commenced operations and the initial cash contributions were received from each the Initial Members of the Jacksonville JV, in proportion to their relative Membership Interest in the JV.

At the time of the initial cash contribution by the Members of the Jacksonville JV, the Company conducted an analysis to determine whether the Jacksonville JV is a VIE, and if a VIE, an evaluation of whether the Company is the primary beneficiary. Under the provisions of *ASC 810, Consolidation*, we have determined that the Jacksonville JV is a VIE and the Company is the primary beneficiary, based on the power to direct the activities that most significantly impact the entity's economic performance. As such, the Company is required to consolidate the assets, liabilities, income and expenses of the Jacksonville JV within the accompanying Condensed Consolidated Financial Statements with a non-controlling interest for the third-party ownership of the joint venture's membership interests.

Accordingly, the Company accounted for the initial consolidation of the joint venture investment in accordance with the provisions of *ASC 805, Business Combinations*. At that time, the fair value of the Jacksonville JV's net assets was $30,000. As such, no gain or loss was recognized by the Company upon initial consolidation as the fair value of the net assets of the Jacksonville JV was equal to the Members initial cash contribution amounts.

The following table presents the assets and liabilities of the Jacksonville JV, included in the Condensed Consolidated Balance Sheet as of December 31, 2022. The assets and liabilities presented below include only the third-party assets and liabilities of the consolidated VIE and excludes any intercompany balances, which were eliminated upon consolidation.

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| | |
|:---|:---|
|  | **December 31,** |
|  | **2022** |
| **Assets:** |  |
| &nbsp;&nbsp;&nbsp;Cash | $301988 |
| &nbsp;&nbsp;&nbsp;Loans to developers | 43624441 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Allowance for loans to developers | (729196) |
| &nbsp;&nbsp;&nbsp;Interest receivable on loans to developers | 3040727 |
| &nbsp;&nbsp;&nbsp;Other current assets | 236000 |
| Total assets | $46473960 |
| Liabilities: |  |
| &nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | 16595 |
| Total liabilities | $16595 |

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**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

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| | |
|:---|:---|
| **NOTE 4:** | **LOANS TO DEVELOPERS AND ALLOWANCE FOR EXPECTED CREDIT LOSSES** |

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The Company provides financing to Developers 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, with maturities ranging from six to eighteen months.

The following table presents the carrying amount of "Loans to developers, net" by performance state as of December 31, 2022, and 2021, respectively:

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| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| Loan Performance State: |  |  |
| &nbsp;&nbsp;&nbsp;Current | $141405942 | $131203243 |
| &nbsp;&nbsp;&nbsp;Workout | 82872431 | 37190846 |
| &nbsp;&nbsp;&nbsp;Fundamental Default | 16215743 | 8037621 |
| Amortized Cost | $240494116 | $176431710 |
| &nbsp;&nbsp;&nbsp;Less: Allowance for loan losses | (6046819) | (3164650) |
| Carrying amount as of December 31 | $234447297 | $173267060 |

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**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 increased from December 31, 2021, to December 31, 2022. The increase is driven by management's historical loss performance and assessment of microeconomic and macroeconomic conditions as of December 31, 2022.

The following tables present analyses of the allowance for credit losses by portfolio segment for the years ended December 31, 2022, and 2021:

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| | |
|:---|:---|
|  | **Balance** |
| Allowance for loan losses, December 31, 2021 | $3164650 |
| Loan allowance charged off | (1046142) |
| Provision for losses | 3928311 |
| Recoveries | - |
| Allowance for loan losses, December 31, 2022 | $6046819 |

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| | |
|:---|:---|
|  | **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 |

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**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

**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, 2022:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** |
|  | **2022** | **2021** | **2020** | **2019** | **2018** | **Total** |
| Loan grades: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;A | $2447948 | $2314653 | $- | $147470 | $- | $4910071 |
| &nbsp;&nbsp;&nbsp;B | 18118004 | 4768365 | 554335 | 71880 |  | 23512584 |
| &nbsp;&nbsp;&nbsp;C | 98564962 | 42869379 | 987227 | 1101636 | 1613325 | 145136530 |
| &nbsp;&nbsp;&nbsp;D | 47388678 | 8732696 | 965420 | 114902 | 79642 | 57281338 |
| &nbsp;&nbsp;&nbsp;E | 7358108 | 2162509 |  | 132976 |  | 9653593 |
| &nbsp;&nbsp;&nbsp;F |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;G | - | - | - | - | - | - |
| Amortized Cost | $173877700 | $60847602 | $2506982 | $1568864 | $1692967 | $240494116 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Allowance for loan losses |  |  |  |  |  | (6046819) |
| Carrying Amount as of December 31, 2022 |  |  |  |  |  | $234447297 |

---

**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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

*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 LROs or Georgia Notes.

All credit quality indicators were updated as of December 31, 2022.

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, 2022:

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** | **Year Originated** |
|  | **2022** | **2021** | **2020** | **2019** | **2018** | **Total** |
| Loan performance state: |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $137395704 | $4010238 | $- | $- | $- | $141405942 |
| &nbsp;&nbsp;&nbsp;Workout | 36481996 | 44828887 | 1516547 |  |  | 82872431 |
| &nbsp;&nbsp;&nbsp;Fundamental Default | - | 12008477 | 945435 | 1568864 | 1692967 | 16215743 |
| Amortized Cost | $173877700 | $60847602 | $2506982 | $1568864 | $1692967 | $240494116 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: Allowance for loan losses |  |  |  |  |  | (6046819) |
| Carrying Amount as of December 31, 2022 |  |  |  |  |  | $234447297 |

---

**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, 2022, the Company placed Loans of approximately $35,673,000 recorded to "Loans to developers" on nonaccrual status. The Company has written off approximately $635,000 of interest receivable in the current period.

The following table presents an aging analysis of past due Loans as of December 31, 2022, and 2021:

---

| | | | |
|:---|:---|:---|:---|
|  | **Amortized<br> Cost** | **Allowance for<br> Loan Losses** | **Loans to<br> Developers, Net** |
| Aging schedule: |  |  |  |
| &nbsp;&nbsp;&nbsp;Current | $143472561 | $1455837 | $142016724 |
| &nbsp;&nbsp;&nbsp;Less than 90 days past due | 41160208 | 812196 | 40348012 |
| &nbsp;&nbsp;&nbsp;More than 90 days past due | 55861347 | 3778786 | 52082561 |
| Total as of December 31, 2022 | $240494116 | $6046819 | $234447297 |

---

---

| | | | |
|:---|:---|:---|:---|
|  | **Amortized<br> Cost** | **Allowance for<br> Loan Losses** | **Loans to<br> Developers, 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 |

---

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

The following is a summary of information pertaining to nonaccrual loans as of December 31, 2022:

---

| | |
|:---|:---|
|  | **Balance** |
| Nonaccrual loans | $35672783 |
| Interest income recognized on nonaccrual loans | $5714335 |

---

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 |

---

---

| | |
|:---|:---|
| **NOTE 5:** | **OTHER CURRENT ASSETS** |

---

"Other current assets" as of December 31, 2022, and 2021, consists of the following:

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Other real estate owned (1) | $4120463 | $3001421 |
| Due from related party (2) | 285300 | 318988 |
| Other | 1098172 | 259828 |
| Other current assets | $5503935 | $3580237 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) During the year ended December 31, 2022, the Company transferred $4,960,000 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 $1,150,000 to "Loans to developers" and an
offsetting decrease to "Limited recourse obligations".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Loan and accrued interest receivable from related parties. Refer to Note 12 – Related Party Transactions.

---

| | |
|:---|:---|
| **NOTE 6:** | **PROPERTY, EQUIPMENT, SOFTWARE, WEBSITE AND INTANGIBLE ASSETS, NET** |

---

"Property, equipment, software, website development costs, and intangible assets, net" at December 31, 2022 and 2021, consists of the following:

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Software and website development costs | $6349726 | $3681563 |
| Computer equipment | 169645 | 169645 |
| Leasehold improvements | 29942 | 29942 |
| Furniture and fixtures | 212251 | 212251 |
| Office equipment | 44748 | 44747 |
| Domain names | 30000 | 30000 |
| Total property, equipment, software, website and intangible assets | 6836312 | 4168148 |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: accumulated depreciation and amortization | (3749522) | (2522531) |
| Property, equipment, software, website and intangible assets, net | $3086790 | $1645617 |

---

Depreciation and amortization expense on "Property, equipment, intangible assets, software, and website development costs, net" for the years ended December 31, 2022, and 2021 was approximately $1,226,991 and $732,000, 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

---

| | |
|:---|:---|
| **NOTE 7:** | **ACCOUNTS PAYABLE AND ACCRUED EXPENSES** |

---

"Accounts payable and accrued expenses" at December 31, 2022 and 2021, consists of the following:

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Deferred loan origination fees | $3120552 | $3522017 |
| Accrued interest expense (1) | 534771 | 123643 |
| Trade accounts payable | 557751 | 1103984 |
| Accrued employee compensation | 107626 | 383315 |
| Other | 14834 | 14870 |
| Accounts payable and accrued expenses | $4335534 | $5147829 |

---

(1) "Accrued interest expense" includes interest related to corporate debt instruments as described
in Note 8.

---

| | |
|:---|:---|
| **NOTE 8:** | **DEBT** |

---

**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 year ended December 31, 2021, respectively, approximately $126,386 was amortized to "Interest expense on corporate debt instruments" in the Consolidated Statements of Operations.

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 shares 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

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 on the 2019 Subordinated Convertible Notes, net of an unamortized discount of approximately $0, was outstanding as of December 31, 2021. 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 as of December 31, 2021. The interest expense related to the 2019 Subordinated Convertible Notes for the year ended December 31, 2021, was $208,000 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. 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 years ended December 31, 2022, and 2021, respectively, approximately $348,147 and $64,700 was amortized to "Interest expense on corporate debt instruments" in the Consolidated Statements of Operations.

In 2022, certain holders of 2021 Subordinated Convertible Notes converted their holdings into common stock. Pursuant to these terms, Noteholders converted $1,261,170 in principal and approximately $81,410 in accrued interest into 48,394 shares of common stock at a conversion price of $27.74, a 10% discount to the per share price of common stock at the time of conversion.

Principal of $3,738,830 and $5,000,000 on the 2021 Convertible Notes, net of an unamortized discount of approximately $142,636 and $490,783 was outstanding as of December 31, 2022, and 2021, respectively. Accrued interest on the 2021 Subordinated Convertible Notes, presented within "Accounts payable and accrued expenses" in the Company's Consolidated Balance Sheets, was approximately $534,771 and $123,600 as of December 31, 2022, and 2021, respectively. The related interest expense of $492,537 and $123,600 is included within "Interest expense on corporate debt instruments" for the years ended December 31, 2022, and 2021, respectively.

**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 FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

**GROUNDFLOOR Notes**

During the years ended December 31, 2022, and 2021, 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 2 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 2 LLC, subject to certain exceptions.

During the years ended December 31, 2022, and 2021, respectively, there were 97 and 69 notes entered into with stated interest rates ranging from 2.0% to 14.0% and with terms ranging from 30 days to 24 months. The principal sum of $43,135,300 and $46,096,000 remains outstanding as of December 31, 2022, and 2021, respectively, and is presented in "Short-term notes payable" on the Company's Consolidated Balance Sheets. The principal sum of $22,325,700 and $0 remains outstanding as of December 31, 2022, and 2021, respectively, and is presented in "Long-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 $4,507,391 and $2,167,211 for the years ended December 31, 2022, and 2021, respectively. Accrued interest on the GROUNDFLOOR Notes, presented within "Accrued interest on limited recourse obligations" in the Company's Consolidated Balance Sheets, was approximately $65,400 and $352,100 at December 31, 2022 and 2021, respectively.

**Stairs Notes**

During the years ended December 31, 2022, and 2021, the Company entered into various secured promissory notes, (the "Stairs Notes"), with Investors. 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 originate, buy, and service loans for the purpose of building, buying, or rehabilitating single family and multifamily structures, or buying land, for commercial purposes. As collateral security for Stairs Notes, the Company granted first priority security interest in all the loan assets of its wholly owned subsidiary, Groundfloor Yield LLC, subject to certain exceptions.

During the years ended December 31, 2022, and 2021, there were a total of 1,017 and 368 notes, respectively, entered into, each with a stated interest rate of 4-6% and term of 5 days. The principal sum of $44,325,580 and $20,985,800 remained outstanding as of December 31, 2022, and 2021, respectively, and is presented in "Short-term notes payable" on the Company's Consolidated Balance Sheets.

Interest paid to Stairs investors totaled $2,064,918 and $142,500 for the years ended December 31, 2022 and 2021, respectively and is presented within "Interest expense" on the Company's Consolidated Statement of Operations.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

**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 at 2021, 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. In May 2022, the Company received notice that our request for forgiveness was approved, and our Second PPP Loan principal and interest were deemed paid in full. Upon the forgiveness of our obligations of the Second PPP Loan promissory note, a gain was recognized of $829,000 in "Other income (expense)" on the Consolidated Statement of Operations for the year ended December 31, 2022.

The Company's Second PPP Loan balance, presented within "Short-term notes payable" in the Company's Consolidated Balance Sheets, was $0 and $829,000 as of December 31, 2022, and 2021, respectively.

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| | |
|:---|:---|
| **NOTE 9:** | **STOCKHOLDERS' Equity (Deficit)** |

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**Capital Structure**

***Authorized Shares*** - As of December 31, 2022, the Company is authorized to issue 30,000,000 shares of no par value common stock and 20,000,000 shares of no par value preferred stock. The preferred stock has been designated as Series B-2 Preferred Stock (the "Series B-2), consisting of 243,348 shares, Series A Preferred Stock (the "Series A"), consisting of 747,373 shares, Series B Preferred Stock (the "Series B"), consisting of 441,940 shares, Series Seed Preferred Stock (the "Series Seed"), consisting of 568,796 shares, Series B-3 Preferred Stock (the "Series B-3"), consisting of 230,000 shares, (collectively, "Preferred Stock").

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

**Common Stock Transactions**

In 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 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 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 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.

In 2022, the third-party investor, in conjunction with the purchase of shares of the Company's newly issued Series B-2 Preferred Stock, executed an additional purchase of 60,765 shares of the Company's common stock through direct, secondary transfer of shares owned by existing shareholders. Accordingly, the common stock transfers between existing shareholders and the third-party investor did not result in any cash proceeds received or issuance costs incurred by the Company. As such, the transfer of shares between the existing shareholders and third-party investor resulted in no impact to the Company's gross capitalization at December 31, 2022.

In 2022, 14,758 shares of Series Seed were converted to common stock.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

In 2022, 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 "2022 Common Stock Offering"). Participation in the 2022 Common Stock Offering was limited to existing shareholders. The Company offered shares of common stock at $30.82 per share. As a result of the offering, the Company received gross proceeds of approximately $1,531,724 in exchange for the issuance of 49,700 shares of common stock.

**Preferred Stock Transactions**

***Series B-2***

In 2022, the Company received gross proceeds of $5,833,262 in exchange for the issuance of 396,724 shares of Series B-2 Preferred Stock ("Series B-2 Preferred Stock"), presented net of offering costs of $78,698 in the Consolidated Balance Sheets as a component of stockholders' equity.

***Series B***

In 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><u>,</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 8.

***Series A***

In 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-3***

In 2022, the Company launched an offering of 230,000 shares of Series B-3 Preferred Stock at $43.90 per share ("Series B-3 Preferred Stock Offering"). Since the launch of the offering, the Company has offered its Series B-3 Preferred Stock on a continuous basis directly the online platform utilized by Wefunder Portal LLC located at <u>www.wefunder.com</u><u>,</u> to both accredited and non-accredited investors.

The offering closed November 2022. As a result of the offering, the Company has, as of December 31, 2022, received gross proceeds of approximately $2,294,402 in exchange for the issuance of 52,265 shares of Series B-3 Preferred Stock, presented net of offering costs of $157,082 in the Consolidated Balance Sheets as a component of stockholders' equity.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

The following is a summary of the rights and privileges of the Preferred Stockholders as of December 31, 2022, and 2021.

***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 B-2 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 Series B, Series A, Series Seed, Series B-3 or common stock, an amount per share equal to the greater of: i) the Series A original issue price of $30.82 per share, plus any dividends declared but unpaid, and ii) such amount per share as would have been payable had all shares of Series B-2 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 B-2 the full amount to which they shall be entitled, then all of the available assets shall be distributed to the holders of the Series B-2 pro rata in accordance with their ownership thereof.

After payment in full of the Series B-2 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 B 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 B the full amount to which they shall be entitled, then all of the available assets shall be distributed to the holders of the Series B pro rata in accordance with their ownership thereof.

After payment in full of the Series B preference amount, the Series A stockholders are entitled to a liquidation preference equal to the greater of: i) the Series A original issue price of $6.69 per share, plus any dividends declared but unpaid, or 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.

After payment in full of the Series Seed preference amount, the Series B-3 stockholders are entitled to a liquidation preference equal to the greater of: i) the Series B-3 original issue price of $43.90 per share, plus any dividends declared but unpaid, or ii) such amount per share as would have been payable had all shares of Series B-3 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 B-3 the full amount to which they shall be entitled, then all of the available assets shall be distributed to the holders of the Series B-3 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.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

***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 B-2, Series B, Series A, Series Seed, and Series B-3 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 B-2, Series B, Series A, Series Seed, and Series B-3 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.

---

| | |
|:---|:---|
| **NOTE 10:** | **stock options and warrants** |

---

**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 950,000 shares of common stock for issuance under the Plan. Of these shares, 183,987 shares are available for future stock option grants as of December 31, 2022.

In January 2022, the Company amended 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.

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.

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, 2022, and 2021.

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

---

| | | |
|:---|:---|:---|
| **For the Year Ended December 31, 2022** | **Non-<br> Employees** | **Employees** |
| Estimated dividend yield | -% | -% |
| Expected stock price volatility | 55.0% | 50.0% |
| Risk-free interest rate | 1.8 – 2.7% | 1.7 – 4.3% |
| Expected life of options (in years) | 10.0 | 6.25 |
| Weighted-average fair value per share | $18.99 | $14.89 |

---

---

| | | |
|:---|:---|:---|
| <br>**For the Year Ended December 31, 2021** | **Non-**<br>**Employees** |<br>**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 |

---

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

The following summarizes the stock option activity for the years ended December 31, 2022, and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **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, 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 |  |  |
| Exercised | (1967) | 12.76 |  |  |
| Terminated | (56738) | 26.62 |  |  |
| Granted | 371234 | 22.55 |  |  |
| Outstanding as of December 31, 2022 | 729465 | $15.13 | 7.1 | $20985000 |
| Exercisable as of December 31, 2022 | 439806 | 10.77 | 5.7 | 14569000 |
| Expected to vest after December 31, 2022 | 289659 | $21.77 | 9.1 | $6363000 |

---

The following table summarizes certain information about all stock options outstanding as of December 31, 2022:

---

| | | | |
|:---|:---|:---|:---|
| **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 | 1 | 64000 |
| 1.87 | 36000 | 2.6 | 36000 |
| 2.40 | 68367 | 4.3 | 68367 |
| 3.99 | 10000 | 1.8 | 10000 |
| 10.00 | 19975 | 5.6 | 19725 |
| 12.00 | 32251 | 6 | 32251 |
| 15.00 | 25437 | 6.6 | 22469 |
| 17.50 | 83839 | 7.9 | 70569 |
| 19.20 | 334544 | 9 | 113584 |
| 30.82 | 42802 | 9.5 | 2841 |
| 43.90 | 12500 | 9.9 | - |
|  | 729465 |  | 439806 |

---

As of December 31, 2022, there was approximately $1,341,400 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 2.0 years. The total intrinsic value of stock option awards exercised was approximately $59,012 during the fiscal year ended December 31, 2022.

The Company recorded approximately $46,050 and $32,200 in non-employee and $470,587 and $372,300 in employee share-based compensation expense during 2022 and 2021, respectively**.**

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

**Performance-Based Grants**

During 2021, the Company granted performance-based awards to employees that entitled the recipients to earn up to 162,500 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. As of December 31, 2022, there are 54,200 eligible performance-based awards, which are expected to be exercised by management and are included as granted in the option activity table above.

The grant date fair value of the options was calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $19.20 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 1.24%, (iv) a weighted average estimated term of 6.01 years, (v) volatility of 50%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $502,800, or $9.28 per option.

Compensation expense of $170,100 and $29,700 was recognized for performance awards granted in 2022 and 2021, respectively. The total unrecognized compensation cost related to performance awards was $303,000 and $473,100 at December 31, 2022, and 2021, respectively, and the weighted-average period over which this expense will be recognized is 2.5 years.

**Equity Incentive Plan**

In February 2022, the Company issued stock options to certain employees, which contained an early-exercise provision, whereby the options were exercisable immediately by the holder upon issuance. Pursuant to the terms of the stock-option agreement, certain of the employees elected to participate in the early exercise option to purchase shares of the Company's common stock. The Company issued 224,000 shares of common stock, at a per share price of $19.20, to the employees who elected to participate in the early exercise.

Shares of common stock issued upon the early exercise of options are not considered outstanding, for accounting purposes, as the grantee is not yet entitled to the rewards of share ownership. As such, the shares of common stock resulting from the early exercise are not shown as outstanding on the face of the Company's Consolidated Balance Sheet and are excluded from earnings (loss) per share until the satisfaction of the vesting conditions have been met.

The shares of common stock were purchased by each employee in exchange for a promissory note (the "Note"), which accrues interest at the rate of 1.4% per annum and is partially collateralized by the assets of the employee (the notes are 50% recourse and 50% non-recourse). Although the promissory note was issued as partially recourse, the Note must be accounted for as non-recourse in its entirety as the recourse provisions of the Note are not aligned with a corresponding percentage of the underlying shares.

Accordingly, the Company has accounted for the combination of the issuance of promissory notes to employees in exchange for shares of common stock as a stock option for accounting purposes, as the substance is similar to the grant of an option. While the shares of common stock purchased by the employees in exchange for a promissory note are considered legally issued, the shares are not deemed, for accounting purposes, outstanding until all of the options are fully vested and the outstanding principal and accrued interest due on the note is repaid in full.

The grant date fair value of the options was calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $19.20 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 1.68%, (iv) a weighted average estimated term of 6.04 years, (v) volatility of 50%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $2,270,000, or $9.38 per option.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

During the year ended December 31, 2022, 96,665 of the outstanding shares vested and the Company recognized approximately $623,600 of stock-based compensation expense related to the early exercise of these options.

At December 31, 2022, the unrecognized stock-based compensation cost related to the unvested shares was approximately $1,474,500, which will be recognized over a weighted-average remaining vesting period of 2.2 years.

**Restricted Stock**

In October 2021, an employee purchased 34,720 shares of common stock (the "Restricted 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 Restricted Stock 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 0.86% 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.

During the year-ended December 31, 2021, the grant date fair value of the Restricted Stock was calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $19.20 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 1.2%, (iv) a weighted average estimated term of 6.25 years, (v) volatility of 50%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $325,700, or $9.38 per option.

During the year-ended December 31, 2022, 8,680 shares of Restricted Stock vested and $133,333 of the Promissory Note was forgiven. The forgiveness of the Promissory Note resulted in a fair value remeasurement of the Restricted Stock issuance.

At remeasurement the grant date fair value of the Restricted Stock was calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $43.90 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 4.2%, (iv) a weighted average estimated term of 5.5 years, (v) volatility of 50%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $872,200, or $31.40 per option.

Compensation expense of $184,500 and $13,600 was recognized for Restricted Stock awards during the years ended December 31, 2022, and 2021, respectively. The total unrecognized compensation cost related to Restricted Stock awards was $832,800 at December 31, 2022 and the weighted-average period over which this expense will be recognized is 1.3 years.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

**Warrants**

The Company has 62,324 and 45,550 warrants issued and outstanding, for the purchase of common stock, at December 31, 2022 and 2021, respectively. The Company recognized expense of approximately $971,000 and $0 related to amortization of warrant discounts for the years ended December 31, 2022, and 2021, respectively.

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.

In January 2022, in conjunction with the Series B-2 Preferred stock issuance, the Company issued warrants to purchase 30,000 shares of the Company's common stock at an exercise price of $19.20 per share. The warrants were exercisable immediately at $19.20 with a contractual term of fifteen years. The fair value of the warrants were calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $19.20 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 1.93%, (iv) an estimated term of 15 years, (v) volatility of 55%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $433,705, or $14.46 per warrant.

In April 2022, the Company issued warrants to purchase 21,000 shares of the Company's common stock at an exercise price of $19.20 per share. The warrants were exercisable immediately at $19.20 with a contractual term of fifteen years. The fair value of the warrants was calculated using the Black-Scholes-Morton pricing model with the following assumptions: (i) a stock price of $30.82 per share, (ii) an exercise price $19.20 per share, (iii) an estimated risk-free interest rate of 1.93%, (iv) an estimated term of 15 years, (v) volatility of 55%, and (vi) dividend yield of 0%. These assumptions resulted in a total grant date fair value of approximately $537,298, or $25.59 per warrant.

In February 2022, 30,300 outstanding warrants from the Company's warrants were exercised for the purchase of common stock at a price of $2.71 per share as a noncash exercise. This conversion is presented as an increase to "Common Stock" as of December 31, 2022.

---

| | |
|:---|:---|
| **NOTE 11:** | **INCOME TAXES** |

---

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, 2022.

For tax years beginning on or after January 1, 2022, the Tax Act eliminates the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and 15 years for research activities performed outside the United States pursuant to Section 174 of the Code. For the year ended December 31, 2022, the Company has capitalized $4.67 million of research and development expenses. This has resulted in an increase in the DTA associated with capitalized research and development expense by $1.08 million as of December 31, 2022.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

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, 2022, and 2021, are as follows:

---

| | | |
|:---|:---|:---|
|  | **2022** | **2021** |
| Deferred income tax assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;Net operating loss carryforwards | $7465000 | $6951000 |
| &nbsp;&nbsp;&nbsp;Capitalized research and development expense | 1076000 |  |
| &nbsp;&nbsp;&nbsp;Share-based compensation | 613000 | 154000 |
| &nbsp;&nbsp;&nbsp;Research and development credit carryforward | 439000 | 256000 |
| &nbsp;&nbsp;&nbsp;Depreciation and amortization | 38000 | 38000 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 28000 | 98000 |
| &nbsp;&nbsp;&nbsp;Valuation allowance | (9659000) | (7497000) |
|  | $- | $- |

---

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 $2,162,000 and $859,000, respectively, during the years ended December 31, 2022, and 2021.

As of December 31, 2022, the Company has federal and state net operating loss carryforwards of approximately $29,683,000 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 2022 and 2021 as follows:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **2022** | **2022** | **2021** | **2021** |
|  | **Amount** | **% of Pre-Tax<br> Earnings** | **Amount** | **% of Pre-Tax<br> Earnings** |
| Income tax expense (benefit) at statutory rate | $(1128000) | (21.0)% | $(829000) | (21.0)% |
| State taxes (net of federal benefit) | (246000) | (4.6)% | (184000) | (4.7)% |
| Non-taxable income | (174000) | (3.2)% | (174000) | (4.4) |
| Non-deductible expenses | 177000 | 3.3% | 447000 | 11.3% |
| True-up adjustment for deferred items | (791000) | (14.7)% | (119000) | (3.0)% |
| Change in valuation allowance | 2162000 | 40.3% | 859000 | 21.8% |
| 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, 2022, and 2021, the Company had no accrual related to uncertain tax positions.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

---

| | |
|:---|:---|
| **NOTE 12:** | **RELATED PARTY TRANSACTIONS** |

---

**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, 2022, and 2021, 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 $285,300 and $318,000, 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, and the related party loan receivable and accrued interest balance was repaid in full by the employee as of December 31, 2021.

---

| | |
|:---|:---|
| **NOTE 13:** | **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 $442,200 and $411,000 as a component of "General and administrative" in the Consolidated Statements of Operations for the years ended December 31, 2022, and 2021, respectively.

As of December 31, 2022, the approximate amounts of the annual future minimum lease payments under noncancelable operating leases obligations are as follows:

---

| | |
|:---|:---|
|  | **Balance** |
| Years ending December 31, |  |
| &nbsp;&nbsp;&nbsp;2023 | $445679 |
| &nbsp;&nbsp;&nbsp;2024 | 151754 |
| &nbsp;&nbsp;&nbsp;2025 |  |
| &nbsp;&nbsp;&nbsp;2026 | - |
|  | $597433 |

---

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 14:** | **SUBSEQUENT EVENTS** |

---

Subsequent events were evaluated through March 6, 2023, the date the Consolidated Financial Statements were available to be issued. Based on this evaluation, it was determined that subsequent events have occurred that require disclosure in the consolidated financial statements.

**GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES**

Notes to Consolidated Financial Statements

In February 2023, the Company commenced an offering of Common Stock to existing shareholders via the Groundfloor platform. Pursuant to this offering, from February 15, 2023, through the issuance date of these consolidated financial statements, the Company has received gross proceeds of $532,946 in exchange for the issuance of 12,140 shares of the Company's Common Stock.

***Project Summary***

![](image_012.jpg)

![](image_013.jpg)

![](image_014.jpg)

![](image_015.jpg)

## Ex1A-2A

**Exhibit 2.3**

Control Number : 14073197

**STATE OF GEORGIA**

**Secretary of State**

**Corporations Division<br> 313 West Tower<br> 2 Martin Luther King, Jr. Dr. <br> Atlanta, Georgia 30334-1530**

**CERTIFICATE OF RESTATED ARTICLES**

I, **Brad Raffensperger,** the Secretary of State and the Corporation Commissioner of the State of Georgia, hereby certify under the seal of my office that

**GROUNDFLOOR FINANCE INC.<br> a Domestic Profit Corporation**

has amended and filed duly restated articles on 01/24/2023 in the Office of the Secretary of State and has paid the required fees as provided by Title 14 of the Official Code of Georgia Annotated. Attached hereto is a true and correct copy of said restated articles.

WITNESS my hand and official seal in the City of Atlanta and the State of Georgia on **02/02/2023.**

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| | |
|:---|:---|
| ![](tm2310287d1_ex2-3img001.jpg) |  |
| ![](tm2310287d1_ex2-3img001.jpg) | /s/ Brad Raffensperger |
| ![](tm2310287d1_ex2-3img001.jpg) |  |
| ![](tm2310287d1_ex2-3img001.jpg) | Brad Raffensperger |
| ![](tm2310287d1_ex2-3img001.jpg) | Secretary of State |
| ![](tm2310287d1_ex2-3img001.jpg) |  |

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**ARTICLES OF RESTATEMENT**

**OF**

**GROUNDFLOOR FINANCE INC.**

Pursuant to Section 14-2-1007 of the Georgia Business Corporation Code, the undersigned corporation hereby submits the following for the purpose of amending and restating its Fourth Amended and Restated Articles of Incorporation and does hereby certify as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The name of the corporation is Groundfloor Finance Inc. (the "***Corporation***").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The Corporation's Fourth Amended and Restated Articles of Incorporation are hereby amended and restated as set forth in the Fifth Amended and Restated Articles of Incorporation attached hereto as <u>Exhibit A</u> (the "***Articles of Restatement***").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The Corporation's Fifth Amended and Restated Articles of Incorporation were approved and adopted by the Corporation's Board of Directors on August 9, 2022, and Shareholders on August 9, 2022, in the manner prescribed by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The Articles of Restatement will be effective upon filing.

IN WITNESS WHEREOF, the Corporation has caused these Articles of Restatement to be signed by its Secretary and Co-Founder on August 9, 2022.

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| | |
|:---|:---|
| **GROUNDFLOOR FINANCE INC.** | **GROUNDFLOOR FINANCE INC.** |
| By: | /s/ Nick Bhargava |
|  | Nick Bhargava |
|  | Secretary and Co-Founder |

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**Exhibit A**

**GROUNDFLOOR FINANCE INC.**

**FIFTH AMENDED AND RESTATED ARTICLES OF INCORPORATION**

**ARTICLE I**

The name of the corporation is Groundfloor Finance Inc. (the "***Corporation***"). These Fifth Amended and Restated Articles of Incorporation (the "***Articles of Incorporation***") shall be effective as of the date of filing.

**ARTICLE II**

The Corporation is organized pursuant to the Georgia Business Corporation Code (the "***GBCC***"), as it may be amended from time to time, and shall have perpetual duration.

**ARTICLE III**

The Corporation is organized for the purpose of engaging in any lawful business not specifically prohibited to corporations for profit under the laws of the State of Georgia, and the Corporation has all powers necessary to conduct any such business and all other powers enumerated in the GBCC, as it may be amended from time to time.

**ARTICLE IV**

The total number of shares of all classes of stock which the Corporation shall have authority to issue is 50,000,000 shares consisting of: (i) 30,000,000 shares of Common Stock, no par value per share (the "***Common Stock***"), and (ii) 20,000,000 shares of Preferred Stock, no par value per share (the "***Preferred Stock***").

The following is a statement of the designations and the powers, privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. COMMON STOCK

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>General</u>. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Voting</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings); provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to these Articles of Incorporation that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to these Articles of Incorporation or pursuant to the GBCC. Unless required by law, there shall be no cumulative voting.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 14-2-1004 of the GBCC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. PREFERRED STOCK

568,796 shares of the authorized Preferred Stock of the Corporation are hereby designated "***Series Seed Preferred Stock***", 747,373 shares of the authorized Preferred Stock of the Corporation are designated "***Series A Preferred Stock***", 441,940 shares of the authorized Preferred Stock of the Corporation are designated "***Series B Stock***", 243,348 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated as "***Series B-2 Preferred Stock***", and 230,000 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated as "***Series B-3 Preferred Stock***", each with the following rights, preferences, powers, privileges and restrictions, qualifications and limitations. Unless otherwise indicated, references to "Sections" or "Subsections" in this Part B of this Article IV refer to sections and subsections of Part B of this Article IV.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Dividends</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 <u>Series B-3 Preferred Stock</u>. The Corporation shall not declare, pay or set aside any dividends on any shares of Series B-3 Preferred Stock unless the Corporation has declared, paid or set aside a dividend with respect to the Common Stock, such dividends on the shares of the Series B-3 Preferred Stock to be paid on a pro rata and pari passu basis with holders of the Common Stock in an amount at least equal to the dividends on the Common Stock. The "***Series B-3 Original Issue Price***" as of the date of these Articles of Incorporation shall mean $43.90 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B-3 Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 <u>Series B-2 Preferred Stock</u>. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in these Articles of Incorporation) the holders of the Series B-2 Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B-2 Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series B-2 Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Series B-2 Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series B-2 Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Series B-2 Original Issue Price (as defined below); provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series B-2 Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series B-2 Preferred Stock dividend. The "***Series B-2 Original Issue Price***" as of the date of these Articles of Incorporation shall mean $30.82 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B-2 Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 <u>Series B Stock</u>. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in these Articles of Incorporation) the holders of the Series B Stock then outstanding shall first receive, or simultaneously receive, on a pro rata and pari passu basis with holders of Series A Preferred Stock, a dividend on each outstanding share of Series B Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series B Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Series B Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series B Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Series B Original Issue Price (as defined below); provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series B Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series B Stock dividend. The "***Series B Original Issue Price***" as of the date of these Articles of Incorporation shall mean $18.23 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series B Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 <u>Series A Preferred Stock</u>. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in these Articles of Incorporation) the holders of the Series A Preferred Stock then outstanding shall first receive, or simultaneously receive, on a pro rata and pari passu basis with holders of Series B Stock, a dividend on each outstanding share of Series A Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series A Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Series A Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series A Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Series A Original Issue Price (as defined below); provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series A Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series A Preferred Stock dividend. The "***Series A Original Issue Price***" shall mean $6.69 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 <u>Series Seed Preferred Stock</u>. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in these Articles of Incorporation) the holders of the Series Seed Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series Seed Preferred Stock in an amount at least equal to (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series Seed Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Series Seed Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series Seed Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Series Seed Original Issue Price (as defined below); provided that, if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series Seed Preferred Stock pursuant to this Section 1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series Seed Preferred Stock dividend. The "***Series Seed Original Issue Price***" as of the date of these Articles of Incorporation shall mean $5.205 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series Seed Preferred Stock. The Series B-2 Original Issue Price, Series B Original Issue Price, Series A Original Issue Price, and Series Seed Original Issue Price may be referred to herein collectively as the "***Original Issue Price***".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.6 <u>Priority</u>. Dividends on Series B-2 Preferred Stock shall be payable in preference and priority to any payment of any dividend on any shares of Common Stock, Series B-3 Preferred Stock, Series B Stock, Series A Preferred Stock, or Series Seed Preferred Stock of the Corporation. After payment of dividends on Series B-2 Preferred Stock, dividends on Series A Preferred Stock shall be payable on a pari passu basis with holders of Series B Stock in preference and priority to any payment of any dividend on any shares of Common Stock or Series Seed Preferred Stock of the Corporation. After payment of dividends on Series B-2 Preferred Stock, dividends on Series B Stock shall be payable on a pari passu basis with holders of Series A Preferred Stock in preference and priority to any payment of any dividends on any shares of Series Seed Preferred Stock, Series B-3 Preferred Stock, or Common Stock of the Corporation. Dividends on shares of Series Seed Preferred Stock shall be payable subject to payment of any dividend on any shares of Series A Preferred Stock, Series B Stock, and Series B-2 Preferred Stock of the Corporation and in preference and priority to any payment of any dividend on any shares of Common Stock of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 <u>Preferential Payments to Holders of Series B-2 Preferred Stock</u>. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the holders of shares of Series B-2 Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of Series B Stock, Series A Preferred Stock, Series Seed Preferred Stock, Series B-3 Preferred Stock, or Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series B-2 Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series B-2 Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter referred to as the "***Series B-2 Liquidation Amount***"). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series B-2 Preferred Stock the full amount to which they shall be entitled under this Subsection 2.1, the holders of shares of Series B-2 Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 <u>Preferential Payments to Holders of Series B Stock</u>. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after payment in full of the Series B-2 Liquidation Amount to the holders of shares of Series B-2 Preferred Stock as set forth in Subsection 2.1, the holders of shares of Series B Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, before any payment shall be made to the holders of Series A Preferred Stock, Series Seed Preferred Stock, Series B-3 Preferred Stock, or Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series B Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series B Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter referred to as the "***Series B Liquidation Amount***"). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series B Stock the full amount to which they shall be entitled under this Subsection 2.2, the holders of shares of Series B Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 <u>Preferential Payments to Holders of Series A Preferred Stock</u>. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after payment in full of the Series B-2 Liquidation Amount to the holders of shares of Series B-2 Preferred Stock as set forth in Subsection 2.1 and payment in full of the Series B Liquidation Amount to holders of shares of Series B Stock as set forth in Subsection 2.2, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders before any payment shall be made to the holders of Series B-3 Preferred Stock, Common Stock or Series Seed Preferred Stock by reason of their ownership thereof, an amount per share equal to the greater of: (i) the Series A Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter referred to as the "***Series A Liquidation Amount***"). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series A Preferred Stock the full amount to which they shall be entitled under this Subsection 2.3, the holders of shares of Series A Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 <u>Preferential Payments to Holders of Series Seed Preferred Stock</u>. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the holders of shares of Series Seed Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders after payment in full to the holders of Series B-2 Preferred Stock as provided in Subsection 2.1 above, the Series B Stock as provided in Subsection 2.2 above, and Series A Preferred Stock as provided in Subsection 2.3 above, but before any payment shall be made to the holders of Series B-3 Preferred Stock or Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Series Seed Original Issue Price, plus any dividends declared but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series Seed Preferred Stock been converted into Common Stock pursuant to Section 4 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event (the amount payable pursuant to this sentence is hereinafter referred to as the "***Series Seed Liquidation Amount***"). If upon any such liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, the assets of the Corporation available for distribution to its stockholders shall be insufficient to pay the holders of shares of Series Seed Preferred Stock the full amount to which they shall be entitled under this Subsection 2.4, the holders of shares of Series Seed Preferred Stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full. The Series B-2 Liquidation Amount, Series B Liquidation Amount, Series A Liquidation Amount, and Series Seed Liquidation Amount are referred to collectively as the "***Liquidation Amount***."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.5 <u>Payments to Holders of Series B-3 Preferred Stock and Common Stock</u>. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or Deemed Liquidation Event, after the payment of all preferential amounts required to be paid to the holders of shares of Preferred Stock described above, the remaining assets of the Corporation available for distribution to its stockholders shall be distributed among the holders of shares of Series B-3 Preferred Stock and Common Stock, on a pro rata and pari passu basis, based on the number of shares held by each such holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6 <u>Deemed Liquidation Events</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6.1 <u>Definition</u>. Each of the following events shall be considered a "***Deemed Liquidation Event***" unless the holders of at least a majority of the outstanding shares of Preferred Stock (excluding the Series B-3 Preferred Stock), voting together as a single class and on an as-converted basis, and the holders of at least a majority of the outstanding shares of Series B-2 Preferred Stock, voting together as a single class and on an as-converted basis, elect otherwise by written notice sent to the Corporation at least 10 days prior to the effective date of any such event:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) a merger or consolidation in which:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Corporation is a constituent party; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a subsidiary of the Corporation is a
 constituent party and the Corporation issues shares of its capital stock pursuant to such
 merger or consolidation,

except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation; or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; (provided that, for the purpose of this Subsection 2.6.1, all shares of Common Stock issuable upon exercise of Options (as defined below) outstanding immediately prior to such merger or consolidation or upon conversion of Convertible Securities (as defined below) outstanding immediately prior to such merger or consolidation shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) (1) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary of the Corporation of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole, or the sale or disposition (whether by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation, or (2) the sale or disposition (whether by merger, consolidation or otherwise) of one or more subsidiaries of the Corporation if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6.2 <u>Effecting a Deemed Liquidation Event</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to Subsection 3.4, the Corporation shall not have the power to effect a Deemed Liquidation Event referred to in Subsection 2.6.1(a)(i) unless the agreement or plan of merger or consolidation for such transaction (the "***Merger Agreement***") provides that the consideration payable to the stockholders of the Corporation shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2. 2.3, 2.4 and 2.5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In the event of a Deemed Liquidation Event referred to in Subsection 2.6.1(a)(ii) or 2.6.1(b), if the Corporation does not effect a dissolution of the Corporation under the GBCC within ninety (90) days after such Deemed Liquidation Event, then (i) the Corporation shall send a written notice to each holder of Preferred Stock no later than the ninetieth (90th) day after the Deemed Liquidation Event advising such holders of their right (and the requirements to be met to secure such right) pursuant to the terms of the following clause; (ii) to require the redemption of such shares of Preferred Stock, and (iii) if the holders of at least a majority of the then outstanding shares of Preferred Stock so request in a written instrument delivered to the Corporation not later than one hundred twenty (120) days after such Deemed Liquidation Event, the Corporation shall use the consideration received by the Corporation for such Deemed Liquidation Event (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the Board of Directors of the Corporation), together with any other assets of the Corporation available for distribution to its stockholders, all to the extent permitted by Georgia law governing distributions to stockholders (the "***Available Proceeds***"), on the one hundred fiftieth (150th) day after such Deemed Liquidation Event, to redeem all outstanding shares of Preferred Stock at a price per share equal to the Liquidation Amount. Notwithstanding the foregoing, in the event of a redemption pursuant to the preceding sentence, if the Available Proceeds are not sufficient to redeem all outstanding shares of Preferred Stock, the Corporation shall ratably redeem each holder's shares of Preferred Stock to the fullest extent of such Available Proceeds, and shall redeem the remaining shares as soon as it may lawfully do so under Georgia law governing distributions to stockholders, all in accordance with the preferences and priorities set forth in Subsections 2.1, 2.2, 2.3, 2.4, and 2.5 above. Prior to the distribution or redemption provided for in this Subsection 2.6.2(b), the Corporation shall not expend or dissipate the consideration received for such Deemed Liquidation Event, except to discharge expenses incurred in connection with such Deemed Liquidation Event or in the ordinary course of business.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Amount Deemed Paid or Distributed</u>. The amount deemed paid or distributed to the holders of capital stock of the Corporation upon any such merger, consolidation, sale, transfer, exclusive license, other disposition or redemption shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. The value of such property, rights or securities shall be determined in good faith by the Board of Directors of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.6.3 <u>Allocation of Escrow and Contingent Consideration</u>. In the event of a Deemed Liquidation Event pursuant to Subsection 2.6.1 (a)(i), if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the "***Additional Consideration***"), the Merger Agreement shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the "***Initial Consideration***") shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2, 2.3, 2,4, and 2.5 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2, 2.3, 2.4, and 2.5 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Section 2.6.3, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Voting</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 <u>General</u>. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Except as provided by law or by the other provisions of these Articles of Incorporation, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted basis, shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provisions hereof, to notice of any shareholders' meeting in accordance with the Bylaws of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 <u>Election of Directors</u>. The holders of record of the shares of Series A Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the "***Series A Director***"), the holders of record of the shares of Series B Stock and Common Stock voting together as a single class on an as-converted basis, shall be entitled to elect one (1) director of the Corporation (the "***Series B and Common Director***"), the holders of record of shares of Series B-2 Preferred Stock, exclusively and as a separate class, shall be entitled to elect one (1) director of the Corporation (the "***Series B-2 Director***"), and the holders of record of the shares of Common Stock, exclusively and as a separate class, shall be entitled to elect two (2) directors of the Corporation (the "***Common Directors***"). Any director elected as provided in the preceding sentence may be removed without cause by, and only by, the affirmative vote of the holders of the shares of the class or series of capital stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders. The Series B-3 Preferred Stock shall not be entitled to elect any directors of the Corporation. If the holders of shares of Series B-2 Preferred Stock, Series B Stock, Series A Preferred Stock, or Common Stock, as the case may be, fail to elect a sufficient number of directors to fill all directorships for which they are entitled to elect directors, voting exclusively and as a separate class or together on an as-converted basis with respect to the Series B and Common Director, pursuant to the first sentence of this Subsection 3.2, then any directorship not so filled shall remain vacant until such time as the holders of the Series B-2 Preferred Stock, Series B Stock, Series A Preferred Stock, or Common Stock, as the case may be, elect a person to fill such directorship by vote or written consent in lieu of a meeting; and no such directorship may be filled by stockholders of the Corporation other than by the stockholders of the Corporation that are entitled to elect a person to fill such directorship, voting exclusively and as a separate class. The holders of record of the shares of Common Stock and of any other class or series of voting stock (including the Preferred Stock), exclusively and voting together as a single class, shall be entitled to elect the balance of the total number of directors of the Corporation. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the class or series entitled to elect such director shall constitute a quorum for the purpose of electing such director. Except as otherwise provided in this Subsection 3.2, a vacancy in any directorship filled by the holders of any class or series shall be filled only by vote or written consent in lieu of a meeting of the holders of such class or series or by any remaining director or directors elected by the holders of such class or series pursuant to this Subsection 3.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.3 <u>Voting Procedures</u>. Each holder of Series B Stock shall have seven (7) calendar days after receipt of notice (the "***Notice Period***") of any action subject to a vote of the holder. If a holder of Series B Stock fails to vote within the Notice Period, such failure will serve as authorization for the Board of Directors of the Corporation to vote such holder's shares in alignment with the majority of all voting holders of Series B Stock; provided, however, that if less than 33% of the stockholders of Series B Stock have voted within the Notice Period, the Notice Period will be extended by a minimum of seven (7) calendar days up to a maximum of fourteen (14) calendar days until at least 33% of holders of Series B Stock have voted on such action, and if, after the Notice Period has been extended up to the maximum fourteen (14) calendar days, less than 33% of the holders of Series B Stock have voted on such action, the Board of Directors of the Corporation shall be authorized to vote on such action on behalf of such shares that failed to vote in the Board of Directors of the Corporation's discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4 <u>Preferred Protective Provisions</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4.1 Series B-2 Preferred Stock Protective Provisions. So long as the Series B-2 Preferred Stock remain outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Articles of Incorporation or Bylaws of the Corporation) the written consent or affirmative vote of the holders of the majority of the issued and outstanding shares of Series B-2 Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) alter the rights, powers or privileges of the Series B-2 Preferred Stock set forth in the Articles of Incorporation or Bylaws of the Corporation, as then in effect, in a manner that adversely affects such rights, powers or privileges of the Series B-2 Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) increase or decrease the authorized number of shares of Series B-2 Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4.2 Series B Preferred Stock Protective Provisions. So long as the Series B Preferred Stock remain outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Articles of Incorporation or Bylaws of the Corporation) the written consent or affirmative vote of the holders of the majority of the issued and outstanding shares of Series B Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) alter the rights, powers or privileges of the Series B Preferred Stock set forth in the Articles of Incorporation or Bylaws of the Corporation, as then in effect, in a manner that adversely affects such rights, powers or privileges of the Series B Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) increase or decrease the authorized number of shares of Series B Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4.3 Series A Preferred Stock Protective Provisions. So long as the Series A Preferred Stock remain outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Articles of Incorporation or Bylaws of the Corporation) the written consent or affirmative vote of the holders of the majority of the issued and outstanding shares of Series A Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) alter the rights, powers or privileges of the Series A Preferred Stock set forth in the Articles of Incorporation or Bylaws of the Corporation, as then in effect, in a manner that adversely affects such rights, powers or privileges of the Series A Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) increase or decrease the authorized number of shares of Series A Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.4.4 Series Seed Preferred Stock Protective Provisions. So long as the Series Seed Preferred Stock remain outstanding, the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Articles of Incorporation or Bylaws of the Corporation) the written consent or affirmative vote of the holders of the majority of the issued and outstanding shares of Series Seed Preferred Stock, given in writing or by vote at a meeting, consenting or voting (as the case may be) separately as a class, and any such act or transaction entered into without such consent or vote shall be null and void ab initio, and of no force or effect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) alter the rights, powers or privileges of the Series Seed Preferred Stock set forth in the Articles of Incorporation or Bylaws of the Corporation, as then in effect, in a manner that adversely affects such rights, powers or privileges of the Series Seed Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) increase or decrease the authorized number of shares of Series Seed Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Optional Conversion</u>.

The holders of Preferred Stock shall have conversion rights as follows (the "***Conversion Rights***").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 <u>Right to Convert</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.1 <u>Conversion Ratio</u>. Each share of Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and non-assessable shares of Common Stock as is determined by dividing the applicable Original Issue Price by the applicable Conversion Price (as defined below) in effect at the time of conversion. The "***Series B-3 Conversion Price***" shall initially be equal to the Series B-3 Original Issue Price, the "***Series B-2 Conversion Price***" shall initially be equal to the Series B-2 Original Issue Price, the "***Series B Conversion Price***" shall initially be equal to the Series B Original Issue Price, the "***Series A Conversion Price***" shall initially be equal to the Series A Original Issue Price, and the "***Series Seed Conversion Price***" shall initially be equal to the Series Seed Conversion Price. The Series B-3 Conversion Price, the Series B-2 Conversion Price, the Series B Conversion Price, the Series A Conversion Price and the Series Seed Conversion Price are collectively referred to herein as the "***Conversion Price".*** Each such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1.2 <u>Termination of Conversion Rights</u>. In the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the last full day preceding the date fixed for the payment of any such amounts distributable on such event to the holders of Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 <u>Fractional Shares</u>. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair market value of a share of Common Stock as determined in good faith by the Board of Directors of the Corporation. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3 <u>Mechanics of Conversion</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.1 <u>Notice of Conversion</u>. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall (a) provide written notice to the Corporation's transfer agent at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent) that such holder elects to convert all or any number of such holder's shares of Preferred Stock and, if applicable, any event on which such conversion is contingent and (b), if such holder's shares are certificated, surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent). Such notice shall state such holder's name or the names of the nominees in which such holder wishes the shares of Common Stock to be issued. If required by the Corporation, any certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or his, her or its attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such notice and, if applicable, certificates (or lost certificate affidavit and agreement) shall be the time of conversion (the "***Conversion Time***"), and the shares of Common Stock issuable upon conversion of the specified shares shall be deemed to be outstanding of record as of such date. The Corporation shall, as soon as practicable after the Conversion Time (i) issue and deliver to such holder of Preferred Stock, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (ii) pay in cash such amount as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (iii) pay all declared but unpaid dividends on the shares of Preferred Stock converted.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.2 <u>Reservation of Shares</u>. The Corporation shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to these Articles of Incorporation. Before taking any action which would cause an adjustment reducing the applicable Conversion Price below the then par value of the shares of Common Stock issuable upon conversion of such series of Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and non-assessable shares of Common Stock at such adjusted Conversion Price.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.3 <u>Effect of Conversion</u>. All shares of Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Subsection 4.2 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of such series of Preferred Stock accordingly.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.4 <u>No Further Adjustment</u>. Upon any such conversion, no adjustment to the applicable Conversion Price shall be made for any declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3.5 <u>Taxes</u>. The Corporation shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4 <u>Definitions</u>. For purposes of this Articles of Incorporation, the following definitions shall apply:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) ****"***Option***" shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) ****"***Series B-2 Original Issue Date***" shall mean the date on which the first share of Series B-2 Preferred Stock was issued.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) "***Convertible Securities***" shall mean any evidence of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5 <u>Adjustment for Stock Splits and Combinations</u>. If the Corporation shall at any time or from time to time after the Series B-2 Original Issue Date effect a subdivision of the outstanding Common Stock, the applicable Conversion Price in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Series B-2 Original Issue Date combine the outstanding shares of Common Stock, the applicable Conversion Price in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding, Any adjustment under this Subsection 4.5 shall become effective at the close of business on the date the subdivision or combination becomes effective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6 <u>Adjustment for Certain Dividends and Distributions</u>. In the event the Corporation at any time or from time to time after the Series B-2 Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the applicable Conversion Price in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

Notwithstanding the foregoing, (a) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the applicable Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price shall be adjusted pursuant to this Subsection 4.6 as of the time of actual payment of such dividends or distributions; and (b) that no such adjustment shall be made if the holders of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares or Common Stock as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7 <u>Adjustments for Other Dividends and Distributions</u>. In the event the Corporation at any time or from time to time after the Series B-2 Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event the holders of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property as they would have received if all outstanding shares of Preferred Stock had been converted into Common Stock on the date of such event.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.8 <u>Adjustment for Merger or Reorganization, etc</u>. Subject to the provisions of Subsection 2.6, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Corporation in which the Common Stock (but not the Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Subsections 4.5, 4.7 or 4.8), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of Preferred Stock immediately prior to such reorganization, recapitalization, reclassification, consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Corporation) shall be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the holders of the Preferred Stock, to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of the Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.9 <u>Certificate as to Adjustments</u>. Upon the occurrence of each adjustment or readjustment of the applicable Conversion Price pursuant to this Section 4, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than ten (10) days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which the Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of Preferred Stock (but in any event not later than ten (10) days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (i) the applicable Conversion Price then in effect, and (ii) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of Preferred Stock.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.10 <u>Notice of Record Date</u>. In the event:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Corporation shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or right, and the amount and character of such dividend, distribution or right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent at least ten (10) days prior to the record date or effective date for the event specified in such notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Mandatory Conversion</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1 <u>Trigger Events</u>. Upon (a) the closing of the sale of shares of Common Stock to the public, in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $20,000,000.00 of proceeds, net of the underwriting discount and commissions, to the Corporation, or (b) with respect to the Series B-2 Preferred Stock only, 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 B-2 Preferred Stock, voting as a single class, (c) with respect to the Series B Stock only, 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 B Stock, voting as a single class, (d) with respect to the Series A Preferred Stock only, 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 the Series A Preferred Stock, voting as a single class, or (e) with respect to the Series Seed Preferred Stock only, 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 the Series Seed Preferred Stock, voting as a single class (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the "***Mandatory Conversion Time***"), (i) all outstanding shares of Series B-2 Preferred Stock, Series B Stock, Series A Preferred Stock, and/or Series Seed Preferred Stock, as applicable, shall automatically be converted into shares of Common Stock, at the then effective conversion rate and (ii) such shares may not be reissued by the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2 <u>Procedural Requirements</u>. All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5. Such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock shall surrender his, her or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice. If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or by his, her or its attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to Subsection 5.1, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Subsection 5.2. As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall (a) issue and deliver to such holder, or to his, her or its nominees, a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof and (b) pay cash as provided in Subsection 4.2 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock accordingly.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Redeemed or Otherwise Acquired Shares</u>. Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately cancelled and retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights granted to the holders of Preferred Stock following redemption or other acquisition by the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. <u>Preemptive Rights</u>. No stockholder of the Corporation has a right to purchase shares of capital stock of the Corporation sold or issued by the Corporation except to the extent that such a right may from time to time be set forth in a written agreement between the Corporation and the stockholder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. <u>Waiver</u>. Any of the rights, powers, preferences and other terms of any series of Preferred Stock set forth herein may be waived on behalf of all holders of said series by the affirmative written consent or vote of the holders of at least a majority of the shares of said series then outstanding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. <u>Notices</u>. Any notice required or permitted by the provisions of this Article IV to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation, or given by electronic communication in compliance with the provisions of the GBCC, and shall be deemed sent upon such mailing or electronic transmission.

**ARTICLE V**

Subject to any additional vote required by these Articles of Incorporation or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

**ARTICLE VI**

Subject to any additional vote required by these Articles of Incorporation, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

**ARTICLE VII**

Meetings of stockholders may be held within or without the State of Georgia, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Georgia at such place or places as may be designated from time to time by the Board of Directors of the Corporation or in the Bylaws of the Corporation.

**ARTICLE VIII**

To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the GBCC or any other law of the State of Georgia is amended after approval by the stockholders of this Article VIII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the GBCC as so amended.

Any repeal or modification of the foregoing provisions of this Article VIII by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

**ARTICLE IX**

The following indemnification provisions shall apply to the persons enumerated below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. <u>Right to Indemnification of Directors and Officers</u>. The Corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person (an "***Indemnified Person***") who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "***Proceeding***"), by reason of the fact that such person, or a person for whom such person is the legal representative, is or was a director or officer of the Corporation or, while a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys' fees) reasonably incurred by such Indemnified Person in such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 3 of this Article IX, the Corporation shall be required to indemnify an Indemnified Person in connection with a Proceeding (or part thereof) commenced by such Indemnified Person only if the commencement of such Proceeding (or part thereof) by the Indemnified Person was authorized in advance by the Board of Directors of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. <u>Prepayment of Expenses of Directors and Officers</u>. The Corporation shall pay the expenses (including attorneys' fees) incurred by an Indemnified Person in defending any Proceeding in advance of its final disposition, provided, however, that, to the extent required by law, such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the Indemnified Person to repay all amounts advanced, including any costs and expenses received pursuant to Section 3 of this Article IX below, if it should be ultimately determined that the Indemnified Person is not entitled to be indemnified under this Article IX or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. <u>Claims by Directors and Officers</u>. If a claim for indemnification or advancement of expenses under this Article IX is not paid in full within 30 days after a written claim therefor by the Indemnified Person has been received by the Corporation, the Indemnified Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim. In any such action the Corporation shall have the burden of proving that the Indemnified Person is not entitled to the requested indemnification or advancement of expenses under applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. <u>Indemnification of Employees and Agents</u>. The Corporation may indemnify and advance expenses to any person who was or is made or is threatened to be made or is otherwise involved in any Proceeding by reason of the fact that such person, or a person for whom such person is the legal representative, is or was an employee or agent of the Corporation or, while an employee or agent of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, limited liability company, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorney's fees) reasonably incurred by such person in connection with such Proceeding. The ultimate determination of entitlement to indemnification of persons who are non-director or officer employees or agents shall be made in such manner as is determined by the Board of Directors of the Corporation in its sole discretion. Notwithstanding the foregoing sentence, the Corporation shall not be required to indemnify a person in connection with a Proceeding initiated by such person if the Proceeding was not authorized in advance by the Board of Directors of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. <u>Advancement of Expenses of Employees and Agents</u>. The Corporation may pay the expenses (including attorney's fees) incurred by an employee or agent in defending any Proceeding in advance of its final disposition on such terms and conditions as may be determined by the Board of Directors of the Corporation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. <u>Non-Exclusivity of Rights</u>. The rights conferred on any person by this Article IX shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of these Articles of Incorporation, the Bylaws, or any agreement, vote of shareholders or disinterested directors or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. <u>Other Indemnification</u>. The Corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, officer or employee of another Corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise shall be reduced by any amount such person may collect as indemnification from such other Corporation, partnership, limited liability company, joint venture, trust, organization or other enterprise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. <u>Insurance</u>. The Board of Directors of the Corporation may, to the full extent permitted by applicable law as it presently exists, or may hereafter be amended from time to time, authorize an appropriate officer or officers to purchase and maintain at the Corporation's expense insurance: (a) to indemnify the Corporation for any obligation which it incurs as a result of the indemnification of directors, officers and employees under the provisions of this Article IX; and (b) to indemnify or insure directors, officers and employees against liability in instances in which they may not otherwise be indemnified by the Corporation under the provisions of this Article IX.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. <u>Amendment or Repeal</u>. Any repeal or modification of the foregoing provisions of this Article IX shall not adversely affect any right or protection hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification. The rights provided hereunder shall inure to the benefit of any Indemnified Person and such person's heirs, executors and administrators.

**ARTICLE X**

The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An "***Excluded Opportunity***" is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Series B-3 Preferred Stock, Series B-2 Preferred Stock, Series B Stock, Series A Preferred Stock, Series Seed Preferred Stock, or any partner, member, director, stockholder, employee or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, "***Covered Persons***"), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person's capacity as a director of the Corporation.

**ARTICLE XI**

Unless the Corporation consents in writing to the selection of an alternative forum, the Superior Court or Business Court of Fulton County in the State of Georgia ("***Court***") shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the GBCC or the Corporation's Articles of Incorporation or Bylaws or (iv) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (i) through (iv) above, any claim as to which the Court determines that there is an indispensable party not subject to the jurisdiction of the Court (and the indispensable party does not consent to the personal jurisdiction of the Court within ten (10) days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court, or for which the Court does not have subject matter jurisdiction. If any provision or provisions of this Article XI shall be held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then, to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article XI (including, without limitation, each portion of any sentence of this Article XI containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be affected or impaired thereby.

**ARTICLE XII**

To the fullest extent permitted under the Code, any action which is required or permitted to be taken at a meeting of the shareholders may be taken by written consent without a meeting and without prior notice by shareholders having not less than the minimum number of votes that would be necessary to take such action at a meeting at which all shares entitled to vote thereon were present and voted. Such signed and dated written consent must be filed with the Secretary of the Corporation to be kept in the corporate minute book, whether done before or after the action so taken, but in no event later than sixty (60) days after the earliest dated consent delivered in accordance with this section. Delivery made to the Secretary of the Corporation shall be by hand or by certified or registered mail, return receipt requested. When corporate action is taken without a meeting by less than unanimous written consent, notice shall be given to those shareholders who have not consented in writing within ten (10) days after such action is taken. A shareholders' consent to action taken without meeting may be in electronic form and delivered by electronic means.

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| | | |
|:---|:---|:---|
| ![](tm2310287d1_ex2-3img003.jpg) | **OFFICE OF SECRETARY OF STATE <br> CORPORATIONS DIVISION** <br> 2 Martin Luther King Jr. Dr. SE <br> Suite 313 West Tower <br> Atlanta, Georgia 30334 <br> (404) 656-2817 <br> sos.ga.gov | \*Electronically Filed\*<br> Secretary of State<br> Filing Date: 1/24/2023 9:19:07 AM |
| Secretary of State |  |  |

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**TRANSMITTAL INFORMATION FORM <br> RESTATEMENT**

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;1. | **GROUNDFLOOR FINANCE INC.** | **GROUNDFLOOR FINANCE INC.** | **GROUNDFLOOR FINANCE INC.** | **GROUNDFLOOR FINANCE INC.** |
|  | Entity Name | Entity Name | Entity Name | Entity Name |
|  | **14073197** | **14073197** | **14073197** | **14073197** |
|  | Entity Control No. | Entity Control No. | Entity Control No. | Entity Control No. |
| &nbsp;&nbsp;2. | **Groundfloor Finance Inc.** | **Groundfloor Finance Inc.** | **Groundfloor Finance Inc.** | **Groundfloor Finance Inc.** |
|  | Name of Person Filing Restatement | Name of Person Filing Restatement | Name of Person Filing Restatement | Name of Person Filing Restatement |
|  | **600 Peachtree Street NE , Ste. 810** | **Atlanta** | **GA** | **30308** |
|  | Address | City | State | Zip Code |
| &nbsp;&nbsp;3. | Submitted with this filing is a filing fee of $20.00 payable to "Secretary of State". Filing fees are non-refundable. | Submitted with this filing is a filing fee of $20.00 payable to "Secretary of State". Filing fees are non-refundable. | Submitted with this filing is a filing fee of $20.00 payable to "Secretary of State". Filing fees are non-refundable. | Submitted with this filing is a filing fee of $20.00 payable to "Secretary of State". Filing fees are non-refundable. |
|  | I understand that this Transmittal Information Form is included as part of my filing, and the information on this form will be entered in the Secretary of State business entity database. I certify that the above information is true and correct to the best of my knowledge. | I understand that this Transmittal Information Form is included as part of my filing, and the information on this form will be entered in the Secretary of State business entity database. I certify that the above information is true and correct to the best of my knowledge. | I understand that this Transmittal Information Form is included as part of my filing, and the information on this form will be entered in the Secretary of State business entity database. I certify that the above information is true and correct to the best of my knowledge. | I understand that this Transmittal Information Form is included as part of my filing, and the information on this form will be entered in the Secretary of State business entity database. I certify that the above information is true and correct to the best of my knowledge. |
|  | **Nick Bhargava** |  |  |  |
|  | Signature of Authorized Person | Signature of Authorized Person | Signature of Authorized Person | Signature of Authorized Person |

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## Ex1A-3

**Exhibit 3.1**

**GROUNDFLOOR REAL ESTATE 1, LLC**

**INVESTOR AGREEMENT**

Effective: ______________, 2023

The following terms constitute a binding agreement (this "Agreement") between you and GROUNDFLOOR REAL ESTATE 1, LLC (the "Company," "we," or "us"). This Agreement, including the Terms and Conditions of Investment attached as Appendix A (the "Terms and Conditions"), each as amended from time to time, will govern all of your purchases of any and all limited recourse obligations ("LROs") from the Company.

We have filed with the Securities and Exchange Commission (the "SEC") an offering statement on Form 1-A (the "Offering Statement", including Part II thereof which is referred to generally as the "Offering Circular"). The offering of each series of LROs will be described in a corresponding Offering Circular (as it may be amended by post-qualification amendment (or "PQA") or supplemented from time to time) that will be available on the web-based investment platform at <u>www.groundfloor.com</u> (the "Groundfloor Platform") owned and operated by the Company. Capitalized terms used, but not otherwise defined, below have the meaning set forth in the Offering Circular (as it may be amended by PQA or supplemented from time to time).

Before purchasing any series of LROs, please read this Agreement, including the Terms and Conditions, the current terms of service (the "Terms of Service") on the Groundfloor Platform, and the current privacy policy (the "Privacy Policy") on the Groundfloor Platform and the Offering Circular (including any supplements or PQAs) and limited recourse obligation agreement (the "LRO Agreement") relating to the particular series of LROs you wish to purchase. We refer, collectively, to this Agreement, including the Terms and Conditions, the Terms of Service, the Privacy Policy, and each applicable LRO Agreement as the "Investment Documents." While they are subject to change, as described below, we advise you to print and retain a copy of the Investment Documents as well as any Offering Circular (including any supplements or PQAs) applicable to the LROs you purchase for your records. By signing electronically below, you agree to the following terms together with the Terms and Conditions and the Terms of Service, consent to the Privacy Policy, agree to transact business with us and to receive communications relating to the LROs electronically, and agree to have any dispute with us resolved by binding arbitration as set forth in <u>Section 21</u> below.

In consideration of the covenants, agreements, representations and warranties hereinafter set forth, and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** **Purchase of LROs.** Subject to the terms and conditions of this Agreement, we will provide you the opportunity through the Groundfloor Platform:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· To review requests for commercial real estate loans that we have arranged with legal entities (each, a
"Borrower") seeking financing for real estate development projects (each, a "Project"); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· To purchase LROs with minimum denominations of $10 through the Groundfloor Platform, each such series
of LRO associated with, and dependent upon payment of, a specific commercial loan made by us to finance a Project (a "Loan").

We will commence the offering of each series of LROs promptly after the date the relevant Offering Circular (or PQA) is qualified by posting a separate landing page on the Groundfloor Platform corresponding to each particular Loan and Project (each, a "Project Summary"). The offering of each series of LROs covered by a particular Offering Circular (or PQA) will remain open until the earlier of (a) 30 days, unless extended, or (b) 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. A commitment to purchase LROs becomes irrevocable following expiration of the Withdrawal Period (as defined below). A commitment to purchase LROs made after expiration of the Withdrawal Period, if any, will be irrevocable when authorized and may not be withdrawn. We will issue the corresponding series of LROs as soon as possible (typically within five days) after the expiration of the Withdrawal Period (and once the offering is fully subscribed with irrevocable funding commitments). Unless previously advanced, the closing and funding of the Loan will occur on the original issue date of the LROs. You will be notified within two business days (by email and through a notice on the Project Summary) when the LROs have been issued. The email notice will include confirmation of the original issue date, final payment date, and extended payment date for such series of LROs (as well as information on how to access the final version of the LRO Agreement through the Groundfloor Platform), an active hyperlink to the uniform resource locator (URL) where the final Offering Statement (which includes the final Offering Circular, including any supplements or PQAs) may be obtained via EDGAR, and the contact information where a request for a copy of the final Offering Circular (including any supplements or PQAs) can be sent.

If the offering of a series of LROs is abandoned or withdrawn before, or not fully subscribed with irrevocable funding commitments by, the end of the Offering Period, we will notify you and promptly release committed funds and make them available in your funding accounts.

As discussed in more detail below, LROs are issued in electronic form on the Groundfloor Platform, and, other than the LRO Agreement, you will not receive a physical instrument. You can view a record of the LROs you own and the form of your LRO Agreement online and print copies for your records by visiting your secure, password-protected webpage (referred to as the "Investor Dashboard" in the "My Account" section of the Groundfloor Platform). Investors will be required to hold their LROs through the Groundfloor Platform's electronic LRO register.

Investor FBO Accounts. You must register on the Groundfloor Platform and create a funding account maintained on the Groundfloor Platform before you can purchase any LROs. This funding account is a non-interest bearing demand deposit pooled account currently established at the FBO Servicer "for the benefit of" all Groundfloor investors (the "Investor FBO Account"). Currently, Wells Fargo Bank acts as the FBO Servicer for the Investor FBO Account. We may change the identity of the FBO Servicer where the Investor FBO Account is maintained at any time without prior notice to you (we will post the name and address of the institution where we maintain the Investor FBO Account on the Groundfloor Platform and notify you by email in the event the institution where the Investor FBO Account is maintained is changed). You have no direct relationship with the FBO Servicer in connection with the Investor FBO Account. We are the owner of the Investor FBO Account; however, we disclaim any economic interest in the assets in the Investor FBO Account and you hereby disclaim any right, title or interest in the assets of any other investor in either Investor FBO Account.

The Investor FBO Account is FDIC-insured on a "pass through" basis to you, subject to applicable limits. This means that your balance is protected by FDIC insurance up to the limits established by the FDIC. Other funds that you have on deposit with the FBO Servicer, for example, may count against any applicable FDIC insurance limits. While your funds are comingled with funds from other investors, your funds are separately accounted for on separate ledgers maintained for the Company. None of the Company's corporate funds, or any corporate funds of any of our affiliated companies, are ever held or commingled with the assets of investors in the Investor FBO Account. There are no restrictions on funds held in the funding account, and we and our affiliated companies disclaim any economic interest in such funds.

You may transfer funds into your Groundfloor account by authorizing an electronic transfer using the ACH network from your designated and verified bank account (or other means that may be permitted by the Funds Transfer Agent (as defined below)) to its funding account. Your pro rata share of any LRO Payments are also deposited directly into your funding account. Currently, we have contracted with Dwolla, Inc. to be the funds transfer intermediary among investors, the Groundfloor Platform, and accounts controlled by us (the "Funds Transfer Agent"). We may change the identity of the Funds Transfer Agent at any time without prior notice to you.

You can view your cash positions in your funding account (i.e., the Investor FBO Account), through an Investor Dashboard maintained on the Groundfloor Platform. These website features are effectively virtual sub-accounts. These recordkeeping sub-accounts are purely administrative and reflect balances and transactions concerning the funds in the Investor FBO Account. The Investor Dashboard allows you to track and report funds committed to purchase LROs, as well as payments received from us (and other affiliated companies) related to LROs previously purchased, and to withdraw non-binding commitments (prior to expiration of the applicable Withdrawal Period) or uncommitted funds from your Groundfloor account.

Your funds stay in the Investor FBO Account indefinitely unless you takes steps to transfer non-irrevocably committed funds out of your funding account. Such funds may include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· funds in your sub-account never committed to purchase LROs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· funds committed to the purchase of LROs (before they become irrevocably committed to purchase LROs); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· payments received related to LROs previously purchased.

You must transfer funds held in your funding account to your own bank account to utilize the funds in any way other than investment in LROs. Upon request, we will cause the Funds Transfer Agent to transfer funds in the Investor FBO Account to your verified bank account by ACH transfer, provided that such funds are not irrevocably committed to the purchase of LROs. You may transfer funds out of your Groundfloor account at any time (provided that such funds are not irrevocably committed to the purchase of LROs). You may withdraw non-binding commitments at any time before the expiration of the Withdrawal Period by accessing your Investor Dashboard and selecting "request withdrawal". Funds withdrawn before the expiration of the Withdrawal Period will be released and made available in your funding account typically within 48 hours. You may withdraw uncommitted funds by accessing your Investor Dashboard on the Groundfloor Platform and selecting the option to move uncommitted funds held in the funding account back to your personal bank account. This transfer typically takes three to five business days to complete.

Non-Binding Commitments. You may purchase a LRO by opening the Project Summary on the Groundfloor Platform and indicating the Purchase Amount you want to invest (in denominations of $10 and integral multiples of $10), subject to the maximum investment amount, if any, imposed on the offering. You will then be prompted to confirm the "commitment" to purchase such amount of that series of LROs. After such confirmation, the commitment serves as a pre-authorization to debit your Groundfloor account. If you do not have sufficient funds in your Groundfloor account, you will be prompted to link your bank account so the appropriate amount may be transferred to you funding account via ACH.

Funds that have been used to commit to this non-binding commitment remain in your Groundfloor account but are set aside for the indicated purchase. No money is transferred from your Groundfloor account (or the Groundfloor Investor FBO Account) at this stage. The commitments do not represent binding obligations and will not become irrevocable until the expiration of the Withdrawal Period. You may withdraw your non-binding commitments at any time before the expiration of the Withdrawal Period by accessing your Investor Dashboard and selecting "request withdrawal." Funds you withdraw from your Groundfloor account before the expiration of the Withdrawal Period will be released and made available in the your Groundfloor account typically within 48 hours, after which time you may elect to transfer such funds to your bank account or make a commitment towards a different Project.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** **The Withdrawal Period**. Once (i) we receive sufficient non-binding commitments to fully subscribe the Loan and (ii) all of the financing conditions have been satisfied (other than the completion of the title search and obtaining valid title insurance), we will notify (by email and through a notice on the Project Summary) those investors who have completed non-binding commitments for the Project that they have 48 hours to withdraw their funds (the "Withdrawal Period"). Commitments may be withdrawn prior to the expiration of the Withdrawal Period by accessing the Investor Dashboard and selecting "request withdrawal." Commitments not withdrawn before the expiration of the 48-hour Withdrawal Period will automatically convert into binding and irrevocable commitments to purchase the LROs relating to the corresponding Project and cannot be withdrawn or committed to purchase additional LROs. Commitments to purchase LROs made after expiration of the Withdrawal Period, if any, are irrevocable when authorized and may not be withdrawn.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.** **Issuance of LROs**. We will issue the corresponding series of LROs as soon as possible (typically within five days) after the expiration of the Withdrawal Period (and once the offering is fully subscribed with irrevocable funding commitments). LROs are issued electronically, in "book entry" form, by means of registration of each investor's ownership in our records. Unless previously advanced, the closing and funding of the Loan will occur on the original issue date of the LROs. You will be notified within two business days (by email and through a notice on the Project Summary) when the LROs have been issued. The email notice will include confirmation of the original issue date, final payment date, and extended payment date for such series of LROs (as well as information on how to access the final version of the LRO Agreement through the Groundfloor Platform), an active hyperlink to the uniform resource locator (URL) where the final Offering Statement (which includes the final Offering Circular, including any supplements or PQAs) may be obtained via EDGAR, and the contact information where a request for a copy of the final Offering Circular (including any supplements or PQAs) can be sent. (You may also access this information on your Investor Dashboard.)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.** **Abandonment and Withdrawn Offerings**. We may abandon or withdraw an offering of a particular series of LROs at any time prior to issuance. For example, we will abandon the offering of a series of LROs in the event the Borrower withdraws its funding request or in the event it is not fully subscribed by the end of the Offering Period. In addition, if we determine prior to issuance of the corresponding series of LROs that the Borrower's financing request contains materially inaccurate information (including unintended inaccuracies, inaccuracies resulting from errors by us, or inaccuracies resulting from changes in a Borrower's financial position, experience, or credit profile or was posted illegally or in violation of any order, writ, injunction or decree of any court or governmental instrumentality, for purposes of fraud or deception, etc.), we would abandon the offering of the corresponding series of LROs.

We will notify you by email if we abandon an offering of one or more series of LROs to which you have made a commitment. In the event we do so, we will promptly (but under no circumstances more than 48 hours following our determination to abandon the offering) release all funds (without interest) committed to purchase that series; after which, you may elect to transfer such funds to your bank account or make a commitment to purchase a different series of LROs.

Offerings are typically withdrawn due to the need to correct or modify specific disclosures about the terms of the related series of LROs and the series of LROs that correspond to Loans that are withdrawn are typically re-qualified at a later date. So we would withdraw (rather than abandon) an offering of LROs in the event we are required to amend or update material information contained in the Offering Circular or any PQA related to the specific terms of the LROs (or the corresponding Loan). More often than not, we withdraw Loans from an offering before commencing the Offering Period for the corresponding LROs. However, if commitments have been made towards a series that is withdrawn, we will promptly (but under no circumstances more than 48 hours following our determination to withdraw the offering) release all funds (without interest) committed to purchase that series; after which, you may elect to transfer such funds to your bank account or make a commitment to purchase a different series of LRO.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.** **Terminated or Suspended Offerings**. We may be required to terminate or suspend on-going offerings of LROs in the event we are required to amend or update certain material information about the Company contained in the Offering Circular or any supplements or PQAs. Although we are permitted to provide updates about the Company by filing supplements with the SEC, any facts or events arising after qualification which, individually or in the aggregate, represent a fundamental change in the information set forth in these disclosures may only be updated or revised though filing and qualifying a new Offering Statement or a PQA with the SEC. Thus, in the event we are unable to use a supplement to update our disclosures adequately for these fundamental changes (such as to update to outdated factual information), we may be forced to terminate or suspend our offerings. Similarly, we may be required suspend offerings to address comments that may be raised by the SEC during the offering process.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.** **Making Commitments through Groundfloor Accounts**. You fund commitments through your Groundfloor funding account or by direct ACH transfer from your bank account to your Groundfloor account. You fund your Groundfloor account by linking your bank account and transferring money via ACH transfer, as provided by our Funds Transfer Agent. For example, when you register for an account and then elect to purchase a LRO, you will first be prompted to link your bank account and transfer funds to your Groundfloor account in order to complete the purchase. Groundfloor may allow, to the extent permitted by applicable law, you to fund your Groundfloor account through other means, such as PayPal, BitPay, Google Wallet, or other online payment systems. If a funds transfer is required before completion of a commitment, the commitment will be completed as one action if there are sufficient funds in the bank account. We are not responsible for any fees you may be charged by your banking institution as a result of any transaction involving your Groundfloor accounts, including in which there are insufficient funds available to complete the transaction.

Once you confirm the non-binding purchase order for a particular series of LROs, the funds allocated for such investment are set aside in your funding account. Commitments made prior to the expiration of the Withdrawal Period may be withdrawn at any time. Commitments made after expiration of the Withdrawal Period, if any, are irrevocable when authorized and may not be withdrawn. If you have insufficient funds in your funding account when making a commitment, you will be prompted to fund your Groundfloor account with the difference via ACH transfer.

Commitments not otherwise withdrawn or made after the expiration of the Withdrawal Period are irrevocable. Irrevocably committed funds may not be withdrawn from your funding account or committed to other Projects, unless we abandon or withdraw the offering of the series of LROs (or terminate or suspend our offering generally), each as described above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.** **Terms of the LROs**. Each series of LROs will have the terms described in the Offering Circular (or PQA) covering the sale thereof and the specific LRO Agreement relating to such LROs. You may access the Offering Circular (including any supplements or PQAs) and LRO Agreement through the Groundfloor Platform. LROs are also subject to this Agreement, including the Terms and Conditions, the Terms of Service, and the Privacy Policy. The material terms of the Loan corresponding to each series of LROs (including, interest rate, maturity, lien position and repayment terms) will be set forth in the Loan Agreement and related form of Promissory Note, the forms of which are exhibits to the Offering Statement of which such Offering Circular is a part. These terms will also be summarized in the corresponding Project Summary (which is part of the Offering Circular (or PQA) and available on the Groundfloor Platform).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.** **Your Covenants and Acknowledgments**. You agree that you have no right to, and shall not, make any attempt, directly or through any third party, to take collection action with respect to any Loan Payments or Loan. YOU ACKNOWLEDGE THAT BORROWERS MAY DEFAULT ON THEIR LOAN AND THAT SUCH DEFAULTS WILL REDUCE THE AMOUNTS, IF ANY, YOU MAY RECEIVE UNDER THE TERMS OF ANY LROs YOU HOLD ASSOCIATED WITH SUCH LOANS. YOU FURTHER ACKNOWLEDGE THAT THE COMPANY'S ENFORCEMENT OF ITS RIGHTS AND REMEDIES WITH RESPECT TO THE LOAN DURING ANY DEFAULT MIGHT NOT RESULT IN THE COMPANY RECOVERING THE FULL AMOUNT OF THE CORRESPONDING LOAN PAYMENTS. You and the Company agree that the LROs are intended to be indebtedness of the issuer that have original issue discount ("OID") for U.S. federal income tax purposes. You agree that you will not take any position inconsistent with such treatment of the LROs for tax, accounting, or other purposes, unless required by law. You further acknowledge that the LROs will be subject to the OID rules of the Internal Revenue Code of 1986, as amended, as described in the Offering Circular (as it may be amended by PQA or supplemented from time to time) for such LROs. You acknowledge that you are prepared to bear the risk of loss of your entire Purchase Amount for any LROs you purchase.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.** **Service and Collection of Loan Payments**. We (or our designated agent) will, both before and after default, administer and service the Loan, and service all LROs. In enforcing the Loan and the Borrower's obligations under the terms of the Loan, we (or our designated agent) may, in our discretion, utilize affiliated or unaffiliated third-party loan servicers, collection agencies or other agents or contractors.

When we undertake administration, servicing, collection and enforcement activities on a Loan, we do so in each particular circumstance, in accordance with specific servicing standards set forth in the LRO Agreement, with the goal of maximizing the amount of the LRO Payments to be paid to investors prior to termination of our limited payment obligation thereunder. The LRO Agreement provides that, in administering, servicing, collecting and enforcing a Loan, we (or our agent) will use commercially reasonable efforts prior to the extended payment date to pursue, either directly or through our representatives, (a) the collection of any amounts owing to us under the Loan Documents (to the extent constituting Loan Payments) and (b) the exercise of our remedies upon a breach or default under the Loan Documents or in order to avoid the occurrence thereof, in each case, to the extent warranted in our business judgment and consistent with reasonable commercial standards of fair dealing and in accordance with industry standards customary for loans of the same general type and character as the Loans in order to maximize the amount of LRO Payments to be made under the terms of the LRO.

Notwithstanding these broad powers, you and we acknowledge in the LRO Agreement that, in circumstances other than Borrower default or prepayment, the modification of a term of the corresponding Loan could be deemed to be a material modification of the terms of your LRO. In such instance, it is possible that the modified series of LROs would constitute a new security under the Securities Act and under applicable State securities laws. You and we acknowledge in the LRO Agreement that, before implementing any modification to the terms of the corresponding Loan (other than in circumstances involving Borrower default or prepayment) that would cause your LROs (as modified) to constitute a new security, the Company will be required to either register the offer of the modified LRO under Section 5 of the Securities Act and under applicable State securities laws or find an exemption from such registration requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.** **Fees**. We do not currently charge investors any fees in connection with our offerings or with respect to LRO Payments. We do not currently charge investors any fees for the use of the Groundfloor Platform.

We will use a Funds Transfer Agent to process electronic payments to and from you as a purchaser of LROs. We pass through these expenses to investors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.** **Your Financial Suitability Acknowledgments, Representations, Warranties and Covenants**. At the time you commit to purchase any LROs, you represent and warrant that you meet any applicable residency or minimum financial suitability requirements applicable to the Offering (collectively, the "Offering Limits"). These requirements will be set forth in the Offering Circular (as it may be amended by PQA or supplemented from time to time) and posted on the Groundfloor Platform. You covenant that you will abide by any maximum investment limits, as set forth in the Offering Circular (as it may be amended by PQA or supplemented from time to time) and as posted on the Groundfloor Platform from time to time. You agree to provide any additional documentation we reasonably request, or as may be required by any governmental authority, including but not limited to the SEC or the securities administrator of any state, to confirm that you meet the Offering Limits. You acknowledge that the LROs will not be listed on any securities exchange, that there will be no trading Groundfloor Platform for the LROs, that any transfer or trading of LROs must be conducted in accordance with federal and applicable state securities laws, any investment in the LROs will be highly illiquid and that LRO purchasers should be prepared to hold the LROs they purchase until Groundfloor's payment obligation thereunder terminate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.** **The Company's Representations and Warranties**. The Company represents and warrants to you, as of the date of this Agreement and as of any date that you commit to purchase LROs, that: (a) it is duly organized and is validly existing as a corporation in good standing under the laws of Georgia and has corporate power to enter into and perform its obligations under this Agreement; (b) this Agreement has been duly authorized, executed (by electronic execution), and delivered by the Company; (c) the LROs as reflected in the applicable LRO Agreement have been duly authorized and, following payment of the purchase price by you and electronic execution, authentication and delivery to you of the LRO Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency or similar laws or general principles of equity; and (d) it has complied in all material respects with applicable federal, state and local laws in connection with the offer and sale of the LROs.

EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, THE LRO AGREEMENT, OR THE OFFERING CIRCULAR (INCLUDING ANY SUPPLEMENT OR PQA), NEITHER THE COMPANY NOR ANY OTHER PERSON HAS MADE OR MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY, EITHER WRITTEN OR ORAL, ON BEHALF OF THE COMPANY WITH RESPECT TO THE SUBJECT MATTER HEREOF.

PAYMENT ON THE LROs, IF ANY, DEPENDS ENTIRELY ON THE RECEIPT BY THE COMPANY OF LOAN PAYMENTS IN RESPECT OF THE CORRESPONDING LOAN. THE COMPANY DOES NOT WARRANT OR GUARANTEE IN ANY MANNER THAT YOU WILL RECEIVE ALL OR ANY PORTION OF THE LRO PAYMENTS YOU EXPECT TO RECEIVE OR REALIZE ANY PARTICULAR OR EXPECTED RATE OF RETURN. THE COMPANY DOES NOT MAKE ANY REPRESENTATIONS AS TO A BORROWER'S ABILITY TO PAY (OR THAT OF ITS PRINCIPAL(S)) AND DOES NOT ACT AS A GUARANTOR OF ANY CORRESPONDING LOAN PAYMENTS.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**13.** **Your Representations and Warranties**. You represent and warrant to the Company, as of the date of this Agreement and as of any date that you commit to purchase LROs, that: (a) you have the power to enter into and perform your obligations under this Agreement; (b) this Agreement has been duly authorized, executed and delivered by you; (c) in connection with this Agreement, you have complied in all material respects with applicable federal, state and local laws; and (e) if you are a person who, in the ordinary course of business, regularly participates in credit transactions, you have considered the application of the Equal Credit Opportunity Act, 15 U.S.C. 1601 et seq., and its implementing Regulation B, 12 C.F.R. 202 et seq., as such may be amended from time to time, and any applicable state or local laws, regulations, rules or ordinances concerning credit discrimination, in determining whether to invest in the LROs (as limited obligations of the Company).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**14.** **Prohibited Activities**. You covenant and agree that you will not do any of the following in connection with any funding requests, LROs, Loan Payments or other transactions involving or potentially involving your investment in LROs through the Groundfloor Platform:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** Take any action on your own to collect, or attempt to collect from any Borrower or its Principals, directly or through any third party, any amount owing under any of your LROs or on any of the Loan Payments that correspond to your LROs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** Bring a lawsuit or other legal proceeding against any Borrower, its Principals or any other party on any Loan Documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** Contact the Borrower or its Principals with respect to any Loan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** Contact any collection agency or law firm to which any Loan has been referred for collection;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)** Violate any applicable federal, state or local laws; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(f)** Undertake any other action in breach of the terms of the applicable LRO Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**15.** **No Advisory Relationship**. You acknowledge and agree that the purchase and sale of the LROs pursuant to this Agreement is an arms'-length transaction between you and the Company. In connection with the purchase and sale of the LROs, the Company is not acting as your agent or fiduciary. The Company assumes no advisory or fiduciary responsibility in your favor in connection with the LROs or the Loan Payments corresponding to the LROs. The Company has not provided you with any legal, accounting, regulatory or tax advice with respect to the LROs. You have consulted your own legal, accounting, regulatory, and tax advisors to the extent you have deemed appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**16.** **Due Diligence and Authentication**. Borrowers must represent and warrant to us in the Loan Agreement that none of the disclosures, statements, projections, materials, assertions or other communications made by them or provided to us contained any untrue statement of a material fact or omitted to state a material fact necessary to make the statement contained herein or therein not misleading. Notwithstanding these assurances, through the use of commercially reasonable efforts, we take steps on our behalf to verify and authenticate certain information provided and representations made by Borrowers. Licensed attorneys and/or real estate professionals are engaged to assist in the due diligence and closing process. For every Loan underwritten, we obtain a completed Application and a signed Master Services Agreement from the Borrower and reviews the materials provided by the Borrower. Various data vendors such as Zillow, CoreLogic, Trulia, Lexis, CDI Credit, Dun & Bradstreet, etc., and other public records are used to verify the information provided , as well as the accuracy of the representations made, by the Borrower (and its Principals) as well as the actual property details. We conduct credit, criminal background, bankruptcy and legal judgment searches on the Borrower and its Principals. We obtain business assurance reports and searches state and local records to determine whether an Application triggers any of the automatic disqualification criteria described above. We also assess whether the Borrower or its Principals have any criminal convictions, federal tax liens, judgments, or other encumbrances and have not been party to any adverse litigation relating to their projects or properties. We check state and local records to verify how long the Borrower has been in business and whether it is in good standing and to confirm that the Borrower is actually in possession of the property and the extent to which it has been encumbered. We also may obtain proof of insurance and marketability assessments from the Borrower when environmental concerns arise.

Prior to closing, we will review a budget/Draw schedule (unless the Loan is for $50,000 or less or when an amount greater than $50,000 is needed for the acquisition of a property) and, at or in connection with closing, obtain evidence of a satisfactory title search and corresponding title insurance on the property covered by the Loans. If we are financing a second lien Loan, the Borrower may provide the results of a title search performed, and title insurance obtained, by the first lienholder within a month of the submitted Application in lieu of performing a separate title search and obtaining title insurance. Decisions as to whether additional information may be sought are made by the Company during the course of our underwriting process.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**17.** **Valuation Reports**. A Valuation Report for each Project is always reviewed prior to determining the letter grade and corresponding interest rate to be applied to a Loan. In the case of a Loan to finance acquisition and/or reconstruction (which is a majority of our Loans), the Valuation Report will reflect an estimate of the projected ARV of the Project. The Valuation Report reflects the projected value of the land if the Loan is to finance ground-up construction. As discussed in more detail below, the valuation of the Project weighs heavily in the Grading Algorithm and the determination of the final letter grade (and thus the minimum interest rate) assigned to a particular Loan. As such, during the course of our underwriting process, we carefully review each Valuation Report received. We may refuse to accept a Valuation Report that it finds unsatisfactory, inaccurate or unreliable, in which case, we will not consider financing the related Loan until the deficiencies are remedied or a new Valuation Report is received. The evidence used to calculate the ARV for a given Loan may be made up of a composite of different Valuation Reports of the same type at the discretion of the underwriters. For example, ARV may be determined by utilizing a composite of two or more BPOs, if available. We will not use composites from different types of Valuation Reports.

For Loans under $250,000, Borrowers may choose the type of Valuation Report they want considered in the underwriting process. We may commission (at the Borrower's expense) a certified independent appraisal or a BPO on the Project or the Borrower may provide a Borrower provided appraisal or a collection of comparable property listings (or "comps"); however, we will always commission a certified independent appraisal for Loans of $250,000 or more.

Reliance on Borrower Provided Comps. Due to the costs associated with the preparation of a certified independent appraisal or a BPO, Borrowers often elect to provide a list of comparable properties to support the projected ARV of a Project. These types of Valuation Reports are viewed as the lowest quality and least reliable of the four types of Valuation Reports accepted. The Grading Algorithm factors in the increased risk associated with these types of Valuation Reports. However, in light of the significance placed on the ARV in determining the letter grade and minimum interest rate applied to the Loan, we have established the following set of conditions that must always be satisfied when a Borrower elects to support its Application with Borrower provided comps.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**18.** **Requirements for Use of Borrower Provided Comps**. Borrowers must supply information with respect to no less than three comparable properties (although more than three comps will be accepted) to support the projected ARV claimed by the Borrower. With respect to each comparable property received, we first locate the listing of that comparable property from a Multiple Listing Service (or "MLS"), which is a kind of bulletin board that identifies recent local real estate listings. We use the MLS listing to confirm that the information presented by the Borrower is accurate (i.e., it has not been altered). If the comp information provided by the Borrower is different from what we find in the MLS listing, we will not consider financing the related Loan until the inaccuracies are corrected or the Borrower provides us with a new comparable property that satisfies our criteria (or a more reliable form of Valuation Report with respect to the Project under consideration).

In limited circumstances, Borrowers may rely on a comparable property for which there is no MLS listing, which can be the case if the comparable property has not been recently listed for sale. In this event, we utilize an online valuation tool called an automated valuation model (or "AVM") to produce a report which is used to verify the comp. The AVM report is a tool often used by banks and other lending institutions in the course of their underwriting procedures. It provides a calculated estimate of a probable selling price of a residential property, even when a home is not for sale, through the analysis of public record data combined with a computerized algorithm. We currently obtain AVM reports from Red Bell Real Estate and Clear Capital, but may change vendors at any time without prior notice to investors. We use the AVM report in much the same way as it uses the MLS listing, inasmuch as, if the information provided by the Borrower is inconsistent with respect to the information in the AVM report, we will not consider financing the related Loan based off of the flawed information.

Once the information provided by the Borrower with respect to the comparable property has been confirmed through the MLS listing or the AVM report, as the case may be, the comparable property must also:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· be representative of the Project—this means that the comparable property must be of the same scope
as the Project on an as-completed basis. For instance, if as-completed, the Project will be a three bedroom, two bath, single-family residence,
on a half-acre lot, without any special features (like a multi-car garage, in-ground swimming pool, etc.), then the comparable property
generally must be substantially similar to those characteristics;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· be located in the same zip code or, only to the extent available, the same school district as the Project;
and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· reflect a value not less than 85% of the ARV of the Project as reported by the Borrower. For instance,
if the ARV of the Project is estimated to be $100,000, the MLS listing or the AVM report, as the case may be, for the comparable property
must reflect a value of $85,000 or more. We would not accept a comparable with less than $85,000 to support the valuation of the Project
at an ARV of $100,000.

If any of these conditions are not satisfied, we will reject the Application, and not consider financing the Loan until the Borrower provides a new comparable property (that satisfies the criteria) or we obtain another form of Valuation Report.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**19.** **Reliability of Information**. When undertaking its diligence, we strive to source data from the most reputable and reliable vendors and resources, however, this data may not always be accurate or dependable. For example, Zillow and AVM vendors determine their estimated property valuations through statistical analysis of historical data and current market information. There may be errors in the underlying data used in the calculation of these estimates, which could compromise the reported property valuation. Further, in addition to the risks discussed above specifically with respect to Borrower provided comps, the reliability of the data contained in the Valuation Reports (and any resources used to judge those reports) depends, in part, on the methods used to collect the data, the expertise of the third party that prepared the report, as well as the appropriateness of the valuation approaches and underlying assumptions that have been used to reach the conclusions presented. Although the Valuation Reports received (other than Borrower provided comps) typically are prepared by real estate professionals who are familiar with the market area of the subject Project, they may not reflect the actual value of a particular project. Only market forces will dictate the ultimate value of any real property.

Although we use various valuation resources to provide a backstop comparison to the Borrower provided comps as part of its due diligence process, these typically report the listing price or estimated market value, as opposed to the proposed ARV typically captured by a Valuation Report. As a result, none of those valuation resources offer a direct comparison. Our ability to access the reports to backstop the Borrower provided comp can be limited, as some MLS systems restrict access to licensed real estate brokers and we must pay additional fees for AVM reports. There are also increased risks with certain valuation resources in that there could be flaws in the mathematical model being implemented. For instance, the model may depend on unreliable or inaccurate data, or fail to test results against other valuation models or actual sales data in the particular market. Care must also be taken to select a vendor that offers tools that are better suited to certain kinds of lending. For example, unlike our current vendor, CoreLogic, which primarily delivers specific valuation data, other AVM vendors, like Desktop Underwriter®, provide additional services, such as document management and benchmarking against federal loan data, which may alter the context of the report.

The Valuation Reports and any AVMs we may obtain are generally prepared solely for its use in connection with our Loan underwriting process, so we do not provide them to investors. Neither we nor our affiliated companies play any role in the preparation of any valuation resources or any other materials provided by the Borrower that may be referenced in a Project Summary, and, while we view the data contained in a Valuation Report, MLS listing, AVM report or other valuation resource as helpful, we do not use these materials as the sole basis for a funding decision.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**20.** **Unverified Information**. Other than as discussed above, we do not independently verify the information provided by Borrowers, and while, in connection with the Loan Agreement, Borrowers represent that any information they provide to us is accurate, such information may nevertheless be inaccurate or incomplete. For example, there is no independent verification of the information about the financial condition and past business experience of the Borrower and business experience of its Principals, including much of the data contained in the Borrower Summary (Box H) of the Project Summary, the proposed costs of a given construction project or the capabilities, and the experience of any contractors or sub-contractors. Further, the information the Borrowers supply may be inaccurate or intentionally false. If information provided by Borrowers turns out to be false or misleading, you may lose part or all of the Purchase Amount you pay for a LRO. In general, information available on the Groundfloor Platform and in the Offering Circular (including any supplements or PQAs) with respect to the LROs being offered hereby is subject to Rule 10b-5 of the Exchange Act and to the liability provisions of the Securities Act. Potential investors should note that on occasion courts have taken the position that plaintiffs who have failed to exercise adequate caution in analyzing the risks associated with reliance upon unverified information may be precluded from asserting a claim for misrepresentation. Although we do not believe this would impact our overall liability under Rule 10b-5 of the Exchange Act and the liability provisions of the Securities Act for information provided to you in connection with this Offering, we advise you that your recourse may be limited in the event information that is self-reported and not independently verified turns out to be false or misleading.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**21.** **The Company's Right to Modify Terms**. You authorize us to correct obvious clerical errors appearing in information you provide to us, without notice to you, although we undertake no obligation to identify or correct such errors. We will not otherwise change, modify or alter the terms and provisions of any of the Investment Documents during a particular Offering Period. After completion of a particular Offering, we have the right (without giving prior notice to you) to change any term or provision of this Agreement, the Terms and Conditions, the Terms of Service, the Privacy Policy, form of LRO Agreement (as it applies to future offerings) and the Groundfloor Platform. We will give you notice (by email) of material changes to such materials, in the manner set forth in Section 19.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**22.** **Termination**. We may, in our sole discretion, with or without cause, terminate this Agreement by giving you written notice. In addition, upon our reasonable determination that you committed fraud or made a material misrepresentation in connection with a Project or a commitment to purchase a LRO, performed any prohibited activity, or otherwise failed to abide by the terms of any of the Investment Documents, including each LRO Agreement to which you are a party, we may, in our sole discretion, immediately and without notice, take one or more of the following actions: (a) terminate or suspend your right to purchase LROs; or (b) terminate this Agreement and your registration with the Company. Upon termination of this Agreement and your registration with the Company, any LRO purchase commitments you have made shall be terminated and any funds you may have committed towards such purchase commitments shall be returned to you. Any LROs you purchase prior to the effective date of termination shall remain in full force and effect in accordance with their terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**23.** **Indemnification**. In addition to any indemnification obligations set forth in the Terms of Service or the LRO Agreement, you agree to indemnify, defend, protect and hold harmless the Company, any of our affiliates, any of our subsidiaries and our and their respective officers, directors, managers, members, shareholders, employees and agents (the "Groundfloor Parties") against all claims, liabilities, actions, costs, damages, losses, demands and expenses of every kind, known or unknown, contingent or otherwise (including, but not limited to, any and all expenses incurred in investigating, preparing or defending against any litigation commenced or threatened) (collectively, the "Losses"), based upon or arising out of (a) any material breach of any obligation you undertake in the Investor Agreement or in any other Investment Document, including but not limited to your obligation to comply with applicable laws; or (b) your acts and omissions, and your representations (and those of your employees, agents or representatives) relating to the Groundfloor Parties. You do not have any liability at any time in excess of an amount equal to the aggregate LRO Payments due under any LROs you hold; provided, however, that the foregoing limitation shall not apply to recovery for Losses based upon or arising out of any inaccuracy in or breach of your representations and warranties made in Section 8 hereof or of the covenant contained in in Section 9(e) (violation of laws) hereof. We may, among other remedies it can pursue, collect against Losses by off-setting amounts owed to you as LRO Payments. Your obligation to indemnify the Groundfloor Parties shall survive termination of this Investment Agreement, regardless of the reason for termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**24.** **Limitations on Damages**. IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY LOST PROFITS OR SPECIAL, EXEMPLARY, CONSEQUENTIAL, OR PUNITIVE DAMAGES, EVEN IF INFORMED OF THE POSSIBILITY OF SUCH DAMAGES. FURTHERMORE, NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER REGARDING THE EFFECT THAT THIS AGREEMENT MAY HAVE UPON THE FOREIGN, FEDERAL, STATE OR LOCAL TAX LIABILITY OF THE OTHER.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**25.** **Further Assurances**. The parties agree to execute and deliver such further documents and information as may be reasonably required in order to effectuate the purposes of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**26.** **Entire Agreement**. This Agreement, together with the other Investment Documents, constitutes the sole and entire agreement between you and the Company with respect to the subject matter contained herein and therein and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in this Agreement and a particular LRO Agreement (other than an exception expressly set forth as such therein), the statements in such LRO Agreement shall control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**27.** **Consent to Electronic Transactions and Disclosures**. Because the Company operates principally on the Internet, you will need to consent to transact business with us online and electronically. As part of doing business with us, therefore, we also need you to consent to our giving you certain disclosures electronically, either via the Groundfloor Platform or to the email address you provide to us. By entering into this Agreement, you consent to receive electronically all documents, communications, notices, contracts, prospectuses, Offering Circulars, supplements or PQAs (either alone or as a part of the corresponding Offering Statement on Form 1-A filed with the Commission) and agreements, including any IRS Form 1099, arising from or relating in any way to your or our rights, obligations or services under this Agreement, your use of the Groundfloor Platform (each, a "Disclosure"). An IRS Form 1099 refers to any Form 1099 or other Form, Schedule or information statement, including corrections of such documents, required to be provided pursuant to U.S. Internal Revenue Service rules and regulations and that may be provided electronically (each, an "IRS Form 1099"). The decision to do business with the Company electronically is yours. You acknowledge that there may be costs associated with this method of delivery including, but not limited to, online time and printing. This Section informs you of your rights concerning Disclosures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**28.** **Electronic Communications**. Any Disclosures will be provided to you electronically, either on the Groundfloor Platform or via electronic mail to the verified email address you provided. Disclosures may be made available in HTML (regular web hypertext) or as a Portable Digital Format or "PDF" file. The Company will only provide electronic copies of all Disclosures, statements, forms, and other materials. If you require paper copies of such Disclosures, you may write to us at the mailing address provided below and paper copies will be sent to you at no additional charge. A request for a paper copy of any Disclosure will not be considered a withdrawal of your consent to receive Disclosures electronically. Any IRS 1099 Forms provided electronically will remain accessible through at least October 15 of the year in which such IRS Form 1099 is made available; after that time the IRS Form 1099 may no longer be accessible electronically. We may discontinue electronic provision of Disclosures at any time in our sole discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**29.** **Scope of Consent**. Your consent to receive Disclosures and transact business electronically (including creation of legally binding and enforceable agreements utilizing electronic records and signatures), and our agreement to do so, applies to any transactions to which such Disclosures relate. Your consent, assuming it has not been withdrawn in accordance with the procedures discussed below, will remain in effect for so long as you are a User and, if you are no longer a User, will continue until such a time as all Disclosures relevant to transactions that occurred while you were a User have been made. Please see below for more information regarding Withdrawal of Consent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**30.** **Consenting to Do Business Electronically**. Before you decide to do business electronically with us, you should consider whether you have the required hardware and software capabilities described below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**31.** **Hardware and Software Requirements**. In order to access and retain Disclosures electronically, you must satisfy the following computer hardware and software requirements: access to the Internet; an email account and related software capable of receiving email through the Internet; a web browser which is SSL-compliant and supports secure sessions, such as Internet Explorer 5.0 or above and Netscape Navigator 6.0 or above, or the equivalent software; and hardware capable of running this software. You must also have software which permits you to receive and access Portable Document Format or "PDF" files, such as Adobe Acrobat Reader® version 8.0 and above (available for download no cost at http://www.adobe.com/products/acrobat/readstep2.html).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**32.** **TCPA Consent: You expressly consent to receiving calls and messages, including auto-dialed and pre-recorded message calls, and SMS messages (including text messages) from us, our affiliates, marketing partners, agents and others calling at their request or on their behalf, at any telephone numbers that you have provided or may provide in the future (including any cellular telephone numbers)**. Your cellular or mobile telephone provider will charge you according to the type of plan you carry.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**33.** **Electronic Signatures**. You agree that any Electronic Signature (defined below), whether digital or encrypted, you provide in connection with any contract or agreement with the Company or its affiliates is intended to authenticate such writing and to have the same force and effect as manual signatures to the extent and as provided for under applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 USC §§ 7001 et seq.), the Georgia Uniform Electronic Transactions Act, O.C.G.A. § 10-12 et seq., or any other similar state laws based on the Uniform Electronic Transactions Act. "Electronic Signature" means any electronic sound, symbol or process attached to or logically associated with a record and executed and adopted by a party with the intent to sign such record.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**34.** **Additional Mobile Technology Requirements**. If you are accessing the Groundfloor Platform and the Disclosures electronically via a mobile device (such as a smart phone, tablet, and the like), in addition to the above requirements you must make sure that you have software on your mobile device that allows you to print and save the Disclosures presented to you during the application process. These applications can be found for most mobile devices in each such device's respective "app store". If you do not have these capabilities on your mobile device, please access the Groundfloor Platform through a device that provides these capabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**35.** **Withdrawing Consent**. You may withdraw your consent to receive Disclosures electronically by contacting us at the address identified in the Offering Statement (as it may be supplemented or amended from time to time). If you are investor on the Groundfloor Platform and you withdraw your consent to receive Disclosures electronically, you may continue to contribute funds to requests on the Groundfloor Platform. If you have already purchased one or more LROs, all previously agreed to terms and conditions will remain in effect, and we will send Disclosures to your verified home address provided during registration.

If you withdraw your consent to receive IRS Forms 1099 electronically, we will confirm your withdrawal and its effective date in writing by email.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**36.** **How to Contact Us Regarding Electronic Disclosures**. You can contact us (for technical assistance, to request a paper copy of a document, or otherwise) via email at contact@groundfloor.us or by calling Groundfloor Investor Support at 404-850-9223 or the phone number identified in the Offering Circular (as it may be supplemented or amended from time to time). You may also reach us in writing at the address: GROUNDFLOOR REAL ESTATE 1, LLC, PO Box 79346, Atlanta, GA 30357 (or such address identified in the Offering Statement (as it may be supplemented or amended from time to time)), Attention: Investor Support. You agree to keep us informed of any change in your email or home mailing address so that you can continue to receive all Disclosures in a timely fashion. If your registered email address changes, you must notify us of the change by sending an email to contact@groundfloor.us or by calling 404-850-9223 or the phone number identified in the Offering Statement (as it may be supplemented or amended from time to time). You also agree to update your registered residence address and telephone number on the web site if they change. You will print a copy of this Agreement for your records, and you agree and acknowledge that you can access, receive and retain all Disclosures electronically sent via email or posted on the Groundfloor Platform.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**37.** **Notices**. All notices, requests, demands, required disclosures and other communications from the Company to you will be transmitted to you only by email to the email address you have registered on the Groundfloor Platform or will be posted on the Groundfloor Platform and shall be deemed to have been duly given and effective upon transmission or posting. You shall send all notices or other communications required to be given hereunder to the Company via email at contact@groundfloor.us or by writing to: GROUNDFLOOR REAL ESTATE 1, LLC, PO Box 79346, Atlanta, GA 30357, Attention: Investor Support or at the address identified in the Offering Statement (as it may be supplemented or amended from time to time). You may call the Company at 404-850-9223 or the phone number identified in the Offering Statement (as it may be supplemented or amended from time to time), but calling may not satisfy your obligation to provide notice hereunder or otherwise preserve your rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**38.** **Miscellaneous**. The terms of this Agreement shall survive until the termination of your registration as an investor on the Groundfloor Platform. The parties acknowledge that there are no third-party beneficiaries of this Agreement, except for any subsidiaries of the Company that issue LROs on the Groundfloor Platform, which the parties agree shall be express third-party beneficiaries hereof. You may not sell, pledge, assign, sub-participate, transfer, or otherwise convey your LRO or your rights or obligations under this Agreement and the LRO Agreement in any way inconsistent with applicable law or without the prior written consent of the Company, which consent shall be conditioned on the transferee being registered as an investor on the Company's investment Groundfloor Platform and such transferee agreeing to the terms of the Investment Documents. Any such assignment, transfer, sublicense, or delegation in violation of this Section shall be null and void. This Agreement shall be governed by the laws of the State of Georgia, without regard to any principle of conflict of laws that would require or permit the application of the laws of any other jurisdiction. Any waiver of a breach of any provision of this Agreement will not be a waiver of any subsequent breach. Failure or delay by either party to enforce any term or condition of this Agreement will not constitute a waiver of such term or condition. If a court of competent jurisdiction holds any provision of this Agreement to be illegal, void, or unenforceable, such provision shall be of no force and effect, but the illegality and unenforceability of such provision shall have no effect upon and shall not impair the enforceability of any other provisions of this Agreement. The headings in this Agreement are for reference purposes only and shall not affect the interpretation of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**39.** **Arbitration**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(a)** Unless you opt out as provided pursuant to Section 21(b) below, either party to this Agreement may, at its sole election, require that the sole and exclusive forum and remedy for resolution of a Claim be final and binding arbitration pursuant to this Section 21 (the "Arbitration Provision"), except with respect to any Claim alleging violation of federal securities laws by the Company or any of our officers or directors (a "Securities Claim"). Unless otherwise agreed to in writing by the Company, the arbitration shall be conducted in Atlanta, Georgia. "Claim" shall include any past, present, or future claim, dispute, or controversy involving you (or persons claiming through or connected with you), on the one hand, and the Company (or persons claiming through or connected with the Company), on the other hand, relating to or arising out of this Agreement, any LRO, the Groundfloor Platform, and/or the activities or relationships that involve, lead to, or result from any of the foregoing, including (except to the extent provided otherwise in the last sentence of Section 21(f) below) the validity or enforceability of this Arbitration Provision, any part thereof, or the entire Agreement. Claims are subject to arbitration regardless of whether they arise from contract; tort (intentional or otherwise); a constitution, statute, common law, or principles of equity; or otherwise. Claims include matters arising as initial claims, counter-claims, cross-claims, third-party claims, or otherwise. The scope of this Arbitration Provision is to be given the broadest possible interpretation that is enforceable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(b)** You may opt out of this Arbitration Provision for all purposes by sending an arbitration opt out notice to GROUNDFLOOR REAL ESTATE 1, LLC, PO Box 79346, Atlanta, Georgia 30357, that is received at the specified address within 30 days of the date of your first electronic acceptance of the terms of this Agreement. The opt out notice must clearly state that you are rejecting arbitration; identify the Agreement to which it applies by date; provide your name, address, and social security or TIN-number; and be signed by you. You may send the opt out notice in any manner you see fit as long as it is received at the specified address within the specified time. No other methods can be used to opt out of this Arbitration Provision. If the opt out notice is sent on your behalf by a third party, such third party must include evidence of his or her authority to submit the opt out notice on your behalf.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(c)** The party initiating arbitration shall do so with the American Arbitration Association (the "AAA") or JAMS. The arbitration shall be conducted according to, and the location of the arbitration shall be determined in accordance with, the rules and policies of the administrator selected, except to the extent the rules conflict with this Arbitration Provision or any countervailing law. In the case of a conflict between the rules and policies of the administrator and this Arbitration Provision, this Arbitration Provision shall control, subject to countervailing law, unless all parties to the arbitration consent to have the rules and policies of the administrator apply.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(d)** If we elect arbitration, we shall pay all of the administrator's filing costs and administrative fees (other than hearing fees). If you elect arbitration, filing costs and administrative fees (other than hearing fees) shall be paid in accordance with the rules of the administrator selected, or in accordance with countervailing law if contrary to the administrator's rules. We shall pay the administrator's hearing fees for one full day of arbitration hearings. Fees for hearings that exceed one day will be paid by the party requesting the hearing, unless the administrator's rules or applicable law require otherwise, or you request that we pay them and we agree to do so. Each party shall bear the expense of its own attorneys' fees, except as otherwise provided by law. If a statute gives you the right to recover any of these fees, these statutory rights shall apply in the arbitration notwithstanding anything to the contrary herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(e)** Within 30 days of a final award by the arbitrator, any party may appeal the award for reconsideration by a three-arbitrator panel selected according to the rules of the arbitrator administrator. In the event of such an appeal, any opposing party may cross-appeal within 30 days after notice of the appeal. The panel will reconsider de novo all aspects of the initial award that are appealed. Costs and conduct of any appeal shall be governed by this Arbitration Provision and the administrator's rules, in the same way as the initial arbitration proceeding. Any award by the individual arbitrator that is not subject to appeal, and any panel award on appeal, shall be final and binding, except for any appeal right under the Federal Arbitration Act (FAA), and may be entered as a judgment in any court of competent jurisdiction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(f)** We agree not to invoke our right to arbitrate an individual Claim you may bring in Small Claims Court or an equivalent court, if any, so long as the Claim is pending only in that court. NO ARBITRATION SHALL PROCEED ON A CLASS, REPRESENTATIVE, OR COLLECTIVE BASIS (INCLUDING AS PRIVATE ATTORNEY GENERAL ON BEHALF OF OTHERS), EVEN IF THE CLAIM OR CLAIMS THAT ARE THE SUBJECT OF THE ARBITRATION HAD PREVIOUSLY BEEN ASSERTED (OR COULD HAVE BEEN ASSERTED) IN A COURT AS CLASS REPRESENTATIVE, OR COLLECTIVE ACTIONS IN A COURT. Unless consented to in writing by all parties to the arbitration, no party to the arbitration may join, consolidate, or otherwise bring claims for or on behalf of two or more individuals or unrelated corporate entities in the same arbitration unless those persons are parties to a single transaction. Unless consented to in writing by all parties to the arbitration, an award in arbitration shall determine the rights and obligations of the named parties only, and only with respect to the claims in arbitration, and shall not (i) determine the rights, obligations, or interests of anyone other than a named party, or resolve any Claim of anyone other than a named party; nor (ii) make an award for the benefit of, or against, anyone other than a named party. No administrator or arbitrator shall have the power or authority to waive, modify, or fail to enforce this Section 21(f), and any attempt to do so, whether by rule, policy, arbitration decision or otherwise, shall be invalid and unenforceable. Any challenge to the validity of this Section 21(f) shall be determined exclusively by a court and not by the administrator or any arbitrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(g)** This Arbitration Provision is made pursuant to a transaction involving interstate commerce and shall be governed by and enforceable under the FAA. The arbitrator will apply substantive law consistent with the FAA and applicable statutes of limitations. The arbitrator may award damages or other types of relief permitted by applicable substantive law, subject to the limitations set forth in this Arbitration Provision. The arbitrator will not be bound by judicial rules of procedure and evidence that would apply in a court. The arbitrator shall take steps to reasonably protect confidential information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(h)** This Arbitration Provision shall survive (i) suspension, termination, revocation, closure, or amendments to this Agreement and the relationship of the parties; (ii) the bankruptcy or insolvency of any party or other person; and (iii) any transfer of any loan or LRO or any other promissory note(s) which you own, or any amounts owed on such loans LRO or notes, to any other person or entity. If any portion of this Arbitration Provision other than Section 21(f) is deemed invalid or unenforceable, the remaining portions of this Arbitration Provision shall nevertheless remain valid and in force. If an arbitration is brought on a class, representative, or collective basis, and the limitations on such proceedings in Section 21(f) are finally adjudicated pursuant to the last sentence of Section 21(f)to be unenforceable, then no arbitration shall be had. In no event shall any invalidation be deemed to authorize an arbitrator to determine Claims or make awards beyond those authorized in this Arbitration Provision.

THE PARTIES ACKNOWLEDGE THAT THEY HAVE A RIGHT TO LITIGATE CLAIMS THROUGH A COURT BEFORE A JUDGE, BUT WILL NOT HAVE THAT RIGHT IF ANY PARTY ELECTS ARBITRATION PURSUANT TO THIS ARBITRATION PROVISION. THE PARTIES HEREBY KNOWINGLY AND VOLUNTARILY WAIVE THEIR RIGHTS TO LITIGATE SUCH CLAIMS IN A COURT UPON ELECTION OF ARBITRATION BY ANY PARTY.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**40.** **Waiver of Jury Trial**. THE PARTIES HERETO WAIVE A TRIAL BY JURY IN ANY LITIGATION RELATING TO THIS AGREEMENT, THE LRO AGREEMENT, PURCHASE OF THE LROs OR ANY OTHER AGREEMENTS RELATED THERETO.

**APPENDIX A**

**TERMS AND CONDITIONS OF INVESTMENT**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Definitions. For purposes of these Terms and Conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) "Affiliate" of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, "Control" when used with respect to any specified person means the power to direct or cause the direction of the management and policies of such person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "Controlling" and "Controlled" have meanings correlative to the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) "Holder," when used with respect to any LRO, means the person in whose name a Security is registered on the Registrar's books.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) "Subsidiaries" of any specified person means any corporation, partnership, limited liability company, joint venture, trust, or estate of or in which more than 50% of (i) the issued and outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether at the time capital stock of any other class of such corporation may have voting power upon the happening of a contingency), (ii) the interest in the capital or profits of such partnership, limited liability company, or joint venture or (iii) the beneficial interest in such trust or estate is at the time directly or indirectly owned or controlled through one or more intermediaries, or both, by such person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Registrar and Paying Agent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Company shall maintain, with respect to each series of LROs, an office or agency where such LROs may be presented for registration of transfer or for exchange ("Registrar") and an office or agency where such LROs may be presented for purchase or payment ("Paying Agent"). The Registrar shall keep a register of the LROs and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent. The Company initially will serve as the Registrar and Paying Agent in connection with such LROs. The Company, or an Affiliate of the Company, may act as Paying Agent, Registrar, co-Payment Agent or co-Registrar.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Company (or its Subsidiaries or Affiliates) shall maintain the Investor FBO Account (or some similar arrangement designed to segregate the money held on behalf of investors) to accommodate funding accounts for investors. The Investor FBO Account is currently maintained at Wells Fargo Bank, 1201 W. Peachtree St., Atlanta, GA 30309; however, the Company may elect to change the institution where the Investor FBO Account is maintained at any time without prior notice to investors. The Company shall post the name and address of the institution where it maintains the Investor FBO Account on the Groundfloor Platform and notify investors by email in the event we change institutions where the FBO Account is maintained. All funds deposited in an investor's funding account on the Groundfloor Platform shall be maintained in such investor's designated sub-account in the Investor FBO Account until withdrawn by such investor or used to fund additional investments through the Groundfloor Platform.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Company (or its Subsidiaries or Affiliates) shall maintain the Closing FBO Account (or similar escrow arrangement) at all times. Currently, the Closing FBO Account is maintained through the Funds Transfer Agent. Dwolla, Inc. ("Dwolla"), currently acts as the Funds Transfer Agent. The Company may elect to change the institution where the Closing FBO Account is maintained and/or the identity of the Funds Transfer Agent at any time. Please see the Terms of Service that addresses your consent to the services provided to us by Dwolla.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The Funds Transfer Agent and/or the institution where the Investor FBO Account is maintained shall act as co-Paying Agents with the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Company shall enter into an appropriate agency agreement with any third-party Registrar, Paying Agent, co-Paying Agent or co-Registrar. The Company shall post the name and address of any third-party Registrar, Paying Agent, co-Paying Agent or co-Registrar on the Groundfloor Platform.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Prior to or on each Payment Date (as defined in the LRO Agreement) in respect of any series of LROs, the Company shall deposit with the Paying Agent(s) with respect to such LROs a sum of money sufficient to make such payments when so becoming due. The Company shall require each Paying Agent to hold such funds in an Investor FBO Account or similar arrangement that segregates the money held by it with respect to the LROs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Maintenance of Office or Agency.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Company will maintain for each series of LROs an office or agency where such LROs may be presented or surrendered for payment, where LROs of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the LROs of that series may be served. Groundfloor's office at 75 Fifth Street, NW, Suite 2170, Atlanta, GA 30308 shall be such office or agency for all of the aforesaid purposes unless and until Groundfloor provides written notice to the Holders of any change in the location of such other office or agency.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Company may also from time to time designate one or more other offices or agencies where the LROs of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided, however, that no such designation or rescission shall in any manner relieve Groundfloor of its obligation to maintain an office or agency in accordance with the requirements set forth above for LROs of any series for such purposes. The Company will give prompt written notice to the Holders of any such designation or rescission and of any change in the location of any such other office or agency.

## Ex1A-4

**Exhibit 4.1** 

**FORM OF LRO AGREEMENT**

FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS LIMITED RECOURSE OBLIGATION IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT BECAUSE PAYMENTS ON THE SECURITY ARE DEPENDENT ON PAYMENTS ON THE CORRESPONDING LOAN BY THE DEVELOPER OF THE CORRESPONDING PROJECT. THE ISSUE PRICE OF THIS LIMITED RECOURSE OBLIGATION IS THE STATED PRINCIPAL AMOUNT, AND THE ISSUE DATE IS THE ORIGINAL ISSUE DATE, EACH AS IDENTIFIED BELOW. UPON REQUEST, THE COMPANY WILL PROMPTLY MAKE AVAILABLE TO THE HOLDER THE AMOUNT OF OID AND YIELD TO MATURITY OF THIS LIMITED RECOURSE OBLIGATION. A HOLDER SHOULD CONTACT GROUNDFLOOR LENDER SUPPORT AT (404) 850-9223 OR support@groundfloor.com.

YOU SHOULD MAKE YOUR OWN DECISION WHETHER THE LIMITED RECOURSE OBLIGATION MEETS YOUR INVESTMENT OBJECTIVES AND RISK TOLERANCE LEVEL. NO FEDERAL OR STATE SECURITIES COMMISSION HAS APPROVED, DISAPPROVED, ENDORSED OR RECOMMENDED THE OFFERING OF THE LIMITED RECOURSE OBLIGATION.

THE COMPANY DOES NOT GUARANTEE PAYMENT OF THE LIMITED RECOURSE OBLIGATIONS IN THE AMOUNT OR ON THE TIME FRAME EXPECTED. LIMITED RECOURSE OBLIGATIONS ARE NOT OBLIGATIONS OF THE BORROWERS OR THEIR PRINCIPALS, AND THE COMPANY DOES NOT GUARANTEE PAYMENT ON THE CORRESPONDING LOANS. THE COMPANY HAS THE AUTHORITY TO MODIFY THE TERMS OF THE CORRESPONDING LOANS WHICH COULD, IN CERTAIN CIRCUMSTANCES, REDUCE (OR ELIMINATE) THE EXPECTED RETURN ON YOUR INVESTMENT.

LIMITED RECOURSE OBLIGATIONS ARE SPECULATIVE SECURITIES. INVESTMENT IN THE LIMITED RECOURSE OBLIGATION INVOLVES SIGNIFICANT RISK AND YOU MAY BE REQUIRED TO HOLD YOUR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. YOU SHOULD PURCHASE THE SECURITIES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT.

ANY TRANSFER, PLEDGE OR OTHER USE OF THE LIMITED RECOURSE OBLIGATION FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL UNLESS THE TRANSFEREE IS REGISTERED AS AN INVESTOR ON GROUNDFLOOR FINANCE INC.'S INVESTMENT PLATFORM AND SUCH TRANSFEREE AGREES TO THE TERMS OF THE INVESTOR AGREEMENT AND THIS AGREEMENT.

**LIMITED RECOURSE OBLIGATION AGREEMENT OF**

**GROUNDFLOOR REAL ESTATE 1, LLC**

**SERIES: ____________**

---

| | |
|:---|:---|
| **Limited Recourse Obligation ("LRO") No.:** ____ | **Holder:** ____________________ |
| **Purchase Amount of the LRO:** U.S. $_________ | **Expected Rate of Return of the LRO:** __%<sup>1</sup> per annum |
| **Date of Offering Circular or PQA:** ____________<sup>2</sup> | **Original Issue Date:** To be determined.<sup>3</sup> |
| **Final Payment Date:** To be determined.<sup>4</sup> | **Extended Payment Date:** To be determined.<sup>5</sup> |
| **Extension of LRO:** This LRO will be fully payable on the Final Payment Date subject to conditions described below. In no event will the Company's obligation to make payments on this LRO be extended beyond the Extended Payment Date. |  |
| **Corresponding Project:** _________________ | **Aggregate Principal Amount of the Corresponding Loan:** U.S. $_____________ |
| **Borrower:** ____________________________ |  |
| **Repayment Terms of the Loan:** _________<sup>6</sup> | **Term of the Loan:** __________<sup>7</sup> |

---

**THIS LIMITED RECOURSE OBLIGATION AGREEMENT**, dated as of the Original Issue Date, is between GROUNDFLOOR REAL ESTATE 1, LLC, a Georgia limited liability company (the "<u>Company</u>"), and the Holder (as amended, supplemented or otherwise modified from time to time in accordance with the terms hereof, this "<u>Agreement</u>").

**WHEREAS**, the Company desires to sell and grant to the Holder, and the Holder desires to purchase and accept from the Company, one of a duly authorized series of unsecured special limited obligations of the Company (each referred to as a "Limited Recourse Obligation," "LRO," or "Security"), on the terms and conditions set forth herein.

**NOW, THEREFORE,** in consideration of the premises and of the mutual covenants contained herein, the sufficiency of which the Parties hereby acknowledge by signing electronically below, the Company and the Holder agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**1.** **DEFINITIONS.** The following capitalized terms shall have the following meanings when used in this Agreement. All capitalized terms not otherwise defined herein have the meaning set forth in the Investor Agreement.

<sup>1</sup> Insert interest rate stated on corresponding Loan.

<sup>2</sup> <sup>Insert the date of the final Offering Circular or PQA covering the LROs.</sup>

<sup>3</sup> Initially reflected as "to be determined" since the date of issuance corresponds to the Original Issue Date. The Company will update this Agreement once the Loan is funded.

<sup>4</sup> Initially reflected as "to be determined" since the Final Payment Date corresponds to the maturity date of the corresponding Loan, which is dependent on the Original Issue Date. The Company will update this Agreement once the Loan is funded.

<sup>5</sup> Initially reflected as "to be determined" since the Extended Payment Date is the date that is the second anniversary of the Final Payment Date. The Company will update this Agreement once the Loan is funded.

<sup>6</sup> Insert the repayment terms (typically balloon payment).

<sup>7</sup> Insert the term of the Loan (in months or years)

**Accrued Return.** The return earned on the Purchase Amount at the Expected Rate of Return from the Original Issue Date through the date the Company's obligation to make any LRO Payments hereunder terminates.

**Agreement.** As defined above.

**Bankruptcy Law.** Title 11, United States Code, or any similar federal or state law for the relief of debtors.

**Business Day.** Each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which banking institutions are authorized or obligated by law or executive order to close in Atlanta, Georgia or New York, New York.

**Company.** As defined above.

**Company Fees and Expenses.** Any fees received by the Company (or its affiliates) in connection with originating and servicing the Loan, and administering the Loan Documents and any reimbursement of Company expenses, including check processing and servicing or administrative fees incurred in connection with facilitating draw payments, upon repayment of the Loan and/or other disbursements of loan proceeds, any fee imposed on the Company or its agent in respect of a Loan when the Company's payment request is denied for any reason, including, but not limited to, non-sufficient funds in the Borrower's bank account or the closing of such bank account.

**Corresponding Project.** The real estate development project, as identified above, that will be financed (in whole or in part) through the Loan.

**Borrower.** The borrower under the Loan, as identified above, and the sponsor of the Corresponding Project.

**Expected Rate of Return.** The expected rate of return on the LRO, as indicated above.

**Extended Payment Date.** The date that corresponds to the second anniversary of the Final Payment Date. The actual Extended Payment Date for this LRO, and those of its series, will be finalized on the Original Issue Date. The Extended Payment Date, as initially identified above, is "to be determined." Following the issuance of this LRO and without any action on the part of the Holder, the Company will (i) revise this Agreement to reflect the actual Extended Payment Date, (ii) notify (by email) the Holder of such change, and (iii) make available to the Holder a copy of this Agreement (as revised) through the Groundfloor Platform.

**Final Payment Date.** The date that corresponds to the maturity date of the Loan. The actual Final Payment Date for this LRO, and those of its series, will be finalized on the Original Issue Date. The Final Payment Date, as initially identified above, is "to be determined." Following the issuance of this LRO and without any action on the part of the Holder, the Company will (i) revise this Agreement to reflect the actual Final Payment Date, (ii) notify (by email) the Holder of such change, and (iii) make available to the Holder a copy of this Agreement (as revised) through the Groundfloor Platform.

**Holder.** As identified above, together with its successors and permitted assigns.

**Investor Agreement.** The Investor Agreement between the Company and the Holder, as well as the Terms and Conditions referred to therein and the Terms of Service and Privacy Policy with the Company referenced therein, each as in effect from time to time.

**Loan.** The commercial real estate loan (governed by the Loan Documents) made by the Company to the Borrower in the aggregate principal amount set forth above, pursuant to which the Corresponding Project is financed by the Company.

**Loan Agreement.** The Loan Agreement to be entered into between the Borrower and the Company with respect to the Loan, as amended, supplemented or otherwise modified from time to time.

**Loan Documents.** As defined in the Loan Agreement, including the Note, the Mortgage Instrument, the Security Documents (each as defined in the Loan Agreement), and any other documents or instruments evidencing or securing the Loan and any other documents entered into in connection with the Loan Agreement to which the Company is a party or for the benefit of the Company in its capacity as such, in each case as amended, supplemented or otherwise modified from time to time.

**Loan Payments.** All amounts received by the Company as payment of (or application by the Company of any payment to) the Loan, including, without limitation, all payments or prepayments of principal and interest and any Collection Proceeds (as defined in Section 9 below); provided, however, that Loan Payments shall be net of any Company Fees and Expenses, Collection Costs, loan modification fees or other expenses charged to the Borrower by the Company, or fees deducted by a backup or successor servicer (the categorization of all such items to be determined by the Company in a manner consistent with the Loan Agreement).

**LRO.** As defined above. Also referred to as the "Limited Recourse Obligation" or "Security."

**LRO Payments.** As defined in <u>Section 2(a)</u> below, and subject to adjustment as set forth below.

**Offering Circular.** That certain Offering Circular (as may be amended by post-qualification amendment (or "PQA") or supplemented from time to time), of the date identified above, relating to the offer and sale of the LROs by the Company.

**Original Issue Date.** The date of issuance of this LRO. The Original Issue Date, as initially identified above, is "to be determined." Following the issuance of this LRO and without any action on the part of the Holder, the Company will (i) revise this Agreement to reflect the actual Original Issue Date, (ii) notify (by email) the Holder of such change, and (iii) make available to the Holder a copy of this Agreement (as revised) through the Groundfloor Platform.

**Parties.** Collectively, the Company and the Holder.

**Payment Date.** The date upon which any payments are made to the Holder, which shall occur no later than five (5) Business Days after the Company's receipt (or application) of any Loan Payment.

**Person.** An individual, corporation, trust, partnership, joint venture, unincorporated organization, government agency or any agency or political subdivision thereof or other entity.

**Pro Rata Share.** Determined by dividing (a) the Purchase Amount of this LRO by (b) the aggregate principal amount of the Loan, each as set forth above.

**Purchase Amount.** The amount paid by the Holder to purchase the LRO, as indicated above.

**Record Date.** The second Business Day immediately preceding each Payment Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**2.** **THE LIMITED RECOURSE OBLIGATION.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to the terms of <u>Section 9</u> and as provided below in this <u>subsection (a)</u>, for value received, the Company hereby promises to pay to the Holder (in U.S. dollars out of any funds at the Company's disposal and, as discussed below, subject to prepayment at any time without penalty) all (or any unpaid portion) of the Purchase Amount of this LRO and of any Accrued Return earned on this LRO through the Payment Date (collectively, the "<u>LRO Payments</u>"). The parties agree that return will begin to accrue on the Purchase Amount at the Expected Rate of Return beginning on the Original Issue Date and continue through the date the Company's obligation to make any LRO Payments hereunder terminates. The Parties agree that the Company's obligation to make LRO Payments hereunder shall be limited, in all circumstances to an amount equal to the Holder's Pro Rata Share of the amount of Loan Payments actually received by the Company in respect of (or through application by the Company of any payment to) the Loan through the Payment Date. For the avoidance of doubt, the Parties hereby agree that the LROs represent an unsecured special limited obligation of the Company, and (i) subject to <u>Section 9</u>, no LRO Payments thereon shall be payable to the Holder unless the Company has received (or applied) Loan Payments in respect of the Loan, and then shall be payable equally and ratably on each LRO of the series only to the extent of the Holder's Pro Rata Share thereof, and (ii) no Holder shall have any recourse against the Company unless, and then only to the extent that, an Event of Default (as defined below) has occurred and is continuing.

The parties acknowledge and agree that the Company may, at any time without penalty, prepay all (or any unpaid portion) of the Purchase Amount of this LRO and/or of any Accrued Return earned on this LRO through the time of such prepayment. If, as a result of any prepayment by the Company, all of the Purchase Amount of, and Accrued Return earned on, this LRO through the Payment Date have been paid in full, the Company's obligation to make any LRO Payments hereunder will automatically terminate and this LRO shall be of no further force or effect. All prepayments shall be made in U.S. dollars, in immediately available funds, by intra-institution book entry transfer or such other transfer mechanism to the Holder's sub-account in the Groundfloor Investor FBO Account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) All LRO Payments due to the Holder hereof pursuant to this Agreement shall be paid (i) on each Payment Date that occurs prior to the Final Payment Date or, if the LRO has been extended in accordance with <u>subsection (c)</u> below, until the Extended Payment Date, (ii) to the Person in whose name this LRO is registered at the close of business on the Record Date next preceding the applicable Payment Date and for administrative convenience the Company may (without penalty and without causing any extension of the Company's payment obligation as contemplated in subsection (c) below or an Event of Default) remit funds to the Holder up to five (5) Business Days after the Final Payment Date, or, as the case may be, the Extended Payment Date and (iii) in U.S. dollars, in immediately available funds, by intra-institution book entry transfer or such other transfer mechanism to the Holder's sub-account in the Groundfloor Investor FBO Account. Any taxes due and payable on any LRO Payments to be made to the Holder hereunder shall be the Holder's sole responsibility, and the Holder agrees to reimburse the Company promptly for any such taxes paid by the Company (including any taxes due and payable by the Company on amounts received by it pursuant to this sentence).

All U.S. dollar amounts used in or resulting from the calculation of amounts due in respect of the LRO may be rounded to the nearest cent (with one-half cent being rounded upward).

This LRO is not payable at the option of the Holder.

The LROs shall be in fully registered form only (without coupons or certificates) in denominations of $10 and integral multiples of $10 in excess thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If, on or within five (5) Business Days of the Final Payment Date, the Purchase Amount of, and Accrued Return earned on, this LRO through the Final Payment Date have been paid in full, the Company's obligation to make any LRO Payments hereunder will automatically terminate and this LRO shall be of no further force or effect.

If, on or within five (5) Business Days of the Final Payment Date, any Purchase Amount of, or Accrued Return earned on, this LRO through the Final Payment Date remain due and payable, the payment obligation set forth in <u>Section 2(a)</u> above will automatically be extended to the Extended Payment Date. In such case, the Company's obligation to make any LRO Payments hereunder will automatically terminate (and this LRO shall be of no further force or effect) on the earlier of (i) the date on which any remaining unpaid Purchase Amount of, or Accrued Return earned on, this LRO through the Payment Date are paid in full, (ii) the date on which all available Collection Proceeds have been applied and the Pro Rata Share thereof paid to the Holder as LRO Payments in accordance with <u>Section 9</u> hereof or (iii) subject to satisfaction of the Company's obligation to make any remaining LRO Payments with respect to Loan Payments received, on or prior to the Extended Payment Date as set forth in <u>subsection (b)</u> above, the Extended Payment Date.

For the avoidance of doubt, the Parties agree that, irrespective of whether the Purchase Amount of, or Accrued Return earned on, this LRO have been paid in full, after the Extended Payment Date, subject to satisfaction of the Company's obligation to make any remaining LRO Payments with respect to Loan Payments received on or prior to the Extended Payment Date as set forth in <u>subsection (b)</u> above, the Company shall have no further obligation to make any LRO Payments to the Holder hereof, and any payments that the Company may receive in respect of (or through application by it of any payment to) the Loan thereafter shall not be required to be paid to the Holder of this LRO.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) An "<u>Event of Default</u>" shall be deemed to occur if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Company fails to comply with its payment obligations set forth in <u>Section 2</u> and such failure continues for a period of sixty (60) days after receipt by the Company of notice from the Holder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Company fails to comply with any of its agreements in the Investor Agreement or this Agreement (other than those referred to in <u>subsection (i)</u> above and other than a covenant or warranty, the breach of which is elsewhere in this Section specifically dealt with) and such failure continues for sixty (60) days after receipt by the Company of notice from the Holder, provided, however, that, if the Company shall proceed to take curative action which, if begun and prosecuted with due diligence, cannot be completed within a period of sixty (60) days, then such period shall be increased to such extent as shall be necessary to enable the Company diligently to complete such curative action;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a court of competent jurisdiction shall enter (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Bankruptcy Law or (B) a decree or order adjudging the Company bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the wind up or liquidation of its affairs, and any such decree or order for relief shall continue to be in effect, or any such other decree or order shall be unstayed and in effect, for a period of sixty (60) consecutive days; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) (A) the Company commences a voluntary case or proceeding under any applicable Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or insolvent, (B) the Company consents to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Bankruptcy Law or to the commencement of any bankruptcy or insolvency case or proceeding against it, (C) the Company files a petition or answer or consent seeking reorganization or substantially comparable relief under any applicable federal or state law, or (D) the Company (1) consents to the filing of such petition by, the appointment of, or taking possession by, a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property or (2) makes an assignment for the benefit of creditors.

If an Event of Default specified in <u>subsection (i)</u> or <u>subsection (ii)</u> above occurs and is continuing, upon notification to the Company by the Holder, the outstanding and unpaid Purchase Amount (or portion thereof) of this LRO, and all unpaid Accrued Return earned thereon, shall become and be immediately due and payable, subject in each case to the limitations set forth in <u>Section 3</u> and <u>Section 5</u>, notwithstanding any other provision of this LRO. A default under <u>subsection (i)</u> or <u>subsection (ii)</u> above is not an Event of Default until the Holder notifies the Company of the default and the Company does not cure such default within the time specified in <u>subsection (i)</u> or <u>subsection (ii)</u> above after receipt of such notice. Any such notice must specify the default, demand that it be remedied and state that such notice is a "Notice of Default."

If an Event of Default specified in <u>subsection (iii)</u> or <u>subsection (iv)</u> above occurs and is continuing, the outstanding and unpaid Purchase Amount (or portion thereof) of this LRO, and all unpaid Accrued Return earned thereon, shall become and be immediately due and payable without any declaration or other act on the part of the Holder, notwithstanding any other provision of this LRO. The Holder, by notice to the Company may rescind acceleration and its consequences if (x) the rescission would not conflict with any judgment or decree, and (y) all Events of Default specified in <u>subsection (iii)</u> or <u>subsection (iv)</u> have been cured or waived. No such rescission shall affect any subsequent Event of Default or impair any right consequent thereto. For avoidance of doubt, there shall be no automatic acceleration of the outstanding and unpaid Purchase Amount (or portion thereof) of the LRO, or any unpaid Accrued Return earned thereon, upon the occurrence of and Event of Default other than an Event of Default specified in <u>subsection (iii)</u> or <u>subsection (iv)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**3.** **RELATIONSHIP OF THE PARTIES.** The Parties hereby agree that (a) the Company (or one of its affiliates) may have advanced funds to originate the Loan prior to the Original Issue Date out of any funds available to it, (b) the Company may sell additional LROs of this series relating to the Loan; (c) the Holder shall be considered the legal and equitable owner of the LRO governed by this Agreement for all purposes; (d) the Holder shall look only to the Company for payment of the Purchase Amount and any Accrued Return earned on this LRO; and (e) the Holder shall have no interest in any property of the Company (or any of its affiliates), the Borrower or any other Person taken as security or guaranty for the Loan or in any property now or hereafter in the possession or control of the Company, which other property may secure the Loan.

The Company (and its agents and affiliates) shall incur no liability by acting upon any notice, consent, certificate or other instrument or writing believed by it to be genuine and signed by or sent by the proper party.

No recourse under or upon any obligation, covenant or agreement contained in this Agreement, or because of any obligations evidenced hereby or thereby, shall be had against any incorporator, or against any past, present or future affiliate, shareholder, manager, member, officer, director, employee or agent as such, of the Company (collectively, the "Groundfloor Parties"), either directly or through the Company, under any rule of law, statute (other than applicable federal securities laws) or constitutional provision or by the enforcement of any assessment or penalty or otherwise, all such personal liability of every such Groundfloor Party, as such, being expressly waived and released by the acceptance hereof and as a condition of and as part of the consideration for the issuance of this LRO.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**4.** **PAYMENT OF THE PRINCIPAL AMOUNT.** The Holder hereby irrevocably and unconditionally agrees to pay the Purchase Amount of this LRO, as set forth above, in U.S. dollars in immediately available funds, by intra-institution book entry transfer to the Company from the Holder's designated sub-account in the Groundfloor Investor FBO Account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**5.** **APPLICATION OF PAYMENTS.** The Company shall have sole discretion in applying amounts received by it from, or for the account of, the Borrower, with respect to the Loan, provided that, if amounts recovered or received by the Company are applied to an outstanding Loan Payment prior to the Final Payment Date or (if applicable) the Extended Payment Date, the Company will pay to the Holder the amounts owed pursuant to <u>Section 2</u>.

THE HOLDER ACKNOWLEDGES AND AGREES THAT PAYMENTS TO THE COMPANY UNDER THE LOAN DOCUMENTS ARE SUBJECT TO ALL LIMITATIONS OR RESTRICTIONS SET FORTH THEREIN OR BY WHICH THE COMPANY IS BOUND, AND THE HOLDER AGREES THAT THE COMPANY SHALL HAVE NO LIABILITY TO THE HOLDER AS A RESULT OF ANY SUCH LIMITATIONS OR RESTRICTIONS UNLESS AND UNTIL A LOAN PAYMENT IS ACTUALLY RECEIVED BY THE COMPANY.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**6.** **REPRESENTATIONS AND WARRANTIES BY THE HOLDER.** The Holder represents and warrants to the Company that the Holder is purchasing the LROs for the Holder's own account. The Holder represents and warrants to the Company that, based on its overall investment objectives, portfolio structure and financial situation, it can bear the economic risk of an investment in the LROs. The Holder further represents and warrants to the Company that (as of the date of this LRO Agreement and as of the date it has committed to purchase the LROs) it has received a copy of the Offering Circular with respect to the offering of the LROs, which includes information regarding the background and qualifications of the Company and the tax consequences of purchasing the LROs, and a discussion of the risks associated with an investment in the LROs (under the heading "Risk Factors" of, and elsewhere in, the Offering Circular). The Holder acknowledges that the purchase of the LROs involves various risks, including, but not limited to, the risk that Holder may lose its entire investment and the other risks outlined in the Offering Circular, and the Holder represents and warrants to the Company that it is able to bear any loss associated with an investment in the LROs. The Holder represents and warrants to the Company that the Holder meets any applicable residency or minimum financial suitability requirements applicable to the Offering, as outlined in the Offering Circular, and has abided by any maximum investment limits applicable to the Offering, as set forth in the Offering Circular (collectively, the "Offering Limits"). The Holder agrees to provide any additional documentation reasonably requested by the Company (or its agents), or as may be required by the Securities and Exchange Commission or the securities administrator of any state, to confirm that it meets and has satisfied such Offering Limits. The Holder acknowledges the Company's recommendation that it consult with its own attorneys, accountants and other processional advisors as to the legal, tax, accounting and other consequences of an investment in the LROs. The Holder acknowledges that neither the Company nor any of its affiliates has made any representation regarding the proper characterization of the LROs for purposes of determining the Holder's authority to invest in the LROs. The Holder further represents and warrants to the Company that the Holder acknowledges that the LROs will not be listed on any securities exchange, that there will be no trading platform or secondary market for the LROs, that any trading of LROs must be conducted in accordance with federal and applicable state securities laws and that the Holder should be prepared to hold the LROs through maturity.

The Holder further warrants and represents to the Company, as of the date of this Agreement and as of any date that it committs to purchase the LROs, that (i) it has the power to enter into and perform its obligations under this Agreement; (ii) this Agreement has been duly authorized, executed and delivered by the Holder; and (iii) in connection with this Agreement it has complied in all material respects with applicable federal, state and local laws. In addition, if the Holder entering this Agreement is a corporation, partnership, limited liability company or other entity (each, an "institution"), the institution warrants and represents that (x) the individual executing this Agreement on behalf of the institution has all necessary power and authority to execute and perform this Agreement on the institution's behalf; (y) the execution and performance of this Agreement will not violate any provision in the institution's charter documents, by-laws, indenture of trust or partnership agreement, or other constituent agreement or instrument governing the institution's formation or administration; and (z) the execution and performance of this Agreement will not constitute or result in a breach or default under, or conflict with, any order, ruling or regulation of any court or other tribunal or of any governmental commission or agency, or any agreement or other undertaking to which the institution is a party or by which it is bound.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**7.** **REPRESENTATIONS AND WARRANTIES BY THE COMPANY.** The Company represents and warrants to the Holder that the Company has the power to enter into this Agreement and each Loan Document and that the Company has taken all action necessary to authorize its execution and delivery of this Agreement and each Loan Document and the performance of its obligations hereunder and thereunder.

EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, IN THE INVESTOR AGREEMENT OR THE OFFERING CIRCULAR, NEITHER THE COMPANY NOR ANY OTHER PERSON HAS MADE OR MAKES ANY OTHER EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY, EITHER WRITTEN OR ORAL, ON BEHALF OF THE COMPANY WITH RESPECT TO THE SUBJECT MATTER HEREOF.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**8.** **RELATIONSHIP WITH THE BORROWER; NOTICE OF DEFAULT; ADMINISTERING, SERVICING, COLLECTION AND ENFORCEMENT.** The Company (or its designated agent) will handle all transactions under the Loan Documents in the ordinary course of business in accordance with its usual practices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Company (or its agents) shall use commercially reasonable efforts to give the Holder notice of any event of default under the Loan Documents of which the Company has received written notice from the Borrower or of which the Company has actual knowledge and which, in the Company's judgment, materially affects the ability of the Borrower to make payments thereunder; provided that neither the Company nor any of the Groundfloor Parties shall be liable for any failure to give any such notice, and the failure by the Company (or its agents) to give any such notice shall not affect any of the duties and obligations of the Holder hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Holder shall be the legal and equitable owner of the rights, privileges and remedies applicable to the LRO. The Holder shall have no direct recourse to the Borrower or any other Person (other than the Company as set forth herein). In administering, servicing, collecting and enforcing the Loan, the Company (or its agents) shall use commercially reasonable efforts prior to the Extended Payment Date to pursue, either directly or through its representatives, (i) the collection of any amounts owing to the Company under the Loan Documents (to the extent constituting Loan Payments), and (ii) the exercise of the Company's remedies upon a breach of or default under the Loan Documents or in order to avoid the occurrence thereof, in each case to the extent warranted in the Company's business judgment and consistent with reasonable commercial standards of fair dealing and in accordance with industry standards customary for loans of the same general type and character as the Loan in order to maximize the amount of LRO Payments to be made hereunder. In no event shall the Company be obligated to pursue (or to continue) any particular action towards collection or enforcement if, in the Company's business judgment, the reasonable costs and expenses thereof will exceed the aggregate Loan Payments reasonably recoverable or realizable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Without limiting the foregoing and subject to the servicing standard set forth in <u>subsection (b)</u> above, the Company (or its designated agent) shall have the right at any time and from time to time, without the Holder's prior consent, and provided that the Company (or its agent) has reasonably and prudently determined that such action will not be materially adverse to the Holder (i) to give or withhold waivers, consents, modifications, extensions or compromises in connection with the Loan Documents and to amend or modify the Loan Documents, including, while there exists, or in order to avoid the occurrence of, an event of default under the Loan Documents, to change the payment date, reduce the principal amount or the rate of interest, change the time or manner of making loan payments on the Loan or amend any other material term of the Loan; (ii) to take or refrain from taking action in connection with the handling, realizing upon, exercise of remedies or enforcing with respect to the Loan Documents; (iii) to control the prosecution and defense of any action, claim or demand of any kind that shall be asserted against either the Company (or the Holder, or both), directly or indirectly relating to any transaction in respect of any of the Loan Documents; (iv) while an event of default exists under the Loan Documents, to enforce any security interest in the assets pledged to secure the Loan or sell all or any portion of its right, title and interest to any Person under the Loan Documents, whether at, below or above par; and (v) if in its business judgment the reasonable costs and expenses associated with further action to collect or enforce the terms of the Loan Documents will exceed the aggregate Loan Payments reasonably recoverable or realizable, to write-off the Loan if the Company (or its designated agent) deems the Loan uncollectible.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Parties hereby acknowledge that, in circumstances other than borrower default or prepayment, the modification of a term of the corresponding Loan could be deemed to be a material modification of the terms of this LRO. In such instance, it is possible that this LRO, as modified, would constitute a new security under the Securities Act and under applicable State securities laws. The Parties acknowledge that, before implementing any modification to the terms of the corresponding Loan (other than in circumstances involving borrower default or prepayment) that would cause this LRO, as modified, to constitute a new security, the Company will be required to either register the offer of the modified LRO under Section 5 of the Securities Act and under applicable State securities laws or find an exemption from such registration requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**9.** **COLLECTION PROCEEDS, COLLECTION COSTS; AUTOMATIC ADJUSTMENT TO LRO PAYMENTS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Any and all Loan Payments received by the Company, whether prior to or in connection with a Borrower bankruptcy or in connection with any exercise of the Company's powers to administer, service, collect and enforce the terms of the Loan or of the Loan Documents, including, without limitation amounts received (i) as late charges and default or penalty interest, or as payment of any principal or accrued interest on the Loan that may be reduced, or (ii) in connection with the enforcement of any security interest in the assets pledged to secure the Loan, or (iii) in connection with a sale of the Company's rights, title and interest under the Loan Documents (collectively, the "<u>Collection Proceeds</u>") shall be applied (A) first, to all costs and expenses of any nature whatsoever incurred by the Company for the maintenance, preservation, defense, protection, sale, other disposition, collection and enforcement of the Loan Documents, including without limitation court costs and reasonable attorneys' fees, expenses (including those associated with the defense or any related action, claim or demand) and disbursements (the "<u>Collection Costs</u>"), (B) second, to earned and unpaid Accrued Return owed on the LRO, and (C) third, to the Purchase Amount of the LRO then outstanding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Parties agree, and the Holder hereby expressly acknowledges, the exercise by the Company (or its agents) of its powers to administer, service and enforce the terms of the Loan and the Loan Documents, (i) could have the effect (without any further action on the part of the Holder) of adjusting the total amount of the LRO Payments owed the Holder pursuant to <u>Section 2(a)</u> above and (ii) that such adjustment shall not, in and of itself, give rise to an Event of Default hereunder. Without limiting the foregoing, the Parties agree and expressly acknowledge that payment of amounts corresponding to the amount of certain Collection Proceeds (such as late charges, default interest or penalty interest charged on the Loan) could automatically *<u>increase</u>* the total amount of the LRO Payments owed to the Holder pursuant to <u>Section 2(a)</u> above, and prepayment by the Company of this LRO, payment of amounts corresponding to other types of Collection Proceeds (such as amounts resulting from any reduction in outstanding principal and accrued interest on the Loan, the Company (or its agent) may agree to, or of amounts received by the Company in connection with the enforcement of any security interest in the assets pledged to secure the Loan, or in connection with a sale of the Company's rights, title and interest under the Loan Documents) or, if the Company (or its agent) elects to write-off the Loan, could automatically *<u>decrease</u>* the total amount of the LRO Payments owed to the Holder pursuant to <u>Section 2(a)</u> above. If, in connection with its powers to administer, service, collect and enforce the terms of the Loan and the Loan Documents, the Company takes action that would materially impact the amount or timing of the LRO Payments owed to the Holder pursuant to <u>Section 2(a)</u> above, the Company will promptly notify the Holder (by email) thereof and of the impact such action will or is expected to have on such Holder's right to receive LRO Payments under <u>Section 2(a)</u> above.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.** **DUTIES OF THE COMPANY.** The Company's duties to the Holder hereunder are limited to those obligations explicitly set forth in this Agreement, and the Company assumes no other duties, fiduciary or otherwise, to the Holder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.** **ADDITIONAL INVESTMENTS BY THE COMPANY.** The Holder recognizes and agrees that the Company (or its affiliates) may from time to time make other or additional investments in the Borrower or any other Person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**12.** **MISCELLANEOUS PROVISIONS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) **Applicable Law.** This Agreement shall be governed by and construed under the laws of the State of Georgia without regard to principles of conflict of laws. Should any provision of this Agreement be deemed invalid or unenforceable as contrary to applicable law, the Parties agree that such provisions shall automatically be deemed to be reformed to the extent necessary to be consistent with applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) **Waiver of Jury Trial.** The Parties waive a trial by jury in any litigation relating to this Agreement or the LRO.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) **Arbitration.** Either Party may, at its sole election, require that the sole and exclusive forum and remedy for resolution of any claim or dispute relating to this Agreement or the LRO be final and binding arbitration pursuant to the terms and conditions set forth in the Investor Agreement between the Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **Successors and Assigns.** The provisions of this Agreement shall bind the Parties' respective successors and assigns. The Holder may not sell, pledge, assign, sub-participate, transfer or otherwise convey its LRO or its rights or obligations under this Agreement in any way inconsistent with applicable law or without the prior written consent of the Company, which consent shall be conditioned on the transferee being registered as an investor on the Company's investment platform and such transferee agreeing to the terms of the Investor Agreement and this Agreement. Any purported conveyance in contravention of the foregoing shall be void.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) **Notices.** All notices required to be given under this Agreement shall be delivered and shall be effective as provided in the Investor Agreement between the Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) **Caption Headings.** Caption or section headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of the Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) **Attorneys' Fees and Costs.** If any lawsuit or proceeding is brought by the Company or the Holder to enforce the terms of this Agreement, the unsuccessful Party shall, subject to any limits under applicable law, pay the prevailing Party all of its court costs and reasonable attorneys' fees incurred in bringing or defending such action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) **No Third Party Beneficiary.** None of the provisions of this Agreement shall inure to the benefit of the Borrower or any other Person other than the Holder and the Company (and it agents with respect to <u>Sections 3, 8, 9 and 12</u> hereof). Consequently, neither the Borrower nor any other Person other than the Company (and its agents) and the Holder shall be entitled to rely upon or raise as a defense, in any manner whatsoever, the failure of either the Holder or the Company to comply with the provisions of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) **Entire Agreement.** This Agreement, together with the Investor Agreement, constitutes the sole and entire agreement of the parties to this Agreement with respect to the subject matter contained herein and therein, and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in this Agreement and the Investor Agreement (other than an exception expressly set forth as such therein), the statements in this Agreement shall control. Without limiting the foregoing, the Holder specifically acknowledges application of Section 18 (Consent to Electronic Transactions and Disclosures) of the Investor Agreement to this Agreement and the LROs. Unless otherwise contemplated herein or in the Investor Agreement, this Agreement cannot be modified or changed in any way except in writing upon the agreement of the Parties hereto. Any waiver of a breach of any provision of this Agreement will not be a waiver of any subsequent breach. Failure or delay by either Party to enforce any term or condition of this Agreement will not constitute a waiver of such term or condition.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) **Electronic Signatures.** The Parties each agree that the Electronic Signature (defined below), whether digital or encrypted, of the Parties included in this Agreement are intended to authenticate this writing and to have the same force and effect as manual signatures to the extent and as provided for under applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 USC §§ 7001, et seq.), the Georgia Uniform Electronic Transactions Act, O.C.G.A. § 10-12, et seq., or any other similar state laws based on the Uniform Electronic Transactions Act. "<u>Electronic Signature</u>" means any electronic sound, symbol or process attached to or logically associated with a record and executed and adopted by a Party with the intent to sign such record.

## Ex1A-6

**Exhibit 6.1**

**<u>FORM OF LOAN AGREEMENT</u>**

**THIS LOAN AGREEMENT** ("Loan Agreement") is entered into as of the ____ day of _______________, 20__ by and between ***[NAME OF BORROWER]***, a ***[INSERT STATE OF ORGANIZATION/RESIDENCY AND TYPE OF ENTITY/NATURAL PERSON]*** ("Borrower"), having the address set forth on the signature page hereof, and **__________________**, a Georgia __________ ("Lender"),<sup>1</sup> having the address set forth on the signature page hereof. Borrower and Lender are sometimes referred to herein individually as a "party" and collectively as the "parties."

**<u>R E C I T A L S</u>**

The following recitals of fact are a material part of this Loan Agreement:

**WHEREAS**, Lender conducts its business through a web-based investment platform (the "Platform"), designed to provide real estate development investment opportunities to the public, generally through the issuance and sale of interests in commercial real estate loans from Lender to developers who have completed the Platform's application process;

**WHEREAS**, Lender has agreed to loan to Borrower for a period of ***[X months]*** amounts not to exceed $[XX,XXX.00] (the "Loan") with interest from ***[_______________, 20__]***, on the committed amount of the Loan at the rate of [X]% per annum in connection with the purchase, construction and/or renovation of that certain real property being more particularly described on **<u>Exhibit A</u>**, attached hereto and incorporated herein by reference (the "Property"). The definition of "Property" shall specifically include any improvements currently located on or to be made to the real property (the "Improvements"); and

**WHEREAS**, Borrower has executed and delivered, or has caused to be executed and delivered, to Lender the following documents:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Promissory Note from Borrower to Lender dated  ***[_________ ___, 20__]*** evidencing the Loan (the "Note"); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.  ***[INSERT COMPLETE MORTGAGE INSTRUMENT NAME*** ] from Borrower to Lender dated  ***[_________ ___, 20__]*** encumbering the Property and securing repayment of the Loan and any other obligations of Borrower (the "Mortgage Instrument") and granting Lender a  ***[first priority lien]*** <sup>2</sup> on the Property and all materials and other personal property related to the construction/renovation of the Improvements, as evidenced by the Security Documents (as defined in Section VI of this Loan Agreement).

This Loan Agreement, the Note, the Mortgage Instrument, the Security Documents, the Summary of Fees (as provided in Section III(C) of this Loan Agreement) and any other documents or instruments evidencing or securing the Loan are collectively referred to herein as the "Loan Documents."

**<u>A G R E E M E N T</u>**

**NOW, THEREFORE**, in connection with the funding and administration of the Loan, the parties agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**I.**  **<u>INCORPORATION OF RECITALS</u>** 

The foregoing recitals are hereby incorporated into this Loan Agreement and made a part hereof by this reference.

<sup>1</sup> Insert name and business type of original lending entity.

<sup>2</sup> Insert "second priority lien," if appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**II.**  **<u>TERMS OF LOAN REPAYMENT</u>** 

Borrower shall repay the Loan in accordance with the terms, conditions and provisions detailed in the Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**III.**  **<u>LOAN ADMINISTRATION</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **General Terms** 

The Loan will be administered by Lender (or Lender's designated agent). Lender (or Lender's designated agent) shall disburse the proceeds of the Loan (less any fees included in the principal amount of the Loan) (the "Loan Proceeds"). In regard to the disbursement of the Loan Proceeds, Lender may, in its sole discretion: (i) disburse amounts from the Loan Proceeds from time to time (subject to customary restrictions imposed by Lender) as advances as provided in Subsection III(B) of this Loan Agreement (the "Draw"); or (ii) disburse the full amount of the Loan Proceeds to Borrower and/or Contractor (as defined below). Any Loan Proceeds not distributed to Borrower shall be deposited in Borrower's sub-account in the non-interest bearing demand deposit pooled account maintained by Lender (or by its designated agent) "for the benefit of" its developers (the "Developer FBO Account"). Lender disclaims any economic interest in the assets maintained in the Developer FBO Account. Borrower disclaims any right, title or interest in the assets of any other borrower in the Developer FBO Account. Such Developer FBO Account is currently maintained at Wells Fargo Bank, 1201 W. Peachtree St., Atlanta, GA 30309; however, Lender may change the institution where such account is maintained at any time with written notice to Borrower.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Draws** 

Draw requests shall be made by Borrower to Lender as provided in this subsection. Lender, at its option, may elect to inspect the Property before allowing a Draw. Prior to receiving any Draw, Borrower shall deliver to Lender (or Lender's designated agent) (i) a properly completed "Request for Advance," in the form set forth in **<u>Exhibit B</u>**, attached hereto, signed by Borrower (and Contractor, to the extent applicable); (ii) invoices for the activities covered by the Use of Proceeds (as defined below) outlined in the Budget (the "Budgeted Activities") that is the subject of the Request for Advance; (iii) construction lien waivers from Contractor and from the suppliers (if any) for all Budgeted Activities covered by the Request for Advance if and as requested by Lender; and (iv) any and all other required information described in the Request for Advance. The items detailed in Subsections (i) through (iv) of this Section III(B) are collectively referred to herein as the "Request for Advance Packet." In order to obtain a Draw, Borrower shall first submit a Request for Advance Packet to Lender. Lender may rely on Borrower's statements (and Contractor's statements, if any) in the Request for Advance Packet (including the invoices and the lien waivers submitted by Contractor and suppliers (if any)). Lender shall not be required to verify any of the information submitted in connection with the Request for Advance. The Draw funds delivered in connection with the Request for Advance shall be used to pay for the Budgeted Activities described in the Request for Advance Packet only and as provided in the Budget (as defined below). In Lender's sole discretion, Draws may be (v) electronically transferred from Lender's account to Borrower's account via electronic funds transfer; (w) electronically transferred from Lender's account to Contractor's account via electronic funds transfer; (x) delivered via check from Lender payable to Borrower or payable jointly to Borrower and Contractor, or (y) via some other mutually agreed upon mechanism.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Other Fees** 

Borrower shall pay to Lender the fees shown on that certain Summary of Fees attached hereto as **<u>Exhibit C</u>** and incorporated herein by reference.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**IV.**  **<u>USE OF PROCEEDS, THE WORK AND CONDITIONS TO DISBURSEMENT OF LOAN PROCEEDS</u>** 

Unless otherwise agreed by Lender, Lender shall not be obligated to close the Loan and disburse any Loan Proceeds unless and until the following conditions have been satisfied (all in a manner acceptable to Lender) or waived by Lender:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Loan Documents; Budget and Use of Proceeds** 

Borrower shall have furnished or delivered to Lender, in form and substance acceptable to Lender, the Loan Documents executed by Borrower and a budget in form and substance acceptable to Lender (the "Budget"), outlining the intended use of the Loan Proceeds (the "Use of Proceeds"). The Budget shall identify all expenses related to the Project to be covered by the Loan, including any Work (as defined below) and those expenses not characterized as Work, such as fees and expenses relating to the purchase of all or any portion of the Property, fees and expenses relating to acquisition of any Permits (as defined below) necessary to complete the Improvements, fees and expenses relating to obtaining any licenses required by a Government Authority (as defined below), the costs of obtaining Borrower's Insurance (as defined below) and other non-construction related fees and expenses (the "Non-Construction Expenses").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Financial Statements** 

Upon request from Lender, Borrower shall deliver to Lender current financial statements for Borrower certified to be true, correct and complete. Said financial statements must be current (within twelve (12) months of the date of Lender's request).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Construction Contract** 

Any labor and/or materials to be furnished in connection with the Improvements on the Property is referred to herein as the "Work." In regard to the Work, Borrower may enter into one or more written agreements (the "Construction Contract") with contractor(s) chosen by Borrower in Borrower's sole discretion (the "Contractor") for the Work or Borrower may elect to directly undertake all Work. Before entering into any Construction Contract and before commencing any Work (whether pursuant to a Construction Contract or otherwise), Borrower shall deliver to Lender, for Lender's review and approval: (i) a copy of all Construction Contracts (including those in effect prior to the date hereof), (ii) the name, address, and telephone number of each person that has a contract with Borrower or with Contractor to supply materials or labor for the Work (each, a "supplier"), and (iii) (to the extent not previously covered in the Budget) an outline of (A) the plans and specifications for the Work ("Plans"); (B) a written itemization of the Work and the Contract Price (as defined below), if applicable, or costs associate therewith ("Construction Budget"); and (C) an itemized description of each segment of the Work that sets the timetable for completing the Work, and the corresponding payments for the Work ("Work and Payment Schedule"). Each Construction Contract, if any, shall state the total amount that Borrower shall pay Contractor for the Work covered thereby ("Contract Price") and shall include (w) the Plans to the extent covered thereby; (x) the Construction Budget for the Work covered thereby; and (y) the Work and Payment Schedule for the Work covered thereby. Borrower shall deliver to any Contractor(s) a copy of this Loan Agreement before entering into any Construction Contract and before commencing any Work.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D.** **Permits** 

Borrower shall obtain and keep in force all approvals of the Budgeted Activities (each, a "Permit") that are required by any federal, state, county or local government agency having jurisdiction over the Property (the "Government Authority"). Borrower shall comply with all applicable laws, rules, regulations and ordinances of the Government Authority including, but not limited to, all zoning, land use, building code, housing code, setbacks and other applicable regulations and restrictions (the "Government Regulations"). Before commencing any Budgeted Activities, Borrower and/or Contractor, if necessary, shall have all licenses required by the Government Authority. Borrower shall deliver (or shall cause to be delivered) to Lender copies of all licenses and Permits required by the Government Authority.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E.** **Adjustments to Budget; Change Orders** 

Borrow shall obtain the prior written approval of Lender before any changes to the Budget or the Budgeted Activities or before any change in the Contract Price, the Work or the Work and Payment Schedule (each, a "Change Order").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F.** **Insurance** 

Borrower shall cause Contractor to obtain and keep in force the following insurance policies ("Contractor's Insurance"): (i) a builder's all-risk insurance policy (with a mortgagee's loss payable clause in favor of Lender and with a physical loss form endorsement), without co-insurance, in an amount not less than one hundred percent (100%) of the replacement cost of the Improvements, with the standard conditions; (ii) public liability insurance with limits of liability equal to at least $500,000 per occurrence; (iii) workers' compensation insurance as required by applicable state law; and (iv) automobile liability insurance with limits of liability equal to at least $300,000 per occurrence. The Contractor's Insurance shall be in force until Borrower accepts the Improvements.

Borrower shall obtain and keep in force the following insurance policies ("Borrower's Insurance"): (w) an all risk insurance policy (with a mortgagee's loss payable clause in favor of Lender and with a physical loss form endorsement), without co-insurance, in an amount not less than one hundred percent (100%) of the replacement cost of the Improvements, with the standard conditions; (x) public liability insurance with limits of liability equal to at least $500,000 per occurrence; and (y) any other insurance required under the Loan Documents. The Borrower's Insurance shall be in force and effect as of the termination date or expiration date of the Contractor's Insurance.

Borrower shall furnish to Lender evidence, either in the form of duplicate policies, binders or certificates acceptable to Lender (identifying each insurance policy, name of insurer, amount of coverage, deductible provisions and expiration date) that Borrower and/or Contractor has purchased, and has in full force and effect, policies of insurance, as required by Lender or the Loan Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**G.** **Completing the Budgeted Activities** 

The Budgeted Activities shall not begin until Borrower (and Contractor, to the extent applicable) have satisfied the provisions detailed in Section II of this Loan Agreement. Upon notice from Lender that Borrower (and Contractor, if applicable) have satisfied the provisions detailed in Section II of this Loan Agreement, the Budgeted Activities shall commence and shall continue diligently and in a good and workmanlike manner to completion in strict accordance with the Budget, the Construction Contract and all Government Regulations. The Budgeted Activities shall not violate any of the conditions, covenants or restrictions on the Property. The Improvements shall be constructed entirely on the Property and shall not encroach upon any easement or right-of-way or upon the land of others.

Lender is not obligated to inspect the Property or the Work or to confirm the completion of any of the Non-Construction Expenses. Notwithstanding the foregoing, Lender has the right to enter the Property to inspect the Work, without notice to Borrower or any Contractor, during normal business hours or any other times that Lender arranges with Borrower or any Contractor. Lender's inspections are for Lender's benefit only. Lender has the right to request additional materials from Borrower to confirm the completion of the Non-Construction Expenses.

Borrower shall notify Lender immediately in writing if (i) the Budgeted Activities do not comply with the Budget, any Construction Contract or this Loan Agreement; (ii) any notice of lien on the Property is served on Borrower or Contractor; or (iii) any Government Authority issues any notice or claim relating to the Property.

Borrower acknowledges and promises that the Budgeted Activities will be completed on or before ***[_________ ___, 20__]*** ("Completion Date"). Lender shall accept the Budgeted Activities as completed once Borrower delivers (x) the final inspection report and (y) the final, unconditional certificate of occupancy issued by the Government Authority, if required by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**H.** **Title Insurance** 

Borrower shall obtain a mortgagee's or lender's policy of title insurance (the "Title Policy") for the Property. The Title Policy shall insure: (i) that the total amount of the lien of Lender's Mortgage Instrument is a valid ***[first priority lien]***<sup>3</sup> on Borrower's interest in the Property; and (ii) that the title to Borrower's interest in the Property is free and clear of all defects and encumbrances except those Lender approves in writing. At or prior to the closing of the Loan, Borrower shall deliver to Lender the commitment of the title company to issue the Title Policy (the "Title Commitment"). When the Budgeted Activities are completed, the Title Policy shall include endorsements insuring Lender to the full amount of the Loan.

<sup>3</sup> Insert "second priority lien," if appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**I.** **Survey** 

If requested by Lender, Borrower, at Borrower's sole cost and expense, shall obtain a survey of the Property and a final as-built survey of the Property and the Improvements, including dimensions and locations of all completed Improvements and all easements or other rights or restrictions (each, a "Survey"). Each Survey shall be certified to Lender and to the title company (if applicable). Each Survey must be satisfactory to Lender and to the title company (if applicable).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**J.** **Appraisal** 

Borrower, at Borrower's sole cost and expense, shall obtain an appraisal of the Property and the Improvements upon request by Lender. The appraiser shall be chosen by Lender in Lender's sole discretion. The appraisal shall reflect an appraised value and shall be satisfactory to Lender in amount, form and substance.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**K.** **Application** 

Borrower at Borrower's sole cost and expense shall provide any additional information or materials required to be submitted in the application process through the Platform (collectively, the "Application Materials").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**V.**  **<u>REPRESENTATIONS AND WARRANTIES</u>** 

In consideration for Lender committing to fund the Loan, Borrower hereby represents and warrants to Lender as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** The Loan shall be used for the Budgeted Activities, which include commercial purposes to finance the costs of the purchase of the Property and/or construction/renovation of the Improvements and payment of certain approved transaction costs and for no other use or purpose. The Property will not be used as a residence by the Developer, and the Loan is obtained by Borrower for a purpose other than a personal, family or household purpose; it being understood that whether a loan is obtained for a purpose other than a personal, family or household purpose shall be guided by the standards established by the federal Truth In Lending Act (Title 1 of Public Law 90-321; 82 Stat. 146; 15 U.S.C. § 160, et seq.) and all regulations and rulings issued pursuant to that Act, as the same may be amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** None of the disclosures, statements, projections, materials, assertions or other communications made by Borrower or provided to Lender, including without any limitations the Budget and the Application Materials, for use in connection with the transactions contemplated by this Agreement and the other Loan Documents (collectively, the "Disclosures"), contained as of the date such statement or contained as of the date hereof, any untrue statement of a material fact or omitted to state a material fact necessary to make the statement contained herein or therein not misleading.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** Borrower has identified on Schedule V(C) attached hereto and disclosed to Lender all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to have a material adverse effect on (i) the business, property, operations, condition (financial or otherwise) of the Borrower or (ii) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of Lender hereunder or thereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D.** Except for those defects and encumbrances set forth in the Title Commitment and/or the Title Policy that are expressly approved by Lender pursuant to Section IV(H) of this Loan Agreement, Borrower owns and has good title to the Property, and the Property is not subject to any mortgage, pledge, hypothecation, assignment (as security), deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever having substantially the same economic effect as any of the foregoing (including, without limitation, any conditional sale or other title retention agreement and any capital lease).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E.** There are no suits, judgments, bankruptcies or executions pending or threatened against Borrower or the Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F.** Any financial statements delivered by Borrower to Lender are true and correct in all material respects, fairly present the respective financial condition of the subject thereof as of the respective dates thereof, no material adverse change has occurred in the financial condition reflected therein since the respective dates thereof, and no additional borrowings have been made by Borrower since the date thereof other than the borrowing contemplated hereby or other borrowing approved by Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**G.** Any projections and *pro forma* financial information (the "Projections") delivered by Borrower to Lender are based upon good faith estimates and assumptions believed by Borrower to be reasonable at the time made; it being recognized by Lender that such Projections as to future events are not to be viewed as fact and that actual results during the period or periods covered by the Projections may differ from such projected results and such differences may be material.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**H.** Borrower shall engage the necessary contractors and/or service providers to complete the Budgeted Activities this Loan is intended to finance. The engagements with any contractors and/or service providers shall be commercially reasonable. Borrower shall obtain the necessary Permits and licenses, as and when appropriate, and shall maintain the necessary insurance policies in accordance with the terms and conditions of this Loan Agreement. Borrower acknowledges and agrees that Lender reserves the right to request proof of any agreements, Permits, licenses or policies that may be necessary to complete the Budgeted Activities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**I.** All other representations and information concerning either the Property or Borrower (collectively, the "Other Information") that is submitted to Lender is true, complete, correct and accurate in all material respects, and Lender shall be entitled to rely on the Other Information. Notwithstanding the foregoing, Lender shall not be required to verify any of the Other Information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**VI.**  **<u>SECURITY</u>** 

This Loan is secured by a ***[first priority lien]***<sup>4</sup> on the Property (including the Improvements and all materials and other personal property related to the construction and/or renovation of the Property), as evidenced by the Mortgage Instrument, any UCC financing statements registered in connection with the Loan, and any and all other Loan Documents securing Borrower's obligations to Lender (collectively, the "Security Documents").

Borrower shall obtain written permission from Lender before using the Property as collateral to obtain additional financing, and such permission may be given or withheld in Lender's sole discretion. The lien (as evidenced by the Security Documents) shall remain the ***[first priority lien]***<sup>5</sup> on the Property at all times, so long as the Loan is outstanding. ***[Borrower represents that there shall be no mechanics liens, materialmen's liens, contractor's liens or any other liens related to the Work to be done with the proceeds of this Loan, that encumber the Property or otherwise, at any time.]***<sup>6</sup>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**VII.**  **<u>COLLECTION COSTS</u>** 

If any payment obligation under this Loan is not paid when due, and the Maturity Date of the Loan has not been extended, Borrower shall pay all costs of collection, including Lender's reasonable attorney fees, whether or not a lawsuit is commenced as part of the collection process.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**VIII.**  **<u>DEFAULT</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Events of Default** 

Borrower shall be in default under this Loan Agreement (and the other Loan Documents), and the Loan and any other obligations of Borrower to Lender shall become due immediately, without demand or notice, if any of the following events ("Events of Default") occur:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** Failure of Borrower to make any payment when due under any Loan Document (and Borrower has not cured such failure within fifteen (15) days after such payment due date);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** Any statement, representation or warranty made by Borrower in the Disclosure, this Loan Agreement, any other Loan Document or any instrument now or hereafter evidencing, securing or in any manner relating to the Loan that proves untrue, false, inaccurate or incomplete in any material respect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** The misuse of any of the Loan Proceeds from this Loan ("misuse" includes, but is not limited to, the use of any Loan Proceeds for any purpose not stated in the Budget, the Construction Contract, the Construction Budget and/or the Work and Payment Schedule, or for any other use or purpose not previously consented to by Lender);

<sup>4</sup> Insert "second priority lien," if appropriate.

<sup>5</sup> Insert "second priority lien," if appropriate.

<sup>6</sup> Insert this language when this is a first priority lien.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv)** In the reasonable opinion of Lender, the prospect of payment or performance of all or any part of Borrower's obligations has been impaired because of a material adverse change in the financial condition of Borrower or any other person/entity liable for the payment or performance of any of Borrower's obligations including, but not limited to, the following: (a) the filing of bankruptcy proceedings involving Borrower as a debtor, (b) the appointment of a trustee, receiver or liquidator for Borrower for all or any substantial part of Borrower's properties or of the Property, (c) the making of an assignment for the benefit of Borrower's creditors or the insolvency of Borrower;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(v)** The bankruptcy or insolvency of any Contractor (or any major subcontractor) under contract for the Work and failure of Borrower to procure a contract or subcontract with a new substitute Contractor or subcontractor satisfactory to Lender within thirty (30) days from the occurrence of such bankruptcy or insolvency;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(vi)** If there is a sale, transfer, assignment or any other disposition of any real estate pledged as collateral for the payment of this Loan if the Loan has not yet been fully paid;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(vii)** If a third party obtains a judgment against Borrower which, in Lender's reasonable discretion, materially and adversely impacts the obligations of Borrower under the Loan, and it is not vacated and released within sixty (60) days of the date of such judgment;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(viii)** An unreasonable delay in the Budgeted Activities, including delay of construction/renovation of the Improvements or a discontinuance of the Work for a period of twenty (20) days (subject to excusable delays as determined by Lender in Lender's sole discretion), or in any event a delay in the construction/renovation of the Improvements (subject to excusable delays as determined by Lender in Lender's sole discretion) so that the Budgeted Activities and Improvements will not, in Lender's reasonable judgment, be completed on or before the Completion Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ix)** The reasonable disapproval by Lender at any time of any Budgeted Activities and the failure of Borrower to cause the same to be corrected to the satisfaction of Lender within thirty (30) days following written notice from Lender, provided, however, if within such thirty (30)-day period Borrower has made a good faith effort to comply with the foregoing requirements but the failure to complete the same cannot reasonably be cured within such thirty (30)-day period, then, provided that such efforts continue and it reasonably appears that Borrower will be successful, then the time to cure such default shall be extended by such reasonable time not to exceed sixty (60) additional days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(x)** A lien for the performance of any Budgeted Activities or the supply of materials filed against the Property, or any stop notice served on Borrower, any Contractor or Lender, remains unsatisfied or unbonded for a period of thirty (30) days after the date of filing or service;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(xi)** A Contractor defaults under the Construction Contract in a manner that Lender deems to be material and, unless otherwise agreed in writing by Lender, Borrower fails promptly to exercise its rights and remedies under the Construction Contract with respect to such default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(xii)** Any change in the ownership or control of Borrower or the Property not approved by Lender in writing. A "change in the ownership or control" includes, but is not limited to, (a) any transfer of Borrower's interest in the Property or transfer of Borrower's rights hereunder by sale, merger, consolidation, acquisition, a transfer of partnership or membership interests, stock transfer or otherwise by operation of law; and (b) any change in the control of Borrower, Borrower's members or any entity directly or indirectly controlling Borrower; and (c) if, in Lender's sole determination, there is a material change in the management of Borrower. "Control" shall mean possession, whether directly or indirectly, of power either to (x) vote twenty-five percent (25%) or more of the equity interests of Borrower having ordinary voting power or (y) to direct or cause the direction of the management and policies of Borrower by contract or otherwise; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(xiii)** Failure of Borrower to comply with any of the terms and conditions of this Loan Agreement, any other Loan Document, or any instrument now or hereafter evidencing, securing or in any manner relating to the Loan (and the occurrence of a default under any other Loan Document shall be deemed an Event of Default under this Loan Agreement and all other Loan Documents) and such failure is not cured within thirty (30) days following written notice from Lender, provided, however, if within such thirty (30)-day period, Borrower has made a good faith effort to comply with such terms and conditions but the failure to complete the same cannot reasonably be cured within such thirty (30)-day period, then, provided such efforts continue, and it reasonably appears that Borrower will be successful, then the time to cure such default shall be extended by a reasonable time (such reasonable time not to exceed sixty (60) additional days).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Lender's Rights, Powers, and Remedies** 

Upon the occurrence of any Event of Default, Lender, in addition to all remedies conferred upon Lender by applicable law or equity, and by the terms of the Loan Documents (or any instrument now or hereafter evidencing, securing or in any manner relating to the Loan), may, in its sole discretion, pursue any one or more of the following rights, powers or remedies concurrently or successively, it being the intent hereof that none of such rights, powers or remedies shall be to the exclusion of any other:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(i)** Lender may apply to any court of competent jurisdiction for, and obtain appointment of, a receiver for the Property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(ii)** Withhold further disbursement of the Loan Proceeds (if applicable);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iii)** Lender may declare the Note or any of the other Loan Documents in default and declare the entire balance of Borrower's obligations under the Note or any of the other Loan Documents, without demand or notice of any kind (which are hereby expressly waived), to be due and payable at once and, in such event, such obligations shall become immediately due and payable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(iv)** Lender may take possession of the Property and Lender may do every act and thing Borrower or any subsequent owner of the Property might or could do for the protection, construction, repair, operation, maintenance and leasing of the Property. Any expense actually incurred by Lender shall be deemed to be part of Borrower's obligations under the Loan Documents, including either Lender's right to avail itself of or procure performance of existing contracts, under the assignment to Lender or otherwise, or enter into any contracts with the same contractors or others. Without restricting the generality of the foregoing and for purposes aforesaid, Borrower hereby appoints and constitutes Lender as Borrower's attorney-in-fact, with full power to (a) exercise any right Borrower may have in or under the Construction Contract or any Permit, (b) complete construction and equipping of the Improvements in the name of Borrower, (c) make changes in the Plans necessary or desirable to complete the Improvements in substantially the manner contemplated by the Plans, (d) retain or employ new general contractors, subcontractors, architects and inspectors as shall be required for such purposes, (e) pay, settle or compromise all existing bills and claims, which may be lien or security interests, or to avoid such bills and claims becoming liens against the Property or security interests against fixtures or equipment, or as may be necessary or desirable for the completion of the construction/renovation of the Improvements or for the clearance of title, (f) do any and every act which Borrower might do in its own behalf, and (g) prosecute and defend all actions or proceedings in connection with the Improvements, the Property, fixtures or equipment; it being understood and agreed that this power of attorney shall be a power coupled with an interest and cannot be revoked. Borrower irrevocably authorizes and directs each party to any Permits and Construction Contract to provide Lender the benefits of the Permits and the Construction Contract upon Lender's written notice. Borrower agrees that any such party shall have the right to rely upon any written notice from Lender without any obligation or right to inquire as to whether an Event of Default actually exists and notwithstanding any notice from Borrower or claim by Borrower to the contrary. Borrower shall have no right or claim against any such party for any benefit provided to Lender by such party. If Borrower cures the Event of Default, or if Lender reinstates the Loan in good standing, Lender shall give written notice of reinstatement to each such party and authorize each such party to render such benefits to Borrower;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(v)** Lender may foreclose on the Property and take title, thereby assuming ownership; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**(vi)** Lender may pursue such other remedies as may be available to Lender at law or in equity.

Borrower shall not be relieved of any of its obligations by reason of the failure of Lender to comply with any request of Borrower to take action to foreclose on the Property under the Security Documents or otherwise to enforce any provision of the Loan Documents, or by reason of the release, regardless of consideration, of all or any part of the Property. No delay or omission of Lender to exercise any right, power or remedy accruing upon the happening of an Event of Default shall impair any such right, power or remedy or shall be construed to be a waiver of any such Event of Default or any acquiescence therein. No remedy available to Lender under the Loan Documents or otherwise is intended to be exclusive of any other remedies provided for in the Loan Documents, and each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder, or under the Loan Documents, or now or hereafter existing at law or in equity. Every right, power and remedy given by the Loan Documents to Lender shall be concurrent and may be pursued separately, successively or together against Borrower or the Property or any part thereof, and every right, power and remedy given by the Loan Documents may be exercised from time to time as often as may be deemed expedient by Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** **Indemnity** 

Borrower shall indemnify and hold Lender and Lender's affiliates, and the managers, members, officers, directors, employees and agents of Lender and its affiliates (collectively, "Indemnified Parties") harmless from and against any and all liabilities, claims, losses, costs and legal expenses (including suits, claims, proceedings, damages and costs arising from or relating to any third-party claim) (the "Claims") incurred by or alleged against any of the Indemnified Parties directly or indirectly arising out of or resulting from any transaction, act, omission, event or circumstance in any way connected with or related to (i) the Property, (ii) the Budgeted Activities, or (iii) Borrower's default under any of the Loan Documents or the Construction Contract. The indemnification contained in this section shall apply to any and all Claims arising both before and after the repayment of the Loan and shall survive the repayment of the Loan, any foreclosure or deed, assignment or conveyance in lieu thereof and any other action by Lender to enforce the rights, powers and remedies of Lender hereunder or under the other Loan Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D.** **Lender's Fees, Costs, and Expenses** 

Borrower shall immediately pay to Lender, on demand, all fees, costs and other expenses (including Lender's attorneys' fees) paid or incurred by Lender in enforcing or exercising Lender's rights, powers and remedies under this Loan Agreement. Interest shall accrue on these amounts at the rate provided in the Note from the date the expense is incurred. The expenses plus interest shall be secured by Lender's Mortgage Instrument.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**IX.**  **<u>MISCELLANEOUS</u>** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**A.** **Cooperation of Borrower** 

Borrower shall, at Borrower's sole cost and expense, sign any other instruments or documents and supply any information and data that Lender considers necessary to accomplish the purposes of this Loan Agreement. If, in Lender's opinion, a modification of the terms of this Loan Agreement is required or occurs, Borrower shall execute an appropriate Loan Modification Agreement. All documents delivered to Lender by Borrower shall become Lender's property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B.** **Credit Information** 

Upon request from Lender, Borrower shall provide to Lender Borrower's updated financial or credit information. Lender may obtain consumer reports from consumer reporting agencies when Lender reviews the Loan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C.** **No Waivers** 

Lender may, in Lender's sole discretion, delay enforcing any of Lender's rights or waive any of Lender's rights under this Loan Agreement. Lender may delay enforcing or waive any of Lender's rights without affecting any of Lender's other rights. If Lender waives a right, power or remedy, Lender may enforce the same right, power or remedy later.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D.** **Costs** 

Borrower shall pay all reasonable costs required to satisfy the conditions of this Loan Agreement, including, but not limited to, all taxes and recording expenses, attorneys' fees, the Change Order (if any), surveys, appraisals, title search, title insurance, title updates, real estate taxes, insurance policies and perfection of the security interest. Upon mutual agreement of Borrower and Lender, these costs may be capitalized into the Loan principal.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E.** **Interest Not to Exceed Maximum Allowed by Applicable Law** 

If from any circumstances whatsoever, by reason of acceleration or otherwise, the fulfillment of any provision of this Loan Agreement or any other Loan Document involves transcending the limit of validity prescribed by any applicable usury statute or any other applicable law, with regard to obligations of like character and amount, then the obligations to be fulfilled will be reduced to the limit of such validity as provided in such statute or law, so that in no event shall any payment of interest or other like charges be possible under this Loan Agreement or the other Loan Documents in excess of the limit of such validity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F.** **WAIVER OF JURY TRIAL** 

BORROWER AND LENDER HEREBY JOINTLY AND SEVERALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS LOAN AGREEMENT AND TO ANY OF THE LOAN DOCUMENTS, THE OBLIGATIONS HEREUNDER OR THEREUNDER, ANY COLLATERAL SECURING BORROWER'S OBLIGATIONS, OR ANY TRANSACTION ARISING THEREFROM OR CONNECTED THERETO. BORROWER AND LENDER EACH REPRESENT TO THE OTHER THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**G.** **Attorneys' Fees** 

As used in this Loan Agreement, the phrase "attorneys' fees," the phrase "reasonable attorneys' fees," and any similar phrases shall mean attorney and paralegal fees actually incurred at standard hourly rates. In the event that this Loan Agreement is governed by the laws of a state in which "attorneys' fees," "reasonable attorneys' fees," "legal fees," or similar phrases would be computed on the basis of a percentage of indebtedness or other statutory presumption resulting in attorneys' fees or legal fees that are greater than the attorneys' fees or legal fees actually incurred, then the parties expressly acknowledge and agree that "attorneys' fees," "reasonable attorneys' fees," "legal fees," and similar phrases used in this Loan Agreement shall mean fees actually incurred at standard hourly rates.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**H.** **Severability** 

If any one or more of the provisions contained in this Loan Agreement shall for any reason be held invalid, illegal, null, void or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. In lieu of any invalid or unenforceable provision, there shall be added automatically a valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**I.** **No Assignment by Borrower** 

Borrower shall not assign this Loan Agreement or the rights to any Loan Proceeds without Lender's prior written consent (and such consent may be withheld or conditioned in Lender's sole discretion), and any such assignment or attempted assignment by Borrower without Lender's prior written consent shall be void and of no effect with respect to Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**J.** **Assignment by Lender; Designated Agent** 

This Loan Agreement, the Loan Documents and any other instrument now or hereafter evidencing, securing or in any manner affecting the Loan may be endorsed, assigned and transferred in whole or in part by Lender, and any such holder and assignee of the same will succeed to and be possessed of the rights of Lender under all of the same to the extent transferred and assigned. The parties acknowledge and agree that Lender may designate one or more agents to administer the Loan or undertake other rights and obligations of Lender set forth herein or in any of the Loan Documents. Any reference to "Lender" contained herein shall be interpreted to mean its designated agent as the context requires.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**K.** **Assignments and Participations** 

Lender may sell or offer to sell the Loan or interests therein to one or more assignees or participants. Borrower shall execute, acknowledge and deliver any and all instruments reasonably requested by Lender in connection therewith. Lender may disseminate any information it now has or hereafter obtains pertaining to the Loan, including any security for the Loan, any credit or other information on the Property, Borrower, any of Borrower's principals or any guarantor, to any actual or prospective assignee or participant, to Lender's affiliates, to any regulatory body having jurisdiction over Lender (if applicable), to any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to Borrower and the Loan, or to any other party as necessary or appropriate in Lender's reasonable judgment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**L.** **Binding Effect** 

The covenants, conditions, waivers, releases and agreements contained in this Loan Agreement shall bind, and the benefits thereof shall inure to, the parties hereto and their respective heirs, executors, administrators, successors and assigns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**M.** **Entire Agreement; Modifications** 

This Loan Agreement, the other Loan Documents and the other contracts, agreements and instruments described herein contain all of the terms and conditions relating to the subject matter hereof, and any prior agreements, whether written or oral, with respect thereof, are expressly superseded hereby; provided, however, that the Terms of Service and Privacy Policy of the Platform (as in effect from time to time) will continue to govern Borrower's use of the Platform and other arrangements addressed thereby. This Loan Agreement may not be supplemented, extended, modified or terminated except by an agreement in writing signed by the party against whom enforcement of any such waiver, change, modification or discharge is sought.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**N.** **Survival of Representations** 

Any and all promises, representations and warranties made by Borrower shall survive the termination of this Loan Agreement and the repayment of the Loan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**O.** **Joint and Several Liability** 

If applicable, each person executing this Loan Agreement as a Borrower has joint and several liability.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**P.** **Notices** 

Any communication required by this Loan Agreement shall be in writing and addressed to the correct party at the address indicated on the signature page of this Loan Agreement or via email transmission to the email address for Lender set forth on the signature page of this Loan Agreement, with respect to Lender, or the email address identified in the Borrower's account on the Platform.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Q.** **No Third Party Beneficiary** 

This Loan Agreement is for the sole benefit of Lender and Borrower and is not for the benefit of any other party. No other person or entity shall have standing to require satisfaction of any of the conditions contained herein or be deemed to be the beneficiary of any of the conditions contained herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**R.** **Governing Law** 

This Loan Agreement shall be governed by, construed, interpreted and enforced in accordance with the laws of the State of Georgia.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**S.** **Time is of the Essence** 

Time is of the essence with respect to the terms of this Loan Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**T.** **Headings** 

The section headings in this Loan Agreement are for convenience only, shall in no way define or limit the scope or content of this Loan Agreement and shall not be considered in any construction or interpretation of this Loan Agreement or any part thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**U.** **Authorization** 

The persons executing this Loan Agreement on behalf of Borrower and Lender warrant and represent that each of them is duly authorized to enter into this Loan Agreement and that this Loan Agreement constitutes the valid and binding obligations of Borrower and Lender, respectively, and enforceable against Borrower and Lender in accordance with its terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**V.** **Counterparts** 

This Loan Agreement may be executed in several counterparts, each of which shall be deemed an original, and all such counterparts shall together constitute one instrument. The exchange of copies of this Loan Agreement and copies of signature pages of this Loan Agreement by facsimile, email or attachment of a scanned electronic copy to email shall constitute effective execution and delivery of such document as to the parties and may be used in lieu of the original for all purposes. Signatures of the parties transmitted by facsimile, email or attachment of a scanned electronic copy to email shall be valid, enforceable and binding as an original signature for all purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**W.** **Consent to Electronic Transactions, Disclosures and Signatures** 

Because Lender operates principally on the Internet, you will need to consent to transact business with us online and electronically. As part of doing business with us, therefore, we also need you to consent to our giving you certain disclosures electronically, either via the Platform or to the email address you provide to us. By entering into this Loan Agreement, you consent to receive electronically all documents, communications, notices, contracts and agreements, including any tax forms, arising from or relating in any way to your or our rights, obligations or services under this Loan Agreement or your use of the Platform (each, a "Disclosure"). The decision to do business with Lender electronically is yours. This Section informs you of your rights concerning Disclosures.

*Electronic Communications*. Any Disclosures will be provided to you electronically, either on the Platform or via electronic mail to the verified email address you provided. Lender will only provide electronic copies of all Disclosures, statements, forms and other materials. If you require paper copies of such Disclosures, you may write to us at the mailing address provided below and paper copies will be sent to you at no additional charge. A request for a paper copy of any Disclosure will not be considered a withdrawal of your consent to receive Disclosures electronically. Any tax forms provided electronically will remain accessible through at least October 15 of the year in which such tax form is made available; after that time the tax form may no longer be accessible electronically. We may discontinue electronic provision of Disclosures at any time in our sole discretion.

*Scope of Consent*. Your consent to receive Disclosures and transact business electronically (including creation of legally binding and enforceable agreements utilizing electronic records and signatures), and our agreement to do so, applies to any transactions to which such Disclosures relate. Your consent, assuming it has not been withdrawn in accordance with the procedures discussed below, will remain in effect for so long as you are a user of the Platform and, if you are no longer a user of the Platform, will continue until such a time as all Disclosures relevant to transactions that occurred while you were a user have been made. Please see below for more information regarding Withdrawal of Consent.

*Consenting to Do Business Electronically*. Before you decide to do business electronically with us, you should consider whether you have the required hardware and software capabilities described below.

*Hardware and Software Requirements*. In order to access and retain Disclosures electronically, you must satisfy the following computer hardware and software requirements: access to the Internet; an email account and related software capable of receiving email through the Internet; a web browser which is SSL-compliant and supports secure sessions, such as Internet Explorer 5.0 or above and Netscape Navigator 6.0 or above, or the equivalent software; and hardware capable of running this software.

*TCPA Consent*: You expressly consent to receiving calls and messages, including auto-dialed and pre-recorded message calls, and SMS messages (including text messages) from us, our affiliates, marketing partners, agents and others calling at their request or on their behalf, at any telephone numbers that you have provided or may provide in the future (including any cellular telephone numbers). Your cellular or mobile telephone provider will charge you according to the type of plan you carry.

*Electronic Signatures*. You agree that any Electronic Signature (defined below), whether digital or encrypted, you provide in connection with any contract or agreement with Lender or its affiliates is intended to authenticate such writing and to have the same force and effect as manual signatures to the extent and as provided for under applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 USC §§ 7001, et seq.), the Georgia Uniform Electronic Transactions Act, O.C.G.A. § 10-12, et seq., or any other similar state laws based on the Uniform Electronic Transactions Act. "Electronic Signature" means any electronic sound, symbol or process attached to or logically associated with a record and executed and adopted by a party with the intent to sign such record.

*Additional Mobile Technology Requirements*. If you are accessing the Platform and the Disclosures electronically via a mobile device (such as a smart phone, tablet and the like), in addition to the above requirements you must make sure that you have software on your mobile device that allows you to print and save the Disclosures presented to you during the application process. These applications can be found for most mobile devices in each such device's respective "app store". If you do not have these capabilities on your mobile device, please access the Platform through a device that provides these capabilities.

*Withdrawing Consent*. You may withdraw your consent to receive Disclosures electronically by contacting us at the address below. However, once you have withdrawn your consent you will not be able to request loans through the Platform. If you have a pending loan request, we will terminate it and remove it from our system. If you have already received a loan, all previously agreed to terms and conditions will remain in effect, and we will send Disclosures to your verified home address provided during registration. If you withdraw your consent to receive tax forms electronically, we will confirm your withdrawal and its effective date in writing by email.

*How to Contact Us regarding Electronic Disclosures*. You can contact us via email at contact@groundfloor.us or by calling Groundfloor Borrower Support at 678-701-1194. You may also reach us in writing at the following address: Groundfloor Finance Inc., ***[insert current mailing address]***, Attention: Borrower Support. You agree to keep us informed of any change in your email or home mailing address so that you can continue to receive all Disclosures in a timely fashion. If your registered email address changes, you must notify us of the change by sending an email to contact@groundfloor.us or by calling 678-701-1194. You also agree to update your registered residence address and telephone number on the web site if they change. You will print a copy of this Loan Agreement for your records, and you agree and acknowledge that you can access, receive and retain all Disclosures electronically sent via email or posted on the Platform.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**X.** **Exhibits and Schedules**.

As provided in this Loan Agreement, the following exhibits are attached to and a part of this Loan Agreement:

Exhibit "A" – Description of the Property

Exhibit "B" – Request for Advance Form

Exhibit "C" – Summary of Fees

Schedule V(C) – List of Restrictions

***[THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY. SIGNATURE PAGE FOLLOWS.]***

***[Signature page to Loan Agreement]***

**IN WITNESS WHEREOF**, Borrower and Lender have executed this Loan Agreement in their respective names, by their duly authorized officers, members, partners or members, as the case may be, as of the day and year first above written.

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| |
|:---|
| **BORROWER** |
| ***[Name of Developer],*** |
| a |
| By: |
| Printed Name: |
| Title: |
| Tax ID No.: |
| **LENDER** |
| ***[Name of Lender],*** |
| a Georgia |
| By: |
| Printed Name: |
| Title: |
| Tax ID No.: |
| Address: |
| Email Address: |

---

**<u>EXHIBIT A</u>**

**LEGAL DESCRIPTION OF PROPERTY**

**<u>EXHIBIT B</u>**

**REQUEST FOR ADVANCE FORM**

TO:

RE:

Borrower, Property & Contractor Information:  

Loan Disbursement Information:  

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;Borrower's Name | &nbsp;&nbsp;Borrower's Name | &nbsp;&nbsp;Borrower's Name | &nbsp;&nbsp;Date of Loan | &nbsp;&nbsp; Advance # ____ (the "Advance")<br>|
| &nbsp;&nbsp;Account Number | &nbsp;&nbsp;Account Number | &nbsp;&nbsp;Account Number | &nbsp;&nbsp;Original Loan Commitment Amount | &nbsp;&nbsp; $|
| &nbsp;&nbsp; Property Address | &nbsp;&nbsp; Property Address | &nbsp;&nbsp; Property Address | &nbsp;&nbsp;Balance of Loan Commitment Amount Before this Advance | &nbsp;&nbsp;$|
| &nbsp;&nbsp;City | &nbsp;&nbsp;State | &nbsp;&nbsp;Zip | &nbsp;&nbsp;Amount of this Request for Advance | &nbsp;&nbsp;$|
| &nbsp;&nbsp; Loan Agreement<br>Dated:<br>General Contractor: | &nbsp;&nbsp; Loan Agreement<br>Dated:<br>General Contractor: | &nbsp;&nbsp; Loan Agreement<br>Dated:<br>General Contractor: | &nbsp;&nbsp;Less: Holdback | &nbsp;&nbsp;$|
| &nbsp;&nbsp; Loan Agreement<br>Dated:<br>General Contractor: | &nbsp;&nbsp; Loan Agreement<br>Dated:<br>General Contractor: | &nbsp;&nbsp; Loan Agreement<br>Dated:<br>General Contractor: | &nbsp;&nbsp;Net Amount of This Request for Advance | &nbsp;&nbsp;$|
| &nbsp;&nbsp; Loan Agreement<br>Dated:<br>General Contractor: | &nbsp;&nbsp; Loan Agreement<br>Dated:<br>General Contractor: | &nbsp;&nbsp; Loan Agreement<br>Dated:<br>General Contractor: | &nbsp;&nbsp;Loan Commitment Amount Remaining after this Request for Advance | &nbsp;&nbsp;$|
|  |  |  | &nbsp;&nbsp;Total of Amounts Advanced after this Request for Advance | &nbsp;&nbsp;$|
|  |  |  | &nbsp;&nbsp;Total Holdbacks to Date | &nbsp;&nbsp;$|

---

By signing below, Borrower (and Contractor, if applicable) represent and agree that; it being understood that the Contractor represents and agrees only to those provisions indicated by an asterisk (\*) below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) This Request for Advance is consistent with the Budget;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) \*They have reviewed the Plans; the Plans are satisfactory and have been approved by all Government Authorities having jurisdiction over the Property and the Work; all Permits and licenses required by the Government Authorities are in force;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) \*All insurance policies required by the Loan Documents are in force;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) \*The Improvements do not violate any of the conditions, covenants or restrictions on the Property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) There are no defaults under the terms of the Loan Agreement or any other Loan Document;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) \*There are no defaults under the terms of the Construction Contract;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) \*The Work for which this Request for Advance is made has been duly completed in a good and workmanlike manner, in accordance with the Plans and in compliance with all Governmental Regulations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) The Loan Commitment Amount remaining will be sufficient to complete all Budgeted Activities and Improvements contemplated by the Loan Agreement, the Budget, the Plans and the Construction Contract(s);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) Lender has received invoices covering all of the Budgeted Activities, and unconditional construction lien releases from Contractor(s), and each supplier for all Budgeted Activities covered by this Request for Advance and for all Requests for Advance previously submitted;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) The funds obtained with the Request for Advance will be used to pay in full the costs of labor performed or materials supplied or related fees and expenses as requested in this Request for Advance; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi) There has been no material adverse change in Borrower's financial condition or employment status since the time Borrower applied for the Loan.

By signing below Borrower (and Contractor, if applicable) requests Lender to pay the following payee(s) in the following amount(s) for the following Budgeted Activities:

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| | |
|:---|:---|
| in the amount of $| for |

---

---

| | |
|:---|:---|
| in the amount of $| for |

---

---

| | |
|:---|:---|
| in the amount of $| for |

---

---

| | |
|:---|:---|
| in the amount of $| for |

---

---

| | |
|:---|:---|
| in the amount of $| for |

---

---

| | |
|:---|:---|
| in the amount of $| for |

---

---

| | |
|:---|:---|
| **CONTRACTOR** | **BORROWER** |
| By: | By: |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized Signature | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Authorized Signature |
| Printed Name: | Printed Name: |
| Title: | Title: |

---

By signing below the authorized [Lender] representative named below approves the disbursement requested in this Request for Advance but, to the extent permitted by applicable law, makes no warranty or representation as to the quality of work completed and/or materials delivered thus far.

**[Lender] ("Lender")**

By:     <br> Authorized Representative Date

Printed Name:  

**<u>EXHIBIT C</u>**

**SUMMARY OF FEES**

Borrower shall pay (or has previously paid) the following fees to Lender, in lawful money of the United States of America, as described below:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;**FEE** | &nbsp;&nbsp;**PERCENTAGE OF LOAN** | &nbsp;&nbsp;**TOTAL FEE<sup>7</sup>** | &nbsp;&nbsp;**TIMING FOR PAYMENT OF FEE<sup>8</sup>** | &nbsp;&nbsp;**TIMING FOR PAYMENT OF FEE<sup>8</sup>** | &nbsp;&nbsp;**TIMING FOR PAYMENT OF FEE<sup>8</sup>** |
| &nbsp;&nbsp;**FEE** | &nbsp;&nbsp;**PERCENTAGE OF LOAN** | &nbsp;&nbsp;**TOTAL FEE<sup>7</sup>** | &nbsp;&nbsp;TO BE PAID PRIOR TO CLOSING | &nbsp;&nbsp;TO BE PAID AT CLOSING | &nbsp;&nbsp;TO BE CAPITALIZED OVER TERM OF LOAN |
| &nbsp;&nbsp;Application Fee | &nbsp;&nbsp;N/A | &nbsp;&nbsp;$__________ |  |  |  |
| &nbsp;&nbsp;Title Review/Title Insurance Fee | &nbsp;&nbsp;N/A | &nbsp;&nbsp;$__________ |  |  |  |
| &nbsp;&nbsp;Origination Fee | &nbsp;&nbsp;______% of the Maximum Principal Amount of the Loan | &nbsp;&nbsp;$__________ |  |  |  |
| &nbsp;&nbsp;Annual Servicing Fee | &nbsp;&nbsp;______% of the Maximum Principal Amount of the Loan | &nbsp;&nbsp;$__________ |  |  |  |

---

---

| | |
|:---|:---|
| &nbsp;&nbsp;**TOTALS** | &nbsp;&nbsp;**TOTALS** |
| &nbsp;&nbsp;Total To Be Paid Prior To Closing | &nbsp;&nbsp;**$<u> </u>** |
| &nbsp;&nbsp;Total To Be Paid At Closing | &nbsp;&nbsp;**$** <u> </u> |
| &nbsp;&nbsp;Total To Be Capitalized Over Term Of Loan | &nbsp;&nbsp;**$** <u> </u> |
| &nbsp;&nbsp;**TOTAL LOAN AMOUNT (INCLUDING CAPITALIZED FEES)** | &nbsp;&nbsp;**$** <u> </u> |

---

Borrower acknowledges and agrees that there may be other fees, costs and expenses detailed in the Loan Agreement and the other Loan Documents that shall be paid by Borrower. Borrower shall pay such other fees, costs and expenses in the amounts and at the times set forth in the Loan Agreement and the other Loan Documents. Except as required by applicable law, this Summary of Fees and the contents hereof shall not be disclosed by Borrower to any third party without the prior written consent of Lender.

<sup>7</sup> Insert amount of flat fee or calculate amount based on loan request (before adding in capitalized fees.)

<sup>8</sup> Check off the applicable box for when certain fees are due. For example, the Application Fee shall be paid prior to or at the submittal of Borrower's loan application. Therefore, the "To Be Paid Prior To Closing" box should be checked for the Application Fee.

**SCHEDULE V(C)**

**LIST OF RESTRICTIONS**

## Ex1A-6

**Exhibit 6.2**

**<u>PROMISSORY NOTE</u>**

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| | |
|:---|:---|
| $***[LOAN AMOUNT]*** | ***[CITY], [STATE]*** |
|  | Date: ___________ ___, 20__ |

---

**FOR VALUE RECEIVED**, _________________, a ___________________ (**"Borrower**"), promises to pay to the order of **____________________** a Georgia ____________,<sup>11</sup> or to the order of any subsequent holder of this Promissory Note ("**Lender**"), at Lender's offices located at _____________________ (or at such other place as Lender may designate in writing from time to time), the principal sum of ________________________________ and no/100 Dollars ($_____________) (the "**Loan**"), payable in lawful money of the United States, together with interest thereon from the date hereof as hereinafter provided, or so much as is advanced pursuant to the Loan Agreement between Lender and Borrower dated ___________ ___, 20__ (as amended from time the time, the "**Loan Agreement**"). Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Loan Agreement.

**1.** **<u>INTEREST RATE</u>.** Interest shall be charged on the maximum principal amount of the Loan from the date hereof until the full amount of principal due hereunder has been paid at a fixed rate of _____________ percent (______%) per annum.

**2.** **<u>PAYMENT OF PRINCIPAL AND INTEREST; MATURITY DATE</u>.** The principal and interest shall be due and payable, without set-off, claim, counterclaim, deduction or withholding for any reason whatsoever, as follows:

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| |
|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; ◻ One payment of all principal, interest and any other amounts owed will be due and payable on the Maturity Date (as defined below in this Section 2).<br> ◻ Accrued interest will be payable on the ______ day of each ◻ month ◻ quarter beginning on ________ _____, _______. Principal plus any accrued and unpaid interest and any other amounts owed will be due and payable on the Maturity Date.  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◻ Fixed schedule consisting of _____ consecutive ◻ monthly ◻ quarterly payments of principal and interest in the amount of $_____________ each, payable on the _____ day of each ◻ month ◻ quarter, beginning on __________________ _______, ___________ and a final payment equal to the unpaid balance of principal plus accrued and unpaid interest and any other amounts owed will be due and payable on the Maturity Date. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◻ Variable schedule consisting of ______ consecutive ◻ monthly ◻ quarterly payments of principal in the amount of $______________ each, plus accrued interest, payable on the ______ day of each ◻ month ◻ quarter, beginning on __________________ _______, ___________ and a final payment of $______________ plus accrued and unpaid interest and any other amounts owed will be due and payable on the Maturity Date. |

---

The entire unpaid principal amount hereof, together with accrued and unpaid interest thereon and all other amounts payable hereunder, shall be due and payable in full on ___________ ___, 20__ (the "**Maturity Date**").

<sup>1</sup> Insert name and business type of original lending entity.

**3. <u>APPLICATION OF PAYMENTS</u>.** Except as otherwise specified herein, each payment or prepayment, if any, made under this Promissory Note (hereinafter referred to as the "**Note**") shall be applied to pay late charges (if any), accrued and unpaid interest, principal and any other fees, costs and expenses which Borrower is obligated to pay under this Note, in such order as Lender may elect from time to time in Lender's sole discretion.

**4.** **<u>LATE CHARGE</u>.** In the event that any payment required to be made by Borrower under this Note or the other Loan Documents (including amounts owed as of the Maturity Date) shall not be received by Lender within fifteen (15) days after its due date, whether by acceleration or otherwise, Lender in its sole discretion may require Borrower to immediately pay to Lender a late charge equal to the lesser of (a) four percent (4%) of the amount of such unpaid amount or (b) the maximum amount permitted to be charged under applicable law.

**5.** **<u>DEFAULT RATE</u>.** All amounts owed hereunder and under the other Loan Documents shall bear interest, from and after the occurrence and during the continuance of a Default, at a rate equal to the lesser of (a) twenty percent (20%) per annum, or (b) the maximum rate permitted to be charged under applicable usury law. Such interest shall be immediately payable to Lender, but in no event later than when scheduled interest payments are due and shall also be charged on the amounts owed by Borrower to Lender pursuant to any judgments entered in favor of Lender with respect to this Note.

**6.** **<u>PREPAYMENT</u>.** The principal amount of this Note may be prepaid in full or in part at any time, and from time to time, without penalty or premium. Partial payments shall be applied to installments due in reverse order of their maturity.

**7.** **<u>SECURITY FOR THE NOTE</u>.** This Note is executed and delivered in accordance with the transaction more specifically described in the Loan Agreement. As evidence of, and as security for, the payment of the monies owing under this Note, Borrower has delivered or has caused to be delivered to Lender a mortgage instrument (the "**Mortgage Instrument**") which is a ***[first priority lien]<sup>2</sup>*** upon the property therein described.

**8.** **<u>EVENTS OF DEFAULT</u>.** The occurrence of any Event of Default, as defined in the Loan Agreement, shall constitute a "**Default**" hereunder.

**9.** **<u>REMEDIES</u>.** Upon the occurrence of any Default, Lender may (without notice to Borrower) exercise any right, power or remedy permitted by law or equity, or as set forth herein, or as set forth in the Loan Agreement, any other Loan Document or any other instrument securing this Note, including, without limitation, the right to declare the entire unpaid principal amount hereof and all interest accrued hereon, and all other sums secured by or owed under any other Loan Document or instrument securing this Note, to be, and such principal, interest and other sums shall thereupon become, immediately due and payable. The rights, powers and remedies of Lender permitted by law or equity, or as set forth herein, or as set forth in the Loan Agreement, any other Loan Document or any other instrument securing this Note shall be cumulative and may be pursued singly, successively or together against the property described in the Mortgage Instrument or any other funds, property or security held by Lender for payment or security, in the sole discretion of Lender. The failure to exercise any such right, power or remedy shall not be a waiver or release of such rights, powers or remedies or the right to exercise any of them at another time.

<sup>2</sup> Insert "second priority lien," if applicable.

**10.** **CONSENT TO ELECTRONIC DISCLOSURES, TRANSACTIONS AND SIGNATURES.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.1** Because Lender conducts its business through a web-based investment platform (the "**Platform**") and operates principally on the Internet, you will need to consent to transact business with us online and electronically. As part of doing business with us, therefore, we also need you to consent to our giving you certain disclosures electronically, either via the Platform or to the email address you provide to us. By entering into the Loan Agreement, you consent to receive electronically all documents, communications, notices, contracts and agreements, including any tax forms, arising from or relating in any way to your or our rights, obligations or services under this Note and the Loan Agreement or your use of the Platform (each, a "**Disclosure**"). The decision to do business with Lender electronically is yours. This Section informs you of your rights concerning Disclosures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.2** **<u>Electronic Communications</u>**. Any Disclosures will be provided to you electronically, either on the Platform or via electronic mail to the verified email address you provided. Lender will only provide electronic copies of all Disclosures, statements, forms and other materials. If you require paper copies of such Disclosures, you may write to us at the mailing address provided below and paper copies will be sent to you at no additional charge. A request for a paper copy of any Disclosure will not be considered a withdrawal of your consent to receive Disclosures electronically. Any tax forms provided electronically will remain accessible through at least October 15 of the year in which such tax form is made available; after that time the tax form may no longer be accessible electronically. We may discontinue electronic provision of Disclosures at any time in our sole discretion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.3** **<u>Scope of Consent</u>**. Your consent to receive Disclosures and transact business electronically (including creation of legally binding and enforceable agreements utilizing electronic records and signatures), and our agreement to do so, applies to any transactions to which such Disclosures relate. Your consent, assuming it has not been withdrawn in accordance with the procedures discussed below, will remain in effect for so long as you are a user of the Platform and, if you are no longer a user of the Platform, will continue until such time as all Disclosures relevant to transactions that occurred while you were a user have been made. Please see below for more information regarding Withdrawal of Consent.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.4** **<u>Consenting to Do Business Electronically</u>**. Before you decide to do business electronically with us, you should consider whether you have the required hardware and software capabilities described in Section 10.5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.5** **<u>Hardware and Software Requirements</u>**. In order to access and retain Disclosures electronically, you must satisfy the following computer hardware and software requirements: access to the Internet; an email account and related software capable of receiving email through the Internet; a web browser which is SSL-compliant and supports secure sessions, such as Internet Explorer 5.0 or above and Netscape Navigator 6.0 or above, or the equivalent software; and hardware capable of running this software.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.6** **<u>TCPA Consent</u>**. You expressly consent to receiving calls and messages, including auto-dialed and pre-recorded message calls, and SMS messages (including text messages) from us, our affiliates, marketing partners, agents and others calling at their request or on their behalf, at any telephone numbers that you have provided or may provide in the future (including any cellular telephone numbers). Your cellular or mobile telephone provider will charge you according to the type of plan you carry.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.7** **<u>Electronic Signatures</u>**. You agree that any Electronic Signature (defined below), whether digital or encrypted, you provide in connection with any contract or agreement with Lender or its affiliates is intended to authenticate such writing and to have the same force and effect as manual signatures to the extent and as provided for under applicable law, including the Electronic Signatures in Global and National Commerce Act of 2000 (15 USC §§ 7001, et seq.), the Georgia Uniform Electronic Transactions Act, O.C.G.A. § 10-12, et seq., or any other similar state laws based on the Uniform Electronic Transactions Act. "**Electronic Signature**" means any electronic sound, symbol or process attached to or logically associated with a record and executed and adopted by a party with the intent to sign such record.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.8** **<u>Additional Mobile Technology Requirements</u>**. If you are accessing the Platform and the Disclosures electronically via a mobile device (such as a smart phone, tablet and the like), in addition to the above requirements you must make sure that you have software on your mobile device that allows you to print and save the Disclosures presented to you during the application process. These applications can be found for most mobile devices in each such device's respective "app store". If you do not have these capabilities on your mobile device, please access the Platform through a device that provides these capabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.9** **<u>Withdrawing Consent</u>**. You may withdraw your consent to receive Disclosures electronically by contacting us at the address below. However, once you have withdrawn your consent you will not be able to request loans through the Platform. If you have a pending loan request, we will terminate it and remove it from our system. If you have already received a loan, all previously agreed to terms and conditions will remain in effect, and we will send Disclosures to your verified home address provided during registration. If you withdraw your consent to receive tax forms electronically, we will confirm your withdrawal and its effective date in writing by email.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**10.10** **<u>How to Contact Us regarding Electronic Disclosures</u>**. You can contact us via email at contact@groundfloor.us or by calling Groundfloor Borrower Support at 678-701-1194. You may also reach us in writing at the following address: _________________,<sup>3</sup> c/o Groundfloor Finance Inc., ***[insert current mailing address]***, Attention: Borrower Support. You agree to keep us informed of any change in your email or home mailing address so that you can continue to receive all Disclosures in a timely fashion. If your registered email address changes, you must notify us of the change by sending an email to contact@groundfloor.us or by calling 678-701-1194. You also agree to update your registered residence address and telephone number on the web site if they change. You will print a copy of this Loan Agreement for your records, and you agree and acknowledge that you can access, receive and retain all Disclosures electronically sent via email or posted on the Platform.

<sup>3</sup> Insert lending entity, if other than Groundfloor Finance Inc.

**11.** **MISCELLANEOUS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.1** **<u>Attorneys' Fees and Expenses</u>.** If Lender retains the services of counsel (a) by reason of a claim of a Default or the occurrence of a Default; (b) on account of any matter involving this Note; (c) for examination of matters subject to Lender's approval under the Loan Documents or any other instrument securing this Note; or (d) to enforce Lender's rights and remedies per Section 9 of this Note, all costs, fees and expenses of suit, all reasonable attorneys' fees and such other reasonable expenses so incurred by Lender shall be paid by Borrower, on demand, and shall be deemed part of the obligations evidenced hereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.2** **<u>Waiver</u>.** Borrower (including any endorsers, guarantors and sureties), jointly and severally, waives demand, notice, presentment, protest, demand for payment, notice of dishonor, notice of protest, notice of acceleration of maturity and diligence of collection of this Note. Borrower (including any endorsers, guarantors and sureties) waives all and every kind of notice of such charge or charges and agrees that the same may be made without notice or consent of any of them. Borrower consents to any and all extensions of time, renewals, waivers or modifications that may be granted by Lender with respect to the payment or other provisions of this Note and to the release of any collateral, with or without substitution. Borrower agrees that borrowers, endorsers, guarantors and sureties may be added or released without notice and without affecting Borrower's liability hereunder. The liability of Borrower shall not be affected by the failure of Lender to perfect or otherwise obtain or maintain the priority or validity of any security interest in any collateral. The liability of Borrower shall be absolute and unconditional and without regard to the liability of any other party hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.3** **<u>No Usurious Amounts</u>.** Anything herein contained to the contrary notwithstanding, Borrower shall not be obligated to pay interest hereunder at a rate which is in excess of the maximum rate permitted by applicable law. If, by the terms of this Note, Borrower is at any time required to pay interest at a rate in excess of such applicable maximum rate, the rate of interest under this Note shall be deemed to be immediately reduced to such applicable maximum legal rate, and the portion of all prior interest payments in excess of such applicable maximum legal rate shall be applied to and shall be deemed to have been payments in reduction of the outstanding principal balance. Borrower agrees that in determining whether or not any interest payable under this Note exceeds the highest rate permitted by applicable law, any non-principal payment, including without limitation late charges, shall be deemed to the extent permitted by applicable law to be an expense, fee or premium rather than interest.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.4** **<u>Severability</u>.** If any one or more of the provisions contained in this Note shall for any reason be held invalid, illegal, null, void or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof. In lieu of any invalid or unenforceable provision, there shall be added automatically a valid and enforceable provision as similar in terms to such invalid or unenforceable provision as may be possible.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.5** **<u>Binding Effect</u>.** The covenants, conditions, waivers, releases and agreements contained in this Note shall bind, and the benefits thereof shall inure to, the parties hereto and their respective heirs, executors, administrators, successors and assigns; provided, however, that this Note cannot be assigned by Borrower without the prior written consent of Lender, and any such assignment or attempted assignment by Borrower without consent shall be void and of no effect with respect to Lender.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.6** **<u>Entire Agreement; Modifications</u>.** This Note contains all of the terms and conditions relating to the subject matter hereof, and any prior agreements, whether written or oral, with respect thereof, are expressly superseded hereby. This Note may not be supplemented, extended, modified or terminated except by an agreement in writing signed by the party against whom enforcement of any such waiver, change, modification or discharge is sought.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.7** **<u>Sales, Participations, etc.</u>** Lender may from time to time sell or assign, in whole or in part, grant participations in, or grant other securities tied to the Loan Agreement, the Loan, this Note and/or the obligations evidenced thereby or hereby. Lender may in its discretion give notice to Borrower of such sale, assignment, participation or grant of such security; however, the failure to give such notice shall not affect any of Lender's or such holder's rights hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.8** **<u>Governing Law</u>.** This Note shall be governed by, construed, interpreted and enforced in accordance with the laws of the State of Georgia.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.9** **<u>Time is of the Essence</u>.** Time is of the essence with respect to the terms of this Note.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.10** **<u>Headings</u>.** The section headings in this Note are for convenience only, shall in no way define or limit the scope or content of this Note and shall not be considered in any construction or interpretation of this Note or any part thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**11.11** **<u>Authorization</u>.** The person(s) executing this Note on behalf of Borrower warrants and represents that (s)he is duly authorized to enter into this Note and that this Note constitutes the valid and binding obligations of Borrower, and enforceable against Borrower in accordance with its terms.

***[THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY. SIGNATURE PAGE FOLLOWS.]***

**IN WITNESS WHEREOF**, Borrower, intending to be legally bound, has duly executed and delivered this Note as of the day and year first above written.

---

| | |
|:---|:---|
| **BORROWER** | **BORROWER** |
|  | , |
| a |  |
| By: |  |
| Printed Name: |  |
| Title: |  |
| Tax ID No.: |  |

---

***[Signature Page to Note]***

State of _____________________

County of ___________________

I, the undersigned Notary Public of the County of __________________ and State of ____________________, certify that _______________________ personally came before me this day and acknowledged that (s)he is the ___________________________ of __________________________, a ______________________, and that by authority duly given and as the act of such entity, (s)he signed the foregoing instrument in its name on its behalf as its act and deed. Witness my hand and notarial stamp or seal, this _____ day of ______________________, 20_.

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| |
|:---|
| Notary Public |
| Notary's |
| Printed or Typed Name |
| My Commission Expires: |

---

(Affix Seal)

## Ex1A-11

**Exhibit 11.1**

![](tm2310287d1_ex11-1img016.jpg)

**Consent of Independent Registered Public Accounting Firm**

We hereby consent to the inclusion of our reports (i) dated March 8, 2023, with respect to the balance sheets of Groundfloor Real Estate 1, LLC (the "Company") as of December 31, 2022 and 2021 and the related statements of operations, changes in member's (deficit) equity, and cash flows for the years then ended, and (ii) dated March 6, 2023, with respect to the consolidated balance sheets of Groundfloor Finance, Inc. and Subsidiaries as of December 31, 2022 and 2021 and the related consolidated statements of operations, changes in member's (deficit), and cash flows for the years then ended, and to the reference to our firm under the heading "Experts", which appears in the accompanying Form 1-A of Groundfloor Real Estate 1, LLC. Our report contains an explanatory paragraph regarding the Company's ability to continue as a going concern.

![](tm2310287d1_ex11-1img017.jpg)

Atlanta, Georgia

March 24, 2023

**cbh.com**

## Ex1A-12

**Exhibit 12.1**

![](image_016.jpg)

**VINCENT R. RUSSO**

DIRECT LINE: 404-856-3260

Email: vrusso@robbinsfirm.com

March 24, 2023

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

Groundfloor Real Estate 1, LLC

600 Peachtree St. NE

Suite 810<br> Atlanta, Georgia 30308

nick@groundfloor.us

---

| | |
|:---|:---|
| **Re:** | **<u>Regulation A Offerig Statement on Form 1-A</u>** |

---

Ladies and Gentlemen:

At your request, we have examined the Offering Statement on Form 1-A of Groundfloor Real Estate 1, LLC (the "Company"), filed with the Securities and Exchange Commission (the "Commission") on March 24, 2023 pursuant to Regulation A under the Securities Act of 1933 (the "Securities Act"), in connection with the Company's offer and sale of up to $152,460 aggregate principal amount of Limited Recourse Obligations (the "Securities"). 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 in the Offering Circular respectively, and as entered into between the Company and each purchaser of the Securities (the "Purchasers").

In rendering this opinion, we have examined such records and documents as we have deemed necessary in order to render 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 Offering Statement, the Offering Circular included as Part II of the Offering Statement, and the exhibits filed as Part III thereof or incorporated therein by reference;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The Articles of Organization of the Company filed with the Georgia Secretary of State on December 16, 2016 (included as Exhibit 2.1 to the Offering Statement);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) The Operating Agreement of the Company (the "Operating Agreement") (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;(4) Action of the Manager of the Company authorizing the offering covered by the Offering Statement; and

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

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

Groundfloor Real Estate 1, LLC

March 24, 2023

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) The Certificate of Organization issued by the Georgia Secretary of State, dated December 16, 2016, and public records of the Georgia Secretary of State indicating that the Company is active and in good standing pursuant to the Georgia Limited Liability Company Act.

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 in accordance with the laws and regulations of those states; (iv) the Company will promptly file any supplements to the Offering Circular and post-qualification amendments in accordance with all applicable laws and regulations in effect from time to time; and (v) the public offer and sale of the Securities shall be exempt from registration pursuant to 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;(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;(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;(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;(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;(e) The financial condition of the Company.

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

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

Groundfloor Real Estate 1, LLC

March 24, 2023

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.

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 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;(1) The Company is a limited liability company validly existing, in good standing, under the laws of the State
of Georgia;

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

&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;(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 Offering Circular 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 Offering Circular, 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, |
| <u>/s/ Vincent R. Russo</u> |
| On behalf of Robbins Alloy |
| &nbsp;&nbsp;&nbsp;&nbsp;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 Real Estate 1, LLC

**Jurisdiction of Incorporation/Organization:** GA

**Year of Incorporation:** 2016

**CIK:** 0001694600

**I.R.S. Employer Identification Number:** 81-4730228

**Primary Standard Industrial Classification Code:** 6500

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

**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                | $0.00        |
| Investment Securities                    | $0.00        |
| Accounts and Notes Receivable            | $72101671.00 |
| Property, Plant and Equipment (PP&E)     | $0.00        |
| Total Assets                             | $72101671.00 |
| Accounts Payable and Accrued Liabilities | $72101671.00 |
| Long-Term Debt                           | $0.00        |
| Total Liabilities                        | $72101671.00 |
| Total Stockholders' Equity               | $0.00        |
| Total Liabilities and Equity             | $72101671.00 |

**Statement of Comprehensive Income Information**

| Metric                                    | Amount   |
|:---|:---|
| Total Revenues                            | $0.00    |
| Costs and Expenses Applicable to Revenues | $0.00    |
| Depreciation and Amortization             | $0.00    |
| Net Income                                | $0.00    |
| Earnings Per Share - Basic                | 0.00     |
| Earnings Per Share - Diluted              | 0.00     |

**Auditor Information**

| Metric          | Amount   |
|:---|:---|
| Name of Auditor | N/A      |

### Outstanding Securities

| Class   |   Outstanding |     CUSIP | Publicly Traded   |
|:---|---:|---:|:---|
| N/A     |             0 | 000000000 | N/A               |
| N/A     |             0 | 000000000 | N/A               |
| N/A     |             0 | 000000000 | 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:** Debt

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

**Was or is the offering to take place within one year after qualification?** No

**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                                    | 24515870     |
| Number of securities outstanding                                | 0            |
| Price per security                                              | $10.00       |
| Issuer's aggregate offering price                               | $75000000.00 |
| Aggregate offering price of securities held by security holders | $0.00        |
| Aggregate price of securities offered concurrently              | $0.00        |
| Total aggregate offering price                                  | $75000000.00 |

**Anticipated Fees**

| Service Provider   | Name                           | Fees     |
|:---|:---|:---|
| Auditor            |  |  |
| Legal              | Manatt, Phelps & Phillips, LLP | $1000.00 |
| Promoters          |  |  |

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

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

- All States and Territories