Advanced Flower Capital Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview AFC Gamma, Inc. is an institutional lender to the cannabis industry that was founded in July 2020 by a veteran team of investment professionals. We originate, structure and underwrite, and invest in senior secured loans and other types of loans and debt securities for established cannabis industry operators in states that have legalized medical 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 currently capital constrained cannabis market which does not typically have access to traditional bank financing, we believe we are well positioned to continue as 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, 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. Some of our borrowers have their equity securities listed for public trading on the Canadian Securities Exchange (“CSE”) in Canada and/or over-the-counter (“OTC”) in the United States. Our loans typically have up to a five-year maturity and contain amortization and/or cash flow sweeps. We commenced operations on July 31, 2020 and completed our initial public offering (“IPO”) in March 2021 . 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 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. Our wholly-owned subsidiary, AFCG TRS1, LLC (“TRS1”), operates as a taxable REIT subsidiary. TRS1 began operating in July 2021. Our investment in the equipment loan to Public Company A was transferred to TRS1 on July 31, 2021 and constituted substantially all of the assets of TRS1 as of March 31, 2022. The financial statements of TRS1 have been consolidated within our consolidated financial statements. On April 1, 2022, our investment in the senior secured loan to Private Company I was transferred to TRS1. We are an “emerging growth company,” as defined in the 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. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we 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 difficult. Additionally, because we have taken advantage of certain reduced reporting requirements available to smaller reporting companies and emerging growth companies, the information contained herein may be different from the information you receive from other public companies. We could remain an “emerging growth company” for up to five years from our IPO, 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 Exchange Act, 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. 26 Index Developments in the First Quarter of 2022: Equity and Debt Offerings On January 10, 2022, we completed an underwritten offering of 3,000,000 shares of our common stock, at a price of $20.50 per share. Our gross proceeds from the offering were $61.5 million, before deducting underwriting discounts and commissions, a structuring fee and offering expenses. In connection with the offering, the underwriters were granted an over-allotment option to purchase up to an additional 450,000 shares of our common stock. On January 14, 2022, the underwriters partially exercised the over-allotment option with respect to 291,832 shares of common stock, which was completed on January 19, 2022. The underwriting commissions of approximately $3.5 million were reflected as a reduction of additional paid-in capital in the first quarter of fiscal year 2022. We incurred approximately $1.0 million of expenses in connection with the offering. After giving effect to the partial exercise of the over-allotment option, the total number of shares sold in the public offering was 3,291,832 shares and total gross proceeds, before deducting underwriting discounts and commissions, a structuring fee and other offering expenses, were approximately $67.5 million. Pursuant to the Articles of Amendment, dated March 10, 2022, we increased the number of authorized shares of common stock from 25,000,000 to 50,000,000 shares at $0.01 par value per share. Updates to Our Loan Portfolio during the First Quarter of 2022 During the first quarter of 2022, we increased commitments to three current borrowers in the amount of approximately $46.9 million and funded approximately $51.5 million of principal amount of new and existing commitments. Additionally, we sold one investment in debt securities of $15.0 million, sold one loan of $10.0 million, and were repaid by Private Company E of approximately $20.0 million. In February 2022, Private Company E repaid its loan in full. The loan had an original maturity date of April 2026 and the outstanding principal on the date of repayment was approximately $20.0 million. We received a prepayment premium of approximately $1.3 million upon repayment of the loan. In February 2022, we committed an additional $15.3 million under the expansion to the Private Company A Credit Facility, and now hold $77.8 million in total of the expanded credit facility, and an additional $1.0 million of the expansion was syndicated. In February 2022, we sold our $15.0 million investment in the Public Company G debt securities for 106% of the face value, resulting in a loss of approximately $0.2 million. This investment was classified as available-for-sale as of December 31, 2021. In March 2022, we entered into the fourth amendment of the Amended and Restated Credit Agreement with Public Company F to, among other things, increase the total loan commitments by $100 million, with approximately (i) $26.6 million of the new loan commitments allocated to us; (ii) $15.0 million of the new loan commitments allocated to Flower Loan Holdco LLC; and (iii) the remaining loan commitments allocated to third-party lenders by the third-party agent. In March 2022, we committed an additional $5.0 million under the Private Company B credit facility. Following the expansion, we now hold $15.5 million in commitments, of which we funded approximately $12.9 million of total principal amount. In March 2022, we sold our $10.0 million investment in the Subsidiary of Public Company D for 106% of the par value, resulting in a gain of approximately $0.6 million. Dividends Declared Per Share In March 2022, we declared a regular cash dividend of $0.55 per share of our common stock, relating to the first quarter of 2022, which was paid on April 15, 2022 to stockholders of record as of March 31, 2022. The aggregate amount of the regular cash dividend payment was approximately $10.9 million. Recent Developments Subsequent to the end of the first quarter, the Company closed two new loans with commitments of approximately $107.3 million, and funded approximately $79.9 million of principal amount of new and existing commitments. In April 2022, each of the loans to Private Company D and Private Company F were repaid in full in connection with the Company’s new loan to Private Company L, an affiliate of Private Company D and Private Company F. The loans to Private Company D and Private Company F had original maturity dates of January 2026 and May 2026, respectively. The outstanding principal of Private Company D and Private Company F on the date of repayment was approximately $12.1 million and $12.9 million, respectively. In addition to the repayment of outstanding principal amounts of the loan to Private Company D and Private Company F, the Company received approximately $0.2 million and $2.0 million related to exit fees and other fees upon repayment of the loans, respectively. 27 Index In April 2022, the loan to Private Company K was repaid in connection with our refinancing and restructuring the loan under a new credit facility with Private Company K. Under the new credit facility with Private Company K, we increased the total loan commitment to approximately $24.8 million, from $19.8 million, and restructured the construction obligations of the borrowers, among other things. As restructured, the Private Company K loan accrues interest at a floating rate, with a floor of 13%, and matures in May 2027. Following the repayment of Private Company K loan, five of our loans have been repaid prior to maturity since March 2021. In April 2022, we filed our shelf registration statement on Form S-3 with the SEC, registering the offer and sale of up to $1.0 billion of securities (the “Shelf Registration Statement”). The Shelf Registration Statement enables us to issue shares of common stock, preferred stock, debt securities, warrants, rights, as well as units that include one or more of such securities. The Shelf Registration Statement also included a prospectus for an at-the-market offering program to sell up to an aggregate of $75.0 million of shares of our common stock (the “ATM Program”) that may be issued and sold from time to time under the Sales Agreement, dated April 5, 2022 (the “Sales Agreement”), with Jefferies LLC and JMP Securities LLC, as Sales Agents. Under the terms of the Sales Agreement, we have agreed to pay the Sales Agents a commission of up to 3.0% of the gross proceeds from each sale of common stock under the Sales Agreement. As of May 9, 2022, no securities have been issued pursuant to the Shelf Registration Statement or the ATM Program the date of this filing. On April 29, 2022, we entered into the Loan and Security Agreement (the “Revolving Credit Agreement”) by and among us, the other loan parties from time-to-time party thereto, the lenders party thereto, and the Lead Arranger, Bookrunner and Agent party thereto, pursuant to which, the Company obtained a $60.0 million senior-secured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility contains aggregate commitments of $60.0 million from two FDIC-insured banking institutions, which may be increased to up to $100.0 million in aggregate (subject to available borrowing base and additional commitments), with a maturity date of April 29, 2025. Interest is payable on the Revolving Credit Facility at the greater of (1) the applicable base rate plus 0.50% and (2) 4.50%, as provided in the Revolving Credit Agreement, payable in cash in arrears. 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, book value per share and dividends declared per share. Non-GAAP Metrics Distributable Earnings In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use 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. 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 Compensation earned under the Management Agreement for the applicable time period, and thus Core Earnings is calculated without giving effect to Incentive Compensation expense, while the calculation of Distributable Earnings accounts for any Incentive Compensation 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) stock-based 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, (v) TRS (income) loss and (vi) 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. 28 Index We believe providing 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 at least equal to such REIT taxable income, if and to the extent authorized by our Board. Distributable Earnings is one of many factors considered by our Board in authorizing 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 is a non-GAAP financial measure and should not be considered as substitutes for GAAP net income. We caution readers that our methodology for calculating 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 may not be comparable to similar measures presented by other REITs. The following table provides a reconciliation of GAAP net income to Distributable Earnings: Three months ended March 31, 2022 2021 Net Income $ 10,162,120 $ 1,400,755 Adjustments to net income Stock-based compensation expense 990,023 1,599,115 Depreciation and amortization - - Unrealized (gain), losses or other non-cash items (80,843 ) 144,402 Provision for current expected credit losses 905,129 66,100 TRS (income) loss (61,071 ) - One-time events pursuant to changes in GAAP and certain non-cash charges - - Distributable Earnings $ 11,915,358 $ 3,210,372 Basic weighted average shares of common stock outstanding (in shares) 19,319,993 7,144,670 Distributable Earnings per Basic Weighted Average Share $ 0.62 $ 0.45 Book Value Per Share We believe that book value per share is helpful to shareholders 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 March 31, 2022 and December 31, 2021 was approximately $17.04 and $16.61, respectively. Dividends Declared Per Share For the period ended March 31, 2022 and year ended December 31, 2021, we paid the following cash dividends: Date Declared Payable to Shareholders of Record at the Close of Business on Date Paid Amount Per Share Aggregate Amount Paid March 12, 2021 March 15, 2021 March 31, 2021 $0.36 $2.2 million May 7, 2021 June 15, 2021 June 30, 2021 $0.38 $5.1 million September 15, 2021 September 30, 2021 October 15, 2021 $0.43 $7.1 million December 15, 2021 December 31, 2021 January 14, 2022 $0.50 $8.2 million March 10, 2022 March 31, 2022 April 15, 2022 $0.55 $10.9 million 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 margin, 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 margin, 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. 29 Index Results of Operations The comparative period for the three months ended March 31, 2022 is the three months ended March 31, 2021 (the “Prior Period ”). For the three months ended March 31, 2022 and 2021 Our net income allocable to our common stockholders for the three months ended March 31, 2022 was approximately $10.2 million or $0.53 per basic weighted average common share, respectively, compared to net income allocable to our common stockholders of $1.4 million or $0.20 per basic weighted average common share for the three months ended March 31, 2021. Interest income increased approximately $13.9 million, from approximately $4.7 million for the three months ended March 31, 2021, to approximately $18.6 million for the three months ended March 31, 2022. This increase was primarily due to an increase in principal outstanding of approximately $98.4 million at March 31, 2021 to $373.7 million at March 31, 2022. Interest expense increased approximately $1.7 million for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021. This increase was due to interest expense incurred and amortization of deferred financing costs relating to our AFCF Revolving Credit Facility, which was amended in November 2021, and our 2027 Senior Notes that were issued in November 2021. General and administrative expenses increased approximately $0.7 million for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021. This increase was primarily due to an increase in expenses relating to personnel, overhead, and occupancy costs as the Company continues to expand. Management fees increased approximately $0.7 million for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021. This increase was primarily due to an increase in the Company’s Equity from approximately $216.3 million to $336.5 million and partially offset by a change in the management fee rate upon our IPO from 0.4375% to 0.375% post-IPO. Incentive fees increased by approximately $2.3 million from approximately $0.7 million to $3.0 million for the three months ended March 31, 2022 and 2021, respectively. This increase was driven by the increase in Core Earnings as defined in the Management Agreement. Provision for Current Expected Credit Losses For the three months ended March 31, 2022, the increase to our provision for current expected credit loss was approximately $0.9 million and the balance as of March 31, 2022 was approximately $4.0 million or 150 basis points of our total loans held at carrying value and loans receivable at carrying value balance of approximately $267.4 million 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 approximately $3.4 million and (ii) a liability for unfunded commitments of approximately $0.6 million. For the three months ended March 31, 2021, the increase to our provision for current expected credit loss was approximately $0.1 million and the balance as of March 31, 2021 was approximately $0.5 million or 125 basis points of our total loans held at carrying value and loans receivable at carrying value balance of approximately $42.4 million 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 approximately $0.2 million and (ii) a liability for unfunded commitments of approximately $0.3 million. 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. The increase in the provision for current expected credit losses for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 is primarily due to changes in macroeconomic factors, changes to the loan portfolio including new commitments and repayments, and changes in other datapoints we use in estimating the reserve. Loan Portfolio As of March 31, 2022 and December 31, 2021, our portfolio included three loans held at fair value. The aggregate originated commitment under these loans was approximately $96.2 million and $75.9 million as of March 31, 2022 and December 31, 2021, respectively, and outstanding principal was approximately $95.6 million and $77.6 million as of March 31, 2022 and December 31, 2021, respectively. For the three months ended March 31, 2022, we funded approximately $17.3 million of additional principal of loans held at fair value and we had no repayments of loans held at fair value. As of March 31, 2022 and December 31, 2021, none of our loans held at fair value had floating interest rates. 30 Index The following tables summarize our loans held at fair value as of March 31, 2022 and December 31, 2021: As of March 31, 2022 Fair Value (1) Carrying Value (2) Outstanding Principal (2) Weighted Average Remaining Life (Years) (3) Senior term loans $ 95,072,832 $ 92,808,827 $ 95,618,815 2.0 Total loans held at fair value $ 95,072,832 $ 92,808,827 $ 95,618,815 2.0 As of December 31, 2021 Fair Value (1) Carrying Value (2) Outstanding Principal (2) Weighted Average Remaining Life (Years) (3) Senior term loans $ 77,096,319 $ 74,913,157 $ 77,630,742 2.2 Total loans held at fair value $ 77,096,319 $ 74,913,157 $ 77,630,742 2.2 (1) Refer to Note 14 to our unaudited interim consolidated financial statements titled “Fair Value.” (2) The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted OID and loan origination costs. (3) Weighted average remaining life is calculated based on the fair value of the loans as of March 31, 2022 and December 31, 2021. The following table presents changes in loans held at fair value as of and for the three months ended March 31, 2022: Principal Original Issue Discount Unrealized Gains (Losses) Fair Value Total loans held at fair value at December 31, 2021 $ 77,630,742 $ (2,717,584 ) $ 2,183,161 $ 77,096,319 Change in unrealized gains (losses) on loans at fair value, net - - 80,843 80,843 New fundings 17,285,000 (429,275 ) - 16,855,725 Accretion of original issue discount - 336,872 - 336,872 PIK interest 703,073 - - 703,073 Total loans held at fair value at March 31, 2022 $ 95,618,815 $ (2,809,987 ) $ 2,264,004 $ 95,072,832 As of March 31, 2022 and December 31, 2021, our portfolio included zero and one investments in debt securities, respectively, held at fair value. We sold our investment in debt securities in the first quarter of 2022 for approximately $15.9 million, which was previously designated as available-for-sale as of December 31, 2021. For the period ended March 31, 2022 and 2021, the realized loss on the sale of marketable securities was approximately $0.2 million and $0.0 million, respectively. We did not hold any investments in debt securities as of March 31, 2022. The following table summarizes our debt securities held at fair value as of March 31, 2022 and December 31, 2021. As of December 31, 2021 Fair Value Carrying Value (1) Outstanding Principal (1) Weighted Average Remaining Life (Years) (2) Debt securities $ 15,881,250 $ 16,050,000 $ 15,000,000 2.9 Total debt securities held at fair value $ 15,881,250 $ 16,050,000 $ 15,000,000 2.9 (1) The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted purchase premium and loan origination costs. (2) Weighted average remaining life is calculated based on the fair value of the loans as of December 31, 2021. 31 Index The following table presents changes in debt securities held at fair value as of and for the three months ended March 31, 2022: Principal Original Issue Discount Unrealized Gains (Losses) Fair Value Total debt securities held at fair value at December 31, 2021 $ 15,000,000 $ 1,050,000 $ (168,750 ) $ 15,881,250 Realized gains (losses) on securities at fair value, net - (150,000 ) - (150,000 ) Change in unrealized gains (losses) on securities at fair value, net - - 168,750 168,750 Sale of loans (15,000,000 ) (900,000 ) - (15,900,000 ) Total debt securities held at fair value at March 31, 2022 $ - $ - $ - $ - As of March 31, 2022 and December 31, 2021, our portfolio included ten and twelve loans, respectively, held at carrying value. The aggregate originated commitment under these loans was approximately $319.9 million and $324.3 million, respectively, and outstanding principal was approximately $275.8 million and $270.8 million, respectively, as of March 31, 2022 and December 31, 2021. During the three months ended March 31, 2022, we funded approximately $34.2 million of additional principal. As of March 31, 2022 and December 31, 2021, approximately 42% and 48%, respectively, of our loans held at carrying value have floating interest rates. These floating rates are subject to 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 our loans held at carrying value as of March 31, 2022 and December 31, 2021: As of March 31, 2022 Outstanding Principal (1) Original Issue Discount Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior term loans $ 275,839,406 $ (10,687,924 ) $ 265,151,482 2.9 Total loans held at carrying value $ 275,839,406 $ (10,687,924 ) $ 265,151,482 2.9 As of December 31, 2021 Outstanding Principal (1) Original Issue Discount Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior term loans $ 270,841,715 $ (13,678,219 ) $ 257,163,496 3.4 Total loans held at carrying value $ 270,841,715 $ (13,678,219 ) $ 257,163,496 3.4 (1) The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted OID and loan origination costs. (2) Weighted average remaining life is calculated based on the carrying value of the loans as of March 31, 2022 and December 31, 2021. 32 Index The following table presents changes in loans held at carrying value as of and for the three months ended March 31, 2022: Principal Original Issue Discount Carrying Value Total loans held at carrying value at December 31, 2021 $ 270,841,715 $ (13,678,219 ) $ 257,163,496 New fundings 34,245,888 (638,400 ) 33,607,488 Accretion of original issue discount - 3,628,695 3,628,695 Loan repayments (20,010,726 ) - (20,010,726 ) Sale of loans (10,000,000 ) - (10,000,000 ) PIK interest 915,688 - 915,688 Loan amortization payments (153,159 ) - (153,159 ) Total loans held at carrying value at March 31, 2022 $ 275,839,406 $ (10,687,924 ) $ 265,151,482 As of March 31, 2022 and December 31, 2021, 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 $2.3 million and $2.5 million as of March 31, 2022 and December 31, 2021, respectively. During the three months ended March 31, 2022, we received repayments of approximately $0.3 of outstanding principal. The following table presents changes in loans receivable as of and for the three months ended March 31, 2022: Principal Original Issue Discount Carrying Value Total loans receivable at carrying value at December 31, 2021 $ 2,533,266 $ (2,678 ) $ 2,530,588 Principal repayment of loans (251,574 ) - (251,574 ) Accretion of original issue discount - 310 310 Total loans receivable at carrying value at March 31, 2022 $ 2,281,692 $ (2,368 ) $ 2,279,324 The below table summarizes our total loan portfolio as of March 31, 2022: Loan Names Status Original Funding Date (1) Loan Maturity AFCG Loan, net of Syndication % of Total AFCG Principal Balance as of 3/31/2022 Cash Interest Rate PIK Fixed/ Floating Amortization During Term YTM (2)(3) Public Co. A - Real Estate Loan Funded 7/3/2019 1/26/2023 $ 2,940,000 0.7 % $ 2,994,612 10.0 % 4.0 % Fixed No 19 % Public Co. A - Equipment Loans Funded 8/5/2019 3/5/2024 4,000,000 0.9 % 2,281,692 12.0 % N/A Fixed Yes 19 % Private Co. A (4) Funded 5/8/2020 5/8/2024 77,785,000 18.5 % 79,744,238 12.8 % 2.7 % Fixed Yes 22 % Private Co. B Funded 9/10/2020 9/1/2023 15,500,000 3.7 % 12,879,965 13.0 % 4.0 % Fixed Yes 28 % Private Co. C Funded 11/5/2020 12/1/2025 24,000,000 5.7 % 24,910,301 13.0 % 4.0 % Floating Yes 23 % Private Co. D Funded 12/23/2020 1/1/2026 12,000,000 2.9 % 12,138,516 13.0 % 2.0 % Fixed Yes 21 % Private Co. F Funded 4/27/2021 5/1/2026 13,000,000 3.1 % 12,811,265 13.0 % 4.0 % Fixed Yes 28 % Sub of Private Co. G (5) Funded 4/30/2021 5/1/2026 65,400,000 15.6 % 50,398,476 12.5 % 1.8 % Floating Yes 21 % Sub of Private Co. H (6) Funded 5/11/2021 5/11/2023 5,781,250 1.4 % 5,781,250 15.0 % N/A Fixed No 20 % Public Co. F (5) Funded 5/21/2021 5/30/2023 86,600,000 20.6 % 86,600,000 8.6 % N/A Fixed No 11 % Private Co. I Funded 7/14/2021 8/1/2026 10,326,875 2.4 % 10,490,497 13.0 % 2.5 % Floating Yes 21 % Private Co. K Funded 8/20/2021 8/3/2026 19,750,000 4.7 % 7,000,000 13.0 % N/A Floating Yes 18 % Private Co. J Funded 8/30/2021 9/1/2025 23,000,000 5.5 % 23,209,100 13.0 % 2.0 % Floating Yes 20 % Sub of Public Co. H Funded 12/16/2021 1/1/2026 60,000,000 14.3 % 42,500,000 9.8 % N/A Fixed No 14 % SubTotal $ 420,083,125 100.0 % $ 373,739,912 11.5 % 1.7 % 19 % Wtd Average Information is as of March 31, 2022 unless otherwise specified. Borrower names have been kept confidential due to confidentiality agreement obligations. (1) 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 features. 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. 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 . 33 Index 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 and collectability of exit fees, the probability and timing of prepayments and the probability of contingent features occurring. For example, certain 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. Actual results could differ from those estimates and assumptions. (3) Estimated YTM for the loans with Public Company A, Private Company A, and Private Company D 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) PIK interest rate for Private Co. A represents a blended rate of differing PIK interest rates applicable to each of the three tranches to which we are a lender under the senior secured term loan credit facility with Private Company A (as may be amended, supplemented, amended and restated or otherwise modified from time to time, the ‘‘Private Company A Credit Facility’’) . (5) Cash interest and PIK interest rates for the Subsidiary of Private Company G and Public Co. F represents a blended rate of differing cash interest and PIK interest rates applicable to each of the three tranches with differing rates . (6) 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. The first 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 . Collateral Overview Our loans are secured by various types of assets of our borrowers, including real property and certain personal property, including value associated with licenses, equipment, and other assets to the extent permitted by applicable laws and the regulations governing our borrowers. We do not have liens on cannabis inventory and are generally restricted from taking ownership of state licenses by current statutory prohibitions and exchange listing standards. The documents governing our loans also include a variety of provisions intended to provide remedies against the value associated with licenses. For example, some loan documents require a grant of a security interest in all property of the entities holding licenses to the extent not prohibited by applicable law or regulations (or requiring regulatory approval), equity pledges of entities holding licenses, receivership remedies and/or other remedies to secure the value associated with the borrowers’ licenses. Upon default of a loan, we may seek to sell the loan to a third party or have an affiliate or a third-party work with the borrower to have the borrower sell collateral securing the loan to a third party or institute a foreclosure proceeding to have such collateral sold, in each case, to generate funds towards the payoff of the loan. While we believe that the appraised value of any real estate assets or other collateral securing our loans may impact the amount of the recovery in each such scenario, the amount of any such recovery from the sale of such real estate or other collateral may be less than the appraised value of such collateral and the sale of such collateral may not be sufficient to pay off the remaining balance on the defaulted loan. Becoming the holder of a license through foreclosure or otherwise, the sale of a license or other realization of the value of licenses requires the approval of regulatory authorities. As of March 31, 2022, our portfolio of loans had a weighted average real estate collateral coverage of approximately 1.2 times our aggregate committed principal amount of such loans. Our real estate collateral coverage for each of our loans was measured at the time of underwriting and based on various sources of data available at such time. We calculate our weighted average real estate collateral coverage by estimating the underlying value of our real estate collateral based on various objective and subjective factors, including, without limitation, third-party appraisals, total cost basis of the subject property and/or our own internal estimates. We may pursue a sale of a defaulted loan if we believe that a sale would yield higher proceeds or that a sale could be accomplished more quickly than a foreclosure proceeding while yielding proceeds comparable to what would be expected from a foreclosure sale. To the extent that we determine that the proceeds are more likely to be maximized through instituting a foreclosure sale or through taking title to the underlying collateral, we will be subject to the rules and regulations under state law that govern foreclosure sales and Nasdaq listing standards that do not permit us to take title to real estate while it is involved in commercial sales of cannabis. In addition, the sale of the collateral securing our loans may be difficult and may be to a party outside of the cannabis industry. Therefore, any appraisal-based value of our real estate and other collateral may not equal the value of such collateral if it were to be sold to a third party in a foreclosure or similar proceeding. We may seek to sell a defaulted loan prior to commencing a foreclosure proceeding or during a foreclosure proceeding to a purchaser that is not required to comply with Nasdaq listing standards. We believe a third-party purchaser that is not subject to Nasdaq listing standards may be able to realize greater value from real estate and other collateral securing our loans. However, we can provide no assurances that a third party would buy such loans or that the sales price of such loans would be sufficient to recover the outstanding principal balance, accrued interest, and fees. We will not own real estate as long as it is used in the commercial sale of cannabis due to current statutory prohibitions and exchange listing standards, which may delay or limit our remedies in the event that any of our borrowers default under the terms of their loans with us. 34 Index 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. 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. The sources of financing for our target investments are described below. Our primary sources of cash generally consist of unused borrowing capacity under our financing sources, 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. Our Shelf Registration Statement became effective on April 18, 2022, allowing us to sell, from time to time in one or more offerings, up to $1.0 billion of our securities, including common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of our common stock or preferred stock. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering. We may also access liquidity through our ATM Program, which was established in April 2022 pursuant to which we may sell, from time to time, up to $75.0 million of our common stock. As of May 9, 2022, no sales of common stock have been made under the ATM program. We expect that our primary sources of financing will be, to the extent available to us, through (a) credit facilities, (b) public and private offerings of our equity and debt securities, and (c) ATM Program. 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 March 31, 2022 and December 31, 2021, all of our cash was unrestricted and totaled approximately $63.6 million and $109.2 million, respectively. As of March 31, 2022, we believe that our cash on hand, capacity available under our line of credit and cash flows from operations will be sufficient to satisfy the operating requirements of our business through at least the next twelve months. Revolving Credit Facility On April 29, 2022, we entered into Revolving Credit Agreement by and among us, the other loan parties from time-to-time party thereto, the lenders party thereto, and the Lead Arranger, Bookrunner and Agent party thereto, pursuant to which, we obtained a $60.0 million senior-secured revolving credit facility. The Revolving Credit Facility contains aggregate commitments of $60.0 million from two FDIC-insured banking institutions, which may be increased to up to $100.0 million in aggregate (subject to available borrowing base and additional commitments), and contains a maturity date of April 29, 2025. Interest is payable on the Revolving Credit Facility at the greater of (1) the applicable base rate plus 0.50% and (2) 4.50%, as provided in the Revolving Credit Agreement, payable in cash in arrears. We incurred a one-time commitment fee expense of approximately $0.4 million, which will be amortized over the life of the facility. Commencing on the six-month anniversary of the closing date, the Revolving Credit Facility has an unused line fee of 0.25% per annum, to be paid semi-annually in arrears, which will be included within interest expense in the Company’s consolidated statements of operations. Our obligations under the Revolving Credit Facility are secured by certain assets of ours comprising of or relating to loan obligations designated for inclusion in the borrowing base. In addition, we are subject to various financial and other covenants, including: (1) liquidity of at least $5.0 million, (2) annual debt service coverage of at least 1.50 to 1.0 and (3) secured debt not to exceed 25% of total consolidated assets of us and our subsidiaries. 35 Index Termination of AFC Finance Credit Facility Pursuant to the terms of the AFCF Revolving Credit Agreement, as amended, the AFCF Revolving Credit Facility provided 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 of applicable taxes) will go to support charitable foundations. As of March 31, 2022 and December 31, 2021, we had $0.0 million and $75.0 million of borrowings outstanding under our Revolving Credit Agreement, respectively. All outstanding borrowings as of December 31, 2021 were repaid in full on January 3, 2022. 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 of the Revolving Credit Agreement (“the Second Amendment”), we incurred a one-time commitment fee of 0.25%, or $187,500, which is payable in three quarterly installments, beginning in the first quarter of 2022. Following the Second Amendment, the Revolving Credit Facility has an unused fee of 0.25% per annum on the undrawn amount of the revolving loan commitments, 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 March 31, 2022, 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 . On April 29, 2022, upon our entry into the Revolving Credit Facility, we terminated the AFCF Revolving Credit Agreement. 2027 Senior Notes On November 3, 2021, we issued $100.0 million in aggregate principal amount of the 2027 Senior Notes. The 2027 Senior Notes accrue interest at a rate of 5.75% per annum. Interest on the 2027 Senior Notes is due semi-annually on May 1 and November 1 of each year, beginning on May 1, 2022. The net proceeds from the issuance of the 2027 Senior Notes were approximately $97.0 million, after deducting the initial purchasers’ discounts and commissions and estimated offering fees and expenses payable by us. 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. Under the Indenture governing the 2027 Senior Notes, we are required to cause all of our existing and future subsidiaries to guarantee the 2027 Senior Notes, other than certain immaterial subsidiaries as set forth in the Indenture. As of March 31, 2022, the 2027 Senior Notes are not guaranteed by any of our subsidiaries. Prior to February 1, 2027, we may redeem the 2027 Senior Notes at any time, in whole or from time to time in part, at a redemption price equal to the greater of 100% of the principal amount thereof or a make-whole premium set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. On or after February 1, 2027, we may redeem the 2027 Senior Notes in whole or in part at a price equal to 100% of the principal amount of the 2027 Senior Notes being redeemed, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. The Indenture also requires us to offer to purchase all of the 2027 Senior Notes at a purchase price equal to 101% of the principal amount of the 2027 Senior Notes, plus accrued and unpaid interest if a “change of control triggering event” (as defined in the Indenture) occurs. 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); and (4) merge, consolidate or sell substantially all of our assets. In addition, the Indenture also provides for customary events of default. If any event of default occurs, any amount then outstanding under the Indenture may immediately become due and payable. These events of default are subject to a number of important exceptions and qualifications set forth in the Indenture. We were in compliance with the terms of the Indenture as of the date of this quarterly report. 36 Index The table below sets forth the material terms of our outstanding senior notes as of the date of this quarterly report: Senior Notes Issue Date Amount Outstanding Interest Rate Coupon Maturity Date Interest Due Dates Optional Redemption Date 2027 Senior Notes November 3, 2021 $100.0 million 5.75% May 1, 2027 May 1 and November 1 February 1, 2027 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. 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. Debt Service As of March 31, 2022, we believe that our cash on hand, capacity available under our Revolving Credit Facility, and cash flows from operations will be sufficient to service our outstanding debt during the next twelve months. Capital Markets We may seek to raise further equity capital and issue debt securities in order to fund our future investments in loans. Cash Flows The following table sets forth changes in cash, cash equivalents and restricted cash for the three months ended March 31, 2022 and 2021: Three months ended March 31, 2022 2021 Net Income $ 10,162,120 $ 1,400,755 Adjustments to reconcile net income to net cash provided by (used in) operating activities and changes in operating assets and liabilities (5,496,773 ) 970,030 Net cash provided by (used in) operating activities 4,665,347 2,370,785 Net cash provided by (used in) investing activities (30,047,753 ) (6,885,056 ) Net cash provided by (used in) financing activities (20,248,463 ) 121,684,423 Change in cash and cash equivalents $ (45,630,869 ) $ 117,170,152 Net Cash Provided by (Used in) Operating Activities Net cash provided by operating activities during the three months ended March 31, 2022 was approximately $4.7 million, compared to approximately $2.4 million for the same period in 2021. The increase from March 31, 2021 to March 31, 2022 was primarily due to an increase in net income of approximately $8.8 million, increase in accrued interest of approximately $1.4 million, offset by an increase in accretion of OID of approximately $(3.3) million, increase in PIK interest of approximately $(1.1) million, and decrease in the interest reserve balance of approximately $(4.1) million. Net Cash Provided by (Used in) Investing Activities Net cash used in investing activities during the three months ended March 31, 2022 was approximately $30.0 million, compared to approximately $6.9 million for the same period in 2021. The change was caused primarily by loan issuance and fundings of approximately $50.5 million in this period versus the Prior Period of approximately $7.1 million, offset by repayment of loans of approximately $20.4 million this period versus $0.1 million in the Prior Period, respectively. Net Cash Provided by (Used in) Financing Activities Net cash used in financing activities during the three months ended March 31, 2022 was approximately $20.2 million, compared to net cash provided by financing activities of approximately $121.7 million for the same period in 2021. The change was caused primarily by the change in proceeds from the sale of common stock of approximately $63.9 million in this period versus approximately $127.0 million in the Prior Period as well as the repayments on the Revolving Credit Facility of approximately $75.0 million in the current period, versus $0 in the Prior Period. 37 Index Contractual Obligations, Other Commitments, and Off-Balance Sheet Arrangements Our contractual obligations as of March 31, 2022 and December 31, 2021 are as follows: As of March 31, 2022 Less than 1 year 1-3 years 3-5 years More than 5 years Total Unfunded commitments $ 49,438,020 - - - $ 49,438,020 Total $ 49,438,020 - - - $ 49,438,020 As of December 31, 2021 Less than 1 year 1-3 years 3-5 years More than 5 years Total Unfunded commitments $ 55,538,620 - - - $ 55,538,620 Total $ 55,538,620 - - - $ 55,538,620 As of March 31, 2022 and December 31, 2021, all unfunded commitments relate to our total loan commitments and were available for funding in less than one year. The Company also had the following contractual obligations as of March 31, 2022 and December 31, 2021 relating to the senior unsecured notes: As of March 31, 2022 Less than 1 year 1-3 years 3-5 years More than 5 years Total Contractual obligations (1) $ 7,634,722 $ 11,500,000 $ 11,500,000 $ 100,958,333 $ 131,593,056 Total $ 7,634,722 $ 11,500,000 $ 11,500,000 $ 100,958,333 $ 131,593,056 As of December 31, 2021 Less than 1 year 1-3 years 3-5 years More than 5 years Total Contractual obligations (1) $ 5,718,056 $ 11,500,000 $ 11,500,000 $ 102,875,000 $ 131,593,056 Total $ 5,718,056 $ 11,500,000 $ 11,500,000 $ 102,875,000 $ 131,593,056 (1) Amounts include projected interest payments during the period based on interest rates in effect as of March 31, 2022 and December 31, 2021, respectively. We may enter into certain contracts that may contain a variety of indemnification obligations. The maximum potential future payment amounts we could be required to pay under these indemnification obligations may be unlimited. 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. 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 agreements. While we are required to maintain our 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. 38 Index Dividends 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 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 our 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. 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. 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 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. Critical Accounting Policies and Estimates As of March 31, 2022, there were no significant changes in or changes in the application of our critical accounting policies or estimates from those presented in our Annual Report on Form 10-K.