What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-04 compared with 2021-08-05 · 460 added, 375 removed, 429 unchanged (66% of the section changed)

1 unchanged sentence

AFC GAMMA, INC.

BALANCE SHEETS

June 30, 2021

CONSOLIDATED BALANCE SHEETS

September 30, 2021

December 31, 2020

Loans held for investment at fair value (cost of $ 43,916,537 and $ 46,994,711 at June 30, 2021 and December 31, 2020, respectively, net)

Loans held for investment at fair value (cost of $ 73,934,116 and $ 46,994,711 at September 30, 2021 and December 31, 2020, respectively, net)

Loans held for investment at carrying value

6 unchanged sentences

Interest reserve

Due to affiliate

Dividends payable

Current expected credit loss reserve

5 unchanged sentences

Stockholders’ Equity

Preferred stock, par value $ 0.01 per share, 10,000 shares authorized at June 30, 2021 and December 31, 2020 and 125 shares issued and outstanding at June 30, 2021 and December 31, 2020

Preferred stock, par value $ 0.01 per share, 10,000 shares authorized at September 30, 2021 and December 31, 2020 and 125 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Common stock, par value $ 0.01 per share, 25,000,000 and 15,000,000

shares authorized at June 30, 2021 and December 31, 2020, respectively, and 16,116,877 and 6,179,392 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

shares authorized at September 30, 2021 and December 31, 2020, respectively, and 16,442,812 and 6,179,392 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Additional paid-in-capital

Accumulated earnings (deficit)

Accumulated earnings

Total stockholders’ equity

Total liabilities and stockholders’ equity

(See accompanying notes to the Financial Statements)

(See accompanying notes to the consolidated financial statements)

AFC GAMMA, INC.

STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS

For the three

September 30,

July 31, 2020 to

September 30,

July 31, 2020 to

September 30,

Interest income

Total revenue

Management and incentive fees, net (less rebate of $ 182,707 and $ 420,450 , respectively)

Management and incentive fees, net (less rebate of $ 256,989 ,

$ 84,167 , $ 677,439

and $ 84,167 , respectively)

General and administrative expenses

Organizational expenses

Stock-based compensation

2 unchanged sentences

Provision for current expected credit losses

Realized gains / (losses) on loans at fair value, net

Change in unrealized gains / (losses) on loans at fair value, net

7 unchanged sentences

Diluted weighted average shares of common stock outstanding (in shares)

(See accompanying notes to the Financial Statements)

(See accompanying notes to the consolidated financial statements)

AFC GAMMA, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

Three months ended June 30, 2021

Additional Paid-

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Three months ended September 30, 2021

Stockholders’

Balance at March 31, 2021

Balance at June 30, 2021

Issuance of common stock, net of offering cost

Stock-based compensation

Dividends declared and paid on common shares ($ 0.38 per share)

Dividends declared and paid on preferred shares ($ 60 per share)

Balance at June 30 , 2021

months ended June 30, 2021

Additional Paid-

Dividends declared on common shares ($ 0.43 per share)

Dividends declared on preferred shares ($ 60 per share)

Balance at September 30 , 2021

Period from July 31, 2020 (date of commencement of operations) to September 30, 2020

Stockholders’

Balance at July 31, 2020

Issuance of common stock

Balance at September 30 , 2020

(See accompanying notes to the consolidated financial statements)

AFC GAMMA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

months ended September 30, 2021

Stockholders’

Balance at December 31, 2020

1 unchanged sentence

Stock-based compensation

Dividends declared and paid on common shares ($ 0.74 per share)

Dividends declared and paid on preferred shares ($ 60 per share)

Balance at June 30 , 2021

(See accompanying notes to the Financial Statements)

Dividends declared on common shares ($ 1.17 per share)

Dividends declared on preferred shares ($ 60 per share)

Balance at September 30 , 2021

Period from July 31, 2020 (date of commencement of operations) to September 30, 2020

Stockholders’

Balance at July 31, 2020

Issuance of common stock

Balance at September 30 , 2020

(See accompanying notes to the consolidated financial statements)

AFC GAMMA, INC.

STATEMENT OF CASH FLOWS

June 30, 2021

CONSOLIDATED STATEMENTS OF CASH FLOWS

September 30, 2021

July 31, 2020 to

September 30, 2020

Operating activities:

Adjustments to reconcile net income / (loss) to net cash provided by / (used in) operating activities:

Adjustments to reconcile net income to net cash provided by / (used in) operating activities:

Provision for current expected credit losses

Realized gain on sale of loans

Change in unrealized (gains) / losses on loans at fair value, net

5 unchanged sentences

Prepaid expenses and other assets

Accrued management fees, net

Accrued management and incentive fees, net

Accrued direct administrative expenses

3 unchanged sentences

Issuance of and fundings on loans

( 156,345,116

Proceeds from sales of Assigned Rights

Proceeds from sales of loans

Principal repayment of loans

Net cash provided by / (used in) investing activities

Net cash used in investing activities

( 121,463,591

Cash flows from financing activities:

2 unchanged sentences

Dividends paid

Net cash provided by / (used in) financing activities

Net cash provided by financing activities

Change in cash, cash equivalents and restricted cash

2 unchanged sentences

Supplemental disclosure of non-cash financing and investing activity

Interest reserve withheld from funding of loan

Loans acquired for issuance of shares of common stock

Interest reserve withheld from funding of loans

OID withheld from funding of loans

Loans funded from amounts due to affiliate

Supplemental information:

1 unchanged sentence

Income taxes paid during the period

(See accompanying notes to the Financial Statements)

(See accompanying notes to the consolidated financial statements)

AFC GAMMA, INC.

NOTES TO FINANCIAL STATEMENTS

As of June 30, 2021

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2021

AFC Gamma, Inc.

(the “Company” or

“AFCG”) is a commercial real estate (“CRE”) finance company primarily engaged in originating, structuring, and underwriting senior secured loans and other types of loans.

“AFCG”) is a commercial real estate finance company primarily engaged in originating, structuring, and underwriting senior secured loans and other types of loans.

The Company was formed and commenced operations on July 31, 2020.

Company is a Maryland corporation and completed its initial public offering (the “IPO”) in March 2021.

The Company is externally managed by AFC Management, LLC (“AFC Management” or the Company’s “Manager”), a Delaware limited liability

company, pursuant to the terms of a management agreement (as amended, the “Management Agreement”).

The Company is

a Maryland corporation and completed its initial public offering (the “IPO”) in March 2021.

The Company is externally managed by AFC Management, LLC (“AFC Management” or the Company’s “Manager”), a Delaware limited liability company, pursuant

to the terms of a management agreement (as amended, the “Management Agreement”).

The Company’s wholly owned subsidiary, AFCG TRS1, LLC (“TRS”), was formed under the laws of the State of Delaware on December 31, 2020, and operates as a taxable

real estate investment trust (“REIT”) subsidiary.

TRS began operating in July 2021, and the financial statements of TRS have been consolidated within the Company’s consolidated financial statements beginning with the quarter ended September 30,

The Company operates as one operating segment and is primarily focused on financing senior secured loans and other types of loans for established cannabis industry

operators in states where medical and/or adult use cannabis is legal.

These loans are generally held for investment and are secured, directly or indirectly, by real estate, equipment, licenses and/or other assets of borrowers depending on the

applicable laws and regulations governing such borrowers.

The Company intends to elect to be taxed as a real estate

investment trust (“REIT”) for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2020.

The Company generally will not be subject to

United States federal income taxes on its REIT taxable income as long as it annually distributes all of its REIT taxable income prior to the deduction for dividends paid to stockholders and complies with various other requirements as a REIT.

These loans are generally held for investment and are secured, directly or indirectly, by real estate, equipment, the value associated

with licenses and/or other assets of borrowers depending on the applicable laws and regulations governing such borrowers.

The Company has elected to be taxed as a REIT for United

States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2020.

The Company generally will not be subject to United States federal income taxes on

its REIT taxable income as long as it annually distributes all of its REIT taxable income prior to the deduction for dividends paid to stockholders and complies with various other requirements as a REIT.

SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim financial statements

should be read in conjunction with the audited financial statements and the related management's discussion and analysis of financial condition and results of operations included in the Company's final prospectus relating to our follow-on

public offering filed with the Securities and Exchange Commission (“SEC”) in accordance with Rule 424(b) of the Securities Act of 1933, as amended (the “Securities Act”) on June 24, 2021 (the “Final Prospectus”).

The accompanying unaudited interim consolidated financial

statements should be read in conjunction with the audited financial statements and the related management’s discussion and analysis of financial condition and results of operations included in the Company’s final prospectus relating to our

follow-on public offering filed with the Securities and Exchange Commission (“SEC”) in accordance with Rule 424(b) of the Securities Act of 1933, as amended (the “Securities Act”) on June 24, 2021 (the “Final Prospectus”).

Refer to Note 2 to the Company’s financial

statements in the Final Prospectus for a description of the Company’s significant accounting policies.

The Company has included disclosure below regarding basis of presentation and other accounting policies that (i) are required to be disclosed

quarterly, (ii) have material changes or (ii) the Company views as critical as of the date of this report.

The Company has included disclosures below regarding basis of presentation and other accounting policies that (i) are required to be disclosed

quarterly, (ii) have material changes or (iii) the Company views as critical as of the date of this report.

Basis of Presentation

The accompanying unaudited interim financial statements and related notes have

been prepared on the accrual basis of accounting in conformity with United States generally accepted accounting principles (“GAAP”) and in conformity with the rules and regulations of the SEC applicable to interim financial information.

unaudited interim financial statements reflect all adjustments and reclassifications that, in the opinion of management, are considered necessary for a fair statement of the balance sheets, statements of operations, statements of stockholders’

equity, and statement of cash flows for the periods presented.

The accompanying unaudited interim consolidated financial statements and related

notes have been prepared on the accrual basis of accounting in conformity with United States generally accepted accounting principles (“GAAP”) and in conformity with the rules and regulations of the SEC applicable to interim financial

These unaudited interim consolidated financial statements reflect all adjustments and reclassifications that, in the opinion of management, are considered necessary for a fair statement of the balance sheets, statements of

operations, statements of stockholders’ equity, and statement of cash flows for the periods presented.

The current period’s results of operations will not

5 unchanged sentences

Significant estimates include the valuation of loans held for investment at fair value.

The spread of a novel strain of coronavirus (“COVID-19”) has caused significant business disruptions

in the United States beginning in the first quarter of 2020 and has resulted in governmental authorities implementing numerous measures to try to contain the virus, such as quarantines, shelter-in-place or total lock-down orders and business

limitations and shutdowns (subject to exceptions for certain “essential” operations and businesses).

Over the course of the COVID-19 pandemic, medical cannabis companies have been deemed “essential” by almost all states with legalized cannabis

and stay-at-home orders.

Consequently, the impact of the COVID-19 pandemic and the related regulatory and private sector response on our financial and operating results for the period ended June 30, 2021 was somewhat mitigated as all of our

borrowers were permitted to continue to operate during this pandemic.

Regardless, the full extent of the economic impact of the business disruptions caused by COVID-19 is uncertain.

The outbreak of COVID-19 has severely impacted global economic

activity and caused significant volatility and negative pressure in financial markets.

The global impact of the outbreak has been rapidly evolving, and many countries, including the United States, have reacted by instituting quarantines,

mandating business and school closures and restricting travel.

As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including the regulated cannabis industry.

Although some of these measures

have been lifted or scaled back, a recent resurgence of COVID-19 in certain parts of the world, including the United States, has resulted in the re-imposition of certain restrictions and may lead to more restrictions to reduce the spread of

The extent of any effect that these disruptions may have on the operations and financial performance of the Company will depend on future developments, including possible impacts on the performance of the Company’s loans, general

business activity, and ability to generate revenue, which cannot be determined.

Over the course of the coronavirus (“COVID-19”) pandemic, medical cannabis companies have been

deemed “essential” by almost all states with legalized cannabis and stay-at-home orders.

Consequently, the impact of the COVID-19 pandemic and the related regulatory and private sector response on our financial and operating results for the

period ended September 30, 2021 was somewhat mitigated as all of our borrowers were permitted to continue to operate during this pandemic.

Regardless, the full extent of the economic impact of the business disruptions caused by COVID-19 is

The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets.

The global impact of the outbreak has been rapidly evolving, and many countries,

including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel.

As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly,

including the regulated cannabis industry.

Although most of these measures have been lifted or scaled back, surges of COVID-19 in certain parts of the world, including the United States, have resulted and may in the future result in the

re-imposition of certain restrictions and may lead to more restrictions to reduce the spread of COVID-19.

The full effect that these disruptions may have on the operations and financial performance of the Company will depend on future

developments, including possible impacts on the performance of the Company’s loans, general business activity, and ability to generate revenue, which cannot be determined.

Recent Accounting

Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued

Accounting Standards Updated (“ASU”) No.

In March 2020, the Financial Accounting Standards Board

(“FASB”) issued Accounting Standards Updated (“ASU”) No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts,

hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate

(“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying

GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts, hedging relationships, and other transactions that reference the London

Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company is currently evaluating the impact of

adopting this ASU on its financial statements.

The Company is currently

evaluating the impact of adopting this ASU on its financial statements.

In January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic

2021-01, Reference

Rate Reform (Topic 848):

Scope, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

2021-01 is effective

immediately for all entities.

An entity may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new

modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued.

If an entity elects to apply any of the

amendments for an eligible hedging relationship, any adjustments as a result of those elections must be reflected as of the date the entity applies the election.

The amendments do not apply to contract modifications made after December 31,

2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that

apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship (including periods after December 31, 2022).

The Company is currently evaluating the impact, if any, of this ASU on its

financial statements.

In October 2020, the FASB issued ASU No.

2020-08, Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs, which is an update to clarify that an entity should reevaluate whether a callable debt security is within the scope of 310-20-35-33 for each

reporting period.

is effective immediately for all entities.

An entity may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective

basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued.

If an entity elects to apply

any of the amendments for an eligible hedging relationship, any adjustments as a result of those elections must be reflected as of the date the entity applies the election.

The amendments do not apply to contract modifications made after

December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31,

2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship (including periods after December 31, 2022).

The Company is currently evaluating the impact, if any, of this

ASU on its financial statements.

In October 2020,

the FASB issued ASU No.

of 310-20-35-33 for each reporting period.

2020-08 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Early application is not permitted.

For all other entities, the

amendments in ASU No.

all other entities, the amendments in ASU No.

2020-08 are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

Early application is permitted for all other entities for fiscal years,

and interim periods within those fiscal years, beginning after December 15, 2020.

All entities should apply the amendments in this update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased

callable debt securities.

The Company has adopted this new standard on January 1, 2021.

The adoption of this standard did not have a material impact on the Company’s financial statements.

Early application is permitted for all other

entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

All entities should apply the amendments in this update on a prospective basis as of the beginning of the period of adoption for

existing or newly purchased callable debt securities.

The Company adopted this new standard on January 1, 2021.

The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

LOANS HELD FOR INVESTMENT AT FAIR VALUE

As of June 30, 2021 and December 31, 2020,

As of September 30, 2021 and December 31,

2020, the Company’s portfolio included three and four loans held at fair value, respectively.

1 unchanged sentence

approximately $ 77.0 million and $ 50.8

million, respectively, as of June 30, 2021 and December 31, 2020.

For the six months ended June 30, 2021, the Company funded approximately $ 7.7

million, respectively, as of September 30, 2021 and December 31, 2020.

For the nine months ended September 30, 2021, the Company funded approximately $ 37.7

million of outstanding principal and had repayments of approximately $ 13.1 million.

As of June 30, 2021 and December 31, 2020,

approximately 0 % and 6.0 %,

As of September 30, 2021 and December 31, 2020, 0.0 % and approximately 6.0 %,

respectively, of the Company’s loans held at fair value have floating interest rates.

2 unchanged sentences

The following tables

summarize the Company’s loans held at fair value as of June 30, 2021 and December 31, 2020:

As of June 30, 2021

summarize the Company’s loans held at fair value as of September 30, 2021 and December 31, 2020:

As of September 30, 2021

Fair Value (2)

15 unchanged sentences

purchase discount, deferred loan fees and loan origination costs.

Refer to Footnote 14 to our unaudited financial statements.

Weighted average remaining life is calculated based on the fair value of the loans as of June 30, 2021 and December 31,

Refer to Note 14 to our unaudited consolidated financial statements.

Weighted average remaining life is calculated based on the fair value of the loans as of September 30, 2021 and December

The following table presents changes in loans held at fair value as of and for

the six months ended June 30, 2021 :

the nine months ended September 30, 2021 :

Original Issue

5 unchanged sentences

Accretion of original issue discount

Total loans held at fair value at June 30, 2021

Total loans held at fair value at September 30, 2021

A more detailed listing of the Company’s

loans held at fair value portfolio based on information available as of June 30, 2021 is as follows:

loans held at fair value portfolio based on information available as of September 30, 2021 is as follows:

Collateral Location

Fair Value (2)

Principal (1)

1 unchanged sentence

AZ, MI, MD, MA

A - Real Estate Loan

Total loans held at fair value

1 unchanged sentence

of the loans consists of unaccreted original issue discount (“OID”) and loan origination costs.

Refer to Footnote 14 to our unaudited financial statements.

Refer to Note 14 to our unaudited consolidated financial statements.

Certain loans are subject to contractual extension options and may be subject to performance based or other conditions as

4 unchanged sentences

I/O = interest-only, P/I = principal and interest.

P/I loans may include interest only periods for a

portion of the loan term.

P/I loans may include interest-only periods for a portion of the loan

Base interest rate of 13 % and payment-in-kind (“PIK”) interest rate of 3.4 % .

Base interest rate of 13 % and PIK interest rate of 4 %.

Base interest rate of 12 % and PIK interest rate of 2 %.

Base interest rate of 13 %

and PIK interest rate of 4 %.

Base interest rate of 12 %

and PIK interest rate of 2 %.

C = Cultivation Facilities, D = Dispensaries.

LOANS HELD FOR INVESTMENT AT CARRYING VALUE

As of June 30, 2021

and December 31, 2020, the Company’s portfolio included ten and three loans, respectively, held at carrying value.

As of September 30,

2021 and December 31, 2020, the Company’s portfolio included 12 and three loans, respectively, held at carrying value.

The aggregate originated commitment under these loans was approximately $ 217.0 million and $ 44.0 million, respectively, and outstanding principal was

approximately $ 164.4 million and $ 33.9

million, respectively, as of June 30, 2021 and December 31, 2020.

For the six months ended June 30, 2021, the Company funded approximately $ 79.9

million, respectively, as of September 30, 2021 and December 31, 2020.

For the nine months ended September 30, 2021, the Company funded approximately $ 139.2

million of outstanding principal.

As of June 30, 2021 and December 31, 2020, approximately 44 % and 35 %, respectively, of the Company’s loans held at carrying value have floating interest rates.

As of September 30, 2021 and December 31, 2020, approximately 68 % and 35 %, respectively, of the Company’s loans held at carrying value have floating interest rates.

These floating rates are subject to LIBOR floors, with

2 unchanged sentences

The following tables

summarize the Company’s loans held at carrying value as of June 30, 2021 and December 31, 2020:

As of June 30, 2021

summarize the Company’s loans held at carrying value as of September 30, 2021 and December 31, 2020:

As of September 30, 2021

Principal (1)

Weighted Average

Remaining Life

3 unchanged sentences

Principal (1)

Weighted Average

Remaining Life

1 unchanged sentence

Total loans held at carrying value

The difference between the Carrying Value and the Outstanding Principal amount of the loans

consists of unaccreted original issue discount and loan origination costs.

Weighted average remaining life is calculated based on the carrying value of the loans as of June

30, 2021 and December 31, 2020.

The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted

original issue discount and loan origination costs.

Weighted average remaining life is calculated based on the carrying value of the loans as of September 30, 2021 and

December 31, 2020.

The following table

presents changes in loans held at carrying value as of and for the six months ended June 30, 2021:

presents changes in loans held at carrying value as of and for the nine months ended September 30, 2021:

Original Issue

2 unchanged sentences

Accretion of original issue discount

Total loans held at carrying value at June 30, 2021

Realized gain on sale of loans

Sale of loans

Total loans held at carrying value at September 30, 2021

A more detailed listing of the Company’s

loans held at carrying value portfolio based on information available as of June 30, 2021 is as follows:

loans held at carrying value portfolio based on information available as of September 30, 2021 is as follows:

Collateral Location

Principal (1)

Original Issue

Maturity Date (2)

of Public Co.

of Private Co.

OH, MA, MI, MD,

of Private Co.

Total loans held at carry value

Total loans held at carrying value

The difference between the Carrying Value and the Outstanding Principal amount of the loans

6 unchanged sentences

I/O = interest-only, P/I = principal and interest.

P/I loans may include interest only periods for a portion of the loan

P/I loans may include interest-only periods for a portion of the loan term .

C = Cultivation Facilities,

3 unchanged sentences

Base interest rate of 12.9 %.

Base interest rate of 13.0 % and PIK interest rate of 2.0 % .

Base interest rate of 12.0 %

plus LIBOR (LIBOR floor of 1.0 %) and PIK interest rate of 4.0 %.

Base interest rate of 13.0 % and PIK interest rate of 4.0 %.

Base interest rate of 13.0 %.

Base interest rate of 11.5 % plus LIBOR (LIBOR floor of 1.0 %)

and PIK interest rate of 1.8 %.

1 unchanged sentence

Base interest rate of 15.0 %.

plus LIBOR (LIBOR floor of 1 %) and PIK interest rate of 4 %.

interest rate of 13 % and PIK interest rate of 4 %.

interest rate of 13 %.

interest rate of 12 % plus LIBOR (LIBOR floor of 1 %) and PIK interest rate of 4 %.

interest rate of 9.8 %.

interest rate of 15 %.

Base interest rate

of 12.0 % plus LIBOR (LIBOR floor of 1.0 % )

Base interest rate of 12.0 % plus LIBOR (LIBOR floor of 1.0 %) and PIK

interest rate of 2.5 %.

Base interest rate of 12.0 %

plus LIBOR (LIBOR floor of 1.0 %) and PIK interest rate of 2.0 %.

LOAN RECEIVABLE AT CARRYING VALUE

As of June 30, 2021 and December 31, 2020,

As of September 30, 2021 and December 31,

2020, the Company’s portfolio included one loan receivable at carrying value.

The originated commitment under this loan was

approximately $ 4.0 million and outstanding principal was approximately $ 3.0 million and $ 3.4 million as of June 30, 2021 and December

31, 2020, respectively.

During the six months ended June 30, 2021, the Company received repayments of $ 337,741 of outstanding

approximately $ 4.0 million and outstanding principal was approximately $ 2.8 million and $ 3.4 million as of September 30, 2021 and

December 31, 2020, respectively.

During the nine months ended September 30, 2021, the Company received repayments of approximately $ 0.6

million of outstanding principal.

The following table presents changes in

loans receivable as of and for the six months ended June 30, 2021:

loans receivable as of and for the nine months ended September 30, 2021:

Original Issue

2 unchanged sentences

Accretion of original issue discount

Total loans receivable at carrying value at June 30 ,

Total loans receivable at carrying value at September 30 ,

CURRENT EXPECTED CREDIT LOSSES

19 unchanged sentences

economic implications of the COVID-19 pandemic and its financial impact on the Company are highly uncertain.

The CECL Reserve takes into consideration the macroeconomic impact of the COVID-19 pandemic on CRE properties and is not specific to

any loan losses or impairments on the Company’s loans held for investment.

As of June 30, 2021 and December 31, 2020,

The CECL Reserve takes into consideration the macroeconomic impact of the COVID-19 pandemic on commercial real estate properties and is

not specific to any loan losses or impairments on the Company’s loans held for investment.

As of September 30, 2021 and December 31,

2020, the Company’s CECL Reserve for its loans held at carrying value and loans receivable at carrying value is $ 1,837,895 and $ 465,397 , respectively, or 118 and 132 basis points, respectively, of the Company’s total loans held at carrying value and loans receivable at carrying value of $ 155,936,236 and $ 35,185,294 ,

6 unchanged sentences

Activity related to

the CECL Reserve for outstanding balances and unfunded commitments on the Company’s loans held at carrying value and loans receivable at carrying value as of and for the three and six months ended June 30, 2021 was as follows:

Outstanding (1)

Balance at March 31, 2021

Provision for current expected credit losses

Balance at June 30, 2021

Provision for current expected credit losses

Balance at September 30, 2021

Outstanding (1)

1 unchanged sentence

Provision for current expected credit losses

Balance at June 30, 2021

As of June 30, 2021 and December 31, 2020, the CECL Reserve related to outstanding balances on loans at

carrying value and loans receivable at carrying value is recorded within current expected credit loss reserve in the Company's balance sheets.

As of June 30, 2021 and December 31, 2020, the CECL Reserve related to unfunded commitments on loans

held at carrying value is recorded within other liabilities in the Company's balance sheets.

Balance at September 30, 2021

As of September 30, 2021 and December 31, 2020, the CECL Reserve related to outstanding balances on

loans at carrying value and loans receivable at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets.

As of September 30, 2021 and December 31, 2020, the CECL Reserve related to unfunded commitments on

loans held at carrying value is recorded within other liabilities in the Company’s consolidated balance sheets.

The Company continuously evaluates the credit quality of

9 unchanged sentences

well as taking into account future economic conditions.

As of June 30, 2021, the carrying value, excluding the CECL

Reserve, of the Company’s loans held at carrying value and loans receivable at carrying value within each risk rating by year of origination is as follows:

As of September 30, 2021, the carrying value, excluding the

CECL Reserve, of the Company’s loans held at carrying value and loans receivable at carrying value within each risk rating by year of origination is as follows:

INTEREST RECEIVABLE

The following table summarize the interest

receivable by the Company as of June 30, 2021 and December 31, 2020:

June 30, 2021

The following table summarizes the

interest receivable by the Company as of September 30, 2021 and December 31, 2020:

September 30, 2021

December 31, 2020

4 unchanged sentences

INTEREST RESERVE

At June 30, 2021 and December 31, 2020, the Company had four and one loans, respectively,

that included a loan funded interest reserve.

For the three and six months ended June 30, 2021, $ 620,621 and $ 702,887 , respectively, of interest income was earned and disbursed from the interest reserve.

At September 30, 2021 and December 31, 2020, the Company had

eight and one loans,

respectively, that included a loan funded interest reserve.

For the three and nine months ended September 30, 2021, approximately $ 1.8

million and $ 2.5 million, respectively, of interest income was earned and disbursed from the interest reserve.

The following table

presents changes in interest reserve as of and for the three and six months ended June 30, 2021:

Three months ended

June 30, 2021

Six months ended

June 30, 2021

presents changes in interest reserve as of and for the three and nine months ended September 30, 2021 and for the period from July 31, 2020 to September 30, 2020:

For the three

September 30, 2021

July 31, 2020 to

September 30, 2020

September 30, 2021

July 31, 2020 to

September 30, 2020

Beginning reserves

1 unchanged sentence

Ending reserves

Revolving Credit Facility

In July 2020, the Company obtained a secured revolving credit

loan (the “Revolving Loan”) from AFC Finance, LLC, an affiliate of the Company’s management.

The Revolving Loan had a loan commitment of $ 40,000,000

and had an interest rate of 8 % per annum, payable in cash in arrears.

The Company did not incur any fees or cost related to the

origination of the Revolving Loan and the Revolving Loan did not have any unused fees.

The maturity date of the Revolving Loan was the earlier of (i) July 31, 2021 and (ii) the date of the closing of any credit facility where the proceeds are incurred to refund, refinance or replace the Revolving Credit Agreement

(as defined below) with an aggregate principal amount equal to or greater than $ 50.0 million (any such financing, a “ Refinancing

Credit Facility ”) in accordance with terms of the credit agreement governing the Revolving Loan (the “Revolving Credit Agreement”) .

The Revolving Loan was secured by the assets of the Company.

On May 7, 2021, the Company amended the Revolving Credit Agreement from AFC Finance, LLC, an affiliate of

the Company’s management.

The amendment to the Revolving Credit Agreement increased the loan commitment from $ 40,000,000 to $ 50,000,000 , decreased the interest rate from 8 %

per annum to 6 % per annum, removed Gamma Lending Holdco LLC as a lender and extended the maturity date from July 31, 2021 to the earlier of (i) December 31, 2021

or (ii) the date of the closing of any Refinancing Credit Facility.

The Company did not incur any fees or cost related to the amendment of the Revolving Loan and the Revolving Loan does not have any unused fees.

For the three and six months

ended June 30, 2021, the Company has no t drawn on the Revolving Loan or incurred any fees or interest expense related to the

Revolving Loan.

loan (the “Revolving Credit Facility”) from AFC Finance, LLC, an affiliate of the Company’s management.

The Revolving Credit Facility had a loan commitment of $ 40,000,000 and had an interest rate of 8 % per annum, payable in cash in arrears.

The Company did

not incur any fees or cost related to the origination of the Revolving Credit Facility and the Revolving Credit Facility did not have any unused fees.

The maturity date of the Revolving Credit Facility was the earlier of (i) July 31, 2021 and (ii) the date of the closing of any credit facility where the proceeds are incurred to refund, refinance or replace the Revolving

Credit Agreement (as defined below) with an aggregate principal amount equal to or greater than $ 50.0 million (any such financing, a

“Refinancing Credit Facility”) in accordance with terms of the credit agreement governing the Revolving Credit Facility (the “Revolving Credit Agreement”).

The Revolving Credit Facility was secured by the assets of the Company.

On May 7, 2021, the

Company amended the Revolving Credit Agreement with AFC Finance, LLC (the “First Amendment”).

The First Amendment increased the loan commitment from $ 40,000,000

to $ 50,000,000 , decreased the interest rate from 8 % per annum to 6 % per annum, removed Gamma Lending Holdco LLC as a lender and extended the

maturity date from July 31, 2021 to the earlier of (i) December 31, 2021 or (ii) the date of the closing of any Refinancing Credit Facility.

On November 3, 2021, the Company entered into the Second Amendment to the Revolving Credit Agreement with AFC Finance, LLC (the “Second

Under the Second Amendment, payments to AFC Finance, LLC for interest, commitment fees and unused fees (net applicable taxes) are required to be paid directly or indirectly through AFC Finance, LLC to charitable organizations

designated by AFC Finance, LLC.

The Second Amendment (i) increased the loan commitment from $ 50,000,000 to $ 75,000,000 ;

(ii) decreased the interest rate from 6 % per annum to 4.75 % per annum;

(iii) introduced a one-time commitment fee of 0.25 %, to be paid in three

equal quarterly installments, and an unused line fee of 0.25 % per annum, to be paid quarterly in arrears;

(iv) provided an optional buyout provision for the holders of the Company’s 2027 Senior Notes (as defined above)

upon an event of default under the Revolving Credit Agreement;

(v) extended the fixed element of the maturity date from December 31, 2021

to September 30, 2022 and (vi) provided that a Refinancing Credit Facility (as defined below) may be any credit facility where

the proceeds are incurred to refund, refinance or replace the Revolving Credit Agreement.

Pursuant to the Second Amendment, the Company incurred a one-time commitment fee expense of $ 187,500 in November 2021, payable in three quarterly installments beginning in the first quarter of 2022, which will be amortized over the life of the loan.

For the three and nine

months ended September 30, 2021 and through November 3, 2021, the Company has no t drawn on the Revolving Credit Facility

or incurred any interest expense related to the Revolving Credit Facility.

2027 Senior Notes

On November 3, 2021, the Company issued $ 100 million in aggregate principal amount of senior unsecured notes due in 2027 (the “2027 Senior Notes”).

The 2027 Senior Notes accrue interest at a rate of 5.75 % per annum.

Interest on the 2027 Senior Notes is due semi-annually

on May 1 and November 1 of each year, beginning on May 1, 2022.

The net proceeds from the Offering were approximately $ 97 million , after deducting the initial purchasers' discounts and commissions and estimated offering fees and expenses payable by the Company.

The Company intends

to use the proceeds from the issuance of the 2027 Senior Notes (i) to fund loans related to unfunded commitments to existing borrowers, (ii) to originate and participate in commercial loans to companies operating in the cannabis industry that are consistent with our investment

strategy and (iii) for working capital and other general corporate purposes.

The terms of the 2027 Senior Notes are governed by an indenture, dated November 3, 2021, among us, as issuer, and TMI Trust Company, as trustee (the "Indenture").

Under the Indenture governing the 2027 Senior Notes, we are required to cause all of our existing and future subsidiaries to guarantee the 2027 Senior Notes, other than certain immaterial

subsidiaries as set forth in the Indenture.

The 2027 Senior Notes are currently not guaranteed by any of our subsidiaries.

The Indenture governing the 2027 Senior Notes contains customary terms and restrictions,

subject to a number of exceptions and qualifications, including restrictions on the Company’s ability to (1) incur additional indebtedness unless the Annual Debt Service Charge (as defined in the Indenture) is no less than 1.5 to 1.0, (2) incur or maintain total debt in an aggregate principal amount greater than 60 % of the Company’s consolidated Total Assets (as defined in the Indenture), (3) incur or maintain secured debt in an aggregate principal amount greater than 25 % of the Company’s consolidated Total Assets (as defined in the Indenture);

and (4) merge, consolidate or sell substantially all of the

Company’s assets.

On or after February 1, 2027, the Company may redeem the 2027 Senior Notes in whole or in part at a price equal to 100 %

of the principal amount of the notes being redeemed, plus a make-whole premium and accrued and unpaid interest thereon to, but excluding, the applicable redemption date.

COMMITMENTS AND CONTINGENCIES

As of June 30, 2021 and

December 31, 2020, the Company had the following commitments to fund various senior term loans, equipment loans and bridge loans.

As of June 30, 2021

As of December 31, 2020

As of September 30, 2021 and December 31, 2020, the Company had the following

commitments to fund various senior term loans, equipment loans and bridge loans:

September 30, 2021

December 31, 2020

Total original loan commitments

2 unchanged sentences

Total undrawn commitments

The Company from time

to time may be a party to litigation in the normal course of business.

As of June 30, 2021, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

The Company from time to

time may be a party to litigation in the normal course of business.

As of September 30, 2021, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

The Company provides

loans to established companies operating in the cannabis industry which involves significant risks, including the risk of strict enforcement against the Company’s borrowers of the federal illegality of cannabis, the Company’s borrowers’ inability to renew or otherwise maintain

their licenses or other requisite authorizations for their cannabis operations, and such loans lack of

liquidity, and the Company could lose all or part of any of the Company’s loans .

The Company’s ability

to grow or maintain our business depends on state laws pertaining to the cannabis industry.

renew or otherwise maintain their licenses or other requisite authorizations for their cannabis operations, and such loans lack of liquidity, and the Company could lose all or part of any of the Company’s loans.

The Company’s ability to

grow or maintain our business depends on state laws pertaining to the cannabis industry.

New laws that are adverse to the Company’s borrowers may be enacted, and current favorable state or national laws or enforcement guidelines relating to

6 unchanged sentences

Series A Preferred Stock

As of June 30, 2021 and December 31, 2020, the Company has authorized 10,000 preferred shares and issued 125

of the preferred shares designated as 12.0 % Series A Cumulative Non-Voting Preferred Stock, par value $ 0.01 per share (the “Series A Preferred Stock”).

As of September 30, 2021 and December 31, 2020, the Company has

authorized 10,000 preferred shares and issued 125 of the preferred shares designated as 12.0 %

Series A Cumulative Non-Voting Preferred Stock, par value $ 0.01 per share (the “Series A Preferred Stock”).

The Series A Preferred Stock entitles the holders thereof to receive

cumulative cash dividends at a rate per annum of 12.0 % of the liquidation preference of $ 1,000 per share plus all accumulated and unpaid dividends thereon.

The Company generally may not declare or pay, or set apart for payment,

any dividend or other distribution on any shares of the Company’s stock ranking junior to the Series A Preferred Stock as to dividends, including the Company’s common stock, or redeem, repurchase or otherwise make payments on any such

shares, unless full, cumulative dividends on all outstanding shares of Series A Preferred Stock have been declared and paid or set apart for payment for all past dividend periods.

The holders of the Series A Preferred Stock generally have

no voting rights except in limited circumstances, including certain amendments to the Company’s charter and the authorization or issuance of equity securities senior to or on parity with the Series A Preferred Stock.

Preferred Stock is not convertible into shares of any other class or series of our stock.

The Series A Preferred Stock is senior to all other classes and series of shares of the Company’s stock as to dividend and redemption rights and

rights upon the Company’s liquidation, dissolution and winding up.

The Company generally may not declare or pay, or set apart for

payment, any dividend or other distribution on any shares of the Company’s stock ranking junior to the Series A Preferred Stock as to dividends, including the Company’s common stock, or redeem, repurchase or otherwise make payments on

any such shares, unless full, cumulative dividends on all outstanding shares of Series A Preferred Stock have been declared and paid or set apart for payment for all past dividend periods.

The holders of the Series A Preferred Stock

generally have no voting rights except in limited circumstances, including certain amendments to the Company’s charter and the authorization or issuance of equity securities senior to or on parity with the Series A Preferred Stock.

Series A Preferred Stock is not convertible into shares of any other class or series of our stock.

The Series A Preferred Stock is senior to all other classes and series of shares of the Company’s stock as to dividend and redemption

rights and rights upon the Company’s liquidation, dissolution and winding up.

Upon written notice to each record holder of the Series A Preferred

4 unchanged sentences

The Board of Directors of the Company (the “Board”) approved a seven -for-one stock split of the Company’s common stock effective on January 25, 2021.

All common shares, stock options, and per share information

presented in the financial statements have been adjusted to reflect the stock split on a retroactive basis for all periods presented, including reclassifying an amount equal to the increase in par value of common stock from additional paid-in

All common shares, stock options, and per share

information presented in the consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis for all periods presented, including reclassifying an amount equal to the increase in par value of common

stock from additional paid-in capital.

There was no change in the par value of the Company’s common stock.

Upon consummation of the Company’s IPO, any stockholder that held fractional shares received cash in lieu of such fractional shares based on the public offering

price of the shares of the Company’s common stock at IPO.

This resulted in the reduction of 15 shares issued and outstanding.

Upon consummation of the Company’s IPO, any stockholder that held fractional shares received cash in lieu of such fractional shares

based on the public offering price of the shares of the Company’s common stock at IPO.

This resulted in the reduction of 15

shares issued and outstanding.

On March 23, 2021, the Company completed its IPO of 6,250,000 shares of its common stock at a price of $ 19.00 per share, raising $ 118,750,000 in gross proceeds.

underwriters also exercised their over-allotment option to purchase up to an additional 937,500 shares of the Company’s common

stock at a price of $ 19.00 per share, which was completed on March 26, 2021, raising $ 17,812,500 in additional gross proceeds.

The underwriting commissions of $ 8,312,500 and $ 1,246,875 , respectively, are reflected as a reduction

of additional paid-in capital on the statement of stockholders’ equity.

The Company incurred approximately $ 3,093,836 of

expenses in connection with the IPO, which is reflected as a reduction in additional paid-in capital.

The underwriters also exercised

their over-allotment option to purchase up to an additional 937,500 shares of the Company’s common stock at a price of $ 19.00 per share, which was completed on March 26, 2021, raising $ 17,812,500 in additional gross proceeds.

The underwriting commissions of $ 8,312,500 and $ 1,246,875 , respectively, are reflected as a reduction of additional paid-in

capital on the consolidated statements of stockholders’ equity.

The Company incurred approximately $ 3,093,836 of expenses in

connection with the IPO, which is reflected as a reduction in additional paid-in capital.

The net proceeds to the Company totaled approximately $ 123,909,289 .

On June 28, 2021, the Company completed an offering of 2,750,000 shares of its common stock at a price of $ 20.50

per share, raising $ 56,375,000 in gross proceeds.

The underwriting commissions of $ 3,100,625 are reflected as a reduction of additional paid-in capital on the statement of stockholders’ equity.

The Company incurred approximately $ 701,989 of expenses in connection with the offering, which is reflected as a reduction in additional paid-in capital.

The net proceeds to

the Company totaled approximately $ 52,572,386 .

to the period ended June 30, 2021, the underwriters partially exercised their

over-allotment option to purchase 269,650 shares of the Company’s common stock at a price of $ 20.50 per share, which was completed on July 6, 2021, raising $ 5,527,825 in additional gross proceeds or $ 5,223,795 in net

proceeds after underwriting commissions of $ 304,030 , which is reflected as a reduction of additional paid-in capital on the

statement of stockholders’ equity.

The Company intends to use the net proceeds of the IPO and

additional offering (i) to fund loans related to unfunded commitments to existing borrowers, (ii) to originate and participate in commercial loans to companies operating in the cannabis industry that are consistent with the Company’s

investment strategy and (iii) for working capital and other general corporate purposes.

Until appropriate investments can be identified, the Company may invest this balance in interest-bearing short-term investments, including money

market accounts or funds, commercial mortgage-backed securities and corporate bonds, which are consistent with the Company’s intention to qualify as a REIT and to maintain our exclusion from registration under the Investment Company Act

of 1940, as amended.

28, 2021, the Company completed an offering of 2,750,000 shares of its common stock at a price of $ 20.50 per share, raising $ 56,375,000 in gross proceeds.

The underwriting commissions of

$ 3,100,625 are reflected as a reduction of additional paid-in capital on the consolidated statements of stockholders’

The Company incurred approximately $ 701,989 of expenses in connection with the offering, which is reflected as a

reduction in additional paid-in capital.

The net proceeds to the Company totaled approximately $ 52,572,386 .

6, 2021, the underwriters partially exercised their over-allotment option to

purchase 269,650 shares of the Company’s common stock at a price of $ 20.50 per share raising $ 5,527,825 in additional

gross proceeds or $ 5,223,795 in net proceeds after underwriting commissions of $ 304,030 , which is reflected as a reduction of additional paid-in capital on the consolidated statements of stockholders’ equity.

Equity Incentive Plan

1 unchanged sentence

The Company’s Board authorized the adoption of the Plan (as amended, the “2020 Plan”) and approved stock option grants of 1,632,632

shares of common stock as of June 30, 2021.

The Board or one or more committees appointed by the Board administers the 2020 Plan.

The 2020 Plan authorizes stock options, stock appreciation rights, restricted stock, stock bonuses, stock units

and other forms of awards granted or denominated in the Company’s common stock or units of common stock.

shares of common stock and 56,285 shares of restricted stock as of September 30, 2021.

The Board or one or more committees

appointed by the Board administers the 2020 Plan.

The 2020 Plan authorizes stock options, stock appreciation rights, restricted stock, stock bonuses, stock units and other forms of awards granted or denominated in the Company’s common stock

or units of common stock.

The 2020 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances.

may be structured to be paid or settled in cash.

The Company currently intends to grant stock options to participants in the 2020 Plan, but it may also grant any other type of award available under the 2020 Plan in the future.

eligible to receive awards under the 2020 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company, employees of the Manager and certain directors and consultants and other service providers to

the Company or any of its subsidiaries.

As of June 30, 2021, the maximum number of shares of the Company common stock that may be delivered pursuant to awards under the 2020 Plan (the “Share Limit”) equals 2,375,000 shares, which is an increase of 275,000 shares compared to

March 31, 2021 under the evergreen provision in the 2020 Plan in connection with the public offering of common stock by the Company in June 2021.

Subsequent to the period ended June 30, 2021, the Company issued an additional 269,650 shares of common stock to the underwriters in connection with their partial exercise of an over-allotment option, which increased the

Share Limit of the 2020 Plan by 26,965 under the evergreen provision in the 2020 Plan, for a total maximum Share Limit of 2,401,965 .

Shares that are subject to or underlie awards that expire or for any reason are cancelled or terminated, are forfeited, fail to vest,

or for any other reason are not paid or delivered under the 2020 Plan will not be counted against the Share Limit and will again be available for subsequent awards under the 2020 Plan.

Shares that are exchanged by a participant or withheld

by the Company as full or partial payment in connection with any award granted under the 2020 Plan, as well as any shares exchanged by a participant or withheld by us to satisfy tax withholding obligations related to any award granted under

the 2020 Plan, will not be counted against the Share Limit and will again be available for subsequent awards under the 2020 Plan.

To the extent that an award is settled in cash or a form other than shares, the shares that would have been

delivered had there been no such cash or other settlement will not be counted against the Share Limit and will again be available for subsequent awards under the 2020 Plan.

Any award may be structured to be paid or settled in cash.

The Company has, and

currently intends to continue to grant stock options to participants in the 2020 Plan, but it may also grant any other type of award available under the 2020 Plan in the future.

Persons eligible to receive awards under the 2020 Plan include

officers or employees of the Company or any of its subsidiaries, directors of the Company, employees of the Manager and certain directors and consultants and other service providers to the Company or any of its subsidiaries.

As of September 30, 2021, the maximum number of shares of the Company common stock that may be delivered pursuant to awards under the 2020 Plan (the “Share Limit”) equals 2,401,965 shares, which is an increase of 26,965

shares compared to June 30, 2021 under the evergreen provision in the 2020 Plan in connection with the issuance of an additional 269,650

shares of common stock to the underwriters in connection with their partial exercise of an over-allotment option in July 2021.

Shares that are subject to or underlie awards that expire or for any reason are cancelled or terminated, are

forfeited, fail to vest, or for any other reason are not paid or delivered under the 2020 Plan will not be counted against the Share Limit and will again be available for subsequent awards under the 2020 Plan.

Shares that are exchanged by

a participant or withheld by the Company as full or partial payment in connection with any award granted under the 2020 Plan, as well as any shares exchanged by a participant or withheld by us to satisfy tax withholding obligations

related to any award granted under the 2020 Plan, will not be counted against the Share Limit and will again be available for subsequent awards under the 2020 Plan.

To the extent that an award is settled in cash or a form other than

shares, the shares that would have been delivered had there been no such cash or other settlement will not be counted against the Share Limit and will again be available for subsequent awards under the 2020 Plan.

The exercise price of any options granted under the

1 unchanged sentence

provided, however, the exercise price will be at least equal to the market price of the underlying shares on the grant date.

The options granted under the 2020 Plan have an ordinary term of up

to ten years .

The options granted under the 2020 Plan have an ordinary term of

up to 10 years.

An option may either be an incentive stock option or a nonqualified stock option.

2 unchanged sentences

The following table summarizes the (i) non-vested

options granted, (ii) vested options granted and (iii) forfeited options granted for the Company’s directors and officers and employees of the Manager as of June 30, 2021 and December 31, 2020:

June 30, 2021

options granted, (ii) vested options granted and (iii) forfeited options granted for the Company’s directors and officers and employees of the Manager as of September 30, 2021 and December 31, 2020:

September 30, 2021

December 31, 2020

The Company uses the Black-Scholes option pricing model

to value stock options in determining the share-based compensation expense.

The following table summarizes the (i) non-vested

restricted stock granted, (ii) vested restricted stock granted and (iii) forfeited restricted stock granted for the Company’s directors and officers and employees of the Manager as of September 30, 2021 and December 31, 2020:

September 30, 2021

December 31, 2020

The Company uses the Black-Scholes option pricing

model to value stock options in determining the share-based compensation expense.

Forfeitures are recognized as they occur.

1 unchanged sentence

Treasury yield curve in effect at the date of grant.

The expected dividend

yield was based on the Company’s expected dividend yield at grant date.

dividend yield was based on the Company’s expected dividend yield at grant date.

Expected volatility is based on the estimated average volatility of similar companies due to the lack of historical volatilities of the Company’s common stock.

share-based compensation expense for the Company was approximately $ 11,457 and $ 1,610,572 for the three and six months ended June 30, 2021, respectively.

Restricted stock grant expense is based on the Company’s stock price at the time of the grant and amortized over the vesting period.

The share-based compensation expense for the Company was approximately $ 51,429 and $ 1,662,001 for the

three and nine months ended September 30, 2021, respectively, and no expense was booked during the period from July 31, 2020 to

September 30, 2020.

The following table presents the assumptions used in

4 unchanged sentences

Expected forfeiture rate

The following tables summarizes stock option activity

during the three and six months ended June 30, 2021:

The following tables summarize stock option activity during the three and nine months ended September 30, 2021 and for

the period from July 31, 2020 to September 30, 2020:

Three months ended

June 30, 2021

September 30, 2021

Weighted-Average

1 unchanged sentence

Value Per Option

Balance as of March 31, 2021

Balance as of June 30, 2021

Six months ended

June 30, 2021

Balance as of September 30 , 2021

July 31, 2020 to

September 30, 2020

Weighted-Average

1 unchanged sentence

Value Per Option

Balance as of July 31, 2020

Balance as of September 30 , 2020

Nine months ended

September 30, 2021

Weighted-Average

Grant Date Fair

Value Per Option

Balance as of December 31, 2020

Balance as of June 30, 2021

Balance as of September 30, 2021

EARNINGS PER SHARE

T he following information sets forth the computations of basic weighted average earnings per common share for the three and six months ended June 30, 2021:

Three months ended

June 30, 2021

Six months ended

June 30, 2021

Net income / (loss) attributable to common stockholders

The following

information sets forth the computations of basic weighted average earnings per common share for the three and nine months ended September 30, 2021 and for the period from July 31, 2020 to September 30, 2020:

For the three

September 30, 2021

July 31, 2020 to

September 30, 2020

September 30, 2021

July 31, 2020 to

September 30 , 2020

Net income attributable to common stockholders

Basic weighted average shares of common stock outstanding

3 unchanged sentences

The income tax provision for the Company

was $ 0 for the six months ended June 30, 2021.

For the three and six months ended June

30, 2021, the Company incurred no expense for United States federal excise tax.

was $ 0 for the nine months ended September 30, 2021.

For the three and nine months ended

September 30, 2021, the Company incurred no expense for United States federal excise tax.

Excise tax represents a 4 % tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the period.

14 unchanged sentences

The following tables

summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of June 30, 2021 and December 31, 2020.

summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of September 30, 2021 and December 31, 2020.

The tables are not intended to be all-inclusive, but instead capture the significant

unobservable inputs relevant to the Company’s determination of fair values.

As of June 30, 2021

As of September 30, 2021

Unobservable Input

16 unchanged sentences

Generally, an increase in market yields may result in a decrease in the fair value of certain of the Company’s loans.

Due to the inherent uncertainty of determining the fair value of loans that do not have a readily available market value, the fair value of the Company’s loans may fluctuate from period to period.

Additionally, the fair value of the Company’s loans

may differ significantly from the values that would have been used had a ready market existed for such loans and may differ materially from the values that the Company may ultimately realize.

Further, such loans are generally subject to legal and

other restrictions on resale or otherwise are less liquid than publicly traded securities.

If the Company was required to liquidate a loan in a forced or liquidation sale, it could realize significantly less than the value at which the Company has

Due to the inherent uncertainty of

determining the fair value of loans that do not have a readily available market value, the fair value of the Company’s loans may fluctuate from period to period.

Additionally, the fair value of the Company’s loans may differ significantly from

the values that would have been used had a ready market existed for such loans and may differ materially from the values that the Company may ultimately realize.

Further, such loans are generally subject to legal and other restrictions on resale

or otherwise are less liquid than publicly traded securities.

If the Company was required to liquidate a loan in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it.

In addition, changes

1 unchanged sentence

The following tables present fair value measurements of

loans held at fair value as of June 30, 2021 and December 31, 2020:

Fair Value Measurement Using as of June 30, 2021

loans held at fair value as of September 30, 2021 and December 31, 2020:

Fair Value Measurement Using as of September 30, 2021

Loans held at fair value

2 unchanged sentences

The following table presents changes in

loans that use Level 3 inputs as of and for the six months ended June 30, 2021:

Six months ended

June 30, 2021

loans that use Level 3 inputs as of and for the nine months ended September 30, 2021:

September 30, 2021

Total loans using Level 3 inputs at December 31 , 2020

5 unchanged sentences

Accretion of original issue discount

Total loans using Level 3 inputs at June 30 , 2021

Total loans using Level 3 inputs at September 30 , 2021

Fair Value of

4 unchanged sentences

financial instruments not recognized at fair value in the balance sheet:

As of June 30, 2021

As of September 30, 2021

Financial assets

22 unchanged sentences

majority of the independent directors.

The Incentive Compensation for the three and six months ended June 30, 2021 was approximately $ 1,442,047

The Incentive Compensation for the three and nine months ended September 30, 2021 was approximately $ 1,769,207

and $ 3,873,984 , respectively.

For the period from July 31, 2020 to September 30, 2020, the Manager agreed to waive the incentive

compensation.

The Company shall pay all of its costs and expenses and shall reimburse the

1 unchanged sentence

The following table summarizes the related party costs incurred by the Company

for the three and six months ended June 30, 2021:

Three months ended

June 30, 2021

Six months ended

June 30, 2021

for the three and nine months ended September 30, 2021 and for the period from July 31, 2020 to September 30, 2020:

For the three

September 30, 2021

July 31, 2020 to

September 30, 2020

September 30, 2021

July 31, 2020 to

September 30, 2020

Affiliate Costs

Management fees

Less other fees earned

Less Outside Fees earned

Incentive fees earned

General and administrative expenses reimbursable to Manager

Amounts payable to the Company’s Manager as of June 30, 2021 and December 31,

Amounts payable to the Company’s Manager as of September 30, 2021 and December

31, 2020 were $ 3,389,646 and $ 728,298 ,

respectively.

Due to Affiliate

Amounts due to an affiliate of the Company as of September 30, 2021 and

December 31, 2020 were $ 9,550,625 and $ 0 ,

respectively.

The amount due to the affiliate, AFC Management, is related to the funding of the loan to Subsidiary of Private Co.

G and was subsequently paid to AFC Management on October 1, 2021.

Investments in Loans

4 unchanged sentences

As such, the Company’s risk is limited to the carrying value of its investment in any such loan.

As of and for the six months ended June 30, 2021,

there were no co-investments held by the Company.

As of September 30, 2021, there were three co-invested loans held by the Company and an affiliate of the Company.

In connection

1 unchanged sentence

The Company may sell the Assigned Right, and the sale may be to an affiliate of the

For the three and six months ended June 30, 2021, the Company sold

approximately $ 1,104,914 and $ 2,313,130 ,

respectively, of Assigned Rights to an affiliate which are accounted for as additional original issue discount and accreted over the life of the loans.

Secured Revolving Credit From Affiliate

The Company has the Revolving Loan from AFC Finance, LLC, an affiliate of the

Company’s management.

Refer to footnote 9 to our unaudited financial statements for more information.

During the three months ended September 30, 2021, the Company neither received no r sold any Assigned Right.

For the nine months ended September 30, 2021, t he Company sold

approximately $ 2.3 million of Assigned Rights to an affiliate which are accounted for as additional original issue discount and

accreted over the life of the loans.

For the period from July 31, 2020 to September 30, 2020, the Company did not have any Assigned Rights which were assigned or sold.

Secured Revolving Credit Facility From Affiliate

The Company has the Revolving Credit Facility from AFC Finance, LLC, an

affiliate of the Company.

Refer to Note 9 to our unaudited consolidated financial statements for more information.

DIVIDENDS AND DISTRIBUTIONS

The following table

summarizes the Company’s dividends declared and paid during the six months ended June 30, 2021:

summarizes the Company’s dividends declared during the nine months ended September 30, 2021:

Regular cash dividend

Total cash dividend

SUBSEQUENT EVENTS

The Company has evaluated subsequent

events through the date the financial statements were available to be issued.

There were no material subsequent events, other than that described below, that required disclosure in these financial statements.

Subsequent to quarter end, the underwriters partially

exercised their over-allotment option under the Company’s follow-on public offering to purchase 269,650 shares of the Company’s common stock at a price of $ 20.50 per share, which was completed on July 6, 2021.

Refer to footnote 11 to our unaudited financial statements for more information.

In July 2021, the Company entered into a commitment to fund

a $ 19.75 million senior secured term loan which is contingent on the borrower raising additional equity as required by the loan

Until the borrower meets the required criteria in the loan agreement, the commitment has a ticking fee based on the aggregate commitment amount as follows:

(a) 6.0 % from the date of closing through July 26, 2021 and (b) 6.5 %

from and after July 27, 2021 through August 9, 2021 or the initial funding date, whichever is earlier.

Once funded, the loan will have a per annum interest rate of 12.0 % plus LIBOR with a LIBOR floor of 1.0 %.

The loan will have a maturity date of August 3, 2026 , an unused fee of 3.0 %,

an exit fee of 3.0 %, OID of 4.0 %

and an interest reserve of $ 0.75 million.

In July 2021,

Private Company I refinanced their bridge loan which had a maturity date of July 9, 2021 which had an interest rate of 13.0 % and OID of 4.0 %.

senior secured loan of $ 15.5 million was syndicated by the Company’s Manager between the Company and A BDC Warehouse, LLC (“ABW”), an

affiliate of the Company that is wholly-owned by Mr.

Tannenbaum, with ABW holding approximately one-third of the principal amount .

The Company committed and funded approximately $ 10.1 million of the new loan which has a per annum interest rate of 12.0 % plus LIBOR, with a LIBOR

floor of 1.0 %, and PIK interest rate of 2.5 %.

The loan has a maturity date of August 1, 2026 , an exit fee of 3.0 % and OID of 4.0 %.

As part of the

refinancing agreement, the exit fee on the bridge loan was waived and the borrower was credited for a portion of the original OID on the bridge loan.

In July 2021, the Company entered into a commitment to

fund a $ 3.0 million bridge loan and funded $ 3.0 million at closing.

The loan has an interest rate of 13.0 %, a maturity date of August 31, 2021 , an exit fee of 10.0 %

which is reduced to 2.0 % upon refinancing the loan with a senior secured loan with the Company, and OID of 4.0 %.

In July 2021, Flower Loan Holdco, LLC, an affiliated entity in which Mr.

Tannenbaum is the majority ultimate beneficial owner (“FLH”),

purchased approximately $ 8.5 million of the senior secured credit facility with Private Company A from a third-party lender, and

the Company has a 30 -day option to purchase such amount from FLH.

The Company and the Company’s Manager, as agent, subsequently

amended and restated the senior secured credit facility with Private Company A to, among other things, increase the loan amount by $ 10.0

million, which the agent syndicated to ABW.

The amendment also allows for the borrower to draw up to an additional $ 20 million from

a designee of the agent, subject to the agent’s satisfaction that certain conditions have been met.

Separately, FLH entered into a new credit facility with Private Company A under which the borrower may draw up to $ 40.0 million (the “Bridge Loan”), which is secured by collateral separate from collateral securing the Company’s credit facility.

In connection

with the Bridge Loan and a related equity raise by Private Company A (the “Equity Raise”), the Manager or its designees are entitled to (i) appoint three of the seven members of Private Company A’s board of directors and (ii) receive a number

of warrants to purchase common stock of Private Company A.

In connection with the Equity Raise, an investment vehicle controlled by Jonathan Kalikow, one of the Company’s directors and executive officers, acquired approximately 8.8 % of the equity interest of Private Company A on a fully-diluted basis.

Following the transactions described above, Mr.

Kalikow beneficially

held or controlled through investment vehicles a total of approximately 10.1 % of Private Company A’s equity interest on a

fully-diluted basis.

As of the date of these transactions, Mr.

Tannenbaum beneficially held approximately 16.7 % of Private Company

A’s equity interest on a fully-diluted basis through investment vehicles, which amount reflects two acquisitions of additional equity of Private Company A from third-party stockholders during the three months ended June 30, 2021.

the transactions described above, Mr.

Tannenbaum beneficially held approximately 21.8 % of Private Company A’s equity interest on a

fully-diluted basis through investment vehicles.

Tannenbaum’s equity ownership, each of the transactions with Private Company A described above were reviewed and approved by the Company’s Audit & Valuation Committee of the Board

in accordance with the Company’s Amended and Restated Code of Business Conduct and Ethics and its Related-Persons Transaction Policy.

The Company has evaluated subsequent events through the date the financial statements were available to be issued.

There were no material subsequent events, other than those described below, that required disclosure in these financial statements.

Subsequent to the end of the third quarter, the Company closed one loan, had new commitments of $ 50.0 million, and funded

approximately $ 52.3 million of principal.

In October 2021, the Company sold its investment in the loan to Public Company E to a third party in a private

The Company received approximately $ 5.1 million in net proceeds from the sale.

In October 2021, the Company entered into an additional

commitment for a $ 50 million senior term loan with Public Company F, as part of a $ 120 million third tranche under Public Company F’s senior secured credit facility and funded $ 50.0 million of principal less OID of $ 1.2 million for net

funding of $ 48.8 million at closing.

Following the expansion, the Company’s total loan commitments to Public Company F increased to an aggregate principal amount of $ 60 million, including $ 10 million of the second tranche

funded in May 2021.

On November 3, 2021, the Company issued the 2027 Senior Notes .

The 2027 Senior Notes accrue interest at a rate of 5.75 % per annum.

Interest on the 2027 Senior Notes is due semi-annually on May 1 and November 1 of

each year, beginning on May 1, 2022.

The net proceeds from the Offering were approximately $ 97 million, after deducting the initial

purchasers' discounts and commissions and estimated offering fees and expenses payable by the Company.

The Company intends to use the net proceeds from the issuance of the 2027 Senior Notes to (i) fund loans related to unfunded commitments to

existing borrowers, (ii) to originate and participate in commercial loans to companies operating in the cannabis industry that are consistent with our investment strategy and (iii) for working capital and other general corporate purposes.

terms of the 2027 Senior Notes are governed by the Indenture.

Under the Indenture governing the 2027 Senior Notes, we are required to cause all of our existing and future subsidiaries to guarantee the 2027 Senior Notes, other than certain

immaterial subsidiaries as set forth in the Indenture.

The 2027 Senior Notes are currently not guaranteed by any of our subsidiaries.

The Indenture

governing the 2027 Senior Notes contains customary terms and restrictions, subject to a number of exceptions and qualifications, including restrictions on the Company’s ability to (1) incur additional indebtedness unless the Annual Debt Service

Charge (as defined in the Indenture) is no less than 1.5 to 1.0, (2) incur or maintain total debt in an aggregate principal amount

greater than 60 % of the Company’s consolidated Total Assets (as defined in the Indenture), (3) incur or maintain secured debt in an

aggregate principal amount greater than 25 % of the Company’s consolidated Total Assets (as defined in the Indenture);

and (4) merge,

consolidate or sell substantially all of the Company’s assets.

On or after February 1, the Company may redeem the 2027 Senior Notes in whole or in part at a price equal to 100 % of the principal amount of the notes being redeemed, plus a make-whole premium and accrued and unpaid interest thereon to, but excluding, the applicable redemption date.

On November 3, 2021, the Company entered

into the Second Amendment to the Revolving Credit Agreement with AFC Finance, LLC.

Under the Second Amendment, the terms of the Revolving Credit Facility were amended to, among other things:

(i) decrease the interest rate to 4.75 % per annum;

(ii) extend the maturity date to the earlier of September 30, 2022 and the closing date of any credit facility where the proceeds are incurred to refund, refinance or replace such Revolving Credit Agreement;

(iii) add an unused fee of 0.25 % per annum on the undrawn amount of the revolving loan commitments;

(iv) add a one-time commitment fee of 0.25 % of the total revolving loan commitments, payable in three

quarterly installments, beginning in the first quarter of 2022;

(v) increase the aggregate revolving credit commitments to $ 75.0 million;

(vi) provided an optional buyout provision for the holders of the Company’s 2027 Senior Notes upon certain events of default under the

Revolving Credit Agreement;

and (vii) require all payments of interest, the commitment fee and unused fee to be paid, directly or indirectly, to a charitable organization to be designated by AFC Finance, LLC in its sole discretion, net of any

See Note 9 to the Company’s consolidated financial statements in this quarterly report for more information.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements