What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-04 compared with 2021-08-05 · 527 added, 489 removed, 186 unchanged (85% of the section changed)

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Statement Regarding Forward-Looking Information

Some of the statements contained in this quarterly report constitute forward-looking statements, within the meaning of the Private

Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend such statements to be covered by the safe harbor provisions contained therein.

The information

contained in this section should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q.

This description contains forward-looking statements that involve risks and

uncertainties.

Actual results could differ significantly from the results discussed in the forward-looking statements due to the factors set forth in “Risk Factors” in our 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”).

In addition, some of the statements in this quarterly report

(including in the following discussion) constitute forward-looking statements, which relate to future events or the future performance or financial condition of AFC Gamma, Inc.

Some of the statements contained in this quarterly report constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and

Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend such statements to be covered by the safe harbor provisions contained therein.

Forward-looking statements relate to future events or the future

performance or financial condition of AFC Gamma, Inc.

(“AFCG” and the “Company,” “we,” “us” and “our”).

The forward-looking

statements contained in this report involve a number of risks and uncertainties, including statements concerning:

use of proceeds of the IPO and our follow-on public offering;

The information contained in this section should be read in conjunction with our consolidated financial statements and notes thereto appearing

elsewhere in this quarterly report on Form 10-Q.

This description contains forward-looking statements that involve risks and uncertainties.

Actual results could differ significantly from the results discussed in the forward-looking statements due

to the factors set forth in this quarterly report and in “Risk Factors” in our 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”) and in Part II, Item 1A of this quarterly report on Form 10-Q, as such risks may by updated, amended or superseded from time to time by subsequent reports we file

with the SEC.

The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:

use of proceeds of the initial public offering (“IPO”), our follow-on public offering and our 2027 Senior Notes offering;

our business and investment strategy;

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illegal under federal law;

the state of the United States, European Union and Asian economies generally or in specific geographic regions;

the state of the United States, or specific regional economies generally;

the estimated growth in and evolving market dynamics of the cannabis market;

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market trends in our industry, interest rates, real estate values, the securities markets or the general economy.

We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions to identify forward-looking statements, although not all forward-looking

statements include these words.

Our actual results and financial condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and the other

information included in our Final Prospectus and elsewhere in this quarterly report on Form 10-Q.

We have based the forward-looking statements included in this quarterly report on information available to us on the date of this quarterly report, and we assume no obligation to update any such

forward-looking statements.

Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we

may make directly to you or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, registration statements on Form S-11, quarterly reports on Form 10-Q and current reports on Form 8-K.

forward-looking statements include these words.

and the other information included in our Final Prospectus and elsewhere in this quarterly report on Form 10-Q.

We have based the forward-looking statements included in this quarterly report on information available to us on the date of this

quarterly report, and we assume no obligation to update any such forward-looking statements.

Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or

otherwise, current and prospective investors are advised to consult any additional disclosures that we may make or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, registration

statements on Form S-11, quarterly reports on Form 10-Q and current reports on Form 8-K.

Available Information

We routinely post important information for investors on our website, www.afcgamma.com.

We intend to use this webpage as a means of disclosing material information, for complying with our

disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis.

AFCG encourages investors, analysts, the media and others interested in AFCG to monitor the Investors section of our

website, in addition to following our press releases, SEC filings, public conference calls, presentations, webcasts and other information we post from time to time on our website.

To sign-up for email-notifications, please visit the “Email Alerts”

section of our website under the “IR Resources” section and enter the required information to enable notifications.

We intend to use this webpage as a means of disclosing material information, for complying

with our disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis.

AFCG encourages investors, analysts, the media and others interested in AFCG to monitor the Investors

section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations, webcasts and other information we post from time to time on our website.

To sign-up for email-notifications, please visit the

“Email Alerts” section of our website under the “IR Resources” section and enter the required information to enable notifications.

AFC Gamma, Inc.

(the “Company” or “AFCG” or “we”) is a commercial real estate finance company founded in July 2020 by a veteran team of

investment professionals.

We originate, structure and underwrite senior secured loans and other types of loans for established cannabis industry operators in states that have legalized medicinal and/or adult use cannabis.

As states continue to

legalize cannabis for medical and adult use, an increasing number of companies operating in the cannabis industry need financing.

Due to the capital constrained cannabis market which does not typically have access to traditional bank financing,

we believe we are well positioned to become a prudent financing source to established cannabis industry operators given our stringent underwriting criteria, size and scale of operations and institutional infrastructure.

Our objective is to

provide attractive risk-adjusted returns over time through cash distributions and capital appreciation by providing loans to state law compliant cannabis companies.

The loans we originate are primarily structured as senior loans secured by real

estate, equipment, licenses and/or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties.

Our targeted borrowers will sometimes be publicly traded on the Canadian Stock

Exchange and/or over-the-counter in the United States.

Our loans typically have up to a five-year maturity and contain amortization and/or cash flow sweeps.

From January 1, 2020 to June 30, 2021, members of our management team, provided by our

Manager, and the members of the Investment Committee of our Manager, who advises on our investments and operations, had sourced loans worth approximately $6.6 billion across the cannabis industry in various states while maintaining a robust

pipeline of potentially actionable opportunities.

is a commercial real estate finance company founded in July 2020 by a veteran team of investment professionals.

We originate, structure and underwrite senior

secured loans and other types of loans for established cannabis industry operators in states that have legalized medicinal and/or adult use cannabis.

As states continue to legalize cannabis for medical and adult use, an increasing number of

companies operating in the cannabis industry need financing.

Due to the capital constrained cannabis market which does not typically have access to traditional bank financing, we believe we are well positioned to become a prudent financing source

to established cannabis industry operators given our stringent underwriting criteria, size and scale of operations and institutional infrastructure.

Our objective is to provide attractive risk-adjusted returns over time through cash distributions

and capital appreciation by providing loans to state law compliant cannabis companies.

The loans we originate are primarily structured as senior loans secured by real estate, equipment, the value associated with licenses and/or other assets of the

loan parties to the extent permitted by applicable laws and the regulations governing such loan parties.

Our targeted borrowers will sometimes be publicly traded on the Canadian Stock Exchange and/or over-the-counter in the United States.

typically have up to a five-year maturity and contain amortization and/or cash flow sweeps.

From January 1, 2020 to September 30, 2021, members of our management team, provided by our Manager, and the members of the Investment Committee of our

Manager, who advises on our investments and operations, had sourced loans worth approximately $8.7 billion across the cannabis industry in various states while maintaining a robust pipeline of potentially actionable opportunities.

We are externally managed by our Manager, AFC Management, LLC, a Delaware limited liability company, pursuant to the terms of our Management Agreement.

We commenced operations on July 31, 2020 and completed our IPO in March 2021.

We are incorporated in Maryland and intend to elect and

qualify to be taxed as a real estate investment trust (“REIT”), commencing with our taxable year ended December 31, 2020.

We are incorporated in Maryland and have elected to be taxed as a REIT, commencing with our taxable

year ended December 31, 2020.

We generally will not be subject to U.S.

federal income taxes on our taxable income to the extent that we annually

distribute all or substantially all of our taxable income to stockholders and maintain our intended qualification as a REIT.

We also intend to operate our business in a manner that will permit us to maintain our exemption from registration under

the Investment Company Act of 1940, as amended (the “Investment Company Act”).

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting

requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act,

reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any

federal income taxes on our taxable income to the extent that we annually distribute all or substantially all of our taxable income to stockholders and maintain our intended

qualification as a REIT.

We also intend to operate our business in a manner that will permit us to maintain our exemption from registration under the 1940 Act.

Our wholly owned subsidiary, AFCG TRS1, LLC (“TRS”), was formed under the laws of the State of Delaware, and operates as a taxable REIT subsidiary.

TRS began operating in July

Our investment in the equipment loans to Public Company A is held by TRS which, as of September 30, 2021, constituted substantially all of the assets of TRS.

The financial statements of TRS have been consolidated within our consolidated

financial statements beginning with the quarter ended September 30, 2021.

On July 31, 2021, the equipment loan to Public Co.

A was transferred to the TRS.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and we are eligible to take advantage of certain exemptions from various

reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley

Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any

golden parachute payments not previously approved.

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will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more

We could remain an “emerging growth company” for up to five years from our initial public offering, or until the earliest of (i) the

last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur

if the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in

non-convertible debt during the preceding three year period.

Developments during the Second Quarter of 2021:

On June 28, 2021, we completed a public offering of 2,750,000 shares of our 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.

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

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

Subsequent to the period ended June 30, 2021, the underwriters partially exercised their over-allotment option to purchase 269,650 shares of our 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.

We intend to use the net proceeds of the 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 our investment strategy and (iii) for working capital and other general corporate purposes.

Until appropriate investments can be identified, we 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 our intention to qualify as a REIT and to maintain our exclusion from registration under the

Investment Company Act.

Updates to Our Loan Portfolio during the Second Quarter of 2021

In April 2021, Sub.

Of Public Co.

C repaid its loan in full.

The loan had an original maturity date of February 2025 and the outstanding principal on the date of repayment was approximately

We could remain an “emerging growth company” for up to five years from our initial public offering, or until the earliest of (i) the last day of the first fiscal year in which

our annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our common stock that

is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three

Developments during the Third Quarter of 2021:

On July 6, 2021, in connection with our June 28, 2021 public offering, the underwriters partially exercised their over-allotment option to purchase 269,650 shares of our 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

statement of stockholders’ equity.

Updates to Our Loan Portfolio during the Third Quarter of 2021

During the third quarter of 2021, we closed two new loans with aggregate commitments of approximately $42.8 million in principal amount, refinanced a bridge loan with a senior

secured term loan with a commitment of approximately $10.1 million in principal amount, amended two borrowers’ senior secured term loans to increase the commitment amounts by approximately $28.5 million and $43.4 million, respectively, for total

new loan commitments subsequent to June 30, 2021 of approximately $119.2 million.

We funded approximately $89.3 million of new and existing loan commitments and sold one loan commitment of $10.0 million in principal amount for net fundings of

approximately $79.3 million.

In July 2021, we entered into a commitment to fund a $19.75 million senior secured term loan to Private Company K contingent on the borrower raising additional equity as required

by the loan agreement.

Until the borrower met the required criteria for funding under the loan agreement, the commitment had a ticking fee based on the aggregate commitment amount as follows:

(a) 6.0% per annum from the date of closing through July

26, 2021 and (b) 6.5% per annum from and after July 27, 2021 through the initial funding date.

In August 2021, the borrower met the required criteria and we funded $7.0 million of the loan commitment.

The loan has a per annum interest rate of 12.0%

plus LIBOR with a LIBOR floor of 1.0%.

The loan has a maturity date of August 3, 2026, an unused line fee of 3.0%, an exit fee of 3.0%, OID of 4.0%, an annual agent fee of 0.75% of the total loan commitment amount, and an interest reserve of $0.75

In July 2021, we entered into a commitment to fund a $3.0 million bridge loan to Private Company J and funded $3.0 million at closing of such bridge loan.

The bridge loan had an

original interest rate of 13.0% per annum, an original maturity date of August 31, 2021, an agent fee of 1.0% of the principal amount of the bridge loan, an exit fee of 10.0% (which would be reduced to 2.0% upon refinancing with us), and original

In August 2021, we refinanced the bridge loan with a senior secured term loan pursuant to which we committed to fund $23.0 million and $18.0 million of which was funded on the closing date.

The refinancing senior secured term loan has

a per annum interest rate of LIBOR plus 12.0% with a LIBOR floor of 1.0% and PIK interest rate of 2.0% per annum.

The PIK interest rate will step down to 0.0% once certain criteria are met in accordance with the loan agreement.

The loans under the

refinancing senior secured term loan facility have a maturity date of September 1, 2025 and an agent fee of 1.0% of the total loan commitment amount payable on the closing date and 1.0% of the outstanding principal balance of the term loans payable

annually thereafter.

The loans also have an exit fee of 4.0% (which may be reduced to 2.0% once certain criteria are met as defined in the loan agreement (including the meeting of certain financial metrics)), OID of 4.0% and an interest reserve of

$1.5 million.

We received an exit fee of $750,000 and a prepayment premium of $750,000 upon repayment of the loan.

In April 2021, we entered into a commitment with Private Co.

F to fund a $13.0 million senior secured term loan and funded $5.25

million at closing, including a $925,000 interest reserve.

The loan has an interest rate of 13.0% and PIK interest rate of 4.0% with a step down to a rate of 2.0% once certain criteria are met as defined in the loan agreement.

The loan has a

maturity date of May 2026, an unused fee of 3.0%, an exit fee of 15.0% and OID of 15.5%.

The borrower is a medical cannabis operator in Missouri.

The real estate collateral for this senior term loan includes the borrower’s cultivation and two

dispensary facilities in Missouri.

In April 2021, we entered into a commitment with Public Co.

E to fund a $15 million senior secured term loan and funded $15 million at

The loan has an interest rate of 13.0%.

The loan has a maturity date of April 2025, which is subject to an optional maturity extension for 364 days, and OID of 7.0%.

The borrower is a multi-state medical and recreational cannabis provider

with operations in Florida, Texas, Michigan and Pennsylvania.

The real estate collateral for this senior term loan includes the borrower’s cultivation facility in Michigan.

In April 2021, we entered into a commitment with Sub of Private Co.

G to fund a $22 million senior secured term loan and funded $22

million at closing, including a $2.0 million interest reserve.

The loan has an interest rate of 12.0% plus LIBOR, with a 1.0% LIBOR floor, and PIK interest rate of 4.0% with step downs to 2.0% and 1.5% once certain criteria are met as defined in

the loan agreement.

The loan has a maturity date of May 2026, an exit fee of 10.0%, provided that if certain criteria are met as defined in the loan agreement the exit fee is 2.0%, and OID of 4.0%.

The borrower’s parent entity has licenses across

nine states, and the real estate collateral for this senior term loan includes the borrower’s retail facility in New Jersey and its cultivation facility under construction in New Jersey.

This senior term loan relates to certain syndication letter

agreements by and among our Manager, AFC Investments, LLC, one of our affiliates that is beneficially owned by Mr.

Tannenbaum, and us, whereby the loan was initially contemplated as a $46,150,000 commitment and our Manager had syndicated

$22.0 million to us and $24,150,000 to an affiliate, AFC Investments, LLC, subject to satisfactory diligence and definitive loan documentation.

The final negotiated loan commitment was for $22.0 million and AFCG holds the entire amount, with no

portion syndicated to AFC Investments, LLC.

In May 2021, we entered into a syndicated senior secured term loan facility with a commitment with Sub of Private Co.

approximately $5.8 million out of a total aggregate principal amount of $37.0 million.

We funded our loan commitment at closing.

The loan has an interest rate of 15.0% per annum.

The loan has an initial maturity date of May 2023, which is subject

to two optional maturity extensions of six months each, subject to payment of a 2.0% fee in the case of the first optional extension and approval of all lenders in the case of the second optional extension.

The loan has an OID of approximately

The loan has an exit fee of 3.0%, an agent fee of $185,000 and a closing fee of $690,000.

The borrower is a subsidiary of a multi-state operator with assets in Arkansas, Florida and Illinois.

The borrower is a single-state operator that is

currently expanding their cultivation facility in Illinois, which is licensed to grow both recreational and medical use cannabis.

The borrower also operates two additional dispensaries in the state, one licensed to sell medical use cannabis and the

other licensed to sell both recreational and medical use cannabis.

The real estate collateral for the borrower consists of a cultivation facility in Illinois.

In May 2021, we entered into a commitment with Public Co.

F to fund a $10.0 million senior secured term loan and funded $10.0 million at

The loan has an interest rate of 9.75% per annum.

The loan has a maturity date of May 2023 and OID of 2.0%.

The borrower is a multi-state operator with operations across 14 states.

The real estate collateral for the borrower includes five

cultivation facilities across Illinois, Florida, Nevada, Ohio, and Massachusetts and eight dispensaries across Illinois, Michigan, Maryland, Arkansas, Ohio, Nevada, Florida, and Arizona.

In June 2021, we entered into a commitment with Private Co.

I to fund a $5.5 million secured bridge loan and funded $5.5 million at

The loan has a short-term maturity date of July 9, 2021 in anticipation of refinancing under a larger credit facility.

The loan has an interest rate of 13.0% per annum, with OID of 4.0%, and an agent fee of 1.0%.

The loan also has an

exit fee of 10.0% if the loan is not refinanced by us and/or one of our affiliates.

The borrower is a single state operator in Maryland, a limited license state, with an existing cultivation and processing operation in the state, as well as one

operational dispensary.

The bridge loan was refinanced subsequent to quarter end.

Refer to “ Recent Developments ” for more information.

Sale of Assigned Rights

On June 29, 2021, we sold to AFC Warehouse Holding, LLC, an affiliate of the Manager and us, an Assigned Right to acquire and/or assign a warrant to purchase 1,978,000 common shares of Private

E at an exercise price of $0.01 per share for an aggregate purchase price of $1,104,614, representing the fair value of such Assigned Right as of the date of such sale, as determined by management and a majority of independent directors (based

on various subjective and objective factors, including input from an independent third-party valuation firm).

As part of the agreement to refinance the bridge loan, the borrower was credited for a portion of the original OID and agent fee paid in connection with the bridge loan.

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

The new senior secured loan of

$15.5 million was syndicated by our Manager between us and A BDC Warehouse, LLC (“ABW”), an affiliate of ours that is wholly-owned by Mr.

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

We 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%.

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, Flower Loan Holdco, LLC (“FLH”), an affiliated entity in which Mr.

Tannenbaum is the majority ultimate beneficial owner, purchased approximately $8.5 million of the

Private Company A Credit Facility from a third-party lender, and we had a 30-day option to purchase such amount from FLH.

Our credit agreement with Private Company A (the “Private Company A Credit Agreement” and, together with the related loan

documents, the “Private Company A Credit Documents”) was amended and restated (such amendment and restatement, the “A&R Private Company A Credit Agreement”) concurrently to, among other things add an additional tranche of loans, which increased

the aggregate loan commitments thereunder by $30.0 million, $10.0 million of which our Manager syndicated to ABW, and $20.0 million of which are held by us, as designee of the Agent.

The A&R Private Company A Credit Agreement has a maturity

date of May 8, 2024.

The original tranche of term loans has an exit fee of 2.0% of the original tranche term loan amount (excluding any unfunded portions of the original tranche term loan amount) and the additional tranche of term loans has an exit

fee of 2.0% of the total amount of such additional tranches (excluding any unfunded portions of the additional tranche term loan amount).

The original tranche of term loans has an agent fee of 1.0% of the total loan commitment amount payable

The second tranche of term loans has an agent fee of (i) 0.3333% of the total loan commitment amount of the additional tranche of term loans payable on the closing date of the A&R Private Company A Credit Agreement and (ii) 0.6667% of

the total loan commitment amount of the additional tranche payable subject to the satisfaction of certain conditions precedent.

The Private Company A Credit Facility bears interest at (i) a fixed interest rate of 13.0% per annum, payable in cash,

and (ii) a blended PIK interest rate of 3.4% per annum, payable in kind, across the two tranches of loans under the Private Company A Credit Facility.

The Private Company A Credit Facility included an upfront fee of 4.0% on the aggregate amount

funded of the original tranche of term loans payable on the closing date of the original tranche of term loans and an unused line fee of 2.0% of the amount of any unfunded portion of the term loans payable annually.

In connection with certain

financing accommodations, a fee of $750,000 was payable to the Agent by the borrower on the closing date thereof.

The A&R Private Company A Credit Agreement also included an OID of $200,000 payable on the closing date of the A&R Private

Company A Credit Agreement and $400,000 payable to lenders, subject to the satisfaction of certain conditions precedent.

In September 2021, we entered into (i) an Assignment and Acceptance (the “September Loan Assignment”) with FLH, Private Company A, as borrower, and our Manager, as the agent,

pursuant to which we acquired FLH’s interest in the $8.5 million portion of the loan to Private Company A under the Private Company A Credit Facility, for a purchase price of approximately $8.5 million (which equaled the outstanding principal

amount of the loan plus any accrued and unpaid interest and less any unaccreted original issue discount) and (ii) a letter agreement (the “September Commitment Assignment” and, together with the September Loan Assignment, the “September

Assignments”) with our Manager, pursuant to which our Manager assigned to us its commitment to make loans to Private Company A in a principal amount of up to $20.0 million under the Private Company A Credit Facility, which was funded in September

We did not pay any consideration to our Manager for our acquisition of our Manager’s loan commitments under the A&R Private Company A Credit Agreement pursuant to the September Commitment Assignment.

As a result of the September

Assignments, the total loan commitments to Private Company A under the Private Company A Credit Facility increased to an aggregate commitment amount of $72.5 million, of which our total loan commitments accounted for $62.5 million.

In September 2021, we entered into an amended and restated credit agreement (the “A&R Sub.

of Private Co.

G Credit Agreement”) related to the Sub.

of Private Co.

Facility to, among other things, increase the total loan commitments by $53.4 million across three tranches, with approximately $10.0 million of new loan commitments allocated to ABW and the remaining $43.4 million of new loan commitments allocated

The loan has a maturity date of May 1, 2026, an annual agent fee of 1.0% of the total loan commitment amount and an exit fee of 10.0%, which will be reduced to 5.0% upon the satisfaction of certain specified criteria.

One of the tranches of

loans, representing $10.0 million in total commitments of which we funded approximately $8.1 million, has a per annum interest rate of 9.0%.

The other two tranches of loans have a per annum interest rate of 12.0% plus LIBOR, with a 1.0% LIBOR

floor, and PIK interest rate of 2.0% per annum.

As a result of the increased loan commitments, the total loan commitments under the A&R Sub.

of Private Co.

G Credit Agreement equal $75.4 million, of which our total loan commitments account for

$65.4 million.

In September 2021, we sold $10.0 million of our $15.0 million loan to Public Co.

E for 104% of par amount generating a realized gain of $0.4 million.

In October 2021, we sold our

remaining investment in the loan to Public Company E to a third party in a private transaction.

We received net proceeds from the sale of approximately $5.1 million.

Dividends Declared Per Share

In May 2021, we declared a regular cash dividend of $0.38 per share of our common stock, relating to the second quarter of 2021, which

was paid on June 30, 2021 to stockholders of record as of June 15, 2021.

In September 2021, we declared a regular cash dividend of $0.43 per share of our common stock, relating to the third quarter of 2021 which was paid on October 15, 2021 to

stockholders of record as of September 30, 2021.

The aggregate amount of the regular cash dividend payment was approximately $7.1 million.

The payment of these dividends are not indicative of our ability to pay such dividends in the future.

The payment of these dividends is not indicative of our ability to pay such dividends in the future.

Recent Developments

Subsequent to quarter end, 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.

Refer to footnote 11 to our unaudited financial statements included elsewhere in this quarterly report for more information.

Subsequent to June 30, 2021, we closed 3 loans including one that is contingent upon the borrower raising additional equity, committed to

$27.3 million, of which $19.8 million is contingent, and funded $10.9 million of principal.

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 agreement.

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

The loan will have a maturity date of August 3, 2026, an unused fee of 30%, 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%.

The new 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

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

In July 2021, the Company entered into a commitment to fund a $3.0 million bridge loan and funded $3.0 million at closing.

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.

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.

Following 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.

Subsequent to September 30, 2021, we have closed one loan, had new commitments of $50.0 million, and funded approximately $52.3 million of principal.

In October 2021, we entered into an additional commitment for a $50.0 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, our total loan commitments to Public Company F increased to an aggregate principal amount of $60.0 million, including $10.0 million of the second tranche funded in May 2021.

On November 3, 2021, we issued $100 million in aggregate

principal amount of senior unsecured notes due May 1, 2027 (the “20217 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.

We intend to use the net proceeds from the issuance of the 2027

Senior Notes to fund debt investments and for general corporate purposes.

The 2027 Senior Notes are guaranteed by any of our existing and future

subsidiaries, other than those Immaterial Subsidiaries (as defined in the Indenture).

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

On November 3, 2021, we 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 go toward the support charitable organizations to be designated by AFC Finance, LLC.

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 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 our 2027 Senior Notes upon an event of default under the Revolving Credit Agreement and (v)

extended the fixed element of the maturity date from December 31, 2021 to September 30, 2022.

Pursuant to the Second Amendment, we incurred a one-time commitment fee expense of $187,500, payable in three quarterly installments beginning in the

first quarter of 2022, which will support charitable organizations, as provided in the Second Amendment

Key Financial Measures and Indicators

As a commercial real estate finance company, we believe the key financial measures and indicators for our business are Distributable Earnings, Adjusted Distributable Earnings, book value per

share and dividends declared per share.

As a commercial real estate finance company, we believe the key financial measures and indicators for our business are Distributable Earnings, Adjusted Distributable Earnings,

book value per share and dividends declared per share.

Non-GAAP Metrics

Distributable Earnings and Adjusted Distributable Earnings

In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use Distributable Earnings and Adjusted Distributable Earnings to evaluate our

performance excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan activity and operations.

Each of Distributable Earnings and Adjusted Distributable Earnings is a measure

that is not prepared in accordance with GAAP.

We use these non-GAAP financial measures both to explain our results to stockholders and the investment community and in the internal evaluation and management of our businesses.

Our management

believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures permit investors and stockholders to assess the overall performance of our business using the same tools that our

management uses to evaluate our past performance and prospects for future performance.

The determination of Distributable Earnings is substantially similar to the determination of Core Earnings under our Management Agreement, provided that Core Earnings is a component of the

calculation of any Incentive Fees earned under the Management Agreement for the applicable time period, and thus Core Earnings is calculated without giving effect to Incentive Fee expense, while the calculation of Distributable Earnings accounts

for any Incentive Fees earned for such time period.

We define Distributable Earnings as, for a specified period, the net income (loss) computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) depreciation and

amortization, (iii) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss);

provided that

Distributable Earnings does not exclude, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash, (iv) provision

for current expected credit losses and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of such

independent directors.

In addition to using certain financial metrics prepared in accordance with United States generally accepted accounting principles (“GAAP”) to evaluate our performance, we also

use Distributable Earnings and Adjusted Distributable Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan activity and operations.

Each of Distributable Earnings and Adjusted Distributable Earnings is a measure that is not prepared in accordance with GAAP.

We use these non-GAAP financial measures both to explain our results to stockholders and the investment community and in

the internal evaluation and management of our businesses.

Our management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures permit investors and stockholders to assess the

overall performance of our business using the same tools that our management uses to evaluate our past performance and prospects for future performance.

The determination of Distributable Earnings is substantially similar to the determination of Core Earnings under our Management Agreement, provided that Core Earnings is a

component of the calculation of any Incentive Fees earned under the Management Agreement for the applicable time period, and thus Core Earnings is calculated without giving effect to Incentive Fee expense, while the calculation of Distributable

Earnings accounts for any Incentive Fees earned for such time period.

We define Distributable Earnings as, for a specified period, the net income (loss) computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii)

depreciation and amortization, (iii) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss);

provided that Distributable Earnings does not exclude, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash,

(iv) provision for current expected credit losses and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of

such independent directors.

We define Adjusted Distributable Earnings, for a specified period, as Distributable Earnings excluding certain non-recurring organizational expenses (such as one-time expenses related to our formation and start-up).

We believe providing Distributable Earnings and Adjusted Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to stockholders in

assessing the overall performance of our business.

As a REIT, we are required to distribute at least 90% of our annual REIT taxable income and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of such

taxable income.

Given these requirements and our belief that dividends are generally one of the principal reasons that stockholders invest in our common stock, we generally intend to attempt to pay dividends to our stockholders in an amount equal

to our net taxable income, if and to the extent authorized by our Board.

Distributable Earnings is one of many factors considered by our Board in declaring dividends and, while not a direct measure of net taxable income, over time, the measure can

be considered a useful indicator of our dividends.

We believe providing Distributable Earnings and Adjusted Distributable Earnings on a supplemental basis to our net income as determined

in accordance with GAAP is helpful to stockholders in assessing the overall performance of our business.

As a REIT, we are required to distribute at least 90% of our annual REIT taxable income, subject to certain adjustments, and to pay tax at

regular corporate rates to the extent that we annually distribute less than 100% of such taxable income.

Given these requirements and our belief that dividends are generally one of the principal reasons that stockholders invest in our common

stock, we generally intend to attempt to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our Board.

Distributable Earnings is one of many factors considered by our Board in

declaring dividends and, while not a direct measure of net taxable income, over time, the measure can be considered a useful indicator of our dividends.

Distributable Earnings and Adjusted Distributable Earnings are “non-GAAP financial measures” and should not be considered as substitutes for GAAP net income.

We caution readers that our

methodology for calculating Distributable Earnings and Adjusted Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our reported

Distributable Earnings and Adjusted Distributable Earnings may not be comparable to similar measures presented by other REITs.

We caution readers

that our methodology for calculating Distributable Earnings and Adjusted Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our

reported Distributable Earnings and Adjusted Distributable Earnings may not be comparable to similar measures presented by other REITs.

The following table provides a reconciliation of GAAP net income to Distributable Earnings and Adjusted Distributable Earnings:

For the three

June 30, 2021

September 30, 2021

July 31, 2020 to

September 30, 2020

September 30, 2021

July 31, 2020 to

September 30, 2020

Adjustments to net income

3 unchanged sentences

Provision for current expected credit losses

Other adjustments

One-time events pursuant to changes in GAAP and certain non-cash charges

7 unchanged sentences

We believe that book value per share is helpful to stockholders in evaluating our growth as we scale our equity capital base and continue to invest in our target investments.

The book value per

share of our common stock as of June 30, 2021 and December 31, 2020 was approximately $16.66 and $14.83, respectively, on a post-split basis.

book value per share of our common stock as of September 30, 2021 and December 31, 2020 was approximately $16.69 and $14.83, respectively, on a post-split basis.

Dividends Declared Per Share

In December 2020, we declared a seven-for-one stock split in the form of a stock dividend, pursuant to which six additional shares of our common stock were issued for each outstanding share of

our common stock, payable on January 25, 2021 to each stockholder of record as of the close of business on January 21, 2021 out of our authorized but unissued shares of common stock.

In March 2021, we declared a regular cash dividend of $0.36 per share of our common stock, relating to the first quarter of 2021which was paid on June 30, 2021 to stockholders of record as of

March 15, 2021.

In September 2021, we declared a regular cash dividend of $0.43 per share of our common stock, relating to the third quarter of 2021 which was paid on October 15, 2021 to

stockholders of record as of September 15, 2021.

The aggregate amount of the regular cash dividend payment was approximately $7.1 million.

The payment of this dividend is not indicative of our ability to pay such dividends in the future.

In May 2021, we declared a regular cash dividend of $0.38 per share of our common stock, relating to the second quarter of 2021 which was paid on June 30, 2021 to stockholders of record as of

June 15, 2021.

The aggregate amount of the regular cash dividend payment will be approximately $5.1 million.

The payment of this dividend is not indicative of our ability to pay such dividends in the future.

For the quarter ended June 30, 2021, we previously declared and paid a regular cash dividend of $0.38 per share of our common stock on June 30, 2021, to stockholders of record as

of June 15, 2021.

The aggregate amount of the second quarter cash dividend payment was approximately $5.1 million.

For the quarter ended March 31, 2021, we previously declared and paid a regular cash dividend of $0.36 per share of our common stock on March 31, 2021, to stockholders of record

as of March 15, 2021.

The aggregate amount of the first quarter cash dividend payment was approximately $2.2 million.

In December 2020, we declared a seven-for-one stock split in the form of a stock dividend, pursuant to which six additional shares of our common stock were issued for each

outstanding share of our common stock, payable on January 25, 2021 to each stockholder of record as of the close of business on January 21, 2021 out of our authorized but unissued shares of common stock.

Factors Impacting our Operating Results

The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our assets and the supply

of, and demand for, commercial real estate debt and other financial assets in the marketplace.

Our net interest income, which includes the accretion and amortization of OID, is recognized based on the contractual rate and the outstanding principal

balance of the loans we originate.

Interest rates will vary according to the type of loan, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, some of which cannot be predicted with any certainty.

The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our

assets and the supply of, and demand for, commercial real estate debt and other financial assets in the marketplace.

Our net interest income, which includes the accretion and amortization of OID, is recognized based on the contractual rate and the

outstanding principal balance of the loans we originate.

Interest rates will vary according to the type of loan, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, some of which cannot be

predicted with any certainty.

Our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers.

Results of Operations

We commenced operations on July 31, 2020 and therefore, have no period to compare results for the three and six months ended June 30, 2021.

We are currently in the process of investing the

proceeds of our offerings.

Results for the initial period of our operations are not indicative of the results we expect when our investment strategy has been fully implemented.

Our net income allocable to our common stockholders for the three and six months ended June 30, 2021 was approximately $4.6 million and

$6.0 million or $0.34 and $0.58 per basic weighted average common share, respectively.

Net income of approximately $4.6 million and $6.0 million for the three and six months ended June 30, 2021, respectively, was comprised of approximately $8.7

million and $13.4 in total revenues, operating expenses of approximately $0.9 million and $1.5 million, stock-based compensation expense of $11,457 and approximately $1.6 million, management and incentive fees of approximately $2.1 million and $3.0

million, change in the provision for current expected credit losses of approximately $0.6 million and $0.7 million and a net change in unrealized gain on loans of approximately $0.5 million and $0.6 million, respectively.

Investments in loans held at fair value are recorded on the trade date at cost, which reflects the amount of principal funded net of any

original issue discounts.

An unrealized gain arises when the value of the loan portfolio exceeds its cost, and an unrealized loss arises when the value of the loan portfolio is less than its cost.

The net change in unrealized gain of approximately

$0.5 million and $0.6 million for the three and six months ended June 30, 2021, respectively, was mainly driven by the net change in the valuation of the loans.

For the three and six months ended June 30, 2021, we incurred fees payable to our Manager for a Base Management Fee of $636,824 and $850,757, which was net of a Base Management Fee Rebate of $182,707 and $420,450,

respectively.

The Incentive Compensation fees payable to our Manager for the three and six months ended June 30, 2021 were $1,442,047 and $2,104,777, respectively.

For the three and six months ended June 30, 2021, our Manager will be reimbursed for approximately $423,939 and $789,506, respectively, for out-of-pocket costs incurred on our behalf.

We commenced operations on July 31, 2020 and therefore, the comparative period for the three and nine months ended September 30, 2021 is from July 31, 2020 to September 30, 2020

(the “Prior Period” or “period ended September 30, 2020”).

Differences in the results of operations compared to the Prior Period are mainly due to the Prior Period only including approximately two months of operations compared to the three and nine

months period ended September 30, 2021.

Results for the initial periods of our operations are not indicative of the results we expect when our investment strategy has been fully implemented.

Our net income allocable to our common stockholders for the three and nine months ended September 30, 2021 was approximately $7.9 million and $14.0 million or $0.48 and $1.13 per

basic weighted average common share, respectively, compared to net income allocable to our common stockholders of $2.1 million or $0.39 per basic weighted average common share for the period ended September 30, 2020.

Net income of approximately

$7.9 million and $14.0 million for the three and nine months ended September 30, 2021, respectively, was comprised of approximately $10.6 million and $24.1 million in total revenues, operating expenses of approximately $1.3 million and $2.8

million, stock-based compensation expense of $0.1 million and approximately $1.7 million, management and incentive fees of approximately $2.5 million and $5.5 million, change in the provision for current expected credit losses of approximately $0.7

million and $1.4 million, realized gains on loans of $0.4 million and $0.4 million and a net change in unrealized gain on loans of approximately $1.4 million and $0.8 million, respectively.

Net income of approximately $2.1 million for the period

ended September 30, 2020 was comprised of approximately $1.6 million in total revenues, operating expenses of approximately $0.9 million, management fees of approximately $0.1 million and a net change in unrealized gain on loans of approximately

$1.6 million.

Investments in loans held at fair value are recorded on the trade date at cost, which reflects the amount of principal funded net of any original issue discounts.

An unrealized

gain arises when the value of the loan portfolio exceeds its cost, and an unrealized loss arises when the value of the loan portfolio is less than its cost.

The net change in unrealized gain of approximately $1.4 million and $0.8 million for the

three and nine months ended September 30, 2021, respectively, was mainly driven by the net change in the valuation of the loans.

The net change in unrealized gain of approximately $1.6 million for the period ended September 30, 2020 was mainly

driven by the net change in the valuation of the loans.

For the three and nine months ended September 30, 2021, we incurred fees earned by our Manager for a Base Management Fee of $773,729 and $1,624,485, which was net of a Base

Management Fee Rebate of $256,989 and $677,439, respectively.

The Incentive Compensation fees earned by our Manager for the three and nine months ended September 30, 2021 were $1,769,207 and $3,873,984, respectively.

For the period ended September

30, 2020, we incurred fees earned by our Manager for a Base Management Fee of $142,067, which was net of a Base Management Fee Rebate of $84,167, and our Manager waived any incentive fees.

For the three and nine months ended September 30, 2021, our Manager will be reimbursed for $625,711 and $1,415,217, respectively, for out-of-pocket costs incurred on our behalf.

For the period ended September 30, 2020, our Manager was reimbursed for $165,434 for out-of-pocket costs incurred on our behalf.

Provision for Current Expected Credit Losses

For the six months ended June 30, 2021, the increase to our provision for current expected credit loss was $711,886 and the balance as of June 30, 2021 was $1,177,283 or 109 basis points of our

total loans held at carrying value and loans receivable at carrying value commitment balance of $108,415,325 and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at

carrying value and loans receivable at carrying value of $701,143 and (ii) a liability for unfunded commitments of $476,140.

The liability is based on the unfunded portion of loan commitments over the full contractual period over which we are

exposed to credit risk through a current obligation to extend credit.

For the nine months ended September 30, 2021, the increase to our provision for current expected credit loss was $1,372,498 and the balance as of September 30, 2021 was

$1,837,895 or approximately 118 basis points of our total loans held at carrying value and loans receivable at carrying value commitment balance of $155,936,236 and was bifurcated between (i) the current expected credit loss reserve (contra-asset)

related to outstanding balances on loans held at carrying value and loans receivable at carrying value of $1,145,629 and (ii) a liability for unfunded commitments of $692,266.

The liability is based on the unfunded portion of loan commitments over

the full contractual period over which we are exposed to credit risk through a current obligation to extend credit.

Management considered the likelihood that funding will occur, and if funded, the expected credit loss on the funded portion.

We continuously evaluate the credit quality of each

loan by assessing the risk factors of each loan.

continuously evaluate the credit quality of each loan by assessing the risk factors of each loan.

Loan Portfolio

As of June 30, 2021 and December 31, 2020, our portfolio included three and four loans, respectively, held at fair value.

The aggregate originated commitment under these loans was approximately

$47.4 million and $59.9 million, respectively, and outstanding principal was approximately $46.7 million and $50.8 million as of June 30, 2021 and December 31, 2020, respectively.

For the six months ended June 30, 2021, the Company funded

approximately $7.7 million of outstanding principal and had repayments of approximately $12.6 million.

As of June 30, 2021 and December 31, 2020, 0% and approximately 6.0%, respectively, of the Company’s loans held at fair value have floating

interest rates.

As of December 31, 2020, these floating rates were subject to LIBOR floors, with a weighted average floor of 2.5%, calculated based on loans with LIBOR floors.

References to LIBOR or “L” are to 30-day LIBOR (unless otherwise

specifically stated).

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

As of September 30, 2021 and December 31, 2020, our portfolio included three and four loans, respectively, held at fair value.

The aggregate originated commitment under these

loans was approximately $75.9 million and $59.9 million, respectively, and outstanding principal was approximately $77.0 million and $50.8 million as of September 30, 2021 and December 31, 2020, respectively.

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 September 30, 2021 and December 31, 2020, 0% and approximately 6.0%, respectively, of the Company’s loans

held at fair value have floating interest rates.

As of December 31, 2020, these floating rates were subject to LIBOR floors, with a weighted average floor of 2.5%, calculated based on loans with London Interbank Offered Rate (“LIBOR”) floors.

References to LIBOR or “L” are to 30-day LIBOR (unless otherwise specifically stated).

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

As of September 30, 2021

Principal (1)

8 unchanged sentences

The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted purchase discount, deferred loan fees and loan origination costs.

Refer to Footnote 14 to our unaudited financial statements included elsewhere in this quarterly report.

Weighted average remaining life is calculated based on the fair value of the loans as of June 30, 2021 and December 31, 2020.

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

Refer to Note 14 to our unaudited consolidated financial statements included elsewhere in this quarterly report.

Weighted average remaining life is calculated based on the fair value of the loans as of September 30, 2021 and December 31, 2020.

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

As of June 30, 2021 and December 31, 2020, our portfolio included ten and three loans, respectively, held at carrying value.

The aggregate originated commitment under these loans was

approximately $136.3 million and $44.0 million, respectively, and outstanding principal was approximately $114.4 million and $33.9 million, respectively, as of June 30, 2021 and December 31, 2020.

During the six months ended June 30, 2021, we

funded approximately $79.9 million of outstanding principal.

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

These floating rates are subject to

London Interbank Offered Rate (“LIBOR”) floors, with a weighted average floor of 1% and 1%, respectively, calculated based on loans with LIBOR floors.

References to LIBOR or “L” are to 30-day LIBOR (unless otherwise specifically stated).

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

Total loans held at fair value at September 30, 2021

As of September 30, 2021 and December 31, 2020, our 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 September 30, 2021 and December 31, 2020.

During the nine months ended

September 30, 2021, we funded approximately $139.2 million of outstanding principal.

As of September 30, 2021 and December 31, 2020, approximately 67.9% and 35%, respectively, of our loans held at carrying value have floating interest rates.

floating rates are subject to London Interbank Offered Rate (“LIBOR”) floors, with a weighted average floor of 1.0% and 1.0%, respectively, calculated based on loans with LIBOR floors.

References to LIBOR or “L” are to 30-day LIBOR (unless

otherwise specifically stated).

The following tables 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)

Original Issue

Weighted Average

Remaining Life

4 unchanged sentences

Original Issue

Weighted Average

Remaining Life

2 unchanged sentences

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

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 nine months ended September 30, 2021:

Original Issue

Total loans held at carrying value at December 31, 2020

Accretion of original issue discount

Total loans held at carrying value at June 30, 2021

As of June 30, 2021 and December 31, 2020, our 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, we received repayments of $337,741 of outstanding principal.

The following table presents changes in loans receivable as of and for the six months ended June 30, 2021:

Realized gain on sale of loans

Sale of loans

Total loans held at carrying value at September 30, 2021

As of September 30, 2021 and December 31, 2020, our portfolio included one loan receivable at carrying value.

The originated commitment under this loan was 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, we received repayments of approximately $0.6 of

outstanding principal.

The following table presents changes in loans receivable as of and for the nine months ended September 30, 2021:

Original Issue

Total loans receivable at carrying value at December 31, 2020

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Accretion of original issue discount

Total loans receivable at carrying value at June 30, 2021

The below table summarizes our total loan portfolio as of June 30, 2021.

Balance as of

Total loans receivable at carrying value at September 30, 2021

The below table summarizes our total loan portfolio as of September 30, 2021:

A - Real Estate Loan

3 unchanged sentences

Sub of Private Co.

I - Bridge Loan (6)

Borrower names have been kept confidential due to confidentiality agreement obligations.

All loans originated prior to July 31, 2020 were purchased from an affiliated entity at fair value which approximated accreted and/or amortized cost plus accrued interest on July 31, 2020.

(2) Estimated YTM includes a variety of fees and features that affect the total yield, which may include, but is not limited to, OID, exit fees, prepayment fees, unused fees and contingent

OID is recognized as a discount to the funded loan principal and is accreted to income over the term of the loan.

Loans originated before July 31, 2020 were acquired by us, net of unaccreted OID, which we accrete to income over the

remaining term of the loan.

Estimated YTM includes a variety of fees and features that affect the total yield, which may include, but is not limited to, OID, exit fees, prepayment fees, unused fees and contingent features.

recognized as a discount to the funded loan principal and is accreted to income over the term of the loan.

Loans originated before July 31, 2020 were acquired by us, net of unaccreted OID, which we accrete to income over the remaining term

In some cases, additional OID is recognized from additional purchase discounts attributed to the fair value of equity positions that were separated from the loans prior to our acquisition of such loans.

The estimated YTM calculations require management to make estimates and assumptions, including, but not limited to, the timing and amounts of loan draws on delayed draw loans, the timing

collectability of exit fees, the probability and timing of prepayments and the probability of contingent features occurring.

For example, our credit agreements with Private Company C, Private Company E, Private Company F, and Subsidiary of

Private Company G contain provisions pursuant to which certain PIK interest rates and fees earned by us under such credit agreements will decrease upon the satisfaction of certain specified criteria which we believe may improve the risk profile

of the applicable borrower.

To be conservative, we have not assumed any prepayment penalties or early payoffs in our estimated YTM calculation.

The estimated YTM calculations require management to make estimates and assumptions, including, but not limited to, the timing and amounts of loan draws on

delayed draw loans, the timing collectability of exit fees, the probability and timing of prepayments and the probability of contingent features occurring.

For example, certain of our credit agreements contain provisions pursuant to which certain

PIK interest rates and fees earned by us under such credit agreements will decrease upon the satisfaction of certain specified criteria which we believe may improve the risk profile of the applicable borrower.

To be conservative, we have not

assumed any prepayment penalties or early payoffs in our estimated YTM calculation.

Estimated YTM is based on current management estimates and assumptions, which may change.

results could differ from those estimates and assumptions.

(3) Estimated YTM for the loans with Public Company A, Private Company A, Private Company D, and Private Company E is enhanced by purchase discounts attributed to the fair value of equity

warrants that were separated from the loans prior to our acquisition of such loans.

Actual results could differ from those estimates and assumptions.

Estimated YTM for the loans with Public Company A, Private Company A, Private Company D, and Private Company E is enhanced by purchase discounts attributed to the fair value of equity warrants that were

separated from the loans prior to our acquisition of such loans.

The purchase discounts accrete to income over the respective remaining terms of the applicable loans.

(4) Loans to Subsidiary Of Public Company D and Public Company E do not reflect each borrower’s option to request a maturity extension for an additional 364 days from the respective original loan

maturity date, each of which we are not obligated to grant.

(5) Loan to Subsidiary of Private Company H does not reflect the borrower’s option to request up to two maturity extensions each for an additional six months from the then-existing loan maturity

The first extension, which is available at the borrower’s sole option, is subject to a payment of a 2.0% fee.

Loans to Subsidiary of Public Company D and Public Company E do not reflect each borrower’s option to request a maturity extension for an additional 364 days from the respective original loan maturity date,

each of which we are not obligated to grant.

In October 2021, the loan to Public Company E was sold for 101% of par value to a third party in a private transaction.

Refer to “— Recent Developments ” for more

information on the sale.

Loan to Subsidiary of Private Company H does not reflect the borrower’s option to request up to two maturity extensions each for an additional six months from the then-existing loan maturity date.

extension, which is available at the borrower’s sole option, is subject to a payment of a 2.0% fee.

The second extension is subject to the approval of all lenders.

(6) Estimated YTM for bridge loan to Private Company I is not presented due to the loan’s short-term nature, which results in a high estimated YTM that management does not believe is indicative

of our expected YTM for the average loans of the types that constitute our portfolio.

In July 2021, the bridge loan to Private Company I was refinanced by a larger credit facility that contains economic terms more consistent with the remainder of

our portfolio.

Estimated YTM for bridge loan to Private Company I is not presented due to the loan’s short-term nature, which results in a high estimated YTM that management does not believe is indicative of our expected

YTM for the average loans of the types that constitute our portfolio.

In July 2021, the bridge loan to Private Company I was refinanced by a larger credit facility that contains economic terms more consistent with the remainder of our

Refer to “— Recent Developments ” for more information on the new loan.

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Single-state cultivator, producer and full-service brand fulfillment partner that produces a wide range of products in the Nevada market.

Public Company A operates a +/- 400,000 square foot

greenhouse and 55,000 square foot processing and custom packaging facility, which is capable of producing 140,000 pounds of dry flower per year.

The real estate collateral of Public Company A consists of a greenhouse and processing facility in

Public Company A operates a +/- 400,000

square foot greenhouse and 55,000 square foot processing and custom packaging facility, which is capable of producing 140,000 pounds of dry flower per year.

The real estate collateral of Public Company A consists of a greenhouse and processing

facility in Nevada.

Private Company A

Multi-state operator with operations in six states.

Private Company A is a vertically integrated cultivator and retailer of both medical and adult-use cannabis that primarily operates under its

Multi-state operator with operations in six states and licenses in seven states.

Private Company A is a vertically integrated cultivator and retailer of both medical and

adult-use cannabis that primarily operates under its own brand.

Private Company A’s business segments include cultivation, extraction and processing, retail products, and dispensaries.

The real estate collateral of Private Company A consists of three cultivation facilities across Arizona and Michigan

and ten dispensaries across Arizona, Maryland, Massachusetts and Michigan.

The real estate collateral of Private Company A consists of

three cultivation facilities across Arizona and Michigan and 11 dispensaries across Arizona, Maryland, Massachusetts and Michigan.

Private Company B

Single-state operator currently constructing an indoor cultivation facility to wholesale product to the medical and adult use markets in Michigan.

Private Company B produces high-end cannabis

strains and intends to focus on the high-end, top-tier cannabis niche.

The management team has over 20 years’ experience in the cannabis industry, including ten years in Michigan.

The real estate collateral for Private Company B consists of a

cultivation facility in Michigan.

Private Company B produces

high-end cannabis strains and intends to focus on the high-end, top-tier cannabis niche.

The management team has over 20 years’ experience in the cannabis industry, including 10 years in Michigan.

The real estate collateral for Private Company B

consists of a cultivation facility in Michigan.

Private Company C

Single-state vertically integrated cultivator and retailer of medical cannabis.

Private Company C operates under a Chapter 20 Clinical Registrant license and has partnered to collaborate on

multifaceted studies to substantiate safety and positive therapeutic outcomes.

Private Company C operates under a Chapter 20 Clinical Registrant license and has partnered to

collaborate on multifaceted studies to substantiate safety and positive therapeutic outcomes.

Private Company C currently operates a cultivation facility and three dispensaries with the ability to add three additional dispensary locations.

The real estate

collateral of Private Company C consists of a cultivation facility and dispensary in Pennsylvania.

estate collateral of Private Company C consists of a cultivation facility, which is still under partial construction, and three dispensaries in Pennsylvania.

The cultivation facility is expected to be fully completed November 2021.

Subsidiary of Public Company D

Public Company D participates in the medical and adult use market across Canada and in several US states where cannabis has been

legalized for therapeutic or adult use.

Public Company D participates in the medical and adult use market across Canada and in several U.S.

states where cannabis has been legalized for therapeutic or adult use.

Subsidiary of Public Company D is a premier medical marijuana cultivator, processor and distributor in Pennsylvania.

Public Company D also has operators in California and New Jersey.

The real estate

collateral for Subsidiary of Public Company D consists of a cultivation facility in Pennsylvania.

Public Company D also has operations in California and New Jersey.

The real estate collateral for Subsidiary of Public Company D

consists of a cultivation facility in Pennsylvania.

Private Company D

Multi-state operator who operates five dispensaries, the maximum amount of dispensaries allowed by law for any operator, in the State of Ohio and one dispensary in Arkansas.

Private Company D

historical focus has been dispensary operations and has licenses in other states, where it also operates dispensaries.

Private Company D historical.

focus has been dispensary operations and has licenses in other states, where it also operates dispensaries.

The real estate collateral for Private Company D consists of three dispensaries across Ohio and Arkansas.

Private Company E

Single-state operator who operates one dispensary and is currently constructing an indoor cultivation facility to wholesale product for medical use in Ohio.

Private Company E approaches the

medical cannabis market from the healthcare and scientific perspectives of its founders and key executives, differentiating it in the industry.

The real estate collateral for Private Company E consists of a cultivation and processing facility and a

dispensary in Ohio.

Single-state operator who operates one dispensary and is currently constructing an indoor cultivation and processing facility to wholesale product for medical use in Ohio.

Private Company E approaches the medical cannabis market from the healthcare and scientific perspectives of its founders and key executives, differentiating it in the industry.

The real estate collateral for Private Company E consists of a

cultivation and processing facility, which is still under construction, and a dispensary in Ohio.

The cultivation and processing facility construction is expected to be completed in second quarter of 2022.

Private Company F

Single-state operator currently constructing a cultivation/manufacturing facility and two dispensaries in Missouri and will lease two additional dispensary locations for a total of four

dispensaries in the state.

Single-state operator currently constructing a cultivation and manufacturing facility and two dispensaries in Missouri and will lease two additional dispensary locations for a

total of four dispensaries in the state.

Private Company F’s management team has extensive experience operating retail operations in other states.

The real estate collateral for Private Company F consists of a cultivation/manufacturing facility and two

dispensaries in Missouri.

The real estate collateral for Private Company F consists of a cultivation and manufacturing facility

and two dispensaries in Missouri.

Construction on the cultivation and manufacturing facility and dispensaries is expected to be completed in the fourth quarter of 2021.

Public Company E

Multi-state operator with operations in four states.

Public Company E is a vertically integrated cultivator and retailer in both Florida and Texas with cultivation in Michigan and retail

operations in Pennsylvania.

Public Company E is a vertically integrated cultivator and retailer in both Florida and Texas with cultivation in Michigan

and retail operations in Pennsylvania.

Public Company E’s Florida operations consist of two cultivation and processing locations as well as 27 dispensaries across the state.

The real estate collateral for Public Company E consists of a cultivation facility in

The real estate collateral for Public Company E consists of a cultivation

facility in Michigan.

Subsidiary of Private Company G

Private Company G is a multi-state operator with assets across nine states.

Subsidiary of Private Company G operates in New Jersey as an alternative treatment center which allows for one

cultivation facility and three dispensary operations, all of which are being constructed using the proceeds of the loan to Subsidiary of Private Company G.

The real estate collateral for Subsidiary of Private Company G consists of a cultivation

facility and dispensary operation in New Jersey.

Subsidiary of Private Company G operates in New Jersey as an alternative treatment center which allows

for one cultivation facility and three dispensary operations, all of which are being constructed using the proceeds of the loan to Subsidiary of Private Company G.

The real estate collateral for Subsidiary of Private Company G consists of a

cultivation facility and dispensary operation in New Jersey.

Construction on the cultivation facility is expected to be completed in the third quarter of 2022.

Subsidiary of Private Company H

Private Company H is a multi-state operator with assets in Arkansas, Florida, Maryland and Illinois.

Subsidiary of Private Company H is a single-state operator that is currently expanding their

cultivation facility in Illinois, which is licensed to grow both recreational and medical use cannabis.

Subsidiary of Private Company H also operates two additional dispensaries in the state, one licensed to sell medical use cannabis and the other

licensed to sell both recreational and medical use cannabis.

Subsidiary of Private Company H is a single-state operator that is currently

expanding their cultivation facility in Illinois, which is licensed to grow both recreational and medical use cannabis.

Subsidiary of Private Company H also operates two additional dispensaries in the state, one licensed to sell medical use

cannabis and the other licensed to sell both recreational and medical use cannabis.

The real estate collateral for Subsidiary of Private Company H consists of a cultivation facility in Illinois.

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Public Company F is an Illinois based multi-state operator with approximately 75 retail locations across 14 states and has expanded via an aggressive M&A strategy.

The real estate collateral for Public Company F

consists of five cultivation facilities across Illinois, Florida, Nevada, Ohio, and Massachusetts and eight dispensaries across Illinois, Michigan, Maryland, Arkansas, Ohio, Nevada, Florida, and Arizona.

estate collateral for Public Company F consists of five cultivation facilities across Illinois, Florida, Nevada, Ohio, and Massachusetts and eight dispensaries across Illinois, Michigan, Maryland, Arkansas, Ohio, Nevada, Florida, and Arizona.

Private Company I

Private Company I is a Maryland based single-state operator with an existing cultivation and processing operation in the state, as well as one operational dispensary.

Private Company J

Private Company J is a single-state, vertically integrated cultivator, processor, and retailer of medical cannabis.

Private Company J operates in the state of Missouri with the

maximum number of allowed cannabis licenses, including three cultivation licenses and five retail licenses.

Private Company J is currently operating all five dispensaries and two of its cultivation facilities while constructing a third cultivation

The real estate collateral for Private Company J consists of a to-be-built cultivation facility.

Construction on the cultivation facility is expected to begin in the first quarter of 2022.

Private Company K

Private Company K is a single-state operator constructing a facility housing cultivation, manufacturing and retail operations as well as two separate dispensaries, all of which

are located in Massachusetts.

The cultivation facility will be operating under a Tier 6 cannabis license and all of Private Company K’s facilities, including the two separate dispensaries, are approved for both medical and adult use production

and/or retail, as applicable.

The real estate collateral for Private Company K includes the to-be-built cultivation, manufacturing and retail facility.

Construction on the cultivation, manufacturing and retail facility as well as the two separate

dispensaries are expected to be completed across the first and second quarters of 2022.

Collateral Overview

Our loans are secured by various types of assets of our borrowers, including real property and certain personal property, including licenses, equipment, and other assets to the extent permitted

by applicable laws and the regulations governing our borrowers.

The below table represents the real estate collateral securing our loans as of June 30, 2021.

The values in the table below were measured at the time of underwriting and based on various sources

of data available at such time.

AFCG Loan, net of Syndication

% of Total AFCG

Total Funded Debt Issuance

AFCG % of the Total Loan

Real Estate Value (1)

Real Estate Collateral Coverage

Implied Real Estate Collateral for AFCG

AFCG Real Estate Collateral Coverage

A - Real Estate Loan (2)

A - Equipment Loan

Subsidiary of Public Co.

Sub of Private Co.

I - Bridge Loan (14)

To the extent the applicable loan is intended to fund any acquisitions and/or construction, the applicable figure includes expected total basis on such future construction and/or acquisitions plus appraised

Public Company A real estate is based on total cost basis.

Private Company A real estate is based on total cost basis

Private Company B real estate is based on the expected total cost basis of a to-be-built facility, as completed.

The anticipated completion date for the to-be-built facility is August 2021.

Private Company C real estate is based on the cost basis of two facilities, including the capital expenditures for one facility that is being converted for cannabis cultivation purposes.

The construction of

the to-be-converted facility is divided into six phases.

The first phase was completed in December 2020 and the anticipated completion date for the remaining phases of construction is November 2021.

Subsidiary of Public Company D real estate is based on total cost basis.

Private Company D real estate is based on our internal estimations of property values.

Private Company E real estate is based on the expected total cost basis, including construction expected to be completed within 12 months of loan closing.

Private Company F real estate is based on the expected total cost basis, including construction expected to be completed within 12 months of loan closing.

Public Company E real estate is based on total cost basis.

Subsidiary of Private Company G real estate is based on the expected total cost basis, including construction expected to be completed within 12 months of loan closing.

Subsidiary of Private Company H real estate is based on appraised value.

Public Company F real estate is based on appraised value.

The bridge loan to Private Company I was refinanced in July 2021 by a larger credit facility.

Refer to “— Recent

Developments ” for more in formation on this loan.

Our loans are secured by various types of assets of our borrowers, including real property and certain personal property, including the

value associated with licenses, equipment, and other assets to the extent permitted by applicable laws and the regulations governing our borrowers.

As of September 30, 2021, our portfolio of loans had weighted average real estate collateral

coverage of approximately 1.1 times our aggregate committed principal amount of such loans.

This value was measured at the time of underwriting and based on various sources of data available at such time.

To the extent the applicable loan is

intended to fund any acquisitions and/or construction, the weighted average real estate collateral coverage includes expected total cost basis on such future construction and/or acquisitions plus appraised value.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions to

our stockholders and meet other general business needs.

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make

distributions to our stockholders and meet other general business needs.

We use significant cash to purchase our target investments, repay principal and interest on our borrowings, make distributions to our stockholders and fund our operations.

Our primary sources of cash generally consist of unused borrowing capacity under our Revolving Credit Agreement, the net proceeds of future debt or equity offerings, payments of principal and interest we receive on

our portfolio of assets and cash generated from our operating results.

We expect that our primary sources of financing will be, to the extent available to us, through (a) credit facilities and (b) public and private offerings of our equity and debt

Our primary sources of cash generally consist of unused borrowing capacity under our Revolving Credit Agreement, the net proceeds of future debt or equity offerings, payments of

principal and interest we receive on our portfolio of assets and cash generated from our operating results.

We expect that our primary sources of financing will be, to the extent available to us, through (a) credit facilities and (b) public and

private offerings of our equity and debt securities.

In the future, we may utilize other sources of financing to the extent available to us.

As the cannabis industry continues to evolve and to the extent that additional states legalize cannabis, the demand for capital continues to

increase as operators seek to enter and build out new markets.

We expect the principal amount of the loans we originate to increase and that we will need to raise additional equity and/or debt funds to increase our liquidity in the near future.

As of June 30, 2021 and December 31, 2020, all of our cash was unrestricted and totaled approximately $124.6 million and $9.6 million, respectively.

As the cannabis industry continues to evolve and to the extent that additional states legalize cannabis,

the demand for capital continues to increase as operators seek to enter and build out new markets.

We expect the principal amount of the loans we originate to increase and that we will need to raise additional equity and/or debt funds to increase

our liquidity in the near future.

As of September 30, 2021 and December 31, 2020, all of our cash was unrestricted and totaled approximately $70.0 million and $9.6 million, respectively.

The sources of financing for our target investments are described below.

Revolving Credit Facility

Pursuant to the terms of the Revolving Credit Agreement, our revolving credit facility provides revolving loan commitments of up to $50.0 million and bears interest at a fixed rate of 6% per

annum, payable in cash in arrears.

As of each of June 30, 2021 and December 31, 2020, we did not have any borrowings outstanding under our Revolving Credit Agreement.

Future proceeds under the Revolving Credit Agreement are available to fund loans

and bridge capital contributions and for general corporate purposes.

We did not incur any fees or costs related to the origination of the Revolving Credit Agreement and we are not required to pay any commitment fees under the Revolving Credit

Our obligations under the Revolving Credit Agreement and the other loan documents delivered in connection therewith are secured by a first priority security interest in substantially all of our existing and future assets.

date of the Revolving Credit Agreement is the earlier of (i) December 31, 2021 and (ii) a Refinancing Credit Facility.

The Revolving Credit Agreement provides for certain covenants, including requiring us to deliver financial information and any

notices of default, and conducting business in the normal course.

To the best of our knowledge, as of June 30, 2021, we were in compliance in all material respects with all covenants contained in our Revolving Credit Agreement.

In addition, the

Revolving Credit Agreement contains customary events of default.

In the case of an event of default, the lenders may terminate the commitments under the secured revolving credit facility and require immediate repayment of all outstanding

Pursuant to the terms of the Revolving Credit Agreement, as amended, our Revolving Credit Facility provides revolving loan commitments of up to $75.0 million and bears interest

at a fixed rate of 4.75% per annum, payable in cash in arrears.

Following the effective date of the Second Amendment, funds paid to AFC Finance, LLC for interest, commitment fees and unused fees (net applicable taxes) will go to support charitable

organizations.

As of September 30, 2021 and December 31, 2020, we did not have any borrowings outstanding under our Revolving Credit Agreement.

Future proceeds under the Revolving Credit

Agreement are available to fund loans and bridge capital contributions and for general corporate purposes.

In connection with the Second Amendment dated November 3, 2021, we incurred a one-time commitment fee of 0.25%, or $187,500, payable in three

quarterly installments beginning in the first quarter of 2022.

See above under “Recent Developments” for additional information regarding the Second Amendment.

Following the Second Amendment, the Revolving Credit Facility has an unused line fee of

0.25% per annum, to be paid quarterly in arrears.

Our obligations under the Revolving Credit Agreement and the other loan documents delivered in connection therewith are secured by a first priority security interest in substantially all of our

existing and future assets.

The maturity date of the Revolving Credit Agreement is the earlier of (i) September 30, 2022 and (ii) a Refinancing Credit Facility.

The Revolving Credit Agreement provides for certain covenants, including requiring us

to deliver financial information and any notices of default, and conducting business in the normal course.

To the best of our knowledge, as of September 30, 2021, we were in compliance in all material respects with all covenants contained in our

Revolving Credit Agreement.

In addition, the Revolving Credit Agreement contains customary events of default.

In the case of an event of default, the lender may terminate the commitments under the secured revolving credit facility and require

immediate repayment of all outstanding borrowings.

Such termination and acceleration would occur automatically in the event of certain bankruptcy events.

Other Credit Facilities, Warehouse Facilities and Repurchase Agreements

In the future, we may also use other sources of financing to fund the origination or acquisition of our target investments, including other credit facilities and other secured and unsecured forms

of borrowing.

In the future, we may also use other sources of financing to fund the origination or acquisition of our target investments, including other credit facilities and other secured

and unsecured forms of borrowing.

These financings may be collateralized or non-collateralized and may involve one or more lenders.

We expect that these facilities will typically have maturities ranging from two to five years and may accrue interest at either fixed or

floating rates.

We expect that these facilities will typically have maturities ranging from two to five years and may accrue

interest at either fixed or floating rates.

2027 Senior Notes

On November 3, 2021, we issued $100 million in aggregate

principal amount of our 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.

We intend to use the net 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 the Indenture.

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.

On or after February 1, 2027, we may, at our option, 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.

The Indenture governing the 2027 Senior Notes contains customary terms and restrictions, subject to a number of exceptions and

qualifications, including restrictions on our 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 our consolidated Total Assets (as defined in the Indenture), (3) incur or maintain secured debt in an aggregate principal amount greater than 25% of our consolidated Total Assets (as defined in the Indenture);

merge, consolidate or sell substantially all of our assets.

We were in compliance with the terms of the Indenture as of this quarterly report.

The table below sets forth the material terms of our outstanding senior notes as of November 3, 2021:

Redemption Date

2027 Senior Notes

May 1 & Nov 1

As of September 30, 2021, we believe that our cash on hand, capacity available under our Revolving Credit Facility, and cash flows from operations for the next 12 months will be

sufficient to service our outstanding debt during the next 12 months.

Capital Markets

We may seek to raise further equity capital and issue debt securities in order to fund our future investments in loans.

The following table sets forth changes in cash, cash equivalents and restricted cash for the six months ended June 30, 2021:

June 30, 2021

The following table sets forth changes in cash, cash equivalents and restricted cash for the nine months ended September 30, 2021 and for the period from July 31, 2020 to

September 30, 2020:

September 30, 2021

July 31, 2020 to

September 30, 2020

Adjustments to reconcile net income to net cash provided by / (used in) operating activities and changes in operating assets and liabilities

Net cash provided by operating activities

Net cash provided by / (used in) operating activities

Net cash used in investing activities

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Change in cash, cash equivalents and restricted cash

Net Cash Provided by Operating Activities

For the six months ended June 30, 2021, net cash provided by operating activities totaled approximately $7.5 million.

For the six months ended June 30, 2021, adjustments to net income related to

operating activities primarily included net change in unrealized gain on loans at fair value of approximately $0.6 million, stock-based compensation expense of approximately $1.6 million, PIK interest of approximately $1.3 million, accretion of

deferred loan original issue discount and other discounts of approximately $2.3 million, provision for current expected credit losses of approximately $0.7 million and change in other assets and liabilities of approximately $2.1 million.

Net Cash Provided by / (Used in) Operating Activities

For the nine months ended September 30, 2021, net cash provided by operating activities totaled approximately $7.6 million.

For the nine months ended September 30, 2021,

adjustments to net income related to operating activities primarily included net change in unrealized gain on loans at fair value of approximately $0.8 million, stock-based compensation expense of approximately $1.7 million, PIK interest of

approximately $2.8 million, accretion of deferred loan original issue discount and other discounts of approximately $4.0 million, provision for current expected credit losses of approximately $1.4 million and change in other assets and liabilities

of approximately $1.4 million.

For the period ended September 30, 2020, net cash used in operating activities totaled approximately $0.1 million.

For the period ended September 30, 2020, adjustments to net

income related to operating activities primarily included net change in unrealized gain on loans at fair value of approximately $1.6 million, PIK interest of approximately $0.1 million, accretion of deferred loan original issue discount and other

discounts of approximately $0.2 million and changes in other assets and liabilities of approximately $0.3 million.

Net Cash Used in Investing Activities

For the six months ended June 30, 2021, net cash used in investing activities totaled approximately $61.7 million.

The net cash used in investing activities was primarily a result of the cash

used for the origination and funding of loans held for investment of approximately $76.9 million exceeding the cash received from principal repayment of loans held for investment of approximately $12.9 million and cash received from the sale of

Assigned Rights of approximately $2.3 million for the six months ended June 30, 2021.

For the nine months ended September 30, 2021, net cash used in investing activities totaled approximately $121.5 million.

The net cash used in investing activities was primarily

a result of the cash used for the origination and funding of loans held for investment of approximately $156.3 million exceeding the cash received from principal repayment of loans held for investment of approximately $22.2 million, cash received

from the sale of loans of $10.4 million, and cash received from the sale of Assigned Rights of approximately $2.3 million for the nine months ended September 30, 2021.

For the period ended September 30, 2020, net cash used in investing activities totaled approximately $0.6 million.

The net cash used in investing activities was primarily a

result of the cash used for the origination and funding of loans held for investment of approximately $0.8 million exceeding the cash received from principal repayment of loans held for investment of approximately $0.1 million.

Net Cash Provided by Financing Activities

For the six months ended June 30, 2021, net cash provided by financing activities totaled approximately $169.2 million and related to

proceeds from the issuance of our common stock in our IPO and follow-on public offering of approximately $180.3 million, less offering costs of approximately $3.8 million and less approximately $7.3 million in dividends paid.

For the nine months ended September 30, 2021, net cash provided by financing activities totaled approximately $174.2 million and related to proceeds from the issuance of our

common stock in our IPO and follow-on public offering of approximately $185.5 million, less offering costs of approximately $4.0 million and less approximately $7.3 million in dividends paid.

For the period ended September 30, 2020, net cash provided by financing activities totaled approximately $31.9 million and related to proceeds from the issuance of our common

stock of approximately $31.9 million.

Contractual Obligations and Other Commitments

Our contractual obligations as of June 30, 2021 and December 31, 2020 are as follows:

As of June 30, 2021

Our contractual obligations as of September 30, 2021 and December 31, 2020 are as follows:

As of September 30, 2021

Unfunded Commitments

1 unchanged sentence

Unfunded Commitments

As of June 30, 2021 and December 31, 2020, all unfunded commitments were due in less than one year.

As of September 30, 2021 and December 31, 2020, all unfunded commitments were due in less than one year.

We may enter into certain contracts that may contain a variety of indemnification obligations.

The maximum potential future payment amount we could be required to pay under these indemnification

obligations may be unlimited.

The maximum potential future payment amount we could be required to pay under these

indemnification obligations may be unlimited.

Off-Balance Sheet Arrangements

Off-balance sheet commitments consist of unfunded commitments on delayed draw loans.

Other than as set forth in this quarterly report on Form 10-Q, we do not have any relationships with

unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, special purpose entities or variable interest entities, established to facilitate off-balance sheet arrangements or other

contractually narrow or limited purposes.

Other than as set forth in this quarterly report on Form 10-Q, we do not have any

relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, special purpose entities or variable interest entities, established to facilitate off-balance sheet

arrangements or other contractually narrow or limited purposes.

Further, we have not guaranteed any obligations of unconsolidated entities or entered into any commitment or intend to provide additional funding to any such entities.

Leverage Policies

We currently do not intend to have leverage of more than one times equity and intend to have substantially less drawn on any revolving credit agreements than available commitments under those

Although we are not required to maintain any particular leverage ratio, we expect to employ prudent amounts of leverage and, when appropriate, to use debt as a means of providing additional funds for the acquisition of loans, to

refinance existing debt or for general corporate purposes.

Leverage is primarily used to provide capital for forward commitments until additional equity is raised or additional medium- to long-term financing is arranged.

This policy is subject to

change by management and our Board.

We will elect to be taxed as a REIT for United States federal income tax purposes and, as such, anticipate annually distributing to our stockholders at least 90% of our REIT taxable income, prior

to the deduction for dividends paid and excluding our net capital gain.

If we distribute less than 100% of our REIT taxable income in any tax year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858

of the Internal Revenue Code of 1986, as amended (the “Code”)), we will pay tax at regular corporate rates on that undistributed portion.

Furthermore, if we distribute less than the sum of (i) 85% of our ordinary income for the calendar year, (ii)

95% of our capital gain net income for the calendar year and (iii) any undistributed shortfall from its prior calendar year (the “Required Distribution”) to our stockholders during any calendar year (including any distributions declared by the last

day of the calendar year but paid in the subsequent year), then we are required to pay non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed.

Any of these taxes would

decrease cash available for distribution to our stockholders.

We currently do not intend to have leverage of more than one times equity and intend to have substantially less drawn on any revolving credit agreements than available

commitments under those agreements.

While we are required to maintain a leverage ratio in compliance with the 2027 Senior Notes Indenture, we expect to employ prudent amounts of leverage and, when appropriate, to use debt as a means of providing

additional funds for the acquisition of loans, to refinance existing debt or for general corporate purposes.

Leverage is primarily used to provide capital for forward commitments until additional equity is raised or additional medium- to

long-term financing is arranged.

This policy is subject to change by management and our Board.

We have elected to be taxed as a REIT for United States federal income tax purposes and, as such, intend to annually distribute to our stockholders at least 90% of our REIT

taxable income, prior to the deduction for dividends paid and excluding our net capital gain.

If we distribute less than 100% of our REIT taxable income in any tax year (taking into account any distributions made in a subsequent tax year under

Sections 857(b)(9) or 858 of the Internal Revenue Code of 1986, as amended (the “Code”)), we will pay tax at regular corporate rates on that undistributed portion.

Furthermore, if we distribute less than the sum of (i) 85% of our ordinary income

for the calendar year, (ii) 95% of our capital gain net income for the calendar year and (iii) any undistributed shortfall from its prior calendar year (the “Required Distribution”) to our stockholders during any calendar year (including any

distributions declared by the last day of the calendar year but paid in the subsequent year), then we are required to pay non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually

Any of these taxes would decrease cash available for distribution to our stockholders.

The 90% distribution requirement does not require the distribution of net capital gains.

However, if we elect to retain any of our net capital gain for any tax year, we must notify our

stockholders and pay tax at regular corporate rates on the retained net capital gain.

The stockholders must include their proportionate share of the retained net capital gain in their taxable income for the tax year, and they are deemed to have

paid the REIT’s tax on their proportionate share of the retained capital gain.

However, if we elect to retain any of our net capital gain

for any tax year, we must notify our stockholders and pay tax at regular corporate rates on the retained net capital gain.

The stockholders must include their proportionate share of the retained net capital gain in their taxable income for the tax

year, and they are deemed to have paid the REIT’s tax on their proportionate share of the retained capital gain.

Furthermore, such retained capital gain may be subject to the nondeductible 4% excise tax.

If we determine that our estimated current year taxable income (including net

capital gain) will be in excess of estimated dividend distributions (including capital gains dividends) for the current year from such income, we will accrue excise tax on a portion of the estimated excess taxable income as such taxable income is

To the extent that our cash available for distribution is less than the amount required to be distributed under the REIT provisions of the Code, we may be required to fund distributions from

working capital or through equity, equity-related or debt financings or, in certain circumstances, asset sales, as to which our ability to consummate transactions in a timely manner on favorable terms, or at all, cannot be assured, or we may make a

portion of the Required Distribution in the form of a taxable stock distribution or distribution of debt securities.

Any future determination to actually pay dividends or other distributions will be at the discretion of our Board, subject to compliance with applicable law and any contractual provisions,

including under agreements for indebtedness we may incur, that restrict or limit our ability to pay dividends, and will depend upon, among other factors, our results of operations, financial condition, earnings, capital requirements, the annual

distribution requirements under the REIT provisions of the Code, our REIT taxable income and other factors that our Board deems relevant.

Under the Maryland General Corporation Law, we generally may only pay a dividend or other distribution if,

after giving effect to the distribution, we would be able to pay our indebtedness as it becomes due in the usual course of business and our total assets exceed our total liabilities.

If we determine that our estimated current

year taxable income (including net capital gain) will be in excess of estimated dividend distributions (including capital gains dividends) for the current year from such income, we will accrue excise tax on a portion of the estimated excess taxable

income as such taxable income is earned.

To the extent that our cash available for distribution is less than the amount required to be distributed under the REIT provisions of the Code, we may be required to fund

distributions from working capital or through equity, equity-related or debt financings or, in certain circumstances, asset sales, as to which our ability to consummate transactions in a timely manner on favorable terms, or at all, cannot be

assured, or we may make a portion of the Required Distribution in the form of a taxable stock distribution or distribution of debt securities.

Any future determination to actually pay dividends or other distributions will be at the discretion of our Board, subject to compliance with applicable law and any contractual

provisions, including under agreements for indebtedness we may incur, that restrict or limit our ability to pay dividends, and will depend upon, among other factors, our results of operations, financial condition, earnings, capital requirements,

the annual distribution requirements under the REIT provisions of the Code, our REIT taxable income and other factors that our Board deems relevant.

Under the Maryland General Corporation Law, we generally may only pay a dividend or other

distribution if, after giving effect to the distribution, we would be able to pay our indebtedness as it becomes due in the usual course of business and our total assets exceed our total liabilities.

Critical Accounting Policies and Estimates

As of June 30, 2021, there were no significant changes in or changes in the application of our critical accounting policies or estimates from those presented in the Final Prospectus.

As of September 30, 2021, there were no significant changes in or changes in the application of our critical accounting policies or estimates from those presented in our Final

Prospectus, included in the Company’s Registration Statement on Form S-11, as amended (SEC File No.

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 2. Management’s Discussion and Analysis