An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this preliminary offering circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Commission is qualified. This preliminary offering circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of such state. The Company may elect to satisfy its obligation to deliver a final offering circular by sending you a notice within two business days after the completion of the Company’s sale to you that contains the URL where the final offering circular or the offering statement in which such final offering circular was filed may be obtained.

PRELIMINARY OFFERING CIRCULAR DATED MAY 25, 2021

Worthy Financial, Inc.

One Boca Commerce Center

551 NW 77 Street, Suite 212

Boca Raton, FL 33487

(561) 288-8467

www.worthy.us

UP TO 1,000,000 SHARES OF COMMON STOCK

INCLUDING UP TO 120,000 SHARES OF COMMON STOCK

TO BE SOLD BY SELLING SHAREHOLDERS

MINIMUM INDIVIDUAL INVESTMENT: 20 Shares ($400)

We are offering a maximum 1,000,000 shares of Common Stock, including 120,000 shares to be sold by selling shareholders, on a “best efforts” basis.*

SEE “SECURITIES BEING OFFERED” AT PAGE 29

* The Company is offering up to 880,000 shares of Common Stock and the selling shareholders are offering up to 120,000 shares of Common Stock. See “Plan of Distribution and Selling Securityholders.”

** The Company has engaged Rialto Markets LLC (“Rialto”) to perform certain services in connection with this offering as set forth in “Plan of Distribution and Selling Securityholders”. The Company and the selling shareholders will pay a cash commission of 1% to Rialto on sales of the Common Stock and a 4% commission on sales to investors solicited by Rialto. This includes the 1% commission, but it does not include the one-time advisory fee payable by the company to Rialto, nor the 4% commission payable for solicited sales. See “Plan of Distribution and Selling Securityholders” on page 31 for details of compensation payable in connection with the offering.

*** The proceeds represent amounts to be paid to the selling shareholders listed in this Offering Circular. The selling shareholders are offering up to 120,000 shares of Common Stock. See “Plan of Distribution and Selling Securityholders.”

The Company expects that the amount of expenses of the offering that it will pay will be approximately $455,000, not including commissions or state filing fees.

The Company has engaged Wilmington Trust Company as an escrow agent (the “Escrow Agent”) to hold funds tendered by investors, and may hold a series of closings on a rolling basis at which we receive the funds from the escrow agent and issue the shares to investors. The offering will terminate at the earlier of the date at which the maximum offering amount has been sold or the date at which the offering is earlier terminated by the Company in its sole discretion. After each closing, funds tendered by investors will be available to the Company.

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

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

This offering is inherently risky. See “Risk Factors” on page 3.

Sales of these securities will commence on approximately, _____, 2021.

The Company is following the “Offering Circular” format of disclosure under Regulation A.

In the event that we become a reporting Company under the Securities Exchange Act of 1934, we intend to take advantage of the provisions that relate to “Emerging Growth Companies” under the JOBS Act of 2012. See “Implications of Being an Emerging Growth Company”.

TABLE OF CONTENTS 

In this Offering Circular, the terms “we,” “us,” “ours,” and the “Company” refers to Worthy Financial, Inc. (“Worthy Financial”), a Delaware corporation, together with our wholly-owned subsidiary Worthy Peer Capital, Inc., a Delaware corporation (“Worthy Peer Capital”), and its wholly-owned subsidiary Worthy Lending, LLC, a Delaware limited liability company (“Worthy Lending”), our wholly-owned subsidiary Worthy Peer Capital II, Inc., a Florida corporation (“Worthy Peer Capital II”) and its wholly-owned subsidiary Worthy Lending II, LLC, a Delaware limited liability company (“Worthy Lending II”), our wholly-owned subsidiary Worthy Community Bonds, Inc, a Florida corporation (“Worthy Community Bonds”), and its wholly-owned subsidiary Worthy Lending III, LLC, a Delaware limited liability company (“Worthy Lending III”), our wholly-owned subsidiary Worthy Community Bonds II, Inc., a Florida corporation (“Worthy Community Bonds II”), and its wholly-owned subsidiary Worthy Lending IV, LLC, a Delaware limited liability company (“Worthy Lending IV”), Worthy Property Bonds, Inc., a Florida corporation (“Worthy Property Bonds”), and its wholly-owned subsidiary Worthy Lending V, LLC, a Delaware limited liability company (“Worthy Lending V”) and our wholly-owned subsidiary Worthy Management, Inc. (“Worthy Management”), a Florida corporation. “Worthy Bonds” refers to bonds issued or to be issued by Worthy Peer Capital, Worthy Peer Capital II, Worthy Community Bonds and Worthy Community Bonds II.

THIS OFFERING CIRCULAR MAY CONTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO, AMONG OTHER THINGS, THE COMPANY, ITS BUSINESS PLAN AND STRATEGY, AND ITS INDUSTRY. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON THE BELIEFS OF, ASSUMPTIONS MADE BY, AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY’S MANAGEMENT. WHEN USED IN THE OFFERING MATERIALS, THE WORDS “ESTIMATE,” “PROJECT,” “BELIEVE,” “ANTICIPATE,” “INTEND,” “EXPECT” AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS, WHICH CONSTITUTE FORWARD LOOKING STATEMENTS. THESE STATEMENTS REFLECT MANAGEMENT’S CURRENT VIEWS WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE THE COMPANY’S ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN THE FORWARD-LOOKING STATEMENTS. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE ON WHICH THEY ARE MADE. THE COMPANY DOES NOT UNDERTAKE ANY OBLIGATION TO REVISE OR UPDATE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER SUCH DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.

Trademarks and Copyrights

We own or have applied for rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names. In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect our business. This Offering Circular may also contain trademarks, service marks and trade names of other companies, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this offering circular is not intended to, and should not be read to, imply a relationship with or endorsement or sponsorship of us. Solely for convenience, some of the copyrights, trade names and trademarks referred to in this Offering Circular are listed without their ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade names and trademarks. All other trademarks are the property of their respective owners.

Implications of Being an Emerging Growth Company

We are not subject to the ongoing reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) because we are not registering our securities under the Exchange Act. Rather, we will be subject to the more limited reporting requirements under Regulation A, including the obligation to electronically file:

In addition, at any time after completing reporting for the fiscal year in which our offering statement was qualified, if the securities of each class to which this Offering Statement relates are held of record by fewer than 300 persons and offers or sales are not ongoing, we may immediately suspend our ongoing reporting obligations under Regulation A.

If and when we become subject to the ongoing reporting requirements of the Exchange Act, as an issuer with less than $1.07 billion in total annual gross revenues during our last fiscal year, we will qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and this status will be significant. An emerging growth company may take advantage of certain reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. In particular, as an emerging growth company we:

We intend to take advantage of all of these reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards, and hereby elect to do so. Our election to use the phase-in periods may make it difficult to compare our financial statements to those of non-emerging growth companies and other emerging growth companies that have opted out of the phase-in periods under Section 107 of the JOBS Act.

Under the JOBS Act, we may take advantage of the above-described reduced reporting requirements and exemptions for up to five years after our initial sale of common equity pursuant to a registration statement declared effective under the Securities Act of 1933, as amended (the “Securities Act”), or such earlier time that we no longer meet the definition of an emerging growth company. Note that this Offering, while a public offering, is not a sale of common equity pursuant to a registration statement, since the Offering is conducted pursuant to an exemption from the registration requirements. In this regard, the JOBS Act provides that we would cease to be an “emerging growth company” if we have more than $1.07 billion in annual revenues, have more than $700 million in market value of our Common Stock held by non-affiliates, or issue more than $1 billion in principal amount of non-convertible debt over a three-year period.

Certain of these reduced reporting requirements and exemptions are also available to us due to the fact that we may also qualify, once listed, as a “smaller reporting company” under the rules of the Securities and Exchange Commission (the “SEC”). For instance, smaller reporting companies are not required to obtain an auditor attestation on their assessment of internal control over financial reporting; are not required to provide a compensation discussion and analysis; are not required to provide a pay-for-performance graph or CEO pay ratio disclosure; and may present only two years of audited financial statements and related MD&A disclosure.

SUMMARY

Overview

The Company was organized to create a “Worthy Community” to provide financial services initially targeted to millennials who are surpassing the baby boomers as the nation’s largest living generation. Management believes that this demographic in large part has a basic distrust of old guard financial institutions, is burdened by student loans and other debt, change employment frequently and is unable to save money and/or fund a retirement program. We have developed technology solutions, including the Worthy App and the websites www.worthybonds.com and www.joinworthy.us, to facilitate the purchase of Worthy Bonds and to provide information to bond investors on their accounts. We refer to these each as the “Worthy App,” the “Worthy Website” and together as the “Worthy Fintech Platform.”

The Offering

Selected Risks Associated with Our Business

Our business is subject to a number of risks and uncertainties, including those highlighted in the section titled “Risk Factors” immediately following this summary. These risks include, but are not limited to, the following:

Involvement in Certain Legal Proceedings

On September 30, 2016, the SEC issued an Order Instituting Cease-and-Desist Proceedings under Administrative Proceeding File No. 3-17605 pursuant to Section 21C of the Exchange Act, Making Findings, and Imposing a Cease-and-Desist Order (collectively, the “Order”) against D’Arelli Pruzansky, P.A. (the “Firm”), Joseph D’Arelli, CPA, who currently serves as our CFO, and Mitchell Pruzansky, CPA (collectively, the “Respondents”). Respondents consented to the Order pursuant to Offers of Settlement, accepted by the SEC, pursuant to which Respondents neither admitted nor denied the findings in the Order. During a PCAOB inspection in July 2015, the Firm was informed that it had failed to comply with the SEC’s partner rotation requirements because Mr. D’Arelli and Mr. Pruzansky performed quarterly reviews after being the lead audit partner for five consecutive audits, with respect to two issuer audit clients. In August 2015, the Firm reviewed all of its engagements and self-reported instances of such rotation issues regarding additional issuer audit clients. Respondents were ordered to cease and desist from committing or causing any violations and any future violations of Sections 10A(j) and 13(a) of the Exchange Act and Rules 10A-2 and 13a-13 thereunder and to pay the SEC, jointly and severally, a civil penalty of $50,000.

RISK FACTORS

The SEC requires the Company to identify risks that are specific to its business and its financial condition. The Company is still subject to all the same risks that all companies in its business, and all companies in the economy, are exposed to. These include risks relating to economic downturns, political and economic events and technological developments (such as hacking and the ability to prevent hacking). Additionally, early-stage companies are inherently more risky than more developed companies. You should consider general risks as well as specific risks when deciding whether to invest.

Risks Related to our Industry

The lending industry is highly regulated. Changes in regulations or in the way regulations are applied to our business could adversely affect our business.

Changes in laws or regulations or the regulatory application or judicial interpretation of the laws and regulations applicable to us could adversely affect our ability to operate in the manner in which we intend to conduct business or make it more difficult or costly for us to participate in or otherwise make loans. A material failure to comply with any such laws or regulations could result in regulatory actions, lawsuits, and damage to our reputation, which could have a material adverse effect on our business and financial condition and our ability to participate in and perform our obligations to investors and other constituents.

The initiation of a proceeding relating to one or more allegations or findings of any violation of such laws could result in modifications in our methods of doing business that could impair our ability to collect payments on our loans or to acquire additional loans or could result in the requirement that we pay damages and/or cancel the balance or other amounts owing under loans associated with such violation. We cannot assure you that such claims will not be asserted against us in the future.

Worsening economic conditions may result in decreased demand for loans, cause borrowers’ default rates to increase, and harm our operating results.

Uncertainty and negative trends in general economic conditions in the United States and abroad, including significant tightening of credit markets, historically have created a difficult environment for companies in the lending industry. Many factors, including factors that are beyond our control, may have a detrimental impact on our operating performance. These factors include general economic conditions, unemployment levels, energy costs and interest rates, as well as events such as natural disasters, global pandemics such as the COVID-19 outbreak, acts of war, terrorism, and catastrophes.

Our borrowers are small businesses. Accordingly, our borrowers have historically been, and may in the future remain, more likely to be affected or more severely affected than large enterprises by adverse economic conditions. These conditions may result in a decline in the demand for loans by potential borrowers or higher default rates by borrowers.

There can be no assurance that economic conditions will remain favorable for our business or that demand for loans in which we participate or default rates by borrowers will remain at current levels. Reduced demand for loans would negatively impact our growth and revenue, while increased default rates by borrowers may inhibit our access to capital and negatively impact our profitability. Further, if an insufficient number of qualified individuals and small businesses apply for loans, our growth and revenue would be negatively impacted.

We operate in a competitive market, which may intensify, and competition may limit our ability to implement our business model and have a material adverse effect on our business, financial condition, and results of operations.

We operate in a competitive market, which may intensify, and competition may limit our ability to implement our business model and have a material adverse effect on our business, financial condition, and results of operations. Our competitors may be able to have a lower cost for their services, which would lead to borrowers choosing such other competitors over the Company. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of loans and investments, offer more attractive pricing or other terms and establish more relationships than us.

Our results of operations may be negatively impacted by the coronavirus outbreak.

In December 2019, a novel strain of coronavirus, or COVID-19, was reported to have surfaced in Wuhan, China. COVID-19 has spread to many countries, including the United States, and was declared to be a pandemic by the World Health Organization. Efforts to contain the spread of COVID-19 have intensified and the U.S., Europe and Asia have implemented severe travel restrictions and social distancing. The impacts of the outbreak are unknown and rapidly evolving as are the different viral variants. A widespread health crisis has adversely affected and could continue to affect the global economy, resulting in an economic downturn that could negatively impact the value of the Shares and Investor demand for the Shares generally.

The continued spread of COVID-19 has also led to severe disruption and volatility in the global capital markets, which could increase our cost of capital and adversely affect our ability to access the capital markets in the future. It is possible that the continued spread of COVID-19 could cause a further economic slowdown or recession or cause other unpredictable events, each of which could adversely affect our business, results of operations or financial condition.

The extent to which COVID-19 affects our financial results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the COVID-19 outbreak and the actions to contain the outbreak or treat its impact, among others. Moreover, the COVID-19 outbreak has had and may continue to have indeterminable adverse effects on general commercial activity and the world economy, and our business and results of operations could be adversely affected to the extent that COVID-19 or any other pandemic harms the global economy generally.

On March 9, 2020, the Company issued a work at home order to all employees. All employees worked efficiently from home until June 8, 2020 when the office was reopened in accordance with Palm Beach County, Florida guidelines. All employees returned to our office at such time.

Several borrowers, especially companies in the retail sector and others manufacturing for or distributing to the retail industry, experienced reductions in revenue and cash flow. We have worked constructively with such borrowers to reschedule interest and/or principal payments to accommodate such COVID-19 related cases. We have provided accommodations to 3 borrowers with an aggregated loan balance of approximately $1,500,000. To date, to our knowledge, no borrower has gone out of business due to the COVID-19 outbreak and all are honoring revised payment loans.

Risks Related to Our Company

We have a history of losses, which we expect to continue.

The Company is currently not profitable. The Company expects that it will lose money in the foreseeable future, and we may not be able to achieve profitable operations. In order to achieve profitable operations, we will need to raise significant proceeds from this offering and the sale of Worthy Bonds through Regulation A offerings conducted by our subsidiaries and effectively deploy the proceeds of the Worthy Bond offerings by making secured loans or other permissible investments that provide a sufficient return to pay the interest payments on the Worthy Bonds, fund our operating expenses and generate a net profit. The Company cannot be certain that its business will be successful or that it will generate significant revenues and become profitable. An investment in the Company is highly speculative, and no assurance can be given that the shareholders will realize any return on their investment or that they will not lose their entire investment.

There is substantial doubt about our ability to continue as a going concern.

During the years ended December 31, 2020 and 2019, we generated net losses of approximately $4,119,000 and $3,712,000, respectively, and had cash used in operations of approximately $684,000 and $1,663,000, respectively. In addition, at December 31, 2020 and 2019, we had a shareholder’s deficit of approximately $7,344,000 and $3,770,000, respectively, and accumulated deficit of approximately $9,105,000 and $4,986,000, respectively. These conditions raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements have been prepared assuming that we will continue as a going concern. No assurances can be given that we will achieve success in selling any material amount of Worthy Bonds, or that our operations will provide sufficient revenues to cover interest payments on the Worthy Bonds and our operating expenses.

We may need to raise additional capital.

We may have substantial future cash requirements but no assured financing source to meet such requirements. We do not presently generate sufficient revenues to pay the interest on the Worthy Bonds and fund our operating expenses. Our future capital requirements will depend on a number of factors, including our ability to generate sufficient “spread” between the interest rate on the Worthy Bonds and the interest our lending subsidiaries receive from loans and other permissible investments they make using proceeds received from the sale of Worthy Bonds. If adequate funds are not available, including from this offering, the Company may be required to delay or scale back its business plan.

We may experience losses on the loans we make or other permissible investments by our lending subsidiaries.

While the loans made and to be made by our lending subsidiaries are and are planned to be primarily secured by the assets of the borrowers, there is no assurance that general economic conditions or the specific business and financial condition of the borrower, will not result in loan defaults. In that event, we would incur the costs to foreclose on our secured interests and there are no assurances that the amount we may recover from the disposal of the assets will equal the amounts of the obligation and associated costs.

Competition for employees is intense, and we may not be able to attract and retain the highly skilled employees whom we need to support our business.

Currently, our staffing needs are satisfied by a total of 17 full time employees and 1 independent contractor who provide a substantial portion of their time to us. We will need to expand our employee base as our Company continues to grow. Competition for highly skilled personnel, especially data analytics personnel, is extremely intense, and we could face difficulty identifying and hiring qualified individuals in many areas of our business. We may not be able to hire and retain such personnel. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In addition, we intend to invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements and the quality of our services and our ability to serve borrowers could diminish, resulting in a material adverse effect on our business.

We have a limited operating history in a rapidly evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.

We have a limited operating history in an evolving industry that may not develop as expected. Assessing our business and future prospects is challenging in light of the risks and difficulties we may encounter. These risks and difficulties include our ability to:

We may not be able to successfully address these risks and difficulties, which could harm our business and cause our operating results to suffer.

Our subsidiaries have begun to make loans with the proceeds from the sale of bonds, however their lending history is limited.

Worthy Lending, the first lending subsidiary we established, made its first loan in September 2018 and, as of the date of this Offering Circular, our lending subsidiaries have approximately 65 outstanding loans. While our lending subsidiaries have identified several additional opportunities for investment, their lending history is limited. Interest that our subsidiaries earn on the proceeds from their Regulation A offerings of bonds will not cover interest payments accruing on the bonds or the subsidiaries’ operating expenses. Accordingly, until such time as our subsidiaries are able to generate significant income from their loans and investments they will be required to utilize cash on hand and the net proceeds of their respective offerings to make the interest payments, which will reduce the amount of proceeds available to them to make loans.

The amount of repayments that bond holders demand at a given time may exceed the amount of funds our subsidiaries, have available to make such payments, which may result in a delay in repayment or loss of investment to the bond holders.

Our subsidiaries will use their commercially reasonable efforts to maintain sufficient cash and cash equivalents on hand to honor repayment demands of bond holders.  Historically, each of Worthy Peer Capital, Worthy Peer Capital II and Worthy Community Bonds have set aside, and we expect Worthy Community Bonds II will set aside, a minimum of 20% of the proceeds from their respective sales of Worthy Bonds in cash and cash equivalents. However, in the event there are more demands for repayment than available cash and cash equivalents on hand at a subsidiary, our subsidiaries may be required to (i) liquidate some of their respective publicly traded investments, loan portfolio, and other investments, (ii) seek commercial bank and non-bank lending sources, such as insurance companies, private equity funds and private lending organizations, for the provision of credit facilities, including, but not limited to, lines of credit, pursuant to which funds would be advanced to the subsidiary, or (iii) seek capital contributions from Worthy Financial. 

During the year ended December 31, 2020, Worthy Peer Capital received redemption requests totaling approximately $22,213,000. Worthy Peer Capital funded approximately 51%, or approximately $11,293,000, of those redemption requests using cash and cash equivalents, approximately 22%, or approximately $4,800,000, of those requests by liquidating publicly traded securities and approximately 27%, or approximately $6,120,000, by liquidating participations it held in loans originated by other lenders.

During the year ended December 31, 2020, Worthy Peer Capital II and Worthy Community Bonds each had approximately $14,518,000 and $2,335,000, respectively, in redemption requests. In each case, those subsidiaries used cash and cash equivalents to meet the redemption requests.

In the event that subsidiaries cannot access the above sources of funds to honor repayments within the time frame of the repayment requests of bond holders, bond holders might have to wait for repayment until the above sources are realized. If the above sources do not generate enough funds to honor bond holders’ requests for repayment, there is a risk that the bond holders may lose some or all of their investment in the Worthy Bonds.

If the information provided by borrowers is incorrect or fraudulent, we may misjudge a customer’s qualification to receive a loan, and our operating results may be harmed.

Our loan participation or loan decisions are based partly on information provided to us by loan applicants. To the extent that these applicants provide information to us in a manner that we are unable to verify, we may not be able to accurately assess the associated risk. In addition, data provided by third-party sources is a significant component of our underwriting process, and this data may contain inaccuracies. Inaccurate analysis of credit data that could result from false loan application information could harm our reputation, business, and operating results.

Our risk management efforts may not be effective.

We could incur substantial losses, and our business operations could be disrupted if we are unable to effectively identify, manage, monitor, and mitigate financial risks, such as credit risk, interest rate risk, liquidity risk, and other market-related risk, as well as operational risks related to our business, assets, and liabilities. To the extent our models used to assess the creditworthiness of potential borrowers do not adequately identify potential risks, the risk profile of such borrowers could be higher than anticipated. Our risk management policies, procedures, and techniques may not be sufficient to identify all of the risks we are exposed to, mitigate the risks that we have identified, or identify concentrations of risk or additional risks to which we may become subject in the future.

Our subsidiaries rely on various referral sources and other borrower lead generation sources, including lending platforms.

Unlike banks and other larger competitors with significant resources, our subsidiaries rely on smaller-scale marketing efforts, affinity groups, partners, and loan referral services to acquire borrowers. We do not have exclusive rights to referral services, and we cannot control which loans or the volume of loans we are sent. In addition, our competitors may enter into exclusive or reciprocal arrangements with their own referral services, which might significantly reduce the number of borrowers we are referred. Any significant reduction in borrower referrals could have an adverse impact on our loan volume, which will have a correspondingly adverse impact on our operations and our Company.

Our loans may be unsecured obligations of our borrowers.

We believe that some of our loans may be unsecured obligations of the borrowers. This means that, for those loans, we will not be able to foreclose on any assets of our borrowers in the event that they default. This limits our recourse in the event of a default. We may also attract borrowers who have fewer assets and may be engaged in less developed businesses than our peers. If we are unable to access collateral on our loans that default, our results of operations may be adversely impacted.

A significant disruption in our computer systems or a cybersecurity breach could adversely affect our operations.

We rely extensively on our computer systems to manage our loan origination and other processes. Our systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, cyber security breaches, vandalism, severe weather conditions, catastrophic events and human error, and our disaster recovery planning cannot account for all eventualities. If our systems are damaged, fail to function properly or otherwise become unavailable, we may incur substantial costs to repair or replace them, and may experience loss of critical data and interruptions or delays in our ability to perform critical functions, which could adversely affect our business and results of operations. Any compromise of our security could also result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, loss or misuse of the information and a loss of confidence in our security measures, which could harm our business.

Our ability to protect the confidential information of our borrowers and investors may be adversely affected by cyber-attacks, computer viruses, physical or electronic break-ins or similar disruptions.

We process certain sensitive data from our borrowers and investors. While we have taken steps to protect confidential information that we receive or have access to, our security measures could be breached. Any accidental or willful security breaches or other unauthorized access to our systems could cause confidential borrower and investor information to be stolen and used for criminal purposes. Security breaches or unauthorized access to confidential information could also expose us to liability related to the loss of the information, time-consuming and expensive litigation and negative publicity. If security measures are breached because of third-party action, employee error, malfeasance or otherwise, or if design flaws in our software are exposed and exploited, our relationships with borrowers and investors could be severely damaged, and we could incur significant liability.

Because techniques used to sabotage or obtain unauthorized access to systems change frequently and generally are not recognized until they are launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. In addition, federal regulators and many federal and state laws and regulations require companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach are costly to implement and often lead to widespread negative publicity, which may cause borrowers and investors to lose confidence in the effectiveness of our data security measures. Any security breach, whether actual or perceived, would harm our reputation, we could lose borrowers and investors and our business and operations could be adversely affected.

Any significant disruption in service on our platform or in our computer systems, including events beyond our control, could prevent us from processing or posting payments on loans, reduce the attractiveness of our marketplace and result in a loss of borrowers or investors.

In the event of a system outage and physical data loss, our ability to perform our servicing obligations, process applications or make loans available would be materially and adversely affected. The satisfactory performance, reliability and availability of our technology are critical to our operations, customer service, reputation and our ability to attract new and retain existing borrowers and investors.

Any interruptions or delays in our service, whether as a result of third-party error, our error, natural disasters or security breaches, whether accidental or willful, could harm our relationships with our borrowers and investors and our reputation. Additionally, in the event of damage or interruption, our insurance policies may not adequately compensate us for any losses that we may incur. Our disaster recovery plan has not been tested under actual disaster conditions, and we may not have sufficient capacity to recover all data and services in the event of an outage. These factors could prevent us from processing or posting payments on the loans, damage our brand and reputation, divert our employees’ attention, reduce our revenue, subject us to liability and cause borrowers and investors to abandon our marketplace, any of which could adversely affect our business, financial condition and results of operations.

Our subsidiaries contract with third parties to provide services related to their online web lending and marketing, as well as systems that automate the servicing of their loan portfolios. While there are material cybersecurity risks associated with these services, we require that our vendors provide industry-leading encryption, strong access control policies, Statement on Standards for Attestation Engagements (SSAE) 16 audited data centers, systematic methods for testing risks and uncovering vulnerabilities, and industry compliance audits to ensure data and assets are protected. To date, we have not experienced any cyber incidents that were material, either individually or in the aggregate.

If our estimates of loan receivable losses are not adequate to absorb actual losses, our provision for loan receivable losses would increase, which would adversely affect our results of operations.

We maintain an allowance for loans receivable losses. To estimate the appropriate level of allowance for loan receivable losses, we consider known and relevant internal and external factors that affect loan receivable collectability, including the total amount of loan receivables outstanding, historical loan receivable charge-offs, our current collection patterns, and economic trends. If customer behavior changes as a result of economic conditions and if we are unable to predict how the unemployment rate, housing foreclosures, and general economic uncertainty may affect our allowance for loan receivable losses, our provision may be inadequate. Our allowance for loan receivable losses is an estimate, and if actual loan receivable losses are materially greater than our allowance for loan receivable losses, our financial position, liquidity, and results of operations could be adversely affected.

If a significant portion of our subsidiaries’ loan portfolios are past due, it could impact their ability to service payments on Worthy Bonds, which could adversely affect our results of operations.

Our subsidiaries’ loans generally are structured as interest only for at least the first year of repayment, then begin paying interest and principal in later years with all principal being due at maturity. At December 31, 2020, approximately 13% of our loan receivables were past due for more than 90 days, and as of that date all loans were still in the interest only phase, with principal repayment upcoming. If our subsidiaries are unable to collect interest and principal on such loans or if their past due loan receivables increase as a percentage of their portfolios, they will be required to utilize cash on hand and the net proceeds of their respective offerings to make the interest payments and redemptions on their Worthy Bonds, which will reduce the amount of proceeds available to them to make loans and could adversely affect our results of operations.

We will face increasing competition and, if we do not compete effectively, our operating results could be harmed.

We compete with other companies that lend to small businesses. These companies include traditional banks, merchant cash advance providers, and newer, technology-enabled lenders. In addition, other technology companies that lend primarily to individual consumers, such as Lending Club and Prosper Marketplace, have already begun to focus, or may in the future focus, their efforts on lending to small businesses. If we are not able to compete effectively with our competitors, our operating results could be harmed.

Many of these competitors have significantly more resources and greater brand recognition than we do and may be able to attract borrowers more effectively than we do.

When new competitors seek to enter one of our markets, or when existing market participants seek to increase their market share, they sometimes undercut the pricing and/or credit terms prevalent in that market, which could adversely affect our market share or ability to explore new market opportunities. Our pricing and credit terms could deteriorate if we act to meet these competitive challenges. Further, to the extent that the fees we pay to our strategic partners and borrower referral sources are not competitive with those paid by our competitors, whether on new loans or renewals or both, these partners and sources may choose to direct their business elsewhere. All of the foregoing could adversely affect our business, results of operations, financial condition, and future growth.

The collection, processing, storage, use, and disclosure of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements, or differing views of personal privacy rights.

We receive, collect, process, transmit, store, and use a large volume of personally identifiable information and other sensitive data from borrowers and purchasers of the Worthy Bonds and services. There are federal, state, and foreign laws regarding privacy, recording telephone calls, and the storing, sharing, use, disclosure, and protection of personally identifiable information and sensitive data. Specifically, personally identifiable information is increasingly subject to legislation and regulations to protect the privacy of personal information that is collected, processed, and transmitted. Any violations of these laws and regulations may require us to change our business practices or operational structure, address legal claims, and sustain monetary penalties, or other harms to our business.

The regulatory framework for privacy issues in the United States and internationally is constantly evolving and is likely to remain uncertain for the foreseeable future. The interpretation and application of such laws is often uncertain, and such laws may be interpreted and applied in a manner inconsistent with other binding laws or with our current policies and practices. If either we or our third-party service providers are unable to address any privacy concerns, even if unfounded, or to comply with applicable laws and regulations, it could result in additional costs and liability, damage our reputation, and harm our business.

We are reliant on the efforts of Sally Outlaw and Alan Jacobs.

We rely on our management team and need additional key personnel to grow our business; the loss of key employees or inability to hire key personnel could harm our business. We believe our success has depended, and continues to depend, on the efforts and talents of our executive officers, Sally Outlaw, our Chief Executive Officer, and Alan Jacobs, our Chief Operating Officer. Ms. Outlaw and Mr. Jacobs have expertise that could not be easily replaced if we were to lose any or all of their services. We currently do not have employment agreements with our executive officers, other than with James Eichman, our Chief Technology Officer.

We could be materially and adversely affected if any of our subsidiaries is deemed to be an investment company under the Investment Company Act of 1940.

We believe that Worthy Peer Capital, Worthy Peer Capital II, Worthy Community Bonds and Worthy Community Bonds II fall within the exception to the definition of an investment company provided by Section 3(c)(5)(B) of the Investment Company Act of 1940 (the “Investment Company Act”). Section 3(c)(5)(B) provides an exemption for a company that is primarily engaged in making loans to manufacturers, wholesalers and retailers of, and to prospective purchasers of, specified merchandise and/or services. Each of our subsidiaries has a Commitment Committee that reviews and legally assesses every potential loan for compliance with the exemption requirements. Once the respective Commitment Committee has confirmed such compliance, the potential loan is financially underwritten pursuant to the subsidiary’s established underwriting policies. Notwithstanding, it is possible that the staff of the SEC could disagree with any of our subsidiaries’ assessments. If the staff of the SEC were to disagree with a subsidiary’s analysis under the Investment Company Act, it would need to adjust its investment strategy. Any such adjustment in strategy could have a material adverse effect on us. If a subsidiary is deemed to be an investment company, it may be required to register as an investment company if it is unable to dispose of the disqualifying assets, which could have a material adverse effect on us.

Registration under the Investment Company Act would require a subsidiary to comply with a variety of substantive requirements that impose, among other things:

If a subsidiary were required to register as an investment company but failed to do so, it could be prohibited from engaging in its business, and criminal and civil actions could be brought against it. Registration with the SEC as an investment company would be costly, would subject us to a host of complex regulations and would divert attention from the conduct of our business, which could materially and adversely affect us. In addition, our subsidiaries would no longer be eligible to offer Worthy Bonds under Regulation A if they were required to register as an investment company.

We are subject to the risk of fluctuating interest rates, which could harm our business operations.

We expect to generate net income from the difference between the interest rates we charge borrowers or otherwise make from our permissible investments, including loan origination fees paid by borrowers, and the interest we pay to the holders of bonds. Due to fluctuations in interest rates, we may not be able to charge borrowers an interest rate sufficient for us to generate income, which could harm our planned business operations.

The Company is controlled by its officers and directors.

The Company’s officers and directors currently hold over 65% of the Company’s Common Stock, and at the conclusion of this offering will continue to hold a majority of the Company’s voting stock. As a result, investors in this offering will not have the ability to control or influence a vote of the shareholders.

The subscription agreement has a forum selection provision that requires disputes be resolved in state or federal courts in the State of Delaware, regardless of convenience or cost to you, the investor.

In order to invest in this offering, investors agree to resolve disputes arising under the subscription agreement in state or federal courts located in the State of Delaware, for the purpose of any suit, action or other proceeding arising out of or based upon the agreement. The forum selection provision will not be applicable to lawsuits arising from the federal securities laws. You will not be deemed to have waived the Company’s compliance with the federal securities laws and the rules and regulations thereunder. This forum selection provision may limit your ability to obtain a favorable judicial forum for disputes with us. Alternatively, if a court were to find the provision inapplicable to, or unenforceable in an action, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.

Investors in this offering may not be entitled to a jury trial with respect to claims arising under the subscription agreement, which could result in less favorable outcomes to the plaintiff(s) in any action under the agreement.

Investors in this offering will be bound by the subscription agreement, which includes a provision under which investors waive the right to a jury trial of any claim they may have against the Company arising out of or relating to the agreement, including any claims made under the federal securities laws. By signing the agreement, the investor warrants that the investor has reviewed this waiver with his or her legal counsel, and knowingly and voluntarily waives the investor’s jury trial rights following consultation with the investor’s legal counsel.

If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by a federal court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of Delaware, which governs the agreements, by a federal or state court in the State of Delaware. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether the visibility of the jury trial waiver provision within the agreement is sufficiently prominent such that a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the subscription agreement. You should consult legal counsel regarding the jury waiver provision before entering into the subscription agreement.

If you bring a claim against the Company in connection with matters arising under the agreement, including claims under the federal securities laws, you may not be entitled to a jury trial with respect to those claims, which may have the effect of limiting and discouraging lawsuits against the Company. If a lawsuit is brought against the Company under any of the agreements, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in such an action.

Nevertheless, if the relevant jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the agreement with a jury trial. No condition, stipulation or provision of the subscription agreement serves as a waiver by any holder of the Company’s securities or by the Company of compliance with any substantive provision of the federal securities laws and the rules and regulations promulgated under those laws.

In addition, when the shares are transferred, the transferee is required to agree to all the same conditions, obligations and restrictions applicable to the shares or to the transferor with regard to ownership of the shares, that were in effect immediately prior to the transfer of the shares, including but not limited to the subscription agreement.

Using a credit card to purchase shares may impact the return on your investment as well as subject you to other risks inherent in this form of payment.

Investors in this offering have the option of paying for their investment with a credit card, which is not usual in the traditional investment markets. Transaction fees charged by your credit card company (which can reach 5% of transaction value if considered a cash advance) and interest charged on unpaid card balances (which can reach almost 25% in some states) add to the effective purchase price of the shares you buy. See “Plan of Distribution and Selling Securityholders.” The cost of using a credit card may also increase if you do not make the minimum monthly card payments and incur late fees. Using a credit card is a relatively new form of payment for securities and will subject you to other risks inherent in this form of payment, including that, if you fail to make credit card payments (e.g. minimum monthly payments), you risk damaging your credit score and payment by credit card may be more susceptible to abuse than other forms of payment. Moreover, where a third-party payment processor is used, as in this offering, your recovery options in the case of disputes may be limited. The increased costs due to transaction fees and interest may reduce the return on your investment.

The SEC’s Office of Investor Education and Advocacy issued an Investor Alert dated February 14, 2018 entitled: Credit Cards and Investments – A Risky Combination, which explains these and other risks you may want to consider before using a credit card to pay for your investment.

There is no public market for shares of our common stock, and none is expected to develop.

There is no formal marketplace for the resale of our common stock and the Company does not expect that such a market will develop in the near future. Investors should assume that they may not be able to liquidate their investment for some time or be able to pledge their shares as collateral.

DILUTION

Dilution means a reduction in value, control, or earnings of the shares the investor owns.

Immediate dilution

An early-stage company typically sells its shares (or grants options over its shares) to its founders and early employees at a very low cash cost, because they are, in effect, putting their “sweat equity” into the Company. When the Company seeks cash investments from outside investors, like you, the new investors typically pay a much larger sum for their shares than the founders or earlier investors, which means that the cash value of your stake is diluted because all the shares are worth the same amount, and you paid more than earlier investors for your shares.

The following table presents the Company’s capitalization as of December 31, 2020 and compares the price that new investors are paying for their shares with the effective cash price paid by existing shareholders, after giving effect to the stock split described in “Securities Being Offered,” and full vesting and exercise of outstanding stock options, and based on the assumption that the price per share in this offering is $10.00. This method gives investors a better picture of what they will pay for their investment compared to the Company’s insiders.

Upon completion of this offering, in the event all of the shares of Common Stock are sold, the net tangible book value of the 3,655,888 shares of Common Stock will be $10,251,341 or approximately $2.80 per share. The net tangible book value of the shares of Common Stock held by our existing shareholders will be increased by $5.45 per share without any additional investment on their part. Investors in the offering will incur an immediate dilution of $17.20 per share.

After completion of this offering, if 1,000,000 shares of Common Stock are sold, investors in this offering will own approximately 27% of the total number of shares then outstanding for which they will have made a cash investment of $20 million, or $20.00 per share.

In the event all the shares of Common Stock are not sold upon completion of this offering, the following table details the range of possible outcomes from the offering assuming the sale of 100%, 75%, 50% and 25% of the available shares.

Future dilution

Another important way of looking at dilution is the dilution that happens due to future actions by the Company. The investor’s stake in a company could be diluted due to the company issuing additional shares. In other words, when the company issues more shares, the percentage of the company that you own will go down, even though the value of the company may go up. You will own a smaller piece of a larger company. This increase in number of shares outstanding could result from a stock offering (such as an initial public offering, another crowdfunding round, a venture capital round, angel investment), employees exercising stock options, or by conversion of certain instruments (e.g. convertible bonds, preferred shares or warrants) into stock.

If the Company decides to issue more shares, an investor could experience value dilution, with each share being worth less than before, and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per share (though this typically occurs only if the company offers dividends, and most early stage companies are unlikely to offer dividends, preferring to invest any earnings into the company).

The type of dilution that hurts early-stage investors most occurs when the company sells more shares in a “down round,” meaning at a lower valuation than in earlier offerings. An example of how this might occur is as follows (numbers are for illustrative purposes only):

This type of dilution might also happen upon conversion of convertible notes into shares. Typically, the terms of convertible notes issued by early-stage companies provide that in the event of another round of financing, the holders of the convertible notes get to convert their notes into equity at a “discount” to the price paid by the new investors, i.e., they get more shares than the new investors would for the same price. Additionally, convertible notes may have a “price cap” on the conversion price, which effectively acts as a share price ceiling. Either way, the holders of the convertible notes get more shares for their money than new investors. In the event that the financing is a “down round” the holders of the convertible notes will dilute existing equity holders, and even more than the new investors do, because they get more shares for their money. Investors should pay careful attention to the amount of convertible notes that the Company has issued (and may issue in the future) and the terms of those notes.

If you are making an investment expecting to own a certain percentage of the Company or expecting each share to hold a certain amount of value, it’s important to realize how the value of those shares can decrease by actions taken by the Company. Dilution can make drastic changes to the value of each share, ownership percentage, voting control, and earnings per share.

USE OF PROCEEDS TO ISSUER

Worthy Financial is selling 880,000 shares of Common Stock at a price per share of $20.00. The net proceeds to the issuer of a fully subscribed $17,600,000 offering to the issuer, after estimated total offering expenses and commissions will be approximately $15,965,000. Worthy Financial plans to use these net proceeds as follows:

If the offering size were to be at 75% of our target proceeds, at $13,200,000 in the aggregate, then we estimate that the net proceeds to Worthy Financial would be approximately $11,900,000. In such an event, Worthy Financial would plan to use its net proceeds as follows:

If the offering size were to be at 50% of our target proceeds, at $8,800,000 in the aggregate, then we estimate that the net proceeds to Worthy Financial would be approximately $7,950,000. In such an event, Worthy Financial would plan to use its net proceeds as follows:

If the offering size were to be at 25% of our target proceeds, at $4,400,000 in the aggregate, then we estimate that the net proceeds to Worthy Financial would be approximately $3,575,000. In such an event, Worthy Financial would plan to use its net proceeds as follows:

The short-term promissory notes referred to above were issued in a private placement conducted by the Company in 2020. The proceeds of the placement are being used by the Company to pay for the professional expenses incurred in connection with this offering. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Indebtedness – Promissory Notes.” None of the net proceeds to be allocated to technology and marketing will be used by the Company’s subsidiaries.

Because the offering is a “best efforts” offering without a required minimum offering amount, we may close the offering without sufficient funds for all the intended purposes set out above. There is no arrangement to return funds to subscribers if all of the securities offered are not sold.

Worthy Financial reserves the right to change the above use of proceeds without notice if management believes it is in the best interests of the Company.

THE COMPANY’S BUSINESS

Overview

The Company was organized to create a “Worthy Community” to provide financial services initially targeted to millennials who are surpassing the baby boomers as the nation’s largest living generation. Management believes that this demographic in large part has a basic distrust of old guard financial institutions, is burdened by student loans and other debt, change employment frequently and is unable to save money and/or fund a retirement program

Worthy Financial, Inc. was formed on February 24, 2016 as a Delaware corporation. Our principal address is One Boca Commerce Center, 551 NW 77 Street, Suite 212, Boca Raton, FL, 33487. Our phone number is (561) 288-8467. The information that appears on, or is accessible through our websites at www.worthybonds.com, www.joinworthy.us and www.worthylending.com is not a part of, and is not incorporated by reference into, this Offering Circular.

Corporate Organization

The diagram below illustrates our corporate organization and the ownership of Worthy Financial after the offering.

*Assumes a fully-subscribed offering. In the event Worthy Financial raises 25%, 50% or 75% of the target proceeds, existing investors would own 93%, 86% and 81%, respectively, of Worthy Financial after the offering and investors in this offering would own 7%, 14% and 19%, respectively, of Worthy Financial after the offering. 

Worthy Fintech Platform

Worthy Financial has developed technology solutions, including the Worthy App and the Worthy Website, to facilitate the purchase of Worthy Bonds and to provide information to bond investors on their accounts. Currently, Worthy Financial, which is the sole owner of the technology underlying the Worthy App and the Worthy Website, receives a license fee from its subsidiaries equal to $10 per active user on the Worthy Fintech Platform each year. “Active user” is defined as an individual that has registered with the Worthy Fintech Platform (providing an email address) and that has purchased at least one bond from a subsidiary. We have approximately 27,000 active users as of the date of this Offering Circular. The fee is subject to periodic review and adjustment. We refer to these each as the “Worthy App,” the “Worthy Website” and together as the “Worthy Fintech Platform.” Monthly license fees paid by subsidiaries to Worthy Financial, Inc. do not appear as revenues on the Company’s consolidated financial statements as they are eliminated in consolidation.

Worthy App

The Worthy App was designed to support the target market for our bonds, which we believe is approximately 74 million millennials, who spend more than $600 billion a year on products and services. The Worthy App seeks to provide an easy way for our target market to micro invest, including monetizing their debit card purchases, credit card purchases and other checking account transactions by “rounding up” each purchase to the next highest dollar until the “round up” reaches $10.00 at which time the user would purchase a $10.00 bond from our operating subsidiaries pursuant to an offering pursuant to Regulation A (each a “Worthy Bond offering”). Our subsidiaries Worthy Peer Capital, Worthy Peer Capital II and Worthy Community Bonds previously conducted such offerings and our subsidiaries Worthy Peer Capital and Worthy Community Bonds II have filed offering statements with the SEC, which have not yet been qualified by the SEC. The Worthy App is available via the web at worthybonds.com or for Apple iPhone users from the Apple Store and for Android phone users from Google Play.

Worthy Website

By accessing our websites at www.worthybonds.com and www.joinworthy.com, prospective investors in Worthy Bonds can create a username and password, and indicate agreement to our terms and conditions and privacy policy.

The following features are available to participants in the Worthy Bonds programs through our website:

In addition to millennials, we may also seek to establish strategic relationships with local and national companies to incorporate our services into the benefits they provide to their hourly employees, borrowers and users, as well as veterans and municipal employees and colleges and university alumni associations.

Our Subsidiaries

Our business is primarily conducted through our operating subsidiaries, Worthy Peer Capital, Worthy Peer Capital II and Worthy Community Bonds, and their subsidiaries. Under our subsidiaries’ business models, we intend to generate revenue in multiple ways, through

Worthy Management has no operations. Its purpose is to pay obligations such as rent and payroll allocable to our operating subsidiaries. Each of our operating subsidiaries has entered into a management services agreement with Worthy Management under which each makes a monthly contribution to Worthy Management relating to its allocated share of such expenses.

Worthy Peer Capital and Worthy Lending

Worthy Peer Capital provides a majority of its assets (excluding cash and government securities) to be used for loans to manufacturers, wholesalers and retailers secured by (i) inventory, (ii) equipment, (iii) accounts receivable and (iv) purchase orders. To a lesser extent, Worthy Peer Capital may also provide (i) secured loans to other borrowers, (ii) acquire equity interests in real estate; (iii) make fixed income and/or equity investments; and (iv) provide factoring financing and other types of loans and investments, provided the amount and nature of such activities does not cause it to lose its exemption from regulation as an investment company pursuant to the Investment Company Act.

Worthy Bond Offering

In January 2018 Worthy Peer Capital launched an offering pursuant to Regulation A under the Securities Act under the terms of an offering circular that was initially qualified by the SEC on January 4, 2018. On March 17, 2020, the offering was completed. From January 2018 through March 17, 2020, Worthy Peer Capital sold approximately $50 million aggregate principal amount of Worthy Bonds to 12,285 investors. Notwithstanding the completion of the offering, Worthy Peer Capital inadvertently sold after March 17, 2020 $594,240 principal amount more in bonds than the maximum offering amount allowable under the offering statement due to a coding error as to redemption transactions in our software. As a result of the oversubscription, on March 25, 2020, Worthy Peer Capital rescinded the purchase and sale of the oversubscribed bonds by refunding and crediting the accounts of the 2,250 purchasers of the oversubscribed bonds their respective investment amounts, without any deduction therefrom, and cancelling the oversubscribed bonds.

The Worthy Bonds sold by Worthy Peer Capital:

The Worthy Bonds issued by Worthy Peer Capital are not dependent upon any particular loan and remain at all times the general obligations of Worthy Peer Capital. Proceeds from the sale of the Worthy Bonds were used to fund loans and for general corporate purposes, including the costs of Worthy Peer Capital’s offering.

Since Worthy Peer Capital has completed the foregoing offering, it may no longer offer interest reinvestment in Worthy Bonds under the auto-invest program to bondholders who selected this reinvestment feature as Worthy Peer Capital may not issue any more Worthy Bonds under the foregoing offering statement. As a result, Worthy Peer Capital pays interest on interest (compounded interest) and credits such interest to such bondholders’ accounts in accordance with the terms of the Worthy Bonds that it issued.

On December 16, 2020, Worthy Peer Capital filed a new offering statement on Form 1-A with the SEC under SEC File No. 024-11389, as amended by Amendment No. 1 to Form 1-A filed with the SEC on January 28, 2021, and as amended by Amendment No. 2 to Form 1-A filed with the SEC on March 22, 2021 for a public offering pursuant to Regulation A of $15,000,000 aggregate principal amount of renewal bonds, $59,920,000 aggregate principal amount of demand bonds and $80,000 of referral bonds. This offering statement has not yet been qualified by the SEC.

Worthy Peer Capital’s Loan and Investment Portfolio

Beginning in September 2018, Worthy Peer Capital, through its subsidiary Worthy Lending, began deploying the net proceeds it had raised through its sale of Worthy Bonds by loaning funds directly to borrowers and by providing funds and underwriting support in connection with participation agreements with other lenders under loan agreements. The balance due Worthy Peer Capital at December 31, 2020 and December 31, 2019, net of the loan loss reserve, was $5,985,377 and $10,161,592, respectively.

The loans to manufacturers, wholesalers and retailers range in size from $165,000 to $2,000,000 and pay interest at varying rates ranging from 0.62% per month to 1.5% per month and collateral management fees between 0.5% and 1% per month. The loan agreements have customary loan origination fees, which have been netted against loan costs with the net amount recorded as deferred revenue to be recognized as revenue over the term of the loan. One of the loans has an annual facility fee, which is being amortized into income over one year. The term of the loans range from two to three years, with no prepayment penalty and generally pay only interest with principal due at maturity. The loans are primarily secured by the assets of the borrowers. The loan loss reserve balance at December 31, 2019 and December 31, 2020 was $1,841,315 and $3,377,890, respectively.

At December 31, 2020, Worthy Peer Capital has real estate loans for a total of $2,145,000. Each loan is secured by a mortgage in the real estate, and is located in the state of Florida. Each loan has a maturity date of 2 years and matures on various dates ranging between March of 2021 and November of 2022. These loans pay interest at rates between 9.5% and 10.5% and are serviced by an outside, unrelated party. There were no mortgage loans past due or on non-accrual status as of December 31, 2020. The loan loss reserve on mortgage loans was $9,200 at December 31, 2020.

During the year ended December 31, 2019, Worthy Peer Capital invested in 8 real estate loans for a total of $1,774,000. Each loan is secured by a first mortgage in the real estate, and is located in the state of Florida. Each loan has a maturity date of 1 or 2 years and matures on various dates ranging between March 2021 and December 2021.These loans pay interest at rates between 9.5% and 10.5% and are serviced by an outside, unrelated party. None of these loans are currently in default, forbearance or deferral.

Worthy Peer Capital maintains a portfolio of investments on its consolidated balance sheet as investments held at fair value. Fair value includes gross unrealized gains, gross unrealized losses, accrued interest, and amortized cost. Worthy Peer Capital typically invests in public preferred and common equities, private market real estate investments with the primary objective to earn diversified risk-adjusted returns while the corporate bonds, certificates of deposit, asset backed securities, and government securities are intended to mitigate risk and minimize potential risk of principal loss. Worthy Peer Capital targets 20% portfolio weight in the more conservative investments.

Worthy Peer Capital II and Worthy Lending II

Our wholly-owned subsidiary Worthy Peer Capital II, recently completed an offering pursuant to Regulation A of its Worthy Bonds, which was qualified by the SEC on March 17, 2020. On October 1, 2020, Worthy Peer Capital II completed the offering and from March 17, 2020 through October 1, 2020, Worthy Peer Capital II sold approximately $50 million aggregate principal amount of its Worthy Bonds to 17,823 investors.

Worthy Peer Capital II, through Worthy Lending II, is implementing its business model. Worthy Peer Capital II’s business model is centered primarily around providing loans for growing businesses directly and by providing funds and underwriting support for participations with other lenders, including loans to manufacturers, wholesalers, and retailers secured by inventory, accounts receivable and/or equipment and purchase order financing. To a lesser extent, Worthy Peer Capital II may also provide loans to other borrowers, acquire equity interests in real estate, make fixed income and/or equity investments, provide factoring financing and other types of loans and investments, provided the amount and nature of such activities does not cause Worthy Peer Capital II to lose its exemption from regulation as an investment company pursuant to the Investment Company Act.

Beginning in March of 2020, Worthy Peer Capital II, through its wholly owned subsidiary Worthy Lending II, began deploying the net Worthy Bond proceeds by loaning funds through participation agreements with other lenders under loan agreements and directly to borrowers. The loan balance, net of the loan loss reserve, due Worthy Peer Capital II at December 31, 2020 was $18,919,044.

Worthy Bond Offering

The Worthy Bonds sold by Worthy Peer Capital II:

The Worthy Bonds issued by Worthy Peer Capital II are not dependent upon any particular loan and remain at all times the general obligations of Worthy Peer Capital II. Proceeds from the sale of the Worthy Bonds were used to fund loans and for general corporate purposes, including the costs of their offering.

Since Worthy Peer Capital II has completed the foregoing offering, it may no longer offer interest reinvestment in Worthy Bonds under the auto-invest program to bondholders who selected this reinvestment feature as Worthy Peer Capital II may not issue any more Worthy Bonds under the foregoing offering statement. As a result, Worthy Peer Capital II pays interest on interest (compounded interest) and credits such interest to such bondholders’ accounts in accordance with the terms of the Worthy Bonds that it issued.

Worthy Peer Capital II’s Loan and Investment Portfolio

The loans to small businesses, currently including loans to wholesalers and retailers range in size from $200,000 to $3,500,000 and pay interest at varying rates ranging from 1% to 1.5% per month. The loan agreements have customary loan origination fees, which have been netted against loan costs with the net amount recorded as deferred revenue to be recognized as revenue over the term of the loan. The term of the loans range from six months to three years with no prepayment penalty and generally pay only interest with principal due at maturity. Our loans consist primarily of loans to small businesses through our funding and participation with other lenders and are secured by the assets of the borrowers, including inventory, equipment, and accounts receivable.

At December 31, 2020, Worthy Peer Capital II was invested in real estate related loans for a total of $3,211,000. Each loan is secured by a first mortgage in the real estate, and is located in the state of Florida. Each loan has a maturity date of 1 to 3.5 years and matures on various dates ranging between May 2022-June 2024. These loans pay interest at rates between 9.5% and 10.5% and are serviced by an outside, unrelated party. None of these real estate loans are currently in default. The allowance for loan losses on these mortgage loans was $16,058 at December 31, 2020.

Worthy Peer Capital II maintains a portfolio of investments on its consolidated balance sheet as investments held at fair value. Fair value includes gross unrealized gains, gross unrealized losses, accrued interest, and amortized cost. Worthy Peer Capital II typically invests in public preferred and common equities, private market real estate investments with the primary objective to earn diversified risk-adjusted returns while the corporate bonds, certificates of deposit, asset backed securities, and government securities are intended to mitigate risk and minimize potential risk of principal loss. Worthy Peer Capital II’s investment targets 20% portfolio weight in the more conservative investments.

Worthy Community Bonds and Worthy Lending III

Our wholly-owned subsidiary Worthy Community Bonds was formed on June 30, 2020. On September 29, 2020, Worthy Community Bonds commenced an offering pursuant to Regulation A of $50 million aggregate principal amount of its Worthy Bonds under its qualified Offering Statement. On February 26, 2021, Worthy Community Bonds completed the offering. From September 29, 2020 through February 26, 2021, Worthy Community Bonds sold approximately $50 million aggregate principal amount of Worthy Bonds to 18,914 investors.

Worthy Community Bonds is implementing its business model through Worthy Lending III. Worthy Community Bonds’ business model is centered primarily around providing loans for small businesses through providing funding and participations with other lenders or direct loans, including loans to manufacturers, wholesalers, and retailers secured by inventory, accounts receivable and/or equipment and purchase order financing. To a lesser extent, Worthy Community Bonds may also provide loans to other borrowers, acquire equity interests in real estate, make fixed income and/or equity investments, provide factoring financing and other types of loans and investments, provided the amount and nature of such activities does not cause Worthy Community Bonds to lose its exemption from regulation as an investment company pursuant to the Investment Company Act.

Worthy Bonds Offering

The Worthy Bonds sold by Worthy Community Bonds:

The Worthy Bonds issued by Worthy Community Bonds are not dependent upon any particular loan and will remain at all times the general obligations of Worthy Community Bonds. Proceeds from the sale of the Worthy Bonds are being used to fund loans and for general corporate purposes.

Worthy Community Bonds’ Loan and Investment Portfolio

The loans to small businesses, currently including loans to wholesalers and retailers range in size from approximately $300,000 to $2,300,000 and pay interest at varying rates ranging from 1% to 1.5% per month. The term of the loans range from one to three years with no prepayment penalty and generally pay only interest with principal due at maturity. Our loans consist primarily of loans to small businesses through our funding and participation with other lenders and are secured by the assets of the borrowers, including inventory, equipment, and accounts receivable.

At December 31, 2020, Worthy Community Bonds was invested in real estate related loans for a total of $2,313,000. Each loan is secured by a first mortgage in the real estate, and is located in the state of Florida. Each loan has a maturity date of 2 years and matures on various dates ranging between October 2022-November 2022. These loans pay interest at rates between 9.5% and 10.5% and are serviced by an outside, unrelated party. None of these real estate loans are currently in default. The allowance for loan losses on these mortgage loans was $11,565 at December 31, 2020.

Worthy Community Bonds maintains a portfolio of investments on its consolidated balance sheet as investments held at fair value. Fair value includes gross unrealized gains, gross unrealized losses, accrued interest, and amortized cost. Worthy Community Bonds typically invests in common equities, with the primary objective to earn diversified risk-adjusted returns while the corporate bonds, certificates of deposit, asset backed securities, and government securities are intended to mitigate risk and minimize potential risk of principal loss. Worthy Community Bonds’ investment targets 20% portfolio weight in the more conservative investments.

Worthy Community Bonds II and Worthy Lending IV

Our wholly-owned subsidiary Worthy Community Bonds II was formed on November 2, 2020. It has not yet generated any revenue and has no operating history. Worthy Community Bonds II filed an offering statement on Form 1-A under SEC File No. 024-11372, with the SEC, as amended by Amendment No. 1 filed on January 8, 2021, Amendment No. 2 filed on January 29, 2021, and Amendment No. 3 filed on March 5, 2021, for a public offering pursuant to Regulation A of $50,000,000 aggregate principal amount of demand bonds. The offering statement has not yet been qualified by the SEC and the offering of bonds has not yet commenced.

Worthy Community Bonds II is an early stage company, which, through Worthy Lending IV, plans to implement its business model. Worthy Community Bonds II’s business model is centered primarily around providing loans for small businesses, including loans to manufacturers, wholesalers, and retailers secured by inventory, accounts receivable and/or equipment and purchase order financing. To a lesser extent, Worthy Community Bonds II may also provide loans to other borrowers, acquire equity interests in real estate, make fixed income and/or equity investments, provide factoring financing and other types of loans and investments, provided the amount and nature of such activities does not cause Worthy Community Bonds II to lose its exemption from regulation as an investment company pursuant to the Investment Company Act.

Worthy Bonds Offering

The Worthy Bonds to be sold by Worthy Community Bonds II:

The Worthy Bonds to be issued by Worthy Community Bonds II will not be dependent upon any particular loan and will remain at all times the general obligations of Worthy Community Bonds II. Proceeds from the sale of the Worthy Bonds II will be used to fund loans and for general corporate purposes, including the costs of the offering being conducted by Worthy Community Bonds II.

Competitors and Industry

Industry

The survival and growth of small businesses depends on access to credit. Banks are the most common source of external credit for small businesses but given the current consolidation trend in U.S. banking, and the continued decline in the number of small banks, there have been significant negative effects on the availability of capital for U.S. companies. Fortunately, over the past decade, additional options for small businesses have emerged with the growth of new technology-enabled lenders. These fintech companies identified the gaps in the small business lending market and revolutionized both the loan application experience, as well as evaluation of creditworthiness, for entrepreneurs looking for capital. A recent Federal Reserve survey found that 21 percent of surveyed employer businesses and 28 percent of non-employer businesses applied for financing from an online alternative lender. Leveling up their growth was the most common reason business owners applied for a loan.

According to a survey by the Small Business Administration, small business non-equity financing of all types amounted to over a trillion dollars. Worthy Financial’s lending subsidiaries are a part of this growing market.

Competitors

We compete with other companies that lend to small businesses. These companies include traditional banks, a number of specialized financial providers (such as wholesalers who may offer supply financing/trade credit), and newer, technology-enabled lenders. In addition, other technology companies that lend primarily to individuals have already begun to pursue expanding their services to business lending.

Many of these competitors have significantly more resources and greater brand recognition than we do and may be able to attract customers more effectively than we do.

When new competitors look to enter our market, or when existing industry participants look to increase their market share, they sometimes reduce the pricing and credit terms common in that market, which could adversely affect our business. Our pricing and credit terms could decline if we make an effort to meet these competitive challenges. Further, to the extent that the fees we pay to our partners and borrower referral sources are not competitive with those paid by others, these partners and sources may move their business elsewhere, resulting in us originating less loans. The consequence of these competitive pressures could also cause us to reduce the interest rates we charge to our customers. All of the foregoing could adversely affect our business, results of operations, financial condition, and future growth.

Competitive Strengths

We believe we benefit from the following competitive strengths compared to our competitors:

We are part of the Worthy Community. The Worthy App and websites are targeted to the millennials who are part of the fastest growing segment of our population. We believe that they have a basic distrust of traditional banking institutions, yet they have a need to accumulate assets for retirement or otherwise. We believe that the Worthy Fintech Platform provides for a savings and investing alternative for millennials as well as potential access to other services, which may appeal to millennials, such as personal loans (often used to reduce or pay off higher interest rate loans such as credit cards), small business loans, auto loans, student loan refinancing and debt counseling.

We are part of the fast-growing online lending industry. Alternative lenders often provide a more appealing financing option to small businesses as they are usually more flexible than larger financial institutions on loan repayment terms and often approve loans much faster than banks. For example, online “peer-to-peer” lending website uses technology to meet market demand where traditional bank and institutional financing has become more difficult to obtain. Alternative lenders often have significant cost advantages over banks, including lower overhead and the absence of branch offices and extensive sales forces. These efficiencies often make it easier for nonbanks to originate loans to borrowers whose options online were traditionally limited to banks.

We focus on an underserved banking sector. Due to higher costs, we believe that banks cannot profitably serve the small business lending market for commercial loans below $500,000. Indeed, traditional banks have been exiting the small business loan market for over a decade. We believe our small business loan program enables us to profitably participate in loans at these levels.

Marketing

Worthy Financial promotes its platform and mobile app through its own monthly newsletter (“Noteworthy”) where financial tips and articles are shared as well as highlights of Worthy employees and technology features.  Worthy’s mobile app is also promoted via the Apple and Android app stores. Before COVID-19 restrictions, Worthy Financial also built product awareness through its representatives speaking at national events such as financial and technology conferences; Worthy Financial still participates in industry events but to a lesser extent as these are now conducted remotely. Our Worthy community members also refer others in their networks, such as friends and family members, to join the platform. Marketing for direct loans and participations through the Worthy Lending subsidiaries is conducted primarily by the management of the Company with professional and business advisers to growing companies. To a lesser extent marketing is done through the Worthy Lending website www.worthylending.com, mailchimp emails and LinkedIn. The information available on, or accessible through, the foregoing website is not a part of this Offering Circular and is not incorporated herein.

Our operating subsidiaries market the Worthy Bonds primarily through digital media channels such as Facebook ads, publishers of financial blogs and through marketing partnerships with other financial service firms.

Strategy

Our strategy is to expand our network of online information, social networking, and institutional, (colleges and universities, charities, trade organizations, and employer) sources of introductions and referrals to our targeted users.

Subject to the successful completion of this offering, one of our primary goals at Worthy Financial for 2021 and beyond is to find additional ways to grow and bring value to our Worthy community members. We will do this through building out a community section on the Worthy Website and the Worthy App where we will offer financial educational resources, more opportunities for our members to be highlighted, as well as offer additional products and services of interest to them. This will also provide Worthy Financial an additional revenue stream as we can earn marketing fees as part of these product offerings.

A portion of the proceeds of this offering will be used to not only build out the technology platform to accommodate the additional benefits for our community but to hire the team – such as those for partnerships, community engagement and content creation – to execute on and to manage the growth. See “Use of Proceeds to Issuer.”

Ultimately, our objective is to bring our members great deals on products and services that will complement their lifestyle, save as well as earn them money, and help them achieve their personal and financial goals.

Governmental Regulation

The regulatory framework for nonbank online lending platforms such as the Company is evolving and uncertain. We are affected by laws and regulations, and judicial interpretations of those laws and regulations, that apply to businesses in general, as well as to commercial lending. This includes a range of laws, regulations and standards that address information security, privacy, fair lending and anti-discrimination, fair sales/marketing practices, transparency, credit bureau reporting, anti-money laundering and sanctions screening, commercial lending, licensing and interest rates, among other things. Because we are not a bank and are engaged in commercial lending, we are not subject to certain of the laws and rules that only apply to banks and that has federal preemption over certain state laws and regulations.

On January 11, 2021, the Company received a subpoena from the SEC in connection with Peerbackers Advisory, LLC (“Peerbackers”), a company that was wholly owned by the Company that was previously registered with the SEC as an investment adviser and did not conduct any business, requesting certain information from Peerbackers, the Company and the Company’s operating subsidiaries. Peerbackers did not conduct any business, withdrew its SEC registration in July 2020 and was dissolved on January 16, 2021. The Company is not currently the subject of any enforcement proceedings. The Company is fully cooperating with the SEC’s request.

State Interest Rate Regulations

Although the federal government does not regulate the maximum interest rates that may be charged on commercial loan transactions, many states have enacted laws specifying the maximum legal interest rate at which loans can be made in their state. The loan agreements relating to loans that we originate are by their terms governed by Delaware law. Delaware does not have rate limitations on commercial loans of $100,000 or more or licensing requirements for commercial lenders making such loans. Our underwriting team and senior members of our credit risk team are headquartered in Boca Raton, Florida. Our direct commercial loan contracts are made in New York state. With respect to loans where we work with a partner, our partner may utilize the law of the jurisdiction applicable to the partner in connection with its commercial loans.

State Issuer-dealer Regulation

In order to conduct their Regulation A offerings of bonds, each of Worthy Peer Capital, Worthy Peer Capital II and Worthy Community Bonds has registered, and Worthy Community Bonds II also has registered, but is subject to qualification, as an issuer-dealer in the states of Florida, Texas, Arizona and North Dakota. The state of Florida requires issuer-dealers registered in the state to maintain a minimum net capital of $5,000, defined as total assets of an issuer, less total liabilities. Texas regulations require that issuer-dealers be solvent. The states may deny an issuer registration if they find a net capital deficiency, in the case of Florida, or that the issuer is not solvent, in the case of Texas. At the date of this Offering Circular, none of our registered subsidiaries has been denied registration.

As of December 31, 2020, Worthy Peer Capital has net capital of ($4,711,024), Worthy Peer Capital II has net capital of ($1,294,000) and Worthy Community Bonds has net capital of $(623,921). Worthy Financial intends to use a portion of the net proceeds of this offering to make capital contributions to each of Worthy Peer Capital and Worthy Peer Capital II so those subsidiaries can meet their net capital requirements. Assuming the offering is fully-subscribed, Worthy Financial would contribute a total of $4,000,000 to Worthy Peer Capital and $1,147,000 to Worthy Peer Capital II. Worthy Peer Capital and Worthy Peer Capital II will not be required to pay back funds received. See “Use of Proceeds to Issuer.”

Intellectual Property

The Company holds 2 registered trademarks, Worthy™, and I am Worthy™.

Legal Proceedings

From time to time, the Company may be a defendant in pending or threatened legal proceeding arising in the normal course of its business. Management is not aware of any pending, threatened or asserted claims.

On January 11, 2021, the Company received a subpoena from the SEC in connection with Peerbackers, a company that was wholly owned by the Company that was previously registered with the SEC as an investment adviser and did not conduct any business, requesting certain information from Peerbackers, the Company and the Company’s operating subsidiaries. Peerbackers did not conduct any business, withdrew its SEC registration in July 2020 and was dissolved on January 16, 2021. The Company is not currently the subject of any enforcement proceedings. The Company is fully cooperating with the SEC’s request.

Employees

At the date of this Offering Circular, we have 17 full-time employees, together with one independent contractor who provides a substantial portion of his time to us.

The Company’s Property

We do not own real property and are currently leasing our offices in Boca Raton, Florida.

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

You should read the following discussion and analysis of our financial condition and results of our operations together with our consolidated financial statements and related notes included in this Offering Circular. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and elsewhere in this Offering Circular. Unless otherwise indicated, the latest results discussed below are as of December 31, 2020.

Overview

Worthy Financial, Inc. was founded February 24, 2016 in Delaware. Through our lending subsidiaries, the Company loans or participates in secured loans, primarily to small business borrowers. We have offered and continue to offer Worthy Bonds in $10.00 increments directly through our website and app.

In 2020 and 2019, our subsidiaries’ revenues were primarily derived from interest and fees on our loans and mortgage loans receivable. Our subsidiaries also derived other income from cash and investments which includes interest and dividend income. In 2018 our subsidiaries’ revenues included revenues from interest income, as well as loan fees as compared to revenues solely from interest income in 2017, which reflects the deployment of a portion of the net proceeds from the sale of Worthy Bonds in 2018 to make loans and other permissible investments. Interest income represents interest the subsidiaries earn on investments and cash on deposit. Loan fees are charged to the borrowers during loan originations. These fees are offset against loan costs and then deferred to be recognized as revenue over the term of the loan. For term loans, subsidiaries recognize interest income, loan fee income and collateral management fee income over the terms of the underlying loans. Loan fees and collateral management fees are reflected as revenue in our consolidated statement of operations. Loan fees typically include due diligence, appraisal and legal fees. Associated costs primarily include costs directly related to evaluating the financial performance of the prospective borrower, preparing and processing loan documentation, employees’ compensation directly related to the loan and costs paid to third parties for legal and appraisal services. The fees and the costs are netted as deferred revenue and amortized into revenue over the life of the loan.

Worthy Financial, Inc. does not receive any of its subsidiaries’ revenues, other than the monthly license fee paid by subsidiaries. All revenues received by subsidiaries are retained by the subsidiaries to fund their operations. Monthly license fees paid by subsidiaries to Worthy Financial, Inc. do not appear as revenues on the Company’s consolidated financial statements as they are eliminated in consolidation. Our subsidiaries do not pay dividends to Worthy Financial, nor do we anticipate that they will pay dividends for the foreseeable future.

A summary of the Company’s loan portfolio at December 31, 2020 and at December 31, 2019, disaggregated by class of financing receivable, are as follows:

Results of Operations

Year ended December 31, 2020 Compared to Year ended December 31, 2019

Operating Revenue

Interest on loans receivable

Total interest on loans receivable received by subsidiaries for the year ended December 31, 2020 (“Fiscal 2020”) was $3,624,277 and for the year ended December 31, 2019 (“Fiscal 2019”) was $749,162, an increase of $2,875,115 from Fiscal 2019. This increase was the direct result of our subsidiaries’ increased loan portfolio.

At December 31, 2020, our subsidiaries’ loans receivable held for investment, net balance and mortgage loans held for investment, net balance were $30,073,878 and $7,632,180, respectively. At December 31, 2019 our subsidiaries’ loans receivable held for investments, net balance and mortgage loans held for investment were $10,161,592 and $1,774,000, respectively. The subsidiaries’ provision for loan losses also increased at December 31, 2020 as a result of their increased loan portfolio. The balance at December 31, 2020 was $3,830,335 and the balance at December 31, 2019 was $1,841,315.

Loan fee income

For Fiscal 2020, loan fee income totaled $391,231 as compared to $202,118 for Fiscal 2019. This $189,113 increase was due to increased loans earning fees in Fiscal 2020 as compared to Fiscal 2019.

Cost of Revenue

Interest expense on bonds

Interest expense on bonds for Fiscal 2020 was $2,459,866, an increase of $1,893,477 from Fiscal 2019. Interest expense on bonds for Fiscal 2019 was $566,389. The increase was the direct result of our increased bond sales and the duration of bonds outstanding during Fiscal 2020 as compared to Fiscal 2019.

Provision for loan losses

The provision for loan losses for Fiscal 2020 was $2,199,326 as compared to $1,841,315 for Fiscal 2019, an increase of $358,011.

Operating Expenses

Our operating expenses for Fiscal 2020 were $4,121,767 as compared to $2,284,031 for Fiscal 2019, an increase of $1,837,736, which represents the growth of our Company during 2020.

This increase is primarily attributable to an increase of approximately $225,000 in sales and marketing expenses, approximately $1,200,000 in compensation and related expenses and approximately $420,000 in general and administrative expenses. The increase in compensation and related expenses is directly related to the growth of the Company. In 2020 the Company hired additional personnel and increased management salaries to maintain pace with the growth of the Company. The Company also added health insurance in 2020 as an additional benefit for all employees.

Other Income (Expenses)

Realized and Unrealized gains (losses) on investments, net

For Fiscal 2020 and Fiscal 2019 our net unrealized gains (losses), on marketable securities were $337,783 and ($11,852), respectively. This was primarily due to a larger investment base in 2020 and a positive change in general market conditions. Realized gains on investments, net was $112,239 for the year ended December 31, 2020 as compared to $0 for the year ended December 31, 2019.

Interest expense

Interest on convertible notes issued by Worthy Financial increased to $73,721 for Fiscal 2020 from $57,065 for Fiscal 2019 which was due to a higher balance of notes outstanding for the full Fiscal 2020.

As we expand we will need to hire more people to support additional administration and marketing needs. However, we are unable at this time to quantify these expected increases. As with the expected increases in our operating expenses, we also expect our subsidiaries’ interest expense will increase in 2021 as they sell additional Worthy Bonds.

Interest and Dividends on Investments

Interest and Dividends on Investments for Fiscal 2020 was $216,816 as compared to $7,550 for Fiscal 2019. This $209,266 increase was the direct result of our increased investment portfolio, which increased in the latter half of fiscal year 2019.

As a result of the foregoing, our net loss was $4,119,032 in Fiscal 2020 and $3,712,068 in Fiscal 2019. Until such time as we begin generating sufficient revenues, if ever, we expect to continue to report net losses.

Liquidity and Capital Resources

At December 31, 2020, we had total shareholders’ deficit of approximately $7,344,000 as compared to a total shareholders’ deficit of approximately $3,770,000 at December 31, 2019. Our total assets increased substantially at December 31, 2020 as compared to December 31, 2019, which principally reflects approximately $23,437,000 in cash on hand from the sale of Worthy Bonds during Fiscal 2020 and approximately $49,752,000 of loans receivable held for investment, mortgage loans held for investment and other investments on our balance sheet. Our total liabilities also increased substantially in Fiscal 2020 as compared to Fiscal 2019, which is principally related to the liabilities of approximately $78,325,000 associated with the Worthy Bonds. We do not have any commitments for capital expenditures.

Our consolidated shareholders’ deficit and working capital deficiency are the result of initial and early-stage operating subsidiary sales of bonds (a liability) at a more rapid pace than the proceeds from the sale of bonds could be effectively invested in income generating loans and investments. The combination of interest payable on the bonds and operating expenses initially generate working capital deficit. Now with three subsidiaries generating income from loans and investments, we expect that the working capital deficit will be reduced starting with the second quarter of 2021.

To date, the working capital deficit has been funded by capital infusions to the Company through funds raised in a variety of equity, debt, and convertible debt financings. One of the primary uses of proceeds of this offering is to make capital contributions to support net capital at certain operating subsidiaries and to reduce or eliminate the shareholders’ deficit.

Net cash used in operating activities for Fiscal 2020 was approximately $684,000, as compared to approximately $1,663,000 for Fiscal 2019. In both periods cash was used primarily to fund our losses. Net cash provided by investing activities was approximately $35,008,000 in Fiscal 2020, which represented primarily loans and mortgage loans made, offset by loan principal pay downs and net purchases of marketable securities and mortgage loans, as compared to approximately $17,258,000 used in investing activities in Fiscal 2019, representing similar uses as made in Fiscal 2020. Net cash provided by financing activities in Fiscal 2020 was approximately $51,060,000, which primarily represented bonds sold less redemptions and to a lesser extent proceeds common stock sold, proceeds from notes payable and proceeds from the PPP loan described below, as compared to approximately $25,528,000 in Fiscal 2019, which primarily represented net proceeds from the sale of bonds, convertible debt and shares of our Common Stock.

Going Concern and Management’s Plans

The Company is dependent upon proceeds from sales of convertible debt and equity for working capital, and has incurred operating losses since inception. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. Throughout the next 12 months, the Company intends to fund its operations, including the payment of interest on the Worthy Bonds, with funding from sales of convertible debt and/or equity, including the net proceeds of this offering, as well as net profits generated from our subsidiaries’ loan portfolio. The Company, however, is not a party to any binding agreement for the sale of convertible debt and/or equity. If the Company cannot raise any additional short-term capital, the Company may consume all of its cash reserved for operations. There are no assurances that management will be able to raise capital on terms acceptable to the Company. If the Company is unable to obtain sufficient amounts of additional capital, it may be required to reduce the scope of the Company’s planned development, which could harm its business, financial condition and operating results. The consolidated balance sheet does not include any adjustment that may result from these uncertainties.

Indebtedness

Since inception, the Company has funded a portion of its operations through capital received from the issuance of convertible promissory notes and, during Fiscal 2020 and Fiscal 2019, from the sale of Worthy Bonds.

Convertible Notes

In January 2017, the Company issued a convertible note payable to a shareholder in the amount of $25,000. The note provided for interest at 9% and matured on January 17, 2019. At maturity, the Company issued 29,500 shares of Common Stock for the conversion of this convertible note payable and related accrued interest.

During Fiscal 2018, we issued 8 convertible notes payable in the amount of $400,000. During Fiscal 2019, we sold an additional $310,000 of 9% convertible notes. The notes bear interest at 9% and mature in three years from the issuance date. At any time prior to the maturity date that we complete a “Qualified Financing,” the principal amount outstanding and all accrued but unpaid interest due is automatically converted into shares of Common Stock without any further action of the noteholder at a discount of 25% to the Qualified Financing valuation with a conversion cap of $5,000,000. A “Qualified Financing” is defined as an offering of our equity securities or convertible notes with net proceeds of not less than $3,000,000, either in a single transaction or in a series of transactions, which close within six months of each other. In the event we do not have a Qualified Financing prior to the maturity date, holders have the option at the maturity date to convert the principal amount of the notes, plus accrued interest, into shares of Common Stock at a pre-conversion valuation of $5,000,000. Holders of convertible notes have no rights as shareholders of the Company, including the right to vote, until such time as the notes are converted into shares of Common Stock in accordance with their respective terms. Assuming we raise at least $3,000,000 in this offering, the terms of this offering would trigger conversion of the notes into a total of 511,770 shares of Common Stock, assuming interest is accrued through June 30, 2021.

Promissory Notes

In July and August 2020, the Company issued $75,000 in 9% short-term promissory notes in a private placement to accredited investors. Purchasers of the promissory notes also purchased 6,000 shares of Common Stock at a price of $0.01 per share for additional gross proceeds to the Company of $30.00. The promissory notes mature one year from the date of issuance and pay simple interest on the maturity date. There is no penalty for payment prior to maturity. The proceeds of the placement are being used by the Company to pay for the professional expenses incurred in connection with this offering. The Company intends to repay the principal amount of the notes and any accrued interest with net proceeds of the offering. See “Use of Proceeds to Issuer.”

Worthy Bonds

Through March 17, 2020, Worthy Peer Capital sold $49,999,980 principal amount of Worthy Bonds, net of redemptions of $32,251,340, as of the date of this Offering Circular. As of October 1, 2020, Worthy Peer Capital II sold a principal amount of $49,999,620 in Worthy Bonds, net of redemptions of $18,502,080 as of the date of this Offering Circular. Through February 26, 2021, Worthy Community Bonds sold a principal amount of $49,870,930 in Worthy Bonds, net of redemptions of $7,944,540. The bonds pay interest at 5% per annum, subject to our subsidiaries’ option to increase the interest rate up to an additional 1% per annum, and mature 3 years from the date of issuance, except for the Worthy Community Bonds which do not have a maturity date. The bonds are renewable at the option of the bond holder and, in the case of bonds issued by Worthy Peer Capital, may be redeemed by the holder subject, at the option of Worthy Peer Capital, to a 1% redemption fee if redeemed within the first year after issuance. Worthy Financial does not directly or indirectly guarantee the indebtedness of any of its subsidiaries, nor do any of its subsidiaries guarantee Worthy Financial’s or other subsidiaries’ obligations.

Paycheck Protection Program Loan

The Company applied for loans being administered by the Small Business Administration under the Coronavirus Aid, Relief, and Economic Recovery Act of 2020 (“CARES Act”) to assist in maintaining payroll and operations through the period impacted by the COVID-19 pandemic. In May 2020, Worthy Financial entered into a loan under the Paycheck Protection Program (“PPP”) for $97,250 in principal amount, which may be forgivable as specified in the CARES Act. The loan will mature 50 months from the date it was issued and will accrue interest at a rate of 1% per year. If the Company does not apply for loan forgiveness, it will be required to pay principal and interest payments. The Company intends to apply for loan forgiveness by utilizing the funds in accordance with defined loan forgiveness guidance issued by the government. The Paycheck Protection Program Flexibility Act of 2020 authorized Worthy Financial to apply for forgiveness of the funds utilized over the course of 24 weeks so long as the full-time equivalent staffing level remains the same (or increases) and that at least 60% of the funds are utilized to pay payroll costs. The Company intends to utilize at least 80% of the funds on payroll costs and 20% on rent/utilities, exceeding the minimum 60% threshold, and intends to maintain staffing levels.

Common Stock Issuances

In 2017, the Company sold 400,712 shares of Common Stock for $605,000 in a private placement to a former director and adviser.

In July 2018, the Company launched a crowdfunding offering pursuant to Regulation Crowdfunding under the Securities Act (the “Crowdfunding Offering”). The Crowdfunding Offering was conducted on the crowdfunding portal operated by StartEngine Crowdfunding, Inc. (“StartEngine Crowdfunding”) and its wholly-owned subsidiary StartEngine Capital, LLC. We raised net proceeds of $241,871 in the Crowdfunding Offering in exchange for the issuance of 107,844 shares of our Common Stock. The Crowdfunding Offering was terminated in February 2019.

In July and August 2020, the Company sold 125,000 shares of Common Stock at a price of $2.50 per share for gross proceeds to the Company of $312,500 in a private placement to accredited investors. The Company also sold 6,000 shares of Common Stock associated with debt sold, as part of the same private placement at a price of $0.005 per share for gross proceeds of $30.

Trend Information

Our business model continues to include direct loans to borrowers and participation with other lenders in similar secured business loans. As our lending capacity increases with the sale of Worthy Bonds and as our affiliates become better known to more established lenders, we anticipate our allocation of loan funds will include an increasing percentage of participations with other lenders.

Although we are currently in a national period of economic distress, we believe the Company is in a relatively good position to withstand potential downward pressure on the economy.

While some temporary accommodations are being made in recognition of certain borrowers’ cash flow issues caused by the slow down or temporary interruption in business, our loan portfolio remains strong.

The Company also has investments in debt and equity securities. Our investment policy requires overnight liquidity and all investments are to be investment grade securities, unless pre-approved by the Company.

COVID-19

As a result of the COVID-19 pandemic, the Company’s office was closed for approximately ten weeks from mid-March 2020 through early June 2020. All employees worked efficiently from home. There were no furloughs or layoffs. All employees have been working from our office since the beginning of June 2020.

During this time, bond sales by Worthy Peer Capital II were uninterrupted. Worthy Peer Capital completed its Regulation A offering of bonds in early March 2020.

Worthy Peer Capital experienced a significant increase in bond redemptions in the first and second quarters of 2020 due to government mandated shutdowns and layoffs. We were able to liquidate enough loans and investments to cover all redemption requests, which are now back to pre-COVID-19 levels. Liquidation of loans and investments resulted in a related reduction in income. Much of the loss in investment value is now approaching pre-COVID-19 levels.

The loan portfolio of Worthy Peer Capital was impacted by COVID-19, particularly loans to retail borrowers and distributors and wholesalers serving the retail industry. We did not experience loan losses as a result of COVID-19, but there were several cash flow accommodations to borrowers in terms of current payments of interest and/or principal.

We anticipate the possibility that as a result of COVID-19 many current commercial bank borrowers will be or become in breach of bank loan covenants resulting in bank requests that the borrowers arrange for new sources of debt financing. Many of these “previously bankable” borrowers could become asset-based borrowers from lenders like our affiliates.

DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES

The executive officers and directors of the Company as of December 31, 2020 are listed below.

Sally Outlaw. Ms. Outlaw, a life-long entrepreneur who is passionate about opening up economic opportunity for all, has served as an officer and director of our Company since founding it in 2016. Ms. Outlaw is also the Chief Executive Officer and director of Worthy Peer Capital. Ms. Outlaw is also the President, Chief Executive Officer and a director of each of Worthy Peer Capital II, Worthy Community Bonds and Worthy Community Bonds II. Since October 2019 she has served as President, Chief Executive Officer and a member of the Board of Directors of Worthy Management. From October 2010 to December 2015 she was the president of Peerbackers LLC, which engaged in all aspects of crowd funding and provides services to help clients navigate the world of crowd finance including the capital and investment opportunities offered through the JOBS Act. Ms. Outlaw received her B.A. in Communications and Media Studies from the University of Minnesota in 1984 and holds a Series 65 license as a Registered Investment Advisor. Ms. Outlaw brings knowledge and experience in the financial industry, which we believe is of great value to our Company.

Alan Jacobs. Mr. Jacobs, who has more than 40 years of experience as a corporate and securities attorney, investment banker, business and financial advisor and entrepreneur/senior executive of both private and public companies, has been an officer and director of our Company since 2016. Mr. Jacobs is also the Executive Vice President and Chief Operating Officer and a director of Worthy Peer Capital and president of Worthy Lending. Mr. Jacobs is also the Executive Vice President, Chief Operating Officer and a member of the Board of Directors of each of Worthy Peer Capital II, Worthy Community Bonds and Worthy Community Bonds II and also serves as the president of Worthy Lending, Worthy Lending II, Worthy Lending III and Worthy Lending IV. Since October 2019 he has served as Executive Vice President, Chief Operating Officer and a member of the Board of Directors of Worthy Management. For more than the past five years he has been engaged as a business consultant for various early stage companies. From 2016 to 2018 Mr. Jacobs was the Founder and President of CorpFin Management Group where he was focused on business development, strategic planning and corporate management. From September 2014 to December 2015, Mr. Jacobs was associated with ViewTrade Securities, a FINRA registered broker-dealer where he was focused on advisory and corporate services. Prior to that time and for more than 30 years, Mr. Jacobs was associated with several FINRA registered broker-dealers including Ladenburg Thalman, Josephthal & Company, and Capital Growth Securities. Mr. Jacobs received his bachelor’s degree from Franklin and Marshall College in 1963 and law degree from Columbia University in 1966. He was also president of Wheelchair Fitness Inc. and director of business development of SSTI, Inc. from 2015 to 2018. Mr. Jacobs brings knowledge and experience in the financial industry, which we believe is of great value to our Company.

Joseph D’Arelli. Mr. D’Arelli has served as our Senior Vice President and Chief Financial Officer since February 2020. He also serves as a Senior Vice President of our Worthy Lending II subsidiary. He also serves as Senior Vice President and Chief Financial Officer of each of Worthy Peer Capital II, Worthy Community Bonds and Worthy Community Bonds II. Since August 2018 Mr. D’Arelli has served as Worthy Lending’s Executive Vice President and Chief Operating Officer, and since October 2019 he has served as Senior Vice President and Chief Financial Officer of Worthy Management. Mr. D’Arelli has over 25 years of experience in public accounting, including partnership and senior management positions, and he has extensive experience in auditing public and private companies in such industries as waste management, financial services, broker/dealers, and distribution and technology companies, which we believe is and continues to be of great value to our Company. From June 2018 until joining Worthy Lending, Mr. D’Arelli was self-employed, providing business advisory and accounting consulting services. From November 2016 until June 2018, Mr. D’Arelli was employed by Attis Industries, Inc. (Nasdaq: ATIS) serving as Chief Financial Officer (November 2016 until April 2017) and SEC Compliance Director (April 2017 until June 2018). From October 2012 until May 2016 he was a partner/shareholder at D’Arelli Pruzansky, P.A., formerly a PCAOB registered accounting firm (the firm voluntarily withdrew as a member of the PCAOB on March 29, 2018). He continues his affiliations with the American Institute of Certified Public Accountants (AICPA), New York State Society of Certified Public Accountants (NYSSCPA), Florida Institute of Certified Public Accountants (FICPA), and is a Certified Public Accountant in the state of Florida. Mr. D’Arelli received a Bachelor’s Degree in Accounting from St. John’s University in 1992.

On September 30, 2016, the SEC issued an Order Instituting Cease-and-Desist Proceedings under Administrative Proceeding File No. 3-17605 pursuant to Section 21C of the Exchange Act, Making Findings, and Imposing a Cease-and-Desist Order (collectively, the “Order”) against D’Arelli Pruzansky, P.A. (the “Firm”), Joseph D’Arelli, CPA, and Mitchell Pruzansky, CPA (collectively, the “Respondents”). Respondents consented to the Order pursuant to Offers of Settlement, accepted by the SEC, pursuant to which Respondents neither admitted nor denied the findings in the Order. During a PCAOB inspection in July 2015, the Firm was informed that it had failed to comply with the SEC’s partner rotation requirements because Mr. D’Arelli and Mr. Pruzansky performed quarterly reviews after being the lead audit partner for five consecutive audits, with respect to two issuer audit clients. In August 2015, the Firm reviewed all of its engagements and self-reported instances of such rotation issues regarding additional issuer audit clients. Respondents were ordered to cease and desist from committing or causing any violations and any future violations of Sections 10A(j) and 13(a) of the Exchange Act and Rules 10A-2 and 13a-13 thereunder and to pay the SEC, jointly and severally, a civil penalty of $50,000.

Jungkun (“Jang”) Centofanti. Ms. Centofanti, who has more than 25 years of operational and management experience in a variety of consumer services industries including hospitality, banking and education, has been an officer of our Company since 2017. Ms. Centofanti has served as Worthy Lending’s senior vice president and chief administrative officer since August 2018. Ms. Centofanti also serves as the Senior Vice President, Chief Administrative Officer and Secretary of Worthy Peer Capital II since October 2019 and of Worthy Community Bonds and Worthy Community Bonds II. She is also Senior Vice President and Chief Administrative Officer of Worthy Lending II. Since October 2019 she has served as Senior Vice President, Chief Administrative Officer and Secretary of Worthy Management. From September 2016 to July 2018 she was Senior Vice President of CorpFin Management Group, a South Florida-based business development and strategic planning company where she handled all aspects of administration, and from January 2017 to July 2018 she served as Vice President of Wheelchair Fitness Solution Inc. Prior to joining CorpFin Management Group, from 2011 to June 2015 she was Administrative and Customer Service Manager for DU20 Holistic Oasis, and from 2004 until 2010 she was Preschool Director for Hazel Crawford School, both South Florida-based companies. Ms. Centofanti received an Associate of Science in Fashion Marketing and Business from the Art Institute of Fort Lauderdale in 1989.

James Eichman. Mr. Eichmann joined Worthy in December 2019 and is responsible for all aspects of product development, IT and security. Prior to joining Worthy, he was with a fintech company, Billtrust, for 18 years where he held positions as CTO, Chief Data Officer and oversaw revenue-generating product lines. At Billtrust, he helped grow the billing and payments company to over 500 employees and $100 million in revenue while managing a team of 150 engineers across multiple product lines. He also built the security and compliance teams to focus on payment industry and ACH audits and requirements. Prior to Billtrust, Jim held a position as Executive VP of Research and Development at PayTrust, managing a24 x 7 data center operation and a $20 million budget. Jim is a New Jersey CIO of the Year honoree and technology speaker at multiple New Jersey conferences. He has published articles addressing digital transformation and is a former board member for several technology organization

Dara Albright. Ms. Albright has been a director of our Company since 2016. A recognized speaker, writer and influencer on topics covering financial disruption, FinTech, RegTech, Digital/Crowd-Finance, she has been Chief Executive Officer of Dara Albright Media since 2011. Ms. Albright possesses a distinguished 28-year career in financial services encompassing IPO execution, investment banking, trading, corporate communications, financial conference production as well as institutional and retail sales. Ms. Albright presently serves on the board of Entoro Wealth, a boutique investment firm that provides customized risk-mitigated strategies for digital currencies. Ms. Albright received her B.A. in psychology from George Washington University in 1991.

Stefanie Crowe. Ms. Crowe has been a director of our Company since April 2019. She is a wealth advisory and banking veteran, an entrepreneur and an angel investor. From 2014 to the present, she is a Co-Founder and General Partner of The JumpFund, an angel fund supporting female-led ventures in the southeast. In June 2020, Stefanie launched her own wealth advisory firm, AegleWealth, serving as CEO. From 2016 – 2020 she served as a wealth strategist for Stone Bridge Asset Management. From 2015 – 2016, Stefanie served as Chief Experience and Strategy Officer facilitating the merger of two community banks, Cornerstone Community Bank and Smartbank. From 2007-2015, Stefanie served as an executive for CapitalMark Bank & Trust, a de novo bank that was acquired in 2015 by Pinnacle Financial Partners. In those more than 8 years, Stefanie launched a Trust & Wealth division and later directed the bank’s marketing, communications, investor relations, community relations and strategic planning efforts. Before joining CapitalMark Bank & Trust, she had a long tenure with Bank of America and its predecessors working as a client advisor involving trusts, estates, investments, private banking and charitable planning. Ms. Crowe obtained her BA in Anthropology from The University of Notre Dame in 1991 and her MBA from University of Tennessee at Chattanooga in 2003. She is a frequent presenter on topics of wealth-building, entrepreneurship, leadership and community-building and she has served on well over a dozen non-profit boards.

Todd Lazenby. Mr. Lazenby has been a director of our Company since April 2019. Mr. Lazenby is the founder of Victory Partners, which he established in 2008, bringing over 25 years of private equity, investment banking, and corporate finance experience to the firm, having held increasing senior level positions in start-ups, mid-sized and Fortune 500 companies. He has built an investment and advisory firm catering to wealthy families and family offices that has made control investments in companies comprising over $300 million in enterprise value and has arranged and overseen in excess of $3.0 billion in capital markets and mergers and acquisitions transactions. Prior to founding Victory Partners, Mr. Lazenby was the Managing Partner of Summit Capital Partners, LLC based in Los Angeles, CA, then the managing partner of WP Capital Partners, L.P. based in Dallas, TX, both merchant banking firms representing middle market companies on a national basis. He holds a MS in Finance from Stanford University Graduate School of Business, a MBA and a BS in Communications from Florida State University, and a BSBA from Barry University.

COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS

For the fiscal year ended December 31, 2020, the Company compensated our three highest-paid executive officers as follows:

The Company’s directors did not receive any compensation in connection with their directorships.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS

The following table sets out, as of April 30, 2021, the voting securities of the Company that are beneficially owned by the executive officers and directors, and other persons holding more than 10% of any class of the Company’s voting securities, or having the right to acquire those securities.

INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS

We were obligated to reimburse one of our officers, Alan Jacobs, for advancing us funds to cover costs such as filing fees and organizational expenses. The balance due was $1,096 at December 31, 2019 and was due on demand, unsecured and interest free. This amount was paid back subsequent to December 31, 2019.

There is $100,000 due from Worthy Peer Capital’s Chief Executive Officer (Sally Outlaw who is the Company’s Chief Executive Officer) and $100,000 due from its Chief Operating Officer (Alan Jacobs who is the Company’s Chief Operating Officer) to Worthy Peer Capital. The $100,000 due from each are notes receivable accruing interest at 10% per annum. The notes are due August 26, 2022. The notes are secured by 203,444 and 203,442 shares of the Common Stock of the Company, respectively. The shares are being held by Worthy Lending, LLC to the extent of the obligation. As of December 31, 2020 and December 31, 2019 the accrued interest on these loans totaled $26,667 and $6,667, respectively.

In March 2020, Worthy Peer Capital II entered into a loan receivable agreement with a small business of which its Chief Financial Officer, Joseph D’Arelli is a minority shareholder and a secured guarantor. The loan commitment is up to $550,000. As of December 31, 2020 Worthy Peer Capital II has loaned $543,000. The loan receivable pays interest at 18% per annum and has a 3 year term. Worthy Peer Capital II also received a 17.5% equity interest in the small business as a condition of the loan commitment. The loan was amended in January of 2021.  The loan agreement was amended to say the borrower will pay to lender interest at a rate per month equal to 1.25% per month from January 1, 2021 to March 31, 2021 and at a rate equal to 1.0% per month thereafter. In October of 2020, Worthy Peer Capital II sold its 17.5% equity interest back to this small business borrower in consideration of payment of $25,000 and the agreement of the borrower to pay to Worthy Lending II, LLC and amount equal to 5% of the net available cash flow of the borrower on or about the first day of each calendar quarter based on the net available cash flow for the prior quarter.

In July 2020, the Company sold 20,000 shares of Common Stock in a private placement to Stefanie Crowe, one of its directors, for total proceeds of $50,000. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Common Stock Issuances.”

SECURITIES BEING OFFERED

General

The Company and the selling shareholders are offering up to 1,000,000 shares of Common Stock.

The following description summarizes the most important terms of the Company’s capital stock. This summary does not purport to be complete and is qualified in its entirety by the provisions of the Company’s amended certificate of incorporation (the “Certificate”) and amended bylaws, copies of which have been filed as exhibits to the Offering Statement of which this Offering Circular is a part. For a complete description of Worth Financial’s capital stock, you should refer to the Certificate, the bylaws and the applicable provisions of Delaware law.

At the date of this Offering Circular, Worthy Financial’s authorized capital stock consists of

At the date of this Offering Circular, the issued and outstanding shares and options of the Company are as follows:

No shares of Preferred Stock are issued and outstanding.

Common Stock

Voting rights

The holders of shares of our Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of our shareholders.

Dividend rights

Subject to preferences that may be granted to any then outstanding shares of Preferred Stock, holder of shares of our Common Stock are entitled to receive ratably such dividends as may be declared by the Board of Directors out of funds legally available therefore, as well as any distribution to the shareholders. The payment of dividends on our common stock will be a business decision to be made by our Board of Directors from time to time based upon the results of our operations, our financial condition and any other factors that our Board of Directors considers relevant. Payment of dividends on our Common Stock may be restricted by law and by loan agreements, indentures and other transactions entered into by us from time to time. We have never paid a dividend on our Common Stock and we do not intend to pay dividends in the foreseeable future, which means that holders of Common Stock may not receive any return on their investment from dividends.

Rights to Receive Liquidation Distributions

In the event of our liquidation, dissolution, or winding up, holders of our Common Stock are entitled to share ratably in all of our assets remaining after payment of liabilities and the liquidation preference of any then outstanding preferred stock. The rights, preferences and privileges of the holders of our Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our Preferred Stock and any additional classes of Preferred Stock that we may designate in the future.

Rights and Preferences

Holders of the Company’s Common Stock have no preemptive, conversion, or other rights, and there are no redemptive or sinking fund provisions applicable to the Company’s Common Stock.

Preferred Stock

Our Board of Directors, without further shareholder approval, may issue Preferred Stock in one or more series from time to time and fix or alter the designations, relative rights, priorities, preferences, qualifications, limitations and restrictions of the shares of each series. The rights, preferences, limitations and restrictions of different series of Preferred Stock may differ with respect to dividend rates, amounts payable on liquidation, voting rights, conversion rights, redemption provisions, sinking fund provisions and other matters. Our Board of Directors may authorize the issuance of Preferred Stock, which ranks senior to our Common Stock for the payment of dividends and the distribution of assets on liquidation. In addition, our Board of Directors can fix limitations and restrictions, if any, upon the payment of dividends on classes of our Common Stock to be effective while any shares of Preferred Stock are outstanding.

Stock Option Plans

During 2018, our Board of Directors approved a stock option plan for the issuance of up to 400,000 options (the “2018 Stock Option Plan”), subject to annual increases in the number of available options. During 2018, we granted 212,800 stock options to three employees. During 2019, we granted 245,072 stock options to 6 employees. During 2020, we granted 161,968 stock options to 2 employees. Since inception of the plan 138,500 stock options were forfeited.

On February 20, 2020, our Board of Directors approved a new stock option plan for the issuance of up to 400,000 options (the “2020 Stock Option Plan,” and, together with the 2018 Stock Option Plan, the “Stock Option Plans.” The Company has granted 310,300 options under the 2020 Stock Option Plan at the date of this Offering Circular.

Each plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, to the Company’s employees and any subsidiary’s employees, and for the grant of nonstatutory stock options, stock appreciation rights, restricted stock, or restricted stock units to the Company’s employees, directors and consultants. Both plans are administered by the Stock Option Committee of our Board of Directors. The exercise price of options granted under the plans must be at least equal to the fair market value of our Common Stock at the time of grant. The term of an option may not exceed 10 years, except that with respect to any participant who owns more than 10% of the voting power of all classes of our outstanding stock, the term of an incentive stock option granted to such participant must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date. Options vest over a 3-year period subject to continued employment. The Stock Option Committee will determine the methods of payment for the exercise price of an option, which may include cash, shares or other property acceptable to the committee, as well as other types of consideration permitted by applicable law. If an individual’s service terminates other than due to the participant’s death or disability, the participant may exercise his or her option within 30 days of termination or such longer period of time as provided in his or her award agreement. If an individual’s service terminates due to the participant’s death or disability, the option may be exercised within six months of termination, or such longer period of time as provided in his or her award agreement. However, in no event may an option be exercised after the expiration of its term. The Stock Option Committee does not use published criteria concerning number of options granted or formal performance formulas. Options are granted based on overall contribution as recommended by the Stock Option Committee and approved by the Board of Directors.

Convertible Notes

In January 2017, we issued a convertible note payable to a shareholder in the amount of $25,000. The note provided for interest at 9% and matured on January 17, 2019. At maturity, we issued 14,750 shares of Common Stock for the conversion of this convertible note payable and related accrued interest.

During Fiscal 2018, we issued 8 convertible notes payable in the amount of $400,000. During Fiscal 2019, we sold an additional $310,000 of 9% convertible notes. The notes bear interest at 9% and mature in three years from the issuance date. At any time prior to the maturity date that we complete a “Qualified Financing,” the principal amount outstanding and all accrued but unpaid interest due is automatically converted into conversion shares at a discount of 25% to the Qualified Financing valuation with conversion cap of $5,000,000 without any further action of the noteholder. A “Qualified Financing” is defined as an offering of our equity securities or convertible notes with net proceeds of not less than $3,000,000, either in a single transaction or in a series of transactions which close within six months of each other. In the event we do not have a Qualified Financing prior to the maturity date, holders have the option at the maturity date to convert the principal amount of the notes, plus accrued interest, into shares of Common Stock at a pre-conversion valuation of $5,000,000. Holders of convertible notes have no rights as shareholders of the Company, including the right to vote, until such time as the notes are converted into shares of Common Stock in accordance with their respective terms. In the event that the Company raises more than $3,000,000 in this offering, all outstanding notes will be automatically converted into shares of Common Stock.

PLAN OF DISTRIBUTION AND SELLING SECURITYHOLDERS

Plan of Distribution

The Company and selling shareholders are offering up to 1,000,000 shares of Common Stock, as described in this Offering Circular. Persons who desire information about the offering may find it at www.worthyshares.com. This Offering Circular will be furnished to prospective investors via download 24 hours per day, 7 days per week on the www.worthyshares.com website.

Commissions and Discounts

Rialto Markets LLC (“Rialto”) has agreed to act as placement agent to assist in connection with this offering.  The placement agent is not purchasing or selling any securities offered by this Offering Circular, nor is it required to arrange the purchase or sale of any specific number or dollar amount of securities, but has agreed to use its best efforts to arrange for the sale of all of the securities offered hereby. In addition, the placement agent may engage other brokers to sell the securities on its behalf.

The following table shows the total discounts and commissions payable to in connection with this offering by the Company, assuming all shares are sold:

Other Terms

The Company has engaged Rialto to perform the following services in connection with the offering in exchange for the compensation discussed above:

In addition to the placement agent commission above, the Company has agreed to pay Rialto an additional commission of 4% for sales of the shares offered and sold through its platform (“Rialto Platform”) and an advisory services retainer of $15,000. Assuming the full amount of the offering is raised and Rialto solicits investments totaling $7,500,000, we estimate that the total fees and expenses of the offering payable by the Company and the selling shareholders to Rialto will be approximately $440,000.

Subscription Procedures

After the Offering Statement has been qualified by the SEC, the Company will accept tenders of funds to purchase the Common Stock. The Company may close on investments on a “rolling” basis (so not all investors will receive their shares on the same date). Investors may subscribe by tendering funds via wire, debit or credit card, or ACH only, checks will not be accepted, to the escrow account to be setup by the Escrow Agent. Tendered funds will remain in escrow until a closing has occurred. Upon closing, funds tendered by investors will be made available to the Company for its use.

The minimum investment in this offering is $400.00, or 20 Shares.

In order to invest you will be required to subscribe to the offering via www.worthyshares.com and agree to the terms of the offering, subscription agreement, and any other relevant exhibit attached thereto.

Investors will be required to complete a subscription agreement in order to invest. The subscription agreement includes a representation by the investor to the effect that, if the investor is not an “accredited investor” as defined under securities law, the investor is investing an amount that does not exceed the greater of 10% of his or her annual income or 10% of your net worth (excluding the investor’s principal residence).

The Company has entered into an Escrow Services Agreement with Wilmington Trust Company (the “Escrow Agent”) and Rialto. Investor funds will be held by the Escrow Agent pending closing or termination of the offering. All subscribers will be instructed by the Company or its agents to transfer funds by wire, credit or debit card, or ACH transfer directly to the escrow account established for this offering. ACHQ, Incorporated will assist with the facilitation of credit and debit card payments through worthyshares.com. The company estimates that processing fees for credit card subscriptions will be approximately 3.5% of total funds invested per transaction, although credit card processing fees may fluctuate. The Company intends to pay these fees and will reimburse ACHQ, Incorporated for transaction fees and return fees that it incurs for returns and chargebacks. The Company estimates that approximately 65% of the gross proceeds raised in this offering will be paid via credit card. This assumption was used in estimating the payment processing fees included in the total offering expenses set forth in “Use of Proceeds to Issuer.” The Company may terminate the offering at any time for any reason at its sole discretion. Investors should understand that acceptance of their funds into escrow does not necessarily result in their receiving shares; escrowed funds may be returned.

The Escrow Agent is not participating as an underwriter or placement agent or sales agent of this offering and will not solicit any investment in the Company, recommend the Company’s securities or provide investment advice to any prospective investor, and no communication through any medium, including any website, should be construed as such, or distribute this Offering Circular or other offering materials to investors. The use of the Escrow Agent’s technology should not be interpreted and is not intended as an endorsement or recommendation by it of the Company or this offering. All inquiries regarding this offering or escrow should be made directly to the Company.

In the event that the Company terminates the offering while investor funds are held in escrow, those funds will promptly be refunded to each investor without deduction or interest and in accordance with Rule 10b-9 under the Exchange Act.

In the event that it takes some time for the Company to raise funds in this offering, the Company will rely on income from sales and funds raised in any offerings of debt or equity securities, as well as net profits generated from its loan portfolio.

Selling Shareholders

Certain shareholders of the Company intend to sell up to 120,000 shares of Common Stock in this offering. Shareholders will only participate in the offering after the Company has sold 100,000 Shares in this offering. The Company will not suspend its offer and sale of securities at any time during the offering.

Once the Company reaches has sold 100,000 Shares in this offering, Sally Outlaw and Alan & Susan Jacobs will each sell 10,000 Shares, for a total of 20,000 Shares.

After the Company has sold an additional 100,000 Shares in this offering (for a total of 200,000 Shares sold by the Company), Stefanie Crowe will sell 5,000 Shares.

After the Company has sold an additional 100,000 Shares in this offering (for a total of 300,000 Shares sold by the Company), Sally Outlaw, Alan & Susan Jacobs, Gino & Jungkun Centofanti and Stefanie Crowe will each sell 5,000 Shares, for a total of 20,000 Shares.

After the Company has sold an additional 100,000 Shares in this offering (for a total of 400,000 Shares sold by the Company), Sally Outlaw, Alan & Susan Jacobs and Gino & Jungkun Centofanti will each sell 5,000 Shares, for a total of 15,000 Shares.

After the Company has sold an additional 100,000 Shares in this offering (for a total of 500,000 Shares sold by the Company), Sally Outlaw and Alan & Susan Jacobs will each sell 5,000 Shares, for a total of 10,000 Shares.

After the Company has sold an additional 100,000 Shares in this offering (for a total of 600,000 Shares sold by the Company), Sally Outlaw and Alan & Susan Jacobs will each sell 7,500 Shares and Gino & Jungkun Centofanti will sell 5,000 Shares, for a total of 20,000 Shares.

After the Company has sold an additional 100,000 Shares in this offering (for a total of 700,000 Shares sold by the Company), Sally Outlaw and Alan & Susan Jacobs will each sell 7,500 Shares and Gino & Jungkun Centofanti will sell 5,000 Shares, for a total of 20,000 Shares.

After the Company has sold an additional 100,000 Shares in this offering (for a total of 800,000 Shares sold by the Company), Sally Outlaw and Alan & Susan Jacobs will each sell 5,000 Shares, for a total of 10,000 Shares.

Assuming a fully-subscribed offering, the selling shareholders will offer up to 12% of the 1,000,000 Shares available in this offering. At no point at which the selling shareholders sell Shares will their Shares constitute more than 30% of the total Shares sold in this offering.

After qualification of the Offering Statement, the selling shareholders will enter into an irrevocable power of attorney (“POA”) with the Company and Joseph D’Arelli as attorneys-in-fact, in which they direct the Company and the attorneys-in-fact to take the actions necessary in connection with the offering and sale of their Shares. A form of the POA is filed as an exhibit to the Offering Statement of which this Offering Circular forms a part.

(1) Assumes maximum number of shares are sold in this offering.

(2) Shares of Common Stock owned prior to the Offering includes 26,456 shares of Common Stock issuable upon conversion of convertible notes held by Ms. Crowe, assuming the Company raises at least $3,000,000 in this offering.

(3) The total number of shares owned by the selling shareholders prior to this offering represents 51.41% of the Company’s capital stock, on a fully diluted basis, assuming all outstanding options are exercised and all outstanding convertible notes convert to shares of Common Stock. The total number of shares of Common Stock offered by the selling shareholders represent 4.3% of the Company’s total issued and outstanding shares prior to this offering.

Provisions of Note in the Subscription Agreement

Jury Trial Waiver

The subscription agreement provides that subscribers waive the right to a jury trial of any claim they may have against us arising out of or relating to the agreement, including any claim under federal securities laws. By signing the subscription agreement an investor will warrant that the investor has reviewed this waiver with the investor’s legal counsel, and knowingly and voluntarily waives his or her jury trial rights following consultation with the investor’s legal counsel. If we opposed a jury trial demand based on the waiver, a court would determine whether the waiver was enforceable given the facts and circumstances of that case in accordance with applicable case law. In addition, by agreeing to the provision, subscribers will not be deemed to have waived the Company’s compliance with the federal securities laws and the rules and regulations promulgated thereunder.

Forum Selection Provision

The subscription agreement that investors will execute in connection with the offering includes a forum selection provision that requires any claims against the Company based on the agreement to be brought in a state or federal court of competent jurisdiction in the State of Delaware, for the purpose of any suit, action or other proceeding arising out of or based upon the agreement. The forum selection provision will not be applicable to lawsuits arising from the federal securities laws. Although we believe the provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies and in limiting our litigation costs, to the extent it is enforceable, the forum selection provision may limit investors’ ability to bring claims in judicial forums that they find favorable to such disputes and may discourage lawsuits with respect to such claims. The Company has adopted the provision to limit the time and expense incurred by its management to challenge any such claims. As a company with a small management team, this provision allows its officers to not lose a significant amount of time travelling to any particular forum so they may continue to focus on operations of the Company. Investors will not be deemed to have waived the Company’s compliance with the federal securities laws and the rules and regulations thereunder.

ONGOING REPORTING AND SUPPLEMENTS TO THIS OFFERING CIRCULAR

We are required to make annual and semi-annual filings with the SEC. We will make annual report filings on Form 1-K, which will be due 120 days after the end of the fiscal year on April 30. The annual report will include audited financial statements for the previous fiscal year. We will make semi-annual filings on Form 1-SA, which will be due by September 28 each year, which will include unaudited financial statements for the six months to June 30. We will also file a Form 1-U to announce important events such as the loss of a senior officer, a change in auditors or certain types of capital-raising. We will be required to keep making these reports unless we file a Form 1-Z to exit the reporting system, which we will only be able to do if we have less than 300 shareholders of record and have filed at least one Form 1-K.

We may supplement the information in this Offering Circular by filing a Supplement with the SEC. We hereby incorporate by reference into this Offering Circular all such Supplements, and the information on any Form 1-K, 1-SA or 1-U filed after the date of this Offering Circular.

All these filings will be available on the SEC’s EDGAR filing system. You should read all the available information before investing.

Worthy Financial, Inc. and Subsidiaries

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of:

Worthy Financial, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Worthy Financial, Inc. and Subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in shareholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2020 and 2019, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, to the consolidated financial statements, the Company had a net loss and had net cash used in operations of $4,119,032 and $684,385, respectively, for the year ended December 31, 2020. The Company also had a shareholders’ deficit and an accumulated deficit of $7,344,143 and $9,104,547, respectively, and total liabilities exceeded total assets by $7,344,143 at December 31, 2020. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plan regarding these matters is also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of loans and mortgage loans and related accrued interest and fees receivable

As described in Footnote 3 “Allowance for Loan Losses” and in Footnote 6 “Loans Receivable and Mortgage Loans Held for Investment”, to the consolidated financial statements, the Company’s consolidated loans and mortgage loans receivable and accrued interest receivable balances, net of the related $4,025,441 allowance for loan losses, was $38,514,956 at December 31, 2020. Loans and mortgage loans held for investment and related accrued interest and fees receivable balances are evaluated by management for collectability periodically and at year-end. The determination of the valuation of these balances requires management to make significant estimates and assumptions related to the intent and ability of the borrowers to pay the amounts due to the Company.

We identified the valuation of loans and mortgage loans and related accrued interest and fees receivable as a critical audit matter. Auditing management’s judgments regarding the intent and ability of the borrowers to pay the amounts due to the Company involved a high degree of complexity and subjectivity.

The primary procedures we performed to address this critical audit matter included (a) reviewing management’s process for developing an estimate of the loan loss allowance to be recorded including management’s use of internal risk ratings and credit quality indicators and the information management uses to develop these ratings and indicators, (b) sending audit confirmation letters to a sample of borrowers, (c) reviewing the promissory notes and related legal documents including any collateral related documents for our sample of borrowers, and (d) reviewing and verifying the historical and subsequent collection history through the date of our procedures for our sample of borrowers and correlating this history to management’s process of developing the loan loss allowance.

2295 NW Corporate Blvd., Suite 240 • Boca Raton, FL 33431

Phone: (561) 995-8270 • Toll Free: (866) CPA-8500 • Fax: (561) 995-1920

www.salbergco.com • info@salbergco.com

Member National Association of Certified Valuation Analysts • Registered with the PCAOB

Member CPAConnect with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality

Worthy Financial, Inc. and Subsidiaries

Consolidated Balance Sheets

The accompanying notes are an integral part of these consolidated financial statements

Worthy Financial, Inc. and Subsidiaries

Consolidated Statements of Operations