DeFi Development Corp.

Previous wording

We provide a technology platform that connects commercial mortgage and small business borrowers looking for debt to refinance, build, or buy commercial property including apartment buildings to commercial property lenders. These property lenders include traditional banks, credit unions, real estate investment trusts (“REITs”), debt funds, and other financial institutions looking to deploy capital into commercial mortgages.

Current wording

Janover is an AI-powered online platform that connects the commercial real estate industry by providing data and software subscriptions as well as value-add services to multifamily and commercial property professionals as we connect the increasingly complex ecosystem that stakeholders have to manage. We provide a technology platform that connects commercial mortgage and small business borrowers looking for debt to refinance, build, or buy commercial property including apartment buildings to commercial property lenders. These property lenders include traditional banks, credit unions, real estate investment trusts (“REITs”), debt funds, and other financial institutions looking to deploy capital into commercial mortgages.

Previous wording

We currently have two different customer segments: lenders and borrowers. Borrowers include (but are not limited to) owners, operators, and developers of commercial real estate including multifamily properties and most recently, a growing segment of small business owners (which we believe represents a significant growth opportunity). Lenders include banks, credit unions, REITs, Fannie Mae® and Freddie Mac® multifamily lenders, FHA® multifamily lenders, debt funds, commercial mortgage-backed securities (“CMBS”) lenders and Small Business Administration (“SBA”) lenders.

Current wording

We currently have two different customer segments: lenders and borrowers. Borrowers include (but are not limited to) owners, operators, and developers of commercial real estate including multifamily properties and most recently, a growing segment of small business owners (which we believe represents a significant growth opportunity). Lenders include banks, credit unions, REITs, Fannie Mae® and Freddie Mac® multifamily lenders, FHA® multifamily lenders, debt funds, CMBS lenders and SBA lenders.

Previous wording

Our business model includes earning a transaction fee each time a loan closes with a lender through our platform. We are either paid a share of the revenue from the transaction by the lender and/or receive some fixed sum in an amount we negotiate from the borrower. We are generally paid by the lender or the borrower and are paid by both sometimes. Our average fee earned per transaction is approximately 1% of the loan amount generally earned at the time of closing. We do not make loans or share risk with the lenders, with whom we conduct business with. With the recent acquisition of Groundbreaker, an increasing portion of our total revenue is recurring software subscription revenue.

Current wording

Our business model includes earning a transaction fee, or platform fee, each time a loan closes with a lender through our platform. We are either paid a share of the revenue from the transaction by the lender and/or receive some fixed sum in an amount we negotiate from the borrower. We are generally paid by the lender or the borrower and are paid by both sometimes. Our average fee earned per transaction is approximately 1% of the loan amount generally earned at the time of closing. We do not make loans or share risk with the lenders, with whom we conduct business with.

Previous wording

Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and the promised services have been transferred to the customer. The Company’s services are generally transferred to the customer at a point in time, which is when the underlying lending transaction has closed and successfully funded. The Company may act as an agent for both lenders and borrowers.

Current wording

The Company derives its revenue primarily from platform fees and subscription revenue. Platform fees include referral and advisory fees generated from multifamily and commercial real estate and small business debt transactions. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and the promised services have been transferred to the customer. The Company’s services are generally transferred to the customer at a point in time, which is when the underlying lending transaction has closed and successfully funded. The Company may act as an agent for both lenders and borrowers.

Previous wording

Revenue for the year ended December 31, 2023 was approximately $2.0 million, as compared to approximately $2.2 million for the year ended December 31, 2022, a decrease of 7%. The decrease in revenue for the year was due primarily to a reduction in closed loans during the quarter ended December 31, 2023. This revenue decline can be attributed the ongoing market disruption within commercial real estate. However, the downward pressure on our commercial real estate financing business was offset by the strong growth in our small business administration (“SBA”) and SMB business, which more than doubled of that last two fiscal years. The SBA/SMB business represented approximately one-third of our total revenue for the year ended December 31, 2023. For the year ended December 31, 2023 there were 179 transactions that closed on our marketplace, compared to 296 during the year ended December 31, 2022, representing a 40% decrease in transaction volume. The average revenue per transaction was $10,866 in the year ended December 31, 2023, compared to $7,050 for the year ended December 31, 2022 representing a 54% increase in revenue per transaction. This increase in average revenue per transaction was the result of a change in the average loan size during year ended December 31, 2023 compared to the prior year. Our average revenue per transaction closed will vary from period to period, depending on the size of the underlying loan transactions in any given period. With the completion of our Initial Public Offering (“IPO”) in 2023, we will focus our efforts on revenue growth, with an emphasis on our most profitable customer cohorts. We will target increasing both the number of transactions closed and revenue per transaction closed.

Current wording

Revenue for the year ended December 31, 2024 was approximately $2.1 million, as compared to approximately $2.0 million for the year ended December 31, 2023, an increase of approximately $97,000, or 5%. The increase in revenue for the year was due primarily to an increase in subscription revenue, related to our SaaS software business, offset by a reduction in platform revenue, related to our legacy debt business. In 2024, the Company started to market, its lender marketplace (“Janover Pro”), its equity marketplace (“Janover Engage”), and its artificial intelligence technology (“Janover AI”) as a software as a service. Subscription Revenue also includes revenue from Janover Connect, formerly known as Groundbreaker, our real estate syndication software and investor portal and from our Insurtech subsidiary. The revenue derived from these SaaS subscriptions will be recognized over the term of the SaaS agreement. Subscription revenue was approximately $480,000 for the year ended December 31, 2024 compared to approximately $32,000 for the same period in the prior year. For the year ended December 31, 2024 approximately 23% of our total revenue was recurring revenue, compared to less than 1%, as there was only a minimal amount of recurring revenue in fiscal 2023. For the year ended December 31, 2024 there were 115 transactions that closed on our marketplace, compared to 179 during the year ended December 31, 2023, representing a 36% decrease in transaction volume. The average revenue per transaction was $12,765 in the year ended December 31, 2023, compared to $10,866 for the year ended December 31, 2023 representing a 17% increase in revenue per transaction. This increase in average revenue per transaction was the result of a change in the average loan size during year ended December 31, 2024 compared to the prior year. Our average revenue per transaction closed will vary from period to period, depending on the size of the underlying loan transactions in any given period. We will focus our efforts on revenue growth, with an emphasis on our most profitable cohorts of customers. We will target increasing both our number of transactions closed and our revenue per transaction. During fiscal 2025, we will continue to focus on larger loan opportunities, which should increase our average loan size. In fiscal 2025, we will continue to focus on transitioning from transactional platform fee debt revenue to the more predictable and profitable recurring SaaS subscription revenue. At December 31, 2024 our annual recurring revenue (“ARR”) reached approximately $812,000, compared to approximately $276,000 in the prior year, an increase of 194%. The recurring revenue in the prior year represented our acquisition of Groundbreaker, which was rebranded as Janover Connect, in November 2023. ARR increased sequentially by approximately 69%, which was approximately $480,000 for the nine months ended September 30, 2024. ARR represents an annualization of our recurring revenue, …

Excerpt shortened here; the source contains the full paragraph.

Previous wording

, or 22%. The majority of the increase can be attributed to increased compensation, benefits and stock-based compensation expense during fiscal 2023, due to increases in employees and the issuance of common stock upon our IPO for services, cancellation of employee stock options and issuance of common stock in connection with the IPO, compared to the same period in 2022. Offsetting this increase in sales and marketing expenses for fiscal 2023, was a purposeful reduction in advertising and marketing expenses. As we continue to improve the efficiency of our sales and marketing efforts, leveraging our search engine optimization and our artificial intelligence engine, we expect to continue to optimize and increase our advertising and marketing expenses while lowering our customer acquisition costs to drive a more productive sales and marketing spend.

Current wording

Our sales and marketing costs are primarily comprised of personnel and advertising costs. Sales and marketing expenses for the year ended December 31, 2024 were approximately $1.5 million, compared to approximately $2.0 million for the year ended December 31, 2023, a decrease of approximately $479,000, or 24%. The majority of the decrease for the year can be attributed to a decrease in stock-based compensation. Stock-based compensation for the year ended December 31, 2024 was approximately $11,000, compared to approximately $509,000 for the year ended December 31, 2023, a decrease of approximately $499,000 which was primarily related to the issuance of common stock for IPO services, the cancellation of employee stock options and the issuance of common stock in connection with the IPO in fiscal 2023. As we continue to improve the efficiency of our sales and marketing efforts, leveraging our search engine optimization and our artificial intelligence engine, we expect to continue to optimize and increase our advertising and marketing expenses to help drive subscription revenue, while lowering our customer acquisition costs, to drive a more productive sales and marketing spend.

Previous wording

Our research and development costs are primarily comprised of personnel costs with a minimal amount of software license fees to support the development of our marketplace. Research and development expenses for the year ended December 31, 2023 were approximately $792,000, compared to approximately $427,000 for the year ended December 31, 2022, an increase of approximately $365,000, or 86%. The majority of the increase can be attributed to an increased compensation and benefits and stock-based compensation expense during fiscal 2023, due to increases in employees and the issuance of common stock upon our IPO for services, cancellation of employee stock options and issuance of common stock in connection with the IPO, compared to the same period in 2022. We will continue to focus on developing our digital marketplace and our AI for the benefit of driving customer value on both sides of our marketplace which we believe will drive long term value to customers and our shareholders.

Current wording

Our research and development costs are primarily comprised of personnel costs with a minimal amount of software license fees to support the development of our platform. Research and development expenses for the year ended December 31, 2024 were approximately $655,000, compared to approximately $792,000 for the year ended December 31, 2023, a decrease of approximately $137,000, or 17%. The majority of the decrease for the year can be attributed to a decrease in stock-based compensation. Stock-based compensation for the year ended December 31, 2024 was approximately $11,000, compared to approximately $210,000 for the year ended December 31, 2023, a decrease of approximately $199,000 which was primarily related to the issuance of common stock for IPO services, the cancellation of employee stock options and the issuance of common stock in connection with the IPO in fiscal 2023. We will continue to focus on developing our platform and our AI for the benefit of driving customer value on our marketplace, which we believe will drive long term value to customers and our shareholders.

Previous wording

Our general and administrative costs include personnel costs, accounting, legal, rent, and other overhead expenses. General and administrative expenses for the year ended December 31, 2023 were approximately $2.6 million, compared to approximately $1.8 million for the year ended December 31, 2022, an increase of approximately $820,000, or 45%. The majority of the increase can be attributed to an increase in professional fees and stock-based compensation expense during the year ended December 31, 2023, due to issuance of common stock upon our IPO for services, cancellation of employee stock options and issuance of common stock in connection with the IPO, compared to the same period in 2022. This increase in professional fees and stock-based compensation were in support of our capital raising process, which led to our successful initial public offering in July 2023.

Current wording

Our general and administrative costs include personnel costs, accounting, legal, rent, and other overhead expenses. General and administrative expenses for both the year ended December 31, 2024 and 2023 were approximately $2.6 million. During the year ended December 31, 2024 there was a large decrease in stock-based compensation expense which was primarily related to the issuance of common stock for IPO services, the cancellation of employee stock options and the issuance of common stock in connection with the IPO in fiscal 2023. Offsetting this decrease were increased costs associated with being a public company, which included professional fees and director and officer insurance, compared to the year ended December 31, 2023.

Previous wording

Other income for the year ended December 31, 2023 was approximately $31,000 compared to income of approximately $459,000 for the year ended December 31, 2022, a decrease to income of approximately $428,000. Our other income (expense) includes interest income offset by the change in the fair value of future equity obligations, which were realized at the IPO in July 2023. This decrease to other income was the result of a change in the fair value of future equity obligations. The change in fair value was primarily related to changes in the underlying assumptions for the valuation of future equity obligations for conversion into common stock upon IPO, which were capitalized on our balance sheet in connection with our IPO.

Current wording

Other income for the year ended December 31, 2024 was approximately $277,000 compared to other income of approximately $31,000 for the year ended December 31, 2023, an increase to other income of approximately $246,000. The majority of the other income balance for the year ended December 31, 2024, represented approximately $156,000 of interest income earned during the period and approximately $114,000 of other income which represented a change in the fair value of marketable securities at December 31, 2024. The majority of the other income balance for the year ended December 31, 2023, represented interest income earned during the period. Offsetting other income during the year ended December 31, 2023 was an expense which represented a change in the fair value of future equity obligations. The change in fair value was primarily related to changes in the underlying assumptions for the valuation of future equity obligations, which were capitalized on our balance sheet in connection with our IPO, which took place in July 2023.

Previous wording

Our principal liquidity requirements are for working capital to fund our sales, marketing, research and development and administrative expenditures. To date, we have funded our liquidity requirements primarily through cash on hand, cash flows from operations, as well as equity and equity-related financing. As of December 31, 2023 and 2022, we had approximately $5.1 million and approximately $981,000 of cash and cash equivalents, respectively. As of December 31, 2023, we had an accumulated deficit of

Current wording

Our principal liquidity requirements are for working capital to fund our sales, marketing, research and development and administrative expenditures. To date, we have funded our liquidity requirements primarily through cash on hand, cash flows from operations, as well as equity and equity-related financing. As of December 31, 2024 and 2023, we had approximately $2.5 million and approximately $5.1 million of cash and cash equivalents, respectively. As of December 31, 2024, we had an accumulated deficit of approximately $9.4 million which included incurred net losses of approximately $2.7 million and $3.4 million during the year ended December 31, 2024 and 2023, respectively. We had cash used in operations of approximately $2.4 million during the year ended December 31, 2024, compared to cash used in operations of approximately $1.6 million for the same period for the prior year.

Previous wording

Our business plan is focused on rapid growth to achieve significant market penetration over the shortest possible time horizon. As such, we intend to continue to invest in research and development, sales and marketing, and general and administrative expenses to drive that rapid growth.

Current wording

Our business plan is focused on rapid growth, as we transition away from transactional platform fee revenue and move more toward the more predictable subscription recurring revenue, to achieve significant market penetration over the shortest possible time horizon. As such, we intend to continue to invest in research and development, sales and marketing, and general and administrative expenses to drive that growth.

Previous wording

For the year ended December 31, 2023, cash used in operating activities was approximately $1.6 million compared to approximately $1.0 million for the year ended December 31, 2022. The increase in cash used in operating activities was the result of funding changes in our working capital balances, primarily accounts receivable, prepaid expenses, accounts payable and accrued expenses, as well as our increased loss from operations in fiscal 2023. The increase in cash used in operating activities was minimized due to the

Current wording

For the year ended December 31, 2024, cash used in operating activities was approximately $2.4 million compared to approximately $1.6 million for the year ended December 31, 2023. The increase in cash used in operating activities was the result of funding changes in our working capital balances, primarily accounts receivable, prepaid expenses, accounts payable and accrued expenses, as well as our increased loss from operations in fiscal 2023. The increase in cash used in operating activities was minimized due to the approximately $1.2 million decrease in stock-based compensation, which is a non-cash expense.

Previous wording

For the year ended December 31, 2023 cash from investing activities were approximately $89,000 compared to $0 for the year ended December 31, 2022. The increase in cash used in investing activities was related to the acquisition of Groundbreaker in November 2023 and the purchase of property and equipment.

Current wording

For the year ended December 31, 2024 cash from investing activities were approximately $22,000 compared to approximately $89,000 for the year ended December 31, 2023. The decrease in cash used in investing activities was related to the acquisition of Groundbreaker in November 2023 and a reduction in the purchase of property and equipment in the year ended December 31, 2024.

Previous wording

For the year ended December 31, 2023, cash from financing activities were approximately $5.8 million compared to approximately $298,000 for the year ended December 31, 2022. The increase was the result of approximately $1.0 million of gross proceeds from the sale of Series B preferred stock in April 2023 and the initial public offering in July 2023 for approximately $5.0 million, net proceeds. With the approximately $5.8 million of net proceeds raised in fiscal 2023, management believes its current capital is sufficient to sustain the Company’s operating expenses for at least one year. We expect to continue to generate operating losses for the foreseeable future as we focus on revenue growth.

Current wording

For the year ended December 31, 2024, cash used in financing activities were approximately $118,000 compared to approximately $5.8 million in cash provided for the year ended December 31, 2023. The decrease from 2023 was the result of approximately $1.0 million of gross proceeds from the sale of Series B preferred stock in April 2023 and the initial public offering in July 2023 for approximately $5.0 million, net proceeds. With the approximately $5.8 million of net proceeds raised in fiscal 2023, management believes its current capital is sufficient to sustain the Company’s operating expenses for at least one year. The company expects to utilize its current Form S-3 Registration Statement and ATM Sales Agreement to raise additional proceeds in fiscal 2025, which is limited to approximately $1.5 million. There is no guarantee that we will be successful raising the maximum proceeds from this capital raise. We expect to continue to generate operating losses for the foreseeable future as we focus on revenue growth, however we expect these operating losses to decline as we continue to grow our subscription software revenue.

Previous wording

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting standards in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Current wording

This discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting standards in the United States (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the valuation of assets acquired, and liabilities assumed pursuant to business combinations, including contingent consideration, and stock-based compensation. Actual results may differ from these estimates under different assumptions or conditions. We believe that the following accounting policies are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Previous wording

Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

Current wording

Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between the customer payment and the transfer of good or derives is expected to be one year or less.

Previous wording

Goodwill and indefinite-lived intangibles are not amortized but are instead evaluated annually for impairment as part of the Company’s annual financial review, or when indicators of a potential impairment are present. The annual test for impairment performed for goodwill can be qualitative or quantitative, taking into consideration certain factors surrounding the fair value of the goodwill including, level by which fair value exceeded carrying value in the prior valuation, as well as macroeconomic factors, industry conditions and actual results at the test date.

Current wording

Goodwill and indefinite-lived intangibles are not amortized but are instead evaluated annually for impairment as part of the Company’s annual financial review, or when indicators of a potential impairment are present. The annual test for impairment performed for goodwill can be qualitative or quantitative, taking into consideration certain factors surrounding the fair value of the goodwill including, level by which fair value exceeded carrying value in the prior valuation, as well as macroeconomic factors, industry conditions and actual results at the test date. As of December 31, 2024 the Company determined that there was an impairment to the indefinite-lived Groundbreaker brand of approximately $83,000 during the fourth quarter of fiscal 2024, The company amortized an additional amount of $83,000, which was Groundbreaker’s brand name intangible asset. It was determined by the Company that the Groundbreaker brand name was less valuable and was deemed impaired. Due to this impairment the Company changed the Groundbreaker brand name to Janover Connect and is no longer marketing the Groundbreaker brand name. There was no impairment as of December 31, 2023.

Previous wording

. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employee’s required service period, which is generally the vesting period.

Current wording

We record stock-based compensation in accordance with ASC 718,Compensation-Stock Compensation. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued and are recognized over the employee’s required service period, which is generally the vesting period.