UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 1-K

ANNUAL REPORT

ANNUAL REPORT PURSUANT TO REGULATION A OF THE SECURITIES ACT OF 1933

For the Annual Period Ended December 31, 2025

GROUNDFLOOR FINANCE INC.

(Exact name of registrant as specified in its charter)

Commission File Number: 024-11188 (Common Shares); 024-12013 (LROs)

(404) 850-9225
Registrant’s telephone number, including area code

Common Shares, Limited Recourse Obligations
(Title of each class of securities issued pursuant to Regulation A)

Groundfloor Finance Inc.

form 1-k

Fiscal Year Ending 2025

March 31, 2026

DESCRIPTION OF THE COMPANY’S BUSINESS

We incorporate by reference the section titled “Description of the Company’s Business,” filed on Form 1-A dated March 12, 2026, and qualified March 25, 2026. Please see this filing on EDGAR.

MANAGEMENT DISCUSSION AND ANALYSIS

See section titled “Management Discussion and Analysis” below.

Directors and officers

We incorporate by reference the section titled “Management” Form 1-A dated March 12, 2026, and qualified March 25, 2026. Please see this filing on EDGAR.

Security ownership of management and certain securityholders

We incorporate by reference the section titled “Principal Shareholders,” Form 1-A dated March 12, 2026, and qualified March 25, 2026. Please see this filing on EDGAR.

Interest of management and others in certain transactions

We incorporate by reference the section titled “Related Party Transactions,” Form 1-A dated March 12, 2026, and qualified March 25, 2026. Please see this filing on EDGAR.

Other information

We do not have other information to disclose under Item 6 of Form 1-K

GROUNDFLOOR FINANCE INC.

Consolidated Financial Statements

As of December 31, 2025 and 2024, and

For the years ended December 31, 2025 and 2024

GROUNDFLOOR FINANCE INC.

Table of Contents

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, 2025 and 2024, and the related consolidated statements of operations, stockholders’ 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, 2025 and 2024, 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 audits. We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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 negative cash flows from operations since its inception, resulting in substantial doubt about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding this matter are also 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.

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, and for 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 the consolidated financial statements are available to be issued.

cbh.com

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:

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.

Atlanta, Georgia

March 31, 2026

GROUNDFLOOR FINANCE INC.

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements

GROUNDFLOOR FINANCE INC.

Consolidated Statements of Operations

See accompanying notes to consolidated financial statements.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Deficit

See accompanying notes to consolidated financial statements

GROUNDFLOOR FINANCE INC.

Consolidated Statements of Cash Flows

GROUNDFLOOR FINANCE INC.

Consolidated Statements of Cash Flows

See accompanying notes to consolidated financial statements

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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. Groundfloor Properties GA LLC, a wholly-owned subsidiary, 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, Groundfloor Yield LLC, Groundfloor Labs, LLC, Groundfloor Credit 1, LLC, Groundfloor Credit 2, LLC, and Groundfloor Credit 3, LLC are wholly-owned subsidiaries that were created for the purpose of financing real estate in any state. Groundfloor Depositor, LLC, Groundfloor Mortgage Trust and Groundfloor Mortgage Trust 2025-1 are wholly-owned subsidiaries that were created for the purpose of securitizing real estate loans. Groundfloor Advisors, LLC is a wholly-owned subsidiary that was created for the purpose of managing certain subsidiary entities. Groundfloor Land, LLC, Discount Lots GF Land 1 LLC, Discount Lots GF Capital 1 LLC, Groundfloor Homeshares, LLC and Groundfloor Nectar SPV I, LLC are wholly-owned subsidiaries created for the purpose of entering into agreements with independent third parties. RTL 2025-GF Repo Trust is a wholly-owned subsidiary that was created for the purpose of establishing the Warehouse Facility. 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 (“Projects”). With this online investment platform (“Platform”), public investors (“Investors”) are able to choose between multiple Projects, and real estate developers (“Developers”) of the Projects are able to obtain financing. Groundfloor’s financing model replaces traditional sources of financing for Projects with the aggregation of capital from Investors using the internet.

Basis of Presentation and Liquidity

The Company’s Consolidated Financial Statements include the results of Groundfloor Finance Inc. and its wholly owned subsidiaries, 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, 2025 and 2024 represents the outside owner’s interest in the Company’s consolidated VIE. Intercompany transactions and balances have been eliminated upon consolidation.

The Company has sponsored three investment programs as of December 31, 2025, Groundfloor Loans 1, LLC, Groundfloor Loans 2, LLC and Groundfloor Loans 3, LLC, which use a typical real estate investment trust (“REIT”) structure similar to other publicly offered REITs, but are only available to investors through the Groundfloor platform.

Certain reclassifications have been made to the prior year presentation to conform to the current period presentation in the Consolidated Financial Statements. These reclassifications were not material to the financial statements.

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. There is substantial doubt that the Company will continue as a going concern for at least twelve 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.

Operations since inception have consisted primarily of organizing the Company, developing the technology, and securing financing. 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.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 and 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.

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 (“GAAP”) 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 periods. In developing estimates and assumptions, management uses all available information; however, actual results could materially differ from those estimates and assumptions.

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 the company is the primary beneficiary of the VIE due to the company holding a controlling financial interest in the VIE. A controlling financial interest in a VIE exists if the company has 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 (“Loan” or “Loans”). Fees include “Origination fees” and “Loan servicing revenue” which are paid by the Developers.

The Company recognizes loan servicing revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers.

The Company recognizes origination fees, net interest income, and gains and losses on sales of loans in accordance with ASC 310, Receivables.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 10.0% 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”).

For Loans to Developers carried at amortized cost, 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. Fees assessed at loan issuance such as processing, underwriting, and closing fees are recognized as revenue when incurred.

For Loans to Developers at fair value, the origination fees are recognized as revenue immediately upon loan origination and direct costs to originate Loans are recorded as expenses as incurred. Fees assessed at loan issuance such as processing, underwriting, and closing fees are recognized as revenue when incurred.

Loan Servicing Revenue

Loan servicing revenue is recognized by the Company 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 the performance obligation is satisfied. 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 within “Origination fees” in the Consolidated Statements of Operations. For sold loans for which the Company retains servicing rights, the Company evaluates whether the expected contractual compensation represents adequate compensation for servicing in order to determine whether a servicing asset or servicing liability arises from the transaction. No servicing rights assets or liabilities have been identified as of December 31, 2025 and 2024. During the year ended December 31, 2025 and 2024, the Company sold $49,268,100 and $3,205,359, respectively, of loans under loan sale agreements. The Company recognized a gain on sale of loan of $42,767 for the year ended December 31, 2025 and $0 for the year ended December 31, 2024.

Net Interest Income on Loans to Developers

The Company recognizes “Net interest income on loans to developers” which consists of interest income generated on loans to developers, net of interest expense incurred on corresponding limited recourse obligations using the accrual method based on the stated interest rate to the extent the Company believes it to be collectable.

Interest Expense on Notes

The Company also recognizes “Interest expense on notes” which consists of interest expense incurred on the Company’s notes payable, using the accrual method based on the stated interest rate. “Interest expense on notes” was $17,810,094 and $10,641,988 for the years ended December 31, 2025, and 2024, respectively.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Cash and Cash Equivalents

The Company considers all highly liquid investments that mature three months or less from the date of purchase to be cash equivalents. The Company had no cash equivalents as of December 31, 2025, and 2024. From time to time, the Company could maintain cash deposits in excess of federally insured limits. The Company believes that no significant concentration of credit risk exists with respect to these balances based on its assessment of the creditworthiness and financial viability of these financial institutions.

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 limited recourse obligation (“LRO”) or held in escrow, are not included as a part of the Company’s cash balance.

Restricted Cash

Included in the accompanying Consolidated Balance Sheets as of December 31, 2025 and 2024 is restricted cash of $14,131,578 and $54,220,669, respectively. These balances represent funds committed by investors in LROs, but not yet disbursed to developers on the underlying Loans.

Loans to Developers and Limited Recourse Obligations

On January 1, 2025, the Company adopted the provisions of ASC 825-10 Financial instruments – Overall guidance on the fair value option for financial instruments, which permits companies to elect to measure certain financial instruments and certain other items at fair value. We applied the provisions of ASC 825-10 to newly originated or purchased loans to developers and the related limited recourse obligations. The standard requires that estimated unrealized gains and losses on items for which the fair value option has been elected be reported in earnings. “Loans to developers, at fair value” are initially recorded at the fair value of the loan receivable and are subsequently increased as additional draws are disbursed to developers. “Loans to developers at fair value” were $155,090,590 and $0 as of December 31, 2025 and 2024, respectively. “Limited recourse obligations, at fair value” are originally recorded at the fair value of the investment payable to investors. Limited Recourse Obligations, at fair value were $35,994,295 and $0 as of December 31, 2025 and December 31, 2024, respectively.

Refer to footnote 3 “Fair value measurements” for details on the Company’s methods of recording these financial instruments at fair value.

“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. “Loans to developers” were $88,373,526 and $224,596,705 as of December 31, 2025 and 2024, respectively. “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. Limited Recourse Obligations were $72,522,955 and $160,742,560 as of December 31, 2025, and 2024, respectively, on the accompanying Consolidated Balance Sheets.

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

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 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, if applicable, less collection costs incurred by the Company. From time to time, the Company may settle LROs with Investors, at the Investors’ election, for amounts less than carrying value. Any gain recognized on such transaction is recorded within “Other Income (expense)” in our Consolidated Statement of Operations.

The Loans are recorded on the Company’s Consolidated Balance Sheets to “Loans to developers” and “Loans to developers at fair value” once the Loan has closed and funds have been disbursed to Developers. Loans are considered closed after the promissory note for that Loan has been signed and the security interest has been perfected.

The LROs are recorded on the Company’s Consolidated Balance Sheets to “Limited recourse obligations” and “Limited recourse obligations at fair value” to the extent LROs related to existing loans have been funded by investors.

Other Securities Payable

“Other securities payable” 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 or investments in real estate then subsequently increased as those funds are disbursed to developers. Total other securities payable were $16,607,253 and $15,915,491 as of December 31, 2025 and 2024, respectively, on the accompanying Consolidated Balance Sheets.

Subscriptions Payable

“Subscriptions payable” are originally recorded at the original principal amount committed by investors. Total other securities payable were $25,077,605, and $0 as of December 31, 2025 and 2024, respectively, on the accompanying Consolidated Balance Sheets.

Interest Receivable and Interest Payable

“Interest receivable on loans to developers” represents interest income the Company is due to receive from developers on the total outstanding principal balance of the loan portfolio as of the consolidated balance sheet dates. This balance is presented as its own line item, separate from “Loans to developers” and “Loans to developers, at fair value”, on the Company’s Consolidated Balance Sheets.

“Accrued interest on limited recourse obligations” represents interest the Company owes investors on the corresponding LROs as of the consolidated balance sheet dates. This balance is presented as its own line item, separate from “Limited recourse obligations” and “Limited recourse obligations, at fair value”, on the Company’s Consolidated Balance Sheets. 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 “Accounts payable and accrued expenses” 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 Sheets. 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 “Loans to developers at fair value” and corresponding “Limited recourse obligations” and “Limited recourse obligations, fair value” is discontinued when, in management’s opinion, the collection of the interest income is less than probable. “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 180 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 is less than probable based on the status of the underlying development project, even if the Loan is not yet 180 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.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Once management determines the accrued interest receivable collection is doubtful, the accrued interest receivable is written off against “Interest income.” Likewise, the corresponding accrued interest payable is written off against “Interest expense.”

Allowance for Current Expected Credit Losses

The Company applies ASC 326, Financial Instruments – Credit Losses ("CECL") for recording 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). In accordance with ASC 326, the Company records an allowance for credit losses 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.

ASC 326 requires an entity to consider historical loss experience, current conditions, and a reasonable and supportable forecast of the economic environment.

Loans to developers

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 assessing 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.

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 Groundfloor 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 on a pro-rata basis as the reserve for LROs and Georgia Notes. The amount of a Loan not funded by LROs or Georgia Notes are then recorded as current expected credit loss within “General and administrative” expense on the Company’s Statement of Operations.

Refer to “Note 5 – Loans to Developers and Allowance for Expected Credit Losses” for further information regarding the CECL allowance and its calculation.

Investments in debt securities

Investments in debt securities arise from our Partner Notes programs with our lending partners. We pool our investments in debt securities based on shared risk characteristics to assess their risk of loss, even when that risk of loss is remote. Management considers whether current conditions or reasonable and supportable forecasts about future conditions warrant an adjustment to our historical loss experience. In applying such adjustments, we primarily consider changes in counterparty credit risk and changes in the underlying macroeconomic environment. These investments in debt securities are either collateralized with assets of or guaranteed by the lending partners. As of December 31, 2025 and 2024, the CECL allowance for investments in debt securities was $0.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Credit facility receivable

Credit facility receivable arises from our credit facility relationship with a mortgage loan originator. 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. In applying such adjustments, we primarily consider changes in counterparty credit risk and changes in the underlying macroeconomic environment. The credit facility receivable is guaranteed by the mortgage loan originator. As of December 31, 2025 and 2024, the CECL allowance for credit facility receivable was $0.

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 on the Company’s Consolidated Balance Sheets and has a balance of $34,322,624 and $20,328,188 as of December 31, 2025, and 2024, respectively.

Software Development Costs

Software development costs primarily include internal and external labor expenses incurred to develop the software that powers the Company’s platform. 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 $2,299,367 and $2,180,525 in expense related to amortization of software development costs for the years ended December 31, 2025, and 2024, 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:

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

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 $2,000 in amortization expense during the years ended December 31, 2025, and 2024.

Equity Offering Costs

The Company accounts for offering costs in accordance with 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 consolidated 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, 2025, no offering costs were incurred.

For the year ended December 31, 2024, offering costs of $91,734 incurred in connection with the issuance of Series B-3 preferred stock were deferred and charged against the gross proceeds of the offering in stockholders’ equity.

Deferred Revenue

Deferred revenue consists of origination fee payments on loans to developers carried at amortized cost received in advance of revenue recognized. We recognized $201,680 and $3,979,794 of deferred revenue as of December 31, 2025 and 2024, respectively, which is presented within “Accounts Payable and Accrued Expenses” on the Company’s Consolidated Balance Sheets.

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 $633,621 and $1,134,528 in advertising costs during the years ended December 31, 2025, and 2024, respectively.

Leases

In accordance with ASC 842, Leases, we determine if an arrangement is or contains a lease at inception of the contract. A contract is or contains a lease if the contract conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. We primarily lease our office space under a multi-year, non-cancelable operating lease. Operating leases are included in other assets and other liabilities in our Consolidated Balance Sheets. As of December 31, 2025 and 2024, we did not have any finance leases.

ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments. The operating lease ROU assets are increased by any prepaid lease payments and are reduced by any unamortized lease incentives. While our lease terms may include options to extend or terminate the leases, it is not reasonably certain that we will exercise such options. Base rent is typically subject to rent escalations on each annual anniversary from the lease commencement dates. Lease expense for lease payments, including any step rent provisions specified in the lease agreements, is recognized on a straight-line basis over the lease term and is included within “General and administrative” expenses in the Consolidated Statements of Operations. Operating lease cost associated with our ROU assets and lease liabilities was $322,321, and $362,479 for the years ended December 31, 2025 and 2024, respectively.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Share-Based Compensation

The Company issues share-based awards to certain employees and non-employees in the form of stock options and warrants, which are measured at fair value at the date of grant. The fair value determined at the date of grant is expensed, based on our estimate of awards that will eventually vest, ratably over the vesting period. The fair value of each stock option and warrant is estimated using the Black-Scholes option pricing model. We account for forfeitures as they occur. Refer to “Note 12 – Stock Options and Warrants” for additional information.

Income Taxes

Deferred tax assets and liabilities are recorded for temporary differences between the reported amounts in the Consolidated Financial Statements and the tax basis of assets and liabilities, using the statutory 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.

In August 2020, the Financial Accounting Standards Board (“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 certain financial instruments with characteristics of liability and equity. Specifically, it reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. The guidance is effective for fiscal years beginning after December 15, 2023, with early adoption permitted. The Company adopted ASU 2020-06 as of January 1, 2024 and elected the modified retrospective transition method, recognizing a cumulative-effect adjustment to retained earnings as of that date, for financial instruments outstanding as of the beginning of the fiscal year of adoption. The adoption resulted in a $92,536 transition adjustment to accumulated deficit as of January 1, 2024. Our adoption of this standard did not have any impact on the Company’s Consolidated Statements of Operations.

In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07). The ASU improves reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments require disclosure of significant segment expenses that are regularly provided to the CODM and included in each reported measure of segment profit or loss, an amount and description for other segment items, and the title and position of the CODM. The ASU also requires that all existing annual disclosures about a reportable segment’s profit or loss and assets be provided in interim periods. The ASU 2023-07 became effective for the Company beginning with annual reporting period ending December 31, 2024. The adoption resulted in enhanced disclosures within this footnote and has been applied retrospectively to all prior periods presented. The adoption of this standard did not have an impact on the Company’s consolidated financial position, results of operations, or cash flows, as it is limited to disclosure requirements only.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In December 2023, the FASB issued ASU No. 2023-09, Income taxes: Improvements to Income Tax Disclosures (Topic 740) (“ASU 2023-09”). The Company adopted ASU 2023-09 effective January 1, 2025 on a prospective basis, which requires disaggregated income tax disclosures of the effective tax rate reconciliation and income taxes paid. See Note 14 – Income Taxes.

In November 2024, the FASB issued ASU No. 2024-03, Disaggregation of Income Statement Expenses (“ASU 2024-03”). The standard requires the disaggregated disclosure of certain income statement items. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and interim periods beginning after December 15, 2027 and early adoption is permitted. The company is currently evaluating the impact of this amendment on its Consolidated Financial Statements.

In July 2025, the FASB issued ASU No. 2025-05 Financial instruments – Credit Losses (Topic 326), which provides a practical expedient that assumes that current conditions as of the balance sheet date do not change for the remaining life of the asset. The ASU is effective for annual reporting periods beginning after December 15, 2025 and interim reporting periods within those annual reporting periods, and early adoption is permitted. The Company is currently evaluating the impact of this amendment on its Consolidated Financial Statements.

In September 2025, the FASB issued ASU No. 2025-06, Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”). The standard clarifies and modernizes the accounting for costs related to internal-use software. ASU 2025-06 is effective for interim and annual periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact on its Consolidated Financial Statements.

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.

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 Consolidated Financial Statements with a non-controlling interest for the third-party ownership of the joint venture's membership interests.

The Company has sponsored three investment programs, Groundfloor Loans 1 LLC (“GF Loans 1”), Groundfloor Loans 2 LLC (“GF Loans 2”) and Groundfloor Loans 3 LLC (“GF Loans 3”) as of December 31, 2025, which use a typical REIT structure similar to other publicly offered REITs but are only available to investors through the Groundfloor platform. Under the provisions of ASC 810, Consolidation, we have determined that GF Loans 3 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 GF Loans 3 within the accompanying Consolidated Financial Statements. GF Loans 3 has not yet begun operations as of December 31, 2025.

Under the provisions of ASC 810, Consolidation, we have determined that GF Loans 1 is a VIE for which Groundfloor is not the primary beneficiary. As such, the Company has not consolidated GF Loans 1 into the Consolidated Financial Statements.

In September 2025, GF Loans 2 began operations and accepted equity investments from outside investors, repaying Groundfloor’s initial equity contribution. Under the provisions of ASC 810, Consolidation, we have reevaluated GF Loans 2’s VIE status and determined that after operations began, GF Loans 2 is a VIE for which Groundfloor is no longer the primary beneficiary. As such, the Assets and Liabilities of GF Loans 2 were deconsolidated from the Consolidated Financial Statements upon the date at which operations began.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table presents the assets and liabilities of the Company’s consolidated VIEs included in the Consolidated Balance Sheets as of December 31, 2025, and 2024, respectively. 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.

During 2024, the Company entered into three limited liability company agreements with independent third parties to form special purpose entities. The purpose of these entities is to facilitate secured lending arrangements between Groundfloor and the independent third parties.

Groundfloor’s contributions to these entities are mandatorily redeemable at the end of the stated term of each entity’s operating agreements and are recorded as investments in debt securities. The Company has determined that Groundfloor is not the primary beneficiary of these VIEs and as such, under ASC 810, Consolidation, has not consolidated these entities into the Consolidated Financial Statements. The Company has recorded its investments in these entities within “Investments in debt securities” in the Company’s Consolidated Balance Sheets.

In 2025, the Company entered into a credit facility agreement with an independent third party to form a special purpose entity. The purpose of this entity is to facilitate secured lending arrangements between Groundfloor and the independent third party and replaces one of the limited liability company agreements entered into in 2024. Groundfloor’s contributions to this entity are mandatorily redeemable at the end of the stated term of the credit facility and are recorded as investments in debt securities. The Company has determined that Groundfloor is not the primary beneficiary of these VIEs and as such, under ASC 810, Consolidation, has not consolidated these entities into the Consolidated Financial Statements. The Company has recorded its investment in these entities within “Investments in debt securities” in the Company’s Consolidated Balance Sheet.

As of December 31, 2025, the Company’s maximum potential loss in aggregate for unconsolidated VIEs is $16,896,251.

The Company uses valuation techniques that are consistent with the market approach, the income approach, and/or the cost approach to measure assets and liabilities that are measured at fair value. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity's own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, accounting standards establish a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Level 1—Financial assets and liabilities whose values are based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

Level 2—Financial assets and liabilities whose values are based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.

Level 3—Financial assets and liabilities whose values are based on inputs that are both unobservable and significant to the overall valuation.

Cash and restricted cash —Cash and restricted cash are classified within Level 1 of the fair value hierarchy, as the primary component of the price is obtained from quoted market prices in an active market. The carrying amounts of our cash approximate their fair values due to the short maturities and highly liquid nature of these accounts.

Loans to Developers, at fair value—We elected the fair value method to account for our Loans to Developers, at fair value. As a result of this election, our Loans to Developers, at fair value are carried at fair value on a recurring basis. The Company determines the fair value of the loans using several inputs, including market rates that similar or identical instruments have been sold to third party market participants by Groundfloor, as well as expected cash flows and historical repayment behavior. The carrying amounts of Loans to Developers approximates their fair values due to their short-term nature. Therefore, Loans to Developers, at fair value are classified within Level 3 of the fair value hierarchy.

Other Real Estate Owned—Other real estate owned are recorded in the Consolidated Balance Sheets at the lower of cost or fair value and therefore, are measured at fair value on a nonrecurring basis. The Company determines the fair value of other real estate owned using several inputs, including market prices that similar or identical properties have been sold to market participants, as well as expected cash flows, and management’s judgement on construction required to sell the property. Therefore, Other Real Estate Owned are classified within Level 3 of the fair value hierarchy.

Contingent consideration receivable – In exchange for selling Loans to our forward flow partners, the Company receives cash, and, in some cases, beneficial interest in the form of additional contingent consideration, which may be received at a later date based on certain potential outcomes (typically based on the credit performance of the underlying loans sold). The contingent consideration receivables serve as a host contract containing an embedded derivative as the credit and prepayment performance of the loan participations are tied to the underlying debtor, rather than the third-party purchaser of the loans. Company only has recourse to payments from Loans underlying the contingent consideration receivable and therefore, the embedded credit derivative is not subject to bifurcation. The contingent consideration receivable is recorded within Other Current Assets in the Consolidated Balance Sheets. The Company determines the fair value of the contingent consideration receivable using several inputs, including market rates that similar or identical instruments to the related loans to developers, at fair value have been sold to third party market participants by Groundfloor, as well as expected cash flows and historical repayment behavior. The carrying amounts of contingent consideration receivable approximates their fair values due to their short-term nature. Therefore, Loans to Developers, at fair value are classified within Level 3 of the fair value hierarchy. Therefore, the contingent consideration receivables are classified within Level 3 of the fair value hierarchy.

Limited Recourse Obligations, at fair value—We elected the fair value method to account for our Limited recourse obligations, at fair value. As a result of this election, limited recourse obligations, at fair value, are carried at fair value on a recurring basis. Our obligation to pay principal and interest on any limited recourse obligations is equal to the pro-rata portion of the payments received on loans to developers, at fair value. As such, the fair value of the limited recourse obligations, at fair value, approximates the fair value of the underlying loans to developers, reasonably adjusted for assumptions that would be used by market participants. As a result, the Company classifies these liabilities within Level 3 of the fair value hierarchy.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table summarizes the financial assets and financial liabilities measured at fair value on a recurring and non-recurring basis as of December 31, 2025, segregated by the level of the valuation inputs within the fair value hierarchy used to measure fair value.

The following table summarizes the financial assets and financial liabilities measured at fair value on a recurring basis as of December 31, 2024, segregated by the level of the valuation inputs within the fair value hierarchy used to measure fair value.

There were no transfers between any of the levels within the fair value hierarchy as of December 31, 2025 and December 31, 2024.

The following tables represent a detailed roll forward of the Company’s Level 3 assets and liabilities. Adjustments to fair value of Level 3 assets and liabilities are recorded within “Other (expense) income” within the Company’s Consolidated Statements of Operations.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The carrying amounts and the fair values of the Company’s financial instruments as of December 31, 2025 and December 31, 2024 are presented below:

The Company believes that no significant concentration of credit risk exists arising from financial instruments.

As of December 31, 2025, the aggregate fair value of Loans to developers, at fair value that are 90 days or more past due was $936,431 and the aggregate fair value of Loans to developers, at fair value in nonaccrual status was $468,000. As of December 31, 2025, the difference between the aggregate fair value and the aggregate unpaid principal balance for loans that are 90 days or more past due, in nonaccrual status, or both was $10,505.

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 $2,500,000, 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, 2025, and 2024, respectively:

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated 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 table presents analyses of the allowance for credit losses for the years ended December 31, 2025, and 2024:

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 based on an assessment of each project and the proposed terms of the underlying loan, which reflect the overall risk of the Loan. 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 relevant factors assessed by the Company’s proprietary grading algorithm 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. These indicators take into account the valuation and strength of a particular project and the experience and risk profile of the Borrower and correlate with how well management believes the loan will perform.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table presents “Loans to developers” carrying amount of our loan portfolio by portfolio segment (loan grade at origination) and vintage of origination as of December 31, 2025 and 2024. There were no “Loans to developers” originated in 2025:

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 or Georgia Notes.

All credit quality indicators were updated as of December 31, 2025.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following tables present “Loans to developers” carrying amount of our loan portfolio by credit quality indicator and vintage of origination as of December 31, 2025 and 2024. There were no “Loans to developers” originated in 2025 outstanding as of December 31, 2025:

Nonaccrual and Past Due Loans

A Loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income is less than probable. Once a loan has been placed in nonaccrual status, it will stop accruing interest income. Additionally, any corresponding limited recourse obligations will stop accruing interest expense. Once management determines the accrued interest receivable collection is doubtful, the accrued interest receivable is written off against interest income. Likewise, the corresponding accrued interest payable is written off against 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, 2025, the Company placed Loans of $38,675,691 recorded to “Loans to developers” on nonaccrual status. The Company has written off $3,017,925 of interest receivable in the current period. The Company has $12,661,293 of Loans that are 90 days or more past due, but are not on nonaccrual status as of December 31, 2025.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following tables present an analysis of past due Loans by aging as of December 31, 2025, and 2024:

The following is a summary of information pertaining to Loans in nonaccrual status as of December 31, 2025 and 2024:

“Other current assets” as of December 31, 2025, and 2024, consists of the following:

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

“Other assets” as of December 31, 2025, and 2024, consists of the following:

“Property, equipment, software, website development costs, and intangible assets, net” at December 31, 2025 and 2024, consists of the following:

Depreciation and amortization expense on “Property, equipment, intangible assets, software, and website development costs, net” for the years ended December 31, 2025, and 2024 was $2,378,887 and $2,294,441, 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.

“Accounts payable and accrued expenses” at December 31, 2025 and 2024, consists of the following:

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

2023 Subordinated Convertible Notes

From August 2023 to December 2023, the Company issued subordinated convertible notes (the “2023 Subordinated Convertible Notes”) to Investors for total proceeds of $7,631,595. The 2023 Subordinated Convertible Notes bear interest at the rate of 12.5% per annum. The outstanding principal and all accrued but unpaid interest is due and payable on the earlier of August 24, 2025, 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 “2023 Subordinated Convertible Notes Maturity Date”). In the event of a closing of a preferred stock financing with gross proceeds of at least $20,000,000 (“2023 Subordinated Convertible Notes Qualified Preferred Financing”) prior to the 2023 Subordinated Convertible Notes 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 2023 Subordinated Convertible Notes Qualified Preferred Financing. At any time after April 1, 2024, 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.

In 2025, certain holders of the 2023 Subordinated Convertible Notes converted their holdings into common stock. Noteholders converted $335,377 in principal and approximately $110,888 in accrued interest into 8,925 shares of common stock at a conversion price of $45, a 10% discount to the per share price of common stock at the time of conversion.

In 2025, certain holders of the 2023 Subordinated Convertible Notes elected to extend their maturity date to December 2025, in exchange for a 15% interest rate for the extended period between August 2025 and December 2025. Noteholders elected to extend the maturity date of $1,290,039 in principal and were paid approximately $58,847 in accrued interest during the extension period.

In August 2025, the Company repaid the remaining principal of $6,006,179 and accrued but unpaid interest of $1,789,294 related to the notes related to the 2023 Subordinated Convertible Notes.

See the table below for the outstanding amounts relating to the 2023 Subordinated Convertible Notes.

2023 Mezzanine Subordinated Convertible Notes

From August 2023 to December 2023, the Company issued mezzanine subordinated convertible notes (the “2023 Mezzanine Convertible Notes”) to Investors for total proceeds of $2,297,974. The 2023 Mezzanine Convertible Notes bear interest at the rate of 10.5% per annum. The outstanding principal and all accrued but unpaid interest is due and payable in 19 equal quarterly installments beginning on April 1, 2024 and thereafter on the first day following the end of each fiscal quarter, such that the 2023 Mezzanine Convertible Notes shall be repaid the earlier of October 1, 2028, 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 “2023 Mezzanine Subordinated Convertible Notes Maturity Date”). In the event of a closing of a preferred stock financing with gross proceeds of at least $20,000,000 (“2023 Mezzanine Subordinated Convertible Notes Qualified Preferred Financing”) prior to the 2023 Mezzanine Subordinated Convertible Notes 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 prior to April 1, 2024, 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.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In 2024, certain holders of 2023 Mezzanine 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 notes with a principal balance of $245,257 and accrued interest of $8,310 into 6,414 shares of common stock at a conversion price of $39.51, a 10% discount to the per share price of common stock at the time of conversion.

The following table summarizes the outstanding balances related to the 2023 Mezzanine Subordinated Convertible notes presented within the Company’s Consolidated Balance Sheets, as well as the interest expense recognized for the years ended December 31, 2025 and 2024 respectively:

2025 Subordinated Convertible Notes

From January 2025 to May 2025, the Company issued subordinated convertible notes (“2025 1.5-year Subordinated Convertible Notes”) to investors for total proceeds of $9,189,000. The 2025 1.5-year Convertible Notes bear interest at the rate of 11.0% - 11.5% per annum. The 2025 1.5 -year Subordinated Convertible Notes pay all accrued but unpaid interest to the investor each month. The outstanding principal and all accrued but unpaid interest is due and payable on July 31, 2026, such that the 2025 1.5-year Subordinated Convertible Notes shall be repaid the earlier of July 31, 2026, 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 (“2025 1.5-year Subordinated Convertible Notes Maturity Date”). In the event of a closing of a preferred stock financing with gross proceeds of at least $20,000,000 (“2025 1.5-year Subordinated Convertible Notes Qualified Preferred Financing”) prior to the 2025 1.5-year Subordinated Convertible Notes 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 June 30, 2025, the investor may elect to 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.

From August 2025 to December 2025, the Company issued subordinated convertible notes (“2025 2-year Subordinated Convertible Notes”) to investors for total proceeds of $9,040,964. The 2025 2-year Convertible Notes bear interest at the rate of 11.5% per annum. The 2025 2-year Subordinated Convertible Notes pay all accrued but unpaid interest to the investor each month. The outstanding principal and all accrued but unpaid interest is due and payable on July 31, 2027, such that the 2025 2-year Subordinated Convertible Notes shall be repaid the earlier of July 31, 2027, 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 (“2025 2-year Subordinated Convertible Notes Maturity Date”). In the event of a closing of a preferred stock financing with gross proceeds of at least $20,000,000 (“2025 2-year Subordinated Convertible Notes Qualified Preferred Financing”) prior to the 2025 Subordinated Convertible Notes 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 January, 2026, the investor may elect to 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.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table summarizes the outstanding balances related to the 2025 Subordinated Convertible notes presented within the Company’s Consolidated Balance Sheets, as well as the interest expense recognized for the years ended December 31, 2025 and 2024 respectively:

Groundfloor Notes

During the years ended December 31, 2025, and 2024, the Company entered into various secured promissory notes, (the “Groundfloor Notes”), with Investors. The Groundfloor Notes are used by 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 Groundfloor Real Estate 2 LLC to the Investors in Groundfloor Notes, subject to certain exceptions. The following table describes the terms and amounts of Groundfloor Notes offered as of and for the years ended December 31, 2025 and 2024:

Stairs Notes

During the years ended December 31, 2025, and 2024, 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.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The following table describes the terms and amounts of Stairs Notes offered as of and for the years ended December 31, 2025 and 2024:

Warehouse Facilities

In October 2025, the Company entered into a warehouse facility agreement to fund future bond securitizations. The amount outstanding on the facility depends on the origination volume of eligible loans the Company has made. The Warehouse Facility initially provided a revolving commitment of $27.5 million, with a maturity date of October 31, 2026. On December 31, 2025, the Warehouse Facility was amended to increase the facility’s revolving commitment to $37.5 million. The Warehouse facility is subject to interest rate of SOFR plus 3.25% per annum. As of December 31, 2025, the outstanding balance on the facility, net of deferred expenses related to the closing of the facility, was $17,917,171 and is recorded within Warehouse facilities on the Company’s Consolidated Balance Sheets. For the year ended December 31, 2025, the Company recognized $38,167 of interest expense, recorded within “Interest expense on notes” within the Company’s Consolidated Statements of Operations.

Revolver Loan

In 2025, the Company entered into an agreement with its banking institution, borrowing $10,000,000 against the same amount of cash collateral held within one of its bank account. The loan bears interest at a variable rate of 1.25% above SOFR and has a maturity date of August 8, 2026. As of December 31, 2025 the outstanding balance on the revolver loan was $10,000,000 and is recorded within Short-term notes payable on the Company’s Consolidated Balance Sheets.

In February 2026, the Company fully repaid its $10 million short-term revolver loan. Under the terms of the payoff letter, the Company paid $10,107,611 of principal and interest.

In December 2024, the Company completed the issuance of $57,986,000 Class A mortgage-backed notes (“Class A Notes”) through a newly created entity, Groundfloor Mortgage Trust (“Issuer”). The Class A Notes have a stated maturity date of December 2027 and are secured by the underlying Loans of the Issuer. The interest rate on the Class A Notes is 7.387% and payments on the Class A Notes are made on the 25th of each month beginning in January 2025. The stated final payment date of the Notes will be in December 2027.

The Company holds the responsibility to repay the Class A Note holders. The Company will collect repayments on loans that are collateral of the Class A Notes and remit those repayments to the Issuer. The underlying loans have maturity dates through October 2025.

We recognized $1,570,404 of debt offering costs, which have been deferred and will be amortized over the term of the Class A Notes.

GROUNDFLOOR FINANCE INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In December 2025, the Company used proceeds from the loan collateral to repay the Class A notes in full. The Company recognized the remaining unamortized debt offering costs of $1,550,086. As of December 31, 2025, and 2024, respectively, the Company had $0 and $57,986,000 payable related to the Class A Notes. The Company recognized $2,457,427 and $0 in interest expense within “Interest expense on notes” in the Company’s Consolidated Statements of Operations for the years ended December 31, 2025, and 2024, respectively.

In May 2025, the Company completed the issuance of $62,063,000 Class A mortgage-backed notes (“2025 Class A Notes”) through a newly created entity, Groundfloor Mortgage Trust 2025-1 (“2025-1 Issuer”). The 2025 Class A Notes have a stated maturity date of May 2028 and are secured by the underlying Loans of the 2025-1 Issuer. The interest rate on the 2025 Class A Notes is 7.371% and payments on the 2025 Class A Notes are made on the 25th of each month beginning in June 2025. The stated final payment date of the Notes will be in May 2028.

The Company holds the responsibility to repay the 2025 Class A Note holders. The Company will collect repayments on loans that are collateral of the 2025 Class A Notes and remit those repayments to the Issuer. The underlying loans have maturity dates through September 2026. The net proceeds of loan repayments, not yet used to pay the outstanding note balance is $8,218,924 and included in "Restricted cash" within the Company's Consolidated Balance Sheet as of December 31, 2025.

We recognized $1,428,082 of debt offering costs, which have been deferred and will be amortized over the term of the 2025 Class A Notes. For the year ended December 31, 2025, we recognized $330,838 in amortization of debt offering costs in the Company's Consolidated Statements of Operations. As of December 31, 2025, and 2024, respectively, the Company had $48,678,414 and $0 payable related to the 2025 Class A Notes. The Company recognized $2,598,409 and $0 in interest expense within “Interest expense on notes” in the Company’s Consolidated Statements of Operations for the years ended December 31, 2025, and 2024, respectively.

Capital Structure

Authorized Shares - As of December 31, 2025, 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 B Preferred Stock (the “Series B”), consisting of 441,940 shares, Series A Preferred Stock (the “Series A”), consisting of 747,373 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”).

Common Stock Transactions

In 2025, the Company launched an offering of its common stock (the “2025 Common Stock Offering”) limited to existing shareholders. The Company offered shares of common stock at $55 per share, with a minimum investment of $550, or 10 shares of common stock. As a result of the offering, the Company received gross proceeds of approximately $226,325 in exchange for the issuance of 4,115 shares of common stock.

Preferred Stock Transactions

Series B-3

In January 2024, the Company launched an offering of its B-3 Preferred Stock (the “2024 B-3 Preferred Stock Offering”) on its platform, limited to existing shareholders. The Company offered shares of its B-3 Preferred Stock at $46 per share. As a result of the offering the Company received gross proceeds of $667,138 in exchange for the issuance of 15,413 shares of Series B-3 Preferred Stock.

From September to December 2024, the Company launched and offering of its B-3 Preferred Stock (the “Republic Offering”) offering shares under Regulation CF, using a third party, Republic, to facilitate the offering. The Company offered shares of its B-3 Preferred Stock at $50 per share. As a result, the company received gross proceeds of $1,147,425, less offering costs of $111,191, in exchange for the issuance of 24,638 shares of Series B-3 Preferred Stock.

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, 2025, and 2024.

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.