DeFi Development Corp.DFDV
DeFi Development Corp. Debt Disclosure
NOTE 9—DEBT
The table below summarizes our debt outstanding, we had no debt outstanding as of December 31, 2024:
| December 31 (in thousands) | Effective Interest Rate | Contractual Interest Rate | 2025 | |||||||||||
| Short-term debt: | ||||||||||||||
| Loans payable | 7.1 | % | 7.1 | % | $ | 107 | ||||||||
| Total short-term debt | $ | 107 | ||||||||||||
| Long-term debt: | ||||||||||||||
| April 2030 convertible notes | 13.1 | % | 2.5 | % | $ | 11,471 | ||||||||
| July 2030 convertible notes | 6.4 | % | 5.5 | % | 122,500 | |||||||||
| Less: unamortized discount and issuance costs | (6,610) | |||||||||||||
| Total long-term debt, net of unamortized discount and issuance costs | $ | 127,361 | ||||||||||||
| Total debt | $ | 127,468 | ||||||||||||
As of December 31, 2025, the estimated fair value of our debt was approximately $119.5 million. The estimated fair value of our long-term convertible notes is based on Level 3 inputs utilizing the discounted cash flow model. The discount rate applied in the valuation model is based on the yield of U.S Treasury securities with similar remaining contractual terms, plus a credit spread derived from the Intercontinental Exchange Bank of America U.S. corporate bond option-adjusted spread indices for issuers with similar credit risk profiles.
The total interest expense on our debt was $5.4 million with contractual interest rate expense of $3.7 million and amortization of debt discount and issuance costs of $1.7 million. Additionally, we recognized interest expense of $1.7 million related to warrant dividends issued to holders of the notes. There was no debt outstanding as of December 31, 2024.
SHORT-TERM DEBT
In April 2025, we entered into a Director and Officer insurance policy for $666.3 thousand, where we borrowed a total of $516.5 thousand. The financed insurance premiums are payable over ten months and have a contractual annual interest rate of 7.1% which is calculated using a 365-day calendar year. During 2025, we paid a total of $426.7 thousand related to the insurance policy borrowings.
LONG-TERM DEBT
July 2030 Convertible Notes
On July 7, 2025, we issued $112.5 million in aggregate principal amount, in a private offering, of 5.5% convertible senior notes due 2030 ("July Notes"). The July Notes bear interest at an annual rate of 5.5% which is calculated based on a 360-day year, payable semiannually in arrears. The July Notes mature on July 1, 2030, unless we redeem or the notes are converted according to the terms of the agreement. In connection with the issuance of the July Notes, we entered into an indenture with U.S. Bank Trust Company, National Association, as trustee. We received $108.1 million in net proceeds, of which approximately $75.6 million was used to
repurchase shares of the Company's common stock in the form of a prepaid forward stock purchase transaction with the remaining used for general corporate purposes, including the acquisition of SOL.
We determined that the prepaid forward stock purchase is an equity contract on our common shares requiring physical settlement in common shares of the Company. As such, we recorded the prepaid forward stock purchase as a reduction to Additional paid-in capital.
On July 9, 2025, the initial purchasers of the private offering exercised the right to purchase additional July Notes, as granted under the terms of the private offering, resulting in an additional issuance of $10.0 million in aggregate principal amount of the July Notes. We received $9.7 million in net proceeds which was used for general corporate purposes, including the acquisition of SOL.
Prior to January 1, 2030, the July Notes are convertible only upon the occurrence of certain events. On or after January 1, 2030 and until the close of business on the second scheduled trading day immediately preceding the maturity date of the July Notes, holders may convert the July Notes at any time. The previously mentioned notes are convertible into cash, shares of the common stock or a combination of cash and shares of the common stock, at our election, subject to certain restrictions. The initial conversion rate of the July Notes is 43.2694 shares per $1,000 principal amount of notes (equivalent to an initial conversion price of approximately $23.11 per share of common stock). The conversion rate is subject to customary anti-dilution adjustments. In addition, following certain events that occur prior to the maturity date or if the Company delivers a notice of redemption, we will increase the conversion rate for a holder who elects to convert its notes in connection with such corporate event or notice of redemption, as the case may be, in certain circumstances as provided in the indenture.
Prior to July 5, 2026, we may not redeem the July Notes. We may redeem for cash all or any portion of the notes, at our option, on or after July 5, 2026 if the last reported sale price of our common stock has been at least 150% of the conversion price then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which we provide a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which we provide notice of redemption. The redemption price will be equal to 100% of the principal amount of the July Notes to be redeemed, plus accrued and unpaid interest, if any, to but excluding, the redemption date.
If the Company undergoes a “fundamental change,” as defined in the indenture, prior to maturity, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their July Notes at a fundamental change repurchase price equal to 100% of the principal amount of the July Notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date.
The indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in principal amount of the outstanding July Notes may declare 100% of the principal of and accrued and unpaid interest, if any, on all the outstanding notes to be due and payable.
We evaluated the embedded conversion features of the July Notes under ASC 815 and concluded that the embedded conversion features qualify for the derivatives scope exception in ASC 815. As such, the embedded conversion options do not require bifurcation from the host instrument. Additionally, we evaluated whether the redemption features of the July Notes were considered embedded derivatives under ASC 815 that should be bifurcated and accounted for separately. We determined the redemption features are clearly and closely related to the debt host contract and do not require bifurcation under ASC 815.
April 2030 Convertible Notes
On April 4, 2025, we entered into several Securities Purchase Agreements (the “Notes Agreement”) with a syndicate of investors (the "Investors"), in which we agreed to, among other things, issue Convertible Notes (the "April Notes") totaling approximately $42.0 million in aggregate principal due April 6, 2030 ("Maturity Date"). The April Notes have an interest rate of 2.5% per year, accrued daily and payable quarterly in arrears on March 31, June 30, September 30 and December 31 each year. The April Notes are convertible at any time prior to and or on the Maturity Date, conditioned that the Company’s market capitalization equals or exceeds $100 million on the day prior to the conversion date (“Market Capitalization Condition”). The conversion price for the April Notes
shall equal the last reported sale price of the Company’s common stock on NASDAQ on the date the Market Capitalization Condition is met. The conversion price will not be adjusted, except for customary anti-dilution and dividend protection. Conversion of the April Notes, together with any accrued and unpaid interest, if any, at the time of conversion will be settled in shares of common stock.
Holders of the April Notes have the right to require us to repurchase the April Notes at a price equal to 100% of par plus accrued and unpaid interest, if any, on April 6, 2028. In addition, the Company may redeem the April Notes on or after April 6, 2028, if the last reported sale price of the common stock has been at least 130% of the conversion price for at least 20 trading days during a period of 30 consecutive trading days at a price equal to 100% of par plus accrued and unpaid interest, if any.
The April Notes provide that the holder may not convert any portion of such holder's April Notes to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of our outstanding shares of common stock immediately after conversion, except that upon at least 61 days' prior notice from the holder to us, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of common stock outstanding immediately after giving effect to the conversion. The April Notes contain certain other customary covenants and customary events of default provisions.
We evaluated the embedded conversion features of the April Notes under ASC 815 and concluded that the embedded conversion features qualify for the derivatives scope exception in ASC 815. As such, the embedded conversion options do not require bifurcation from the host instrument.
In connection with the issuance of the April Notes, we issued two series of detachable stock warrants for each $1,000 in principal amount of the April Notes to purchase approximately 58.34 shares of our common stock at an exercise price of $17.14 per share in one series and approximately 46.66 shares of our common stock at an exercise price of $21.43 per share in the second series.
We determined that the warrants issued in connection with the April Notes are freestanding equity-linked instruments and have allocated the proceeds based on the relative fair values of the April Notes and warrants. The fair value of the April Notes of $34.1 million was estimated using a Monte Carlo simulation. The fair value of the warrants of $7.9 million was estimated using Black-Scholes Option model. The allocation of proceeds between the April Notes and the warrants resulted in a discount on the April Notes of $7.9 million. The discount will be amortized as interest expense over the contractual term of the April Notes using the effective interest method. In addition, the fair value of the warrants was recorded in Additional paid-in capital, as stated on our Consolidated Balance Sheets. See Note 11—Stockholders’ Equity and Note 15—Fair Value Measurements for further discussion.
On April 15, 2025, the Company triggered the Market Capitalization Condition and accordingly the conversion price on the April Notes was set to equal the last reported sale price of common stock on NASDAQ on that day of $10.64 per share. On the same day, we reached an agreement with the Investors and provided them notice that the conversion price would be set at $9.74 per share (the “Conversion Price Reduction”), which was not in alignment with the terms of the April Notes agreements. We performed an assessment in accordance with the modifications and extinguishments guidance under Accounting Standards Codification Topic 470, Debt (“ASC 470”) to determine whether the Conversion Price Reduction resulted in terms substantially different from the Notes Agreement. The Conversion Price Reduction was considered a debt modification as the contractual cash flows of the April Notes did not change, and the $3.3 million increase in the fair value of the embedded conversion option as a result of the modification was less than 10% of the carrying value of the April Notes on the date of the modification. Accordingly, the Company recorded an additional discount of $3.3 million on the April Notes with a corresponding increase in Additional paid-in capital in accordance with ASC 470, and reset the effective interest rate used to amortize the discount on the date of the Conversion Price Reduction. See Note 15—Fair Value Measurements for further discussion.
As a result of meeting the market capitalization condition, the share impact from the April Notes that have not yet been converted are included in the calculation for diluted earnings per share. See Note 4—Net (Loss) Income Per Share for further discussion. During 2025, approximately $30.5 million of the April Notes were converted to common stock, resulting in a reduction of $7.4 million of the unamortized discount on the April Notes associated with the conversion.
The table below shows the future principal payments associated with our long-term debt as of December 31, 2025:
| (in thousands) | ||||||||
| 2026 to 2029 | $ | — | ||||||
| 2030 and thereafter | $ | 133,971 | ||||||
Holders of the previously mentioned notes, in lieu of an adjustment to the conversion rate, received, at the same time and on the same terms as holders of our common stock, warrant dividends, without having to convert such holder’s notes, as if the holder held a number of shares of our common stock, equal to the product of the conversion rate applicable to the notes in effect on the record date and the aggregate principal amount (expressed in thousands) of the notes held by such holder on the record date. On October 27, 2025, holders of the notes were issued 647,798 of warrant dividends. See Note 11—Stockholders’ Equity for further discussion.
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.