What changed in this filing

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Item 1. Business

2026-03-04 compared with 2025-03-13 · 656 added, 255 removed, 271 unchanged (77% of the section changed)

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is an institutional lender that was founded in July 2020 by a veteran team of investment professionals.

We primarily originate, structure, underwrite, invest in and manage senior secured loans and other types of mortgage loans and debt securities, with a specialization in loans to cannabis industry operators in states that have legalized medical and/or adult-use cannabis.

Our investment guidelines primarily relate to deploying capital in attractive lending opportunities to state law-compliant cannabis operators, typically secured by real estate, equipment, cash flows and license value.

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

The loans we originate are primarily structured as senior loans typically secured by real estate, equipment, cash flows and the value associated with licenses (where applicable) and/or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties.

We are a Maryland corporation and externally managed by AFC Management, LLC.

Effective January 1, 2026, we elected to be regulated as a BDC under the Investment Company Act of 1940, as amended (the “1940 Act”).

During the year ended December 31, 2025, we primarily originated, structured, underwrote, invested in and managed senior secured loans and other types of mortgage loans and debt securities, with a specialization in loans to cannabis industry operators in states that have legalized medical and/or adult-use cannabis.

During that period, our investment guidelines primarily related to deploying capital in attractive lending opportunities, typically secured by real estate, equipment, cash flows and license value, to (i) state law-compliant cannabis operators and ancillary cannabis companies and (ii) other public and privately held middle-market companies.

Our primary objective is to provide attractive risk-adjusted returns over time through cash distributions and capital appreciation.

During 2025, we sought to attain this objective primarily by providing loans to state law compliant cannabis companies.

The loans originated during this period were primarily structured as senior loans typically secured by real estate, equipment, cash flows and the value associated with licenses (where applicable) 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 cannabis-related 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.

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Due to the current capital constrained cannabis market, which does not typically have access to traditional bank financing, we believe we continue to be well positioned to act as a prudent financing source to cannabis industry operators given our stringent underwriting criteria, size and scale of operations and institutional infrastructure.

We are a Maryland corporation and externally managed by AFC Management, LLC, a Delaware limited liability company (our “Manager”), pursuant to the terms of the Amended and Restated Management Agreement, dated January 14, 2021, by and between the Company and AFC Management, LLC (as amended from time to time, the “Management Agreement”).

During the year ended December 31, 2025, the Company was managed pursuant to the terms of the Amended and Restated Management Agreement, dated January 14, 2021, by and between the Company and AFC Management, LLC (in its capacity as investment adviser under such agreement, the “Manager”) (as amended from time to time, the “Management Agreement”).

We commenced operations on July 31, 2020 and completed our initial public offering (“IPO”) in March 2021.

We have elected to be taxed as a REIT under Section 856 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2020.

We believe that we have qualified as a REIT and that our current and proposed method of operation will enable us to continue to qualify as a REIT.

However, no assurances can be given that our beliefs or expectations will be fulfilled, since qualification as a REIT depends on us continuing to satisfy numerous asset, income and distribution tests, which in turn depends, in part, on our operating results and ability to obtain financing.

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.

Our wholly-owned subsidiary, AFCG TRS1, LLC (“TRS1”), operates as a taxable REIT subsidiary (a “TRS”).

We elected to be taxed as a REIT under Section 856 of the Code, commencing with our taxable year ended December 31, 2020 and ending with our taxable year ended December 31, 2025.

We believe that we qualified as a REIT during that period and that our proposed method of operation enabled us to continue to qualify as a REIT until the year ended December 31, 2025.

However, no assurances can be given that our beliefs or expectations were fulfilled, since qualification as a REIT depended on us satisfying numerous asset, income and distribution tests, which in turn depended, in part, on our operating results and ability to obtain financing.

During that period, we also operated our business in a manner that permitted us to rely on an exemption from registration under the 1940 Act.

Our wholly-owned subsidiary, AFCG TRS1, LLC (“TRS1”), operated as a taxable REIT subsidiary (a “TRS”).

TRS1 began operating in July 2021.

The financial statements of TRS1 are consolidated within our consolidated financial statements.

On February 22, 2024, we announced a plan to separate into two independent, publicly traded companies.

Prior to the Spin-Off, Sunrise Realty Trust, Inc.

(“SUNS”) held our commercial real estate (“CRE”) portfolio as our wholly-owned subsidiary.

On July 9, 2024, we completed the separation of our CRE portfolio through the spin-off of SUNS into an independent, publicly traded REIT (the “Spin-Off”) through a pro-rata distribution of all of the outstanding shares of SUNS common stock to our shareholders of record as of the close of business on July 8, 2024 (the “Record Date”).

Our shareholders of record as of the Record Date received one share of SUNS common stock for every three shares of our common stock held as of the Record Date.

We retained no ownership interest in SUNS following the Spin-Off.

In connection with the Spin-Off, the operating results of the SUNS business through the date of the Spin-Off are reported in net income from discontinued operations, net of tax in the consolidated statements of operations for all periods presented.

The related assets and liabilities are reported as assets and liabilities of discontinued operations on the consolidated balance

Cash flows from the Company’s discontinued operations are presented as such in the consolidated statements of cash flows for all periods presented.

Unless otherwise noted, all amounts, percentages and discussion below reflect only the results of operations and financial condition from our continuing operations.

At a meeting of the Board of Directors (the “Board”) on August 12, 2025 (the “August Meeting”), the Board approved the Sixth Amendment to our then existing Management Agreement, which expanded our investment strategy during our operation as a REIT.

Accordingly, under the Sixth Amendment, we expanded our investment strategy and were permitted to originate, structure, underwrite, invest in and manage senior secured mortgage loans and other types of loans and debt securities to companies ancillary to the cannabis industry as well as companies outside of the cannabis industry.

Businesses ancillary to the cannabis industry may include, but are not limited to, brand developers, business services providers, and

equipment and consumables providers.

We believe there are also attractive lending opportunities in companies ancillary to and outside of the cannabis industry that could generate attractive risk-adjusted returns.

By expanding the investment mandate, we expect to be able to diversify our exposure across industries and credit risk profiles while maintaining deal selectivity.

Although the Sixth Amendment amended the prior Management Agreement, the expanded investment mandate approved by the Board was carried forward and reflected in the Company’s current Advisory Agreement (as defined below).

At the August Meeting, the Board also unanimously approved a series of matters intended to facilitate the conversion (the “Conversion”) of the Company from a REIT to a BDC.

Among other things, the Board, including a majority of the directors who are not “interested persons” of the Company (as that term is defined under the 1940 Act) (the “Independent Directors”), approved a new, 1940 Act-compliant investment advisory agreement (the “Advisory Agreement”) by and between the Company and AFC Management, LLC (in its capacity as investment adviser under the Advisory Agreement, the “Adviser”), subject to the approval of the Company’s shareholders.

On September 16, 2025, the Company filed a definitive proxy statement with the U.S.

Securities and Exchange Commission (“SEC”) in connection with a special meeting of shareholders (the “Special Meeting”) held on November 6, 2025 for the purpose of seeking shareholder approval of certain proposals required to effect the Conversion, namely shareholder approvals of (i) the Advisory Agreement and (ii) the application of reduced asset coverage requirements pursuant to Section 61(a) of the 1940 Act (enabling the Company to utilize a greater degree of leverage than would otherwise be permitted) (the “Proposals”).

On November 6, 2025, at the Special Meeting, the Company’s shareholders approved the Proposals, including the Advisory Agreement, which was necessary for the Company to be able to operate as a BDC under the 1940 Act.

Prior to the Conversion, we historically focused on lending to vertically integrated cannabis industry companies with significant real estate holdings in order to satisfy the regulatory requirements applicable to mortgage REITs.

Given the capital-intensive nature of the industry and the limited availability of traditional bank financing, many operators did not own sufficient real estate collateral, which constrained the universe of potential borrowers under our former structure.

Effective January 1, 2026, we completed our Conversion to a BDC, ceased operating as a mortgage REIT, and became subject to the regulatory requirements applicable to BDCs under the 1940 Act.

Our primary objective following the Conversion continues to be to provide attractive risk-adjusted returns over time through cash distributions and capital appreciation.

Effective January 1, 2026, the Management Agreement ceased to govern our operations, and we became managed pursuant to the Advisory Agreement and an administration agreement (the “Administration Agreement”) entered into with AFC Management, LLC (in its capacity as administrator under the Administration Agreement, the “Administrator”).

In addition, following the Conversion, we are no longer subject to constraints regarding real property collateral coverage and in pursuit of our investment objective may invest in a much broader universe of assets, including both real estate and non-real estate related assets, including in private and public middle-market companies that may not have sufficient real property collateral coverage to satisfy the REIT regulatory requirements.

While we continue to pursue lending opportunities to cannabis operators and ancillary cannabis companies, such investments are no longer our primary focus and are evaluated alongside opportunities in other industries, subject to the requirements of the 1940 Act applicable to BDCs.

This expanded mandate is expected to enhance portfolio diversification, increase investment flexibility, and support the pursuit of attractive risk-adjusted returns.

The Conversion is also expected to enable us to significantly expand our investment universe by increasing our ability to lend to ancillary cannabis businesses as well as non-real estate covered vertically integrated operators.

Our Competitive Strengths

Our investment guidelines focus on investments in first and second lien loans, typically secured by mortgages and other security interests, to cannabis 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.

During the year ended December 31, 2025 , our investment guidelines focused on senior secured loans and other types of mortgage loans and debt securities, with a specialization in loans to 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 required financing.

Due to the capital constrained cannabis market, which historically did not typically have access to traditional bank financing, we believe we were well positioned during 2025 to act as a prudent financing source to cannabis industry operators.

During the year ended December 31, 2025 , some of the factors that represented competitive strengths included our experienced management team, flexible structure, compelling risk-adjusted returns, underlying collateral, leading loan origination platform in the high-growth cannabis market and significant management investments.

• Experienced Management Team :

Our Manager administers our business activities and day-to-day operations subject to the overall supervision of our Board of Directors (the “Board”).

Our Manager administered our business activities and day-to-day operations during 2025 , subject to the overall supervision of our Board of Directors (the “Board”).

Our Manager’s team is comprised of professionals with extensive and diverse expertise and significant finance industry experience.

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• Flexible Structure :

We believe we have a more flexible funding structure, with the ability to redeploy capital more quickly than the typical REIT land ownership models and traditional lenders.

Our funding structure commits and funds loans with an average maturity of two to five years with significant prepayment protections whereas certain competitors with typical REIT land ownership models have longer-term leases.

During 2025, we believe we operated under a more flexible funding structure, with the ability to redeploy capital more quickly than the typical REIT land ownership models and traditional lenders.

Our investments during 2025 generally consisted of loans with an average maturity of two to five years with significant prepayment protections whereas certain competitors with typical REIT land ownership models have longer-term leases.

The duration of our loans, as compared to the length of leases usually employed by REIT land ownership models, allows us to redeploy our capital with more flexibility as market changes occur instead of being locked in for longer periods of time.

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• Compelling Risk-Adjusted Returns :

We seek to obtain strong risk-adjusted yield-to-maturity (“YTM”) with targeted annual gross yields on our portfolio within the range of 12% to 20% through coupons, original issue discount (“OID”), prepayment or exit fees, and other fees.

During 2025 , we sought to obtain strong risk-adjusted returns through a combination of coupons, original issue discount (“OID”), prepayment or exit fees, and other fees.

• Underlying Collateral :

Our loans are primarily secured by real property and certain personal property, including by the cash flows and the value associated with licenses (where applicable), equipment, and other assets to the extent permitted by applicable laws, and the regulations governing our borrowers and our intention to qualify as a REIT.

As of December 31, 2024, our portfolio of assets held outside of TRS1 had a weighted average real estate collateral coverage of approximately 1.0 times our aggregate committed principal amount of such loans, with the real estate collateral coverage for each of our loans measured as of the time of closing for such loan and based on various sources of data available at such time.

Our loans during 2025 were primarily secured by real property and certain personal property, including by the cash flows and the value associated with licenses (where applicable), equipment, and other assets to the extent permitted by applicable laws, and the regulations governing our borrowers and our operation as a REIT.

• Leading Loan Origination Platform in High-Growth Cannabis Market with Extensive Barriers to Entry :

Through our size and scale of operations, as well as our incumbency and institutional infrastructure, we believe we are well positioned to continue as a leading financing source of choice for cannabis companies.

Currently, we are able to take advantage of the capital supply/demand imbalance to generate strong risk-adjusted returns by providing operators debt capital.

Based on historical and projected growth, as states continue to legalize cannabis, the demand for capital to fund operations should increase and we believe we will be positioned to continue funding these borrowers both as a relationship lender and institutional capital provider to an expanding universe of operators.

Through our size and scale of operations, as well as our incumbency and institutional infrastructure, we believe we operated an established lending platform serving cannabis industry operators during our REIT period.

During 2025 , we sought to address capital supply and demand imbalances by providing debt capital to operators.

• Significant Management Investment.

Tannenbaum, our Chairman of the Board, made an equity investment of approximately $47.8 million in August 2020, which included a combination of cash and a transfer of loan assets at fair value plus accrued and unpaid interest, in exchange for 3,342,500 shares of our common stock.

Robyn Tannenbaum, our President and Chief Investment Officer, and her husband, Leonard M.

Tannenbaum, our Chairman, together beneficially own approximately 26.6% of our common stock through direct ownership and indirectly through family office foundations and trusts as of the date of this Annual Report on Form 10-K .

Following the Conversion, many of the same factors that have in the past contributed to our performance and positioning in the marketplace are expected to continue to represent potential competitive strengths that will help enable us to execute on attractive investment opportunities, including, but not limited to our stringent underwriting criteria, size and scale of operations and institutional infrastructure, as well as the following factors:

• Experienced Management Team;

Team Continuity.

Our Adviser’s team is comprised of professionals with extensive and diverse expertise and significant finance industry experience.

We believe that the length and breadth of this team’s financing experience, its familiarity with the Company pre- and post-Conversion, and its ability to source and execute a wide variety of loans is one of our significant competitive advantages.

• Innovative and Complex Transactions.

A willingness to evaluate complex transactions that other capital providers are less willing to analyze;

• Capital Stack Financing.

The ability to finance entire capital structures;

• Flexible Structure.

The flexibility to create financing solutions that are outside of most lenders’ typical “box” and are tailored to the borrower’s specific needs.;

• Due Diligence.

The analytical resources that allow us to perform due diligence quickly and commit to a term sheet and fund the investment within a short time frame;

• Significant Management Investment.

Tannenbaum and her husband together own beneficially approximately 26.6% of our common stock through direct ownership and indirectly with her spouse through family office foundations and trusts as of the date of this Annual Report on Form 10-K .

Our Portfolio

For information about our investment portfolio (our “Existing Portfolio”), see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Investment Portfolio” and the notes to our consolidated financial statements included in this Annual Report.

For information about our investment portfolio during the year ended December 31, 2025 (our “Existing Portfolio”), see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Investment Portfolio” and the notes to our consolidated financial statements included in this Annual Report.

Collateral Overview

Our loans are typically secured by various types of assets of our borrowers, including real property and certain personal property, such as cash flows and the value associated with licenses (where applicable), equipment, and other assets to the extent permitted by applicable laws and the regulations governing our borrowers.

During the year ended December 31, 2025, our loans were typically secured by various types of assets of our borrowers, including real property and certain personal property, such as cash flows and the value associated with licenses (where applicable), equipment, and other assets to the extent permitted by applicable laws and the regulations governing our borrowers.

With respect to our loans to cannabis operators, 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.

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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.

Becoming the holder of a license through foreclosure or otherwise, or the sale of a license or other realization of the value of licenses requires the approval of regulatory authorities.

As of December 31, 2025, our portfolio of assets held outside of TRS1 had a weighted average real estate collateral coverage of approximately 1.0 times our aggregate committed principal amount of such loans, with the real estate collateral coverage for each of our loans measured as of the time of closing for such loan 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.

During 2025, we could have pursued a sale of a defaulted loan if we believed 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 during 2025 we were 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 even for loans to cannabis operators, the collateral securing our loans may be sold 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 with respect to loans to cannabis operators.

During 2025, we could have sought 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 believed during 2025, that 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 with respect to loans to cannabis operators.

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.

We did not own real estate as long as it was 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.

Our Loan Origination Pipeline

As of March 1, 2025, our loan origination pipeline consisted of potential new loans to state law compliant cannabis operators representing prospective total loan commitments of approximately $383 million.

From January 1, 2020 to March 1, 2025, members of our management team, provided by our Manager, and the members of the investment committee of our Manager (the “Investment Committee”), who advise on our investments and operations, sourced over $20.6 billion of loans across the cannabis industry in various states while maintaining a robust pipeline of potentially actionable opportunities.

As of February 25, 2026, our loan origination pipeline had approximately $1.4 billion of potential commitments under review by our Adviser and its affiliates for new loans to public and privately held lower-middle-market companies, including state law-compliant cannabis operators and ancillary cannabis companies.

As a whole, members of our management team and the members of our investment committee provided by our Adviser (the “Investment Committee”) have sourced over $29 billion of prospective loans to lower-middle-market companies across various industries, while

maintaining a robust pipeline of potentially actionable opportunities.

We are in various stages of our evaluation process with respect to these loans.

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As a result, no assurance can be given that any of these potential loans will close on the currently contemplated terms or at all.

We intend to fund these potential loans using unused borrowing capacity under our senior secured revolving credit facility (as amended from time to time, the “Revolving Credit Facilit y”), obtained under the Loan and Security Agreement (the “Revolving Credit Agreement”) and unsecured revolving credit facility (the “AFCF Credit Facility”), by and among the Company, as borrower, the lenders party thereto from time to time, and AFC Finance, LLC, as agent and lender, net proceeds of future debt or equity offerings, including in connection with our at-the-market offering program (the “ATM Program”), existing cash and/or, depending upon the timing of closing, or net proceeds from loan repayments.

We intend to fund these potential loans using unused borrowing capacity under our senior secured revolving credit facility (as amended from time to time, the “Revolving Credit Facilit y”), obtained under the Loan and Security Agreement (the “Revolving Credit Agreement”) and unsecured revolving credit facility (the “TCGSL Credit Facility”), by and among the Company, as borrower, the lenders party thereto from time to time, and TCGSL LLC, as agent and lender, net proceeds of future debt or equity offerings, including existing cash and/or, depending upon the timing of closing, or net proceeds from loan repayments.

We may in the future seek other or additional financing arrangements at the discretion of our Adviser, subject to approval by our Board and in accordance with applicable law.

Financial Statements - Notes to Consolidated Financial Statements - Note 18.

Subsequent Events”

Our Leadership

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He has taken four other entities public and has managed several externally-managed investment vehicles with approximately $5.0 billion of assets under management in the aggregate.

During his career, Mr.

Tannenbaum has underwritten over 400 loans with over $10.0 billion in principal value.

Daniel Neville, our Chief Executive Officer, has over 15 years of experience in finance.

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Brandon Hetzel, our Chief Financial Officer and Treasurer, has over 15 years of experience in accounting and finance.

Our Manager and Our Management Agreement

We are externally managed and advised by our Manager, a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and an affiliate of Mr.

Management and the investment team personnel have over 30 years of experience in direct lending, with over $10 billion of direct lending transactions executed between this Company and prior firms, as well as 20 years experience managing and scaling BDCs.

Management of the Company

As of January 1, 2026, we are an externally managed, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act.

During the year ended December 31, 2025 , prior to the Conversion, we were advised by the Manager (subsequent to the Conversion, the Manager is referred to herein as the Adviser), a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and an affiliate of certain officers.

The Adviser is a wholly-owned subsidiary of Castleground Holdings LLC (the “Parent Manager”).

As of December 31, 2025, certain officers have ownership in the outstanding equity of the Parent Manager, including Mr.

Tannenbaum, Mrs.

Tannenbaum and Mr.

Each of our officers is employed by our Manager and certain of our officers are members of AFC’s Investment Committee.

Our Manager’s team is comprised of professionals with extensive and diverse expertise and significant financing industry experience.

Tannenbaum, Mr.

Hetzel, Bernard Berman, a member of the Company’s Investment Committee, and Gabriel Katz, Chief Legal Officer and Secretary.

Our officers are employed by our Adviser and certain of our officers are members of AFC’s Investment Committee.

Prior to the Conversion, the Manager provided us advisory and other services pursuant to the Management Agreement.

Subsequent to the Conversion, the Adviser will provide us advisory services pursuant to the Advisory Agreement and the Administrator will provide us certain administrative and operational services necessary for our operations pursuant to the Administration Agreement.

Our Adviser’s team is comprised of professionals with extensive and diverse expertise and significant financing industry experience.

Members of the Investment Committee of our Manager and the investment personnel provided by our Manager have approximately 50 years of combined investment management experience and are a valuable resource to us.

Our Manager, its affiliates and the members of our Investment Committee have managed several externally-managed vehicles in cannabis-related assets.

Our Manager’s Investment Committee is comprised of Leonard M.

Tannenbaum, Robyn Tannenbaum, Daniel Neville, and Bernard D.

The Manager is a wholly-owned subsidiary of Castleground Holdings LLC (f/k/a Advanced Flower Capital Management, LLC) (the “Parent Manager”).

As of December 31, 2024, certain officers have ownership in the outstanding equity of the Parent Manager, including Leonard Tannenbaum, Chairman of the Board, Robyn Tannenbaum, President and Chief Investment Officer, Bernard Berman, a member of the Company’s Investment Committee, and Daniel Neville, Chief Executive Officer.

Our Management Agreement

Pursuant to the Management Agreement, our Manager manages our portfolio and our day-to-day operations, subject to the terms set forth in the Management Agreement and such further conditions as may be imposed from time to time by our Board.

Under the Management Agreement, our Manager has contractual responsibilities to us, including to provide us with a management team (whether our Manager’s own employees or individuals for which our Manager has contracted with other parties to provide services to its clients), who will be our executive officers, and the Investment Committee.

Currently, the Management Agreement automatically renews every year on July 31 st for a one-year period, unless we or our Manager elects not to renew.

The Management Agreement may be terminated by us or our Manager under certain specified circumstances.

Pursuant to the Management Agreement, upon the date on which our equity equals or exceeds $1,000,000,000, we may, at our election, provide our Manager with a written offer for an internalization transaction in which our Manager will contribute all of its assets to us, or in the alternative, the equity owners of our Manager will contribute 100% of the outstanding equity interest in our Manager to us.

If the offer price of such internalization transaction has not been agreed prior to the date that is the three-month anniversary of the date on which our equity equals or exceeds $1,000,000,000, then we shall have the right, but not the obligation, to consummate such internalization transaction, effective as of such date, at

an internalization price equal to five times the sum of (i) the annual base management fee received by our Manager (the “Base Management Fee”) (without giving effect to any Base Management Fee Rebate (as defined below)), (ii) the annual incentive compensation the Manager is entitled to receive (the “Incentive Compensation”) and (iii) the aggregate amount of any other fees (the “Outside Fees”) less the Base Management Fee Rebate, in each case, earned by our Manager during the 12-month period immediately preceding the most recently completed fiscal quarter.

Our Adviser, its affiliates and the members of our Investment Committee have managed several externally-managed vehicles in cannabis-related assets, as well as prior experience managing and scaling BDCs.

Our Adviser’s Investment Committee is comprised of Robyn Tannenbaum, Daniel Neville, Johanna White, and Bernard D.

Our Management Agreement prior to January 1, 2026

Pursuant to the Management Agreement, as amended from time to time, our Manager during the year ended December 31, 2025 managed our portfolio and our day-to-day operations, subject to the terms set forth in the Management Agreement and such further conditions as were imposed from time to time by our Board.

Under the Management Agreement, our Manager had contractual responsibilities to us, including to providing us with a management team (whether our Manager’s

own employees or individuals for which our Manager has contracted with other parties to provide services to its clients), who will be our executive officers, and the Investment Committee.

During 2025 , the Management Agreement automatically renewed annually on July 31 st for successive one-year periods, unless we or our Manager elected not to renew.

The Management Agreement could be terminated by us or our Manager under certain specified circumstances.

The Management Agreement provided that, upon the date on which our equity equaled or exceeded $1,000,000,000, we could have, at our election, provided our Manager with a written offer for an internalization transaction in which our Manager would have contributed all of its assets to us, or in the alternative, the equity owners of our Manager would have contributed 100% of the outstanding equity interest in our Manager to us.

If the offer price of such internalization transaction had not been agreed prior to the date that is the three-month anniversary of the date on which our equity equaled or exceeded $1,000,000,000, then we would have had the right, but not the obligation, to consummate such internalization transaction, effective as of such date, at an internalization price equal to five times the sum of (i) the annual base management fee received by our Manager (the “Base Management Fee”) (without giving effect to any Base Management Fee Rebate (as defined below)), (ii) the annual incentive compensation the Manager is entitled to receive (the “Incentive Compensation”) and (iii) the aggregate amount of any other fees (the “Outside Fees”) less the Base Management Fee Rebate, in each case, earned by our Manager during the 12-month period immediately preceding the most recently completed fiscal quarter.

For a summary of compensation paid to our Manager for the years ended December 31, 2025 and 2024, see Note 14 to our consolidated financial statements in this Annual Report for more information.

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Pursuant to the amendment, the Management Agreement was amended to update the investment guidelines to focus on our investments in first and second lien loans, typically secured by mortgages and other security interests, to cannabis operators in states that have legalized medical and/or adult use cannabis.

Therefore, the investment guidelines were amended such that loans and investments made in respect of (x) first lien or second lien loans secured by mortgages or mezzanine loans to commercial real estate owners, operators and related businesses and (y) the ownership of non-cannabis related commercial real estate assets, were removed and are no longer permitted by the investment guidelines.

We and our Manager have agreed that this amendment became effective upon the completion of the Spin-Off.

real estate assets, were removed and are no longer permitted by the investment guidelines.

We and our Manager have agreed that this amendment became effective upon the completion of the Spin-Off (as defined below).

On August 12, 2025, we entered into an amendment to our Management Agreement between us and our Manager.

Pursuant to the amendment, the Management Agreement was updated to expand the Company’s investment strategy to additionally originate, structure, underwrite, invest in and manage senior secured mortgage loans and other types of loans and debt securities to companies ancillary to the cannabis industry as well as companies outside of the cannabis industry.

Businesses ancillary to the cannabis industry may include, but are not limited to, brand developers, business service providers, and equipment and consumables providers.

The Company believes there are also attractive lending opportunities in companies ancillary to and outside of the cannabis industry that could generate attractive risk-adjusted returns.

By expanding the investment mandate, the Company expects to be able to diversify its exposure across industries and credit risk profiles while maintaining deal selectivity.

Effective January 1, 2026, in connection with the Company’s conversion to a BDC, the Management Agreement, as amended, ceased to govern the Company’s operations and was replaced by the Advisory Agreement and the Administration Agreement.

See “— Our Advisory Agreement ” and “— Our Administration Agreement ” below for a more detailed discussion of the Advisory Agreement and Administration Agreement.

Indemnification and Liability

Our Management Agreement provides for customary indemnification of our Manager and its affiliates, and certain of our and their respective members, shareholders, managers, partners, trustees, personnel, officers, directors, employees, consultants and Sub-Managers, as applicable.

Additionally, we have entered into indemnification agreements with the members of the Investment Committee provided by our Manager that provide for indemnification and advance of expenses to the maximum extent permitted by Maryland law, subject to certain standards to be met and certain other limitations and conditions as set forth in such indemnification agreements.

We also carry directors and officers insurance.

Our Management Agreement during the year ended December 31, 2025 provided for customary indemnification of our Manager and its affiliates, and certain of our and their respective members, shareholders, managers, partners, trustees, personnel, officers, directors, employees, consultants and Sub-Managers, as applicable.

Additionally, we entered into indemnification agreements with the members of the Investment Committee provided by our Manager that provided for indemnification and advance of expenses to the maximum extent permitted by Maryland law, subject to certain standards to be met and certain other limitations and conditions as set forth in such indemnification agreements.

We also carried directors and officers insurance.

We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the coverage and standard industry practice;

however, our insurance coverage may not be sufficient to cover all of our losses.

The Management Agreement also provides that our Manager, its affiliates, and any of their respective members, shareholders, managers, partners, trustees, personnel, officers, directors, employees, consultants and any person providing sub-advisory

services to our Manager (collectively, the “Manager Parties”) will not be liable to us for acts or omissions performed in accordance with and pursuant to the Management Agreement, except by reason of acts constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their duties under the relevant Management Agreement.

The Management Agreement automatically renews every year on July 31 st for a one-year period, unless we or our Manager elect not to renew.

We may decline to renew our Management Agreement upon 180 days prior written notice and the affirmative vote of at least two-thirds of our independent directors that there has been unsatisfactory performance by our Manager that is materially detrimental to us taken as a whole.

In such event, we shall pay our Manager a termination fee (the “Termination Fee”) equal to three times the sum of (i) the annual Base Management Fee and (ii) the annual Incentive Compensation, in each case, earned by our Manager during the 12-month period immediately preceding the most recently completed fiscal quarter.

Our Manager may decline to renew our Management Agreement upon 180 days prior written notice and without payment of any termination fee by either party.

We and our Manager have agreed that it is both of our intention that if our Management Agreement is not terminated prior to our equity equaling or exceeding $1,000,000,000, then we and our Manager (or the equity owners of our Manager) shall contemplate effecting an Internalization Transaction (as defined below) pursuant to our Management Agreement.

Our Management Agreement was amended and restated to reflect these terms upon the consummation of our IPO.

Termination for Cause

We may terminate our Management Agreement effective upon 30 days’ prior written notice, without payment of any termination fee, if (i) our Manager, its agents or its assignees breach any material provision of our Management Agreement and such breach shall continue for a period of 30 days after written notice thereof specifying such breach and requesting that the same be remedied in such 30-day period (or 45 days after written notice of such breach if our Manager takes steps to cure such breach within 30 days of the written notice);

(ii) there is a commencement of any proceeding relating to our Manager’s bankruptcy or insolvency, including an order for relief in an involuntary bankruptcy case or our Manager authorizing or filing a voluntary bankruptcy petition;

(iii) any Manager change of control occurs that a majority of the independent directors determines is materially detrimental to us taken as a whole;

(iv) our Manager is dissolved;

or (v) our Manager commits fraud against us, misappropriates or embezzles our funds, or acts, or fails to act, in a manner constituting bad faith, willful misconduct, gross negligence or reckless disregard in the performance of its duties under this Agreement;

provided, however, that if any of the actions or omissions described in this clause (v) are caused by an employee, personnel and/or officer of our Manager or one of its affiliates and our Manager (or such affiliate) takes all necessary and appropriate action against such person and cures the damage caused by such actions or omissions within 30 days of our Manager’s actual knowledge of its commission or omission, we shall not have the right to terminate our Management Agreement.

Our Manager may terminate our Management Agreement effective upon 60 days’ prior written notice in the event that we default in the performance or observance of any material term, condition or covenant contained in our Management Agreement and such default shall continue for a period of 30 days after written notice thereof specifying such default and requesting that the same be remedied in such 30-day period.

We are required to pay to our Manager the Termination Fee if our Management Agreement is terminated pursuant to the preceding sentence.

Additionally, our Manager may terminate our Management Agreement if we are required to register as an investment company under the Investment Company Act, in which case we shall not be required to pay a termination fee.

Internalization of our Manager

Our Management Agreement was amended and restated in connection with our IPO such that upon the date on which our equity equals or exceeds $1,000,000,000 (such date, the “Internalization Trigger Date”), we may, at our election, provide our Manager with a written offer for an internalization transaction in which our Manager will contribute all of its assets to us, or in the alternative, the equity owners of our Manager will contribute 100% of the outstanding equity interest in our Manager to us (such transaction an “Internalization Transaction”).

The initial offer price will be as determined by a special committee of our Board consisting solely of our independent directors (the “Internalization Committee”) and set forth in any such initial written offer.

Upon receipt of our initial offer, our Manager may accept our proposal or submit a counter offer.

If an Internalization Transaction is not consummated pursuant to our initial offer or our Manager’s counter offer, our Manager and we agree to enter into good faith negotiations for the consummation of an Internalization Transaction with an offer price to be agreed.

Notwithstanding the foregoing, if the price of such Internalization Transaction (the “Internalization Price”) has not been agreed upon prior to the date that is the three-month anniversary of the Internalization Trigger Date, then we shall have the right, but not the obligation, to consummate an Internalization Transaction, effective as of such date, at an Internalization Price equal to five times the sum of (i) the annual Base Management Fee (without giving effect to any

Base Management Fee Rebate), (ii) the annual Incentive Compensation and (iii) the aggregate amount of Outside Fees less the Base Management Fee Rebate, in each case, earned by our Manager during the 12-month period immediately preceding the most recently completed fiscal quarter.

At the time of consummation of an Internalization Transaction, all assets of our Manager or 100% of the equity interest in our Manager shall be conveyed to and acquired by us in exchange for the consideration to be paid for the Internalization Transaction.

Consummation of any Internalization Transaction agreed to between us and our Manager is conditioned upon the satisfaction of the following conditions:

(i) our receipt of a fairness opinion from a nationally-recognized investment banking firm to the effect that the consideration to be paid by us for the assets and equity of our Manager is fair, from a financial point of view, to our shareholders who are not affiliated with our Manager or its affiliates;

(ii) the approval of the acquisition by the Internalization Committee;

and (iii) the approval of our shareholders holding a majority of the votes cast on such Internalization Transaction proposal at a meeting of shareholders duly called and at which a quorum is present, any of which conditions may be waived by us, in our sole discretion.

The price to be paid to our Manager in any Internalization Transaction may be payable in cash, shares of our common stock or a combination at the discretion of our Board.

The value of any our common stock paid as partial or full consideration of any Internalization Transaction shall be calculated based on the volume-weighted average of the closing market price of our common stock for the ten consecutive trading days immediately preceding the date with respect to which value must be determined;

provided, however, that if our common stock is not traded on a securities exchange at the time of closing of any such Internalization Transaction, then the number of shares of common stock shall be determined by agreement between our Board and our Manager or, in the absence of such agreement, the Internalization Price shall be paid in cash.

however, our insurance coverage may not have been sufficient to cover all of our losses.

The Management Agreement also provided that our Manager, its affiliates, and any of their respective members, shareholders, managers, partners, trustees, personnel, officers, directors, employees, consultants and any person providing sub-advisory services to our Manager (collectively, the “Manager Parties”) were not liable to us for acts or omissions performed in accordance with and pursuant to the Management Agreement, except by reason of acts constituting bad faith, willful misconduct, gross negligence, or reckless disregard of their duties under the relevant Management Agreement.

Investment Guidelines

We have adopted investment guidelines (the “Investment Guidelines”) which require us and our Manager to abide by certain investment strategies which include, but are not limited to:

(i) not making loans that would cause us to fail to qualify as a REIT, or that would cause us to be regulated as an investment company under the Investment Company Act;

(ii) not making loans that would cause us to violate any law, rule or regulation of any applicable governmental body or agency (excluding the federal prohibition under the CSA (defined below) of the cultivation, processing, sale or possession of cannabis or parts of cannabis including the sale or possession of cannabis paraphernalia, advertising the sale of cannabis, products containing cannabis or cannabis paraphernalia, or controlling or managing real estate on which cannabis is trafficked, as long as such investments are in compliance with applicable state law) or any applicable securities exchange or that would otherwise not be permitted by our governing documents;

Prior to the Conversion, we had adopted investment guidelines (the “Investment Guidelines”) which required us and our Manager to abide by certain investment strategies which included, but are not limited to:

(i) not making loans that would cause us to fail to qualify as a REIT, or that would have caused us to be regulated as an investment company under the 1940 Act;

(ii) not making loans that would have caused us to violate any law, rule or regulation of any applicable governmental body or agency (excluding the federal prohibition under the CSA (defined below) of the cultivation, processing, sale or possession of cannabis or parts of cannabis including the sale or possession of cannabis paraphernalia, advertising the sale of cannabis, products containing cannabis or cannabis paraphernalia, or controlling or managing real estate on which cannabis is trafficked, as long as such investments are in compliance with applicable state law) or any applicable securities exchange or that would otherwise not be permitted by our governing documents;

(iii) requiring the approval of the Investment Committee for all investments made by us;

and (iv) until appropriate loans that align with our overall investment strategy are identified, permitting our Manager to cause us to invest our available cash in interest-bearing, short-term investments, including money market accounts or funds, commercial mortgage backed securities and corporate bonds, debt and equity interests of real estate investment trusts and other investments, subject to the requirements for our qualification as a REIT.

Our Investment Guidelines may only be amended, restated, modified, supplemented or waived pursuant to the approval of (i) a majority of our Board (which must include a majority of our independent directors) and (ii) our Manager.

and (iv) until appropriate loans that align with our overall investment strategy were identified, permitting our Manager to cause us to invest our available cash in interest-bearing, short-term investments, including money market accounts or funds, commercial mortgage backed securities and corporate bonds, debt and equity interests of real estate investment trusts and other investments, subject to the requirements for our qualification as a REIT.

Our Investment Guidelines could only be amended, restated, modified, supplemented or waived pursuant to the approval of (i) a majority of our Board (which must include a majority of our independent directors) and (ii) our Manager.

Effective January 1, 2026, in connection with the Conversion, the Management Agreement ceased to govern the Company’s operations and was replaced by the Advisory Agreement and Administration Agreement.

Our Advisory Agreement

Effective January 1, 2026, in connection with the Conversion, we entered into an Advisory Agreement with the Adviser, pursuant to which the Adviser serves as our investment adviser.

The Advisory Agreement replaced our prior Management Agreement, as amended, which ceased to govern our operations as of that date.

Pursuant to the Advisory Agreement, the Adviser manages our investment activities and day-to-day operations, subject to the oversight of the Board and in accordance with the requirements of the 1940 Act.

Under the Advisory Agreement, the Adviser is responsible for, among other things, determining the composition and allocation of our investment portfolio, the nature and timing of any changes therein and the manner of implementing such changes;

identifying, evaluating and negotiating the structure of our investments;

performing due diligence on prospective portfolio companies;

executing closing, servicing and monitoring our investments;

determining the securities and other assets that we purchase, retain or sell;

arranging financings and borrowing facilities;

and providing us with such other investment advisory, research and related services as we may, from time to time, reasonably require.

The Advisory Agreement reflects an expanded investment mandate approved by our Board, including the ability to invest in a broader range of debt and other investments than was permitted under our prior REIT structure.

While we continue to pursue lending opportunities within the cannabis industry, such investments are no longer our primary focus and are evaluated alongside opportunities in other industries, including private publicly held middle-market companies and businesses ancillary to the cannabis industry, subject to the requirements of the 1940 Act as applicable to BDCs.

The Advisory Agreement was approved by our Board of Directors, including a majority of the Independent Directors, and by our shareholders at the Special Meeting held on November 6, 2025.

The Advisory Agreement remains subject to the terms, conditions, and termination provisions set forth therein and to applicable requirements under the 1940 Act.

Investment Committee

Pursuant to our Manage ment Agreement, our Manager has established an Investment Committee for us, the members of which consist of employees or advisers of our Manager and/or its affiliates and which currently includes certain of our Manager’s affiliates and certain of our officers.

During the year ended December 31, 2025 , pursuant to our Manage ment Agreement, our Manager established an Investment Committee for us, the members of which consist of employees or advisers of our Manager and/or its affiliates and which currently includes certain of our Manager’s affiliates and certain of our officers.

The Investment Committee has the following responsibilities:

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All of our loans require the approval of the Investment Committee.

The members of the Investment Committee currently consist of Mr.

Tannenbaum, Mrs.

Effective January 1, 2026, in connection with our Conversion to a BDC, the Investment Committee will operate in accordance with the Adviser’s duties and responsibilities under our Advisory Agreement.

The members of the Investment Committee are expected to remain the same following the Conversion, except that Mr.

Tannenbaum resigned from the Investment Committee effective February 27, 2026, and Johanna White, Managing Director, was appointed to the Investment Committee effective February 27, 2026.

The Investment Committee will continue to review and approve investments and otherwise support the Adviser in the management of our investment activities, subject to the oversight of our Board and the requirements of the 1940 Act, as amended.

The structure and/or membership of our Investment Committee may change from time to time in the sole discretion of our Adviser.

As of the date of this Annual Report on Form 10-K, t he members of the Investment Committee consist of Mrs.

Tannenbaum, Mr.

Neville and Mr.

An y action to be taken by the Investment Committee requires the approval of a majori ty of the members of the Investment Committee;

provided that during any time that the Investment Committee is comprised of less than four (4) members, any action by the Investment Committee shall require unanimous approval of all members of the Investment Committee.

Manager Succession Plan

The members of our Manager have delegated the management of the business and affairs of our Manager to Mrs.

Tannenbaum, as manager (the “Managing Member”).

Pursuant to our Manager’s operating agreement, the Managing Member will hold office until such Managing Member resigns or is removed pursuant to our Manager’s operating

The Managing Member shall be automatically removed as such in the event of his or her death, permanent physical or mental disability.

Upon the resignation or removal of Mrs.

Tannenbaum as the Managing Member, the members of our Manager will appoint Mr.

Tannenbaum as the Managing Member.

Co-Investments

From time to time, we may co-invest with other investment vehicles managed by our Manager or its affiliates, including our Manager, and their portfolio companies, including by means of splitting loans, participating in loans or other means of syndicating loans.

We are not obligated to provide, nor have we provided, any financial support to the other managed investment vehicles.

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

As of December 31, 2024 , there were two co-invested loans held by us and our affiliates.

Certain investment opportunities in loans, which may be suitable for us, may also be suitable for other accounts, private funds, pooled investment vehicles or other entities managed or advised, directly or indirectly, by our Manager, Mr.

Tannenbaum or Mrs.

Tannenbaum, or any of their or our respective affiliates or entities in which any such person is an executive, in each case (such accounts, private funds, pooled investment vehicles and other entities, collectively, the “Ancillary Entities”), and, subject to compliance with our Manager’s Conflict of Interest Policy, our related persons transaction policy, our code of business conduct and ethics and applicable regulatory considerations, our Manager may allocate such loans and participate in such loans on behalf of Ancillary Entities under such allocation process as our Manager deems reasonable under the circumstances in good faith.

Additionally, subject to the foregoing policies, codes and considerations, our Manager or its affiliates, including AFC Agent LLC (“AFC Agent”), may from time to time serve as administrative agent to the lenders under our co-investments, which as of December 31, 2024 include Private Company A and Subsidiary of Private Company G.

AFC Agent, an entity wholly-owned by Mr.

Tannenbaum, serves as the administrative agent to all respective lenders under the majority of our credit facilities.

We do not pay any consideration to AFC Agent for its services as administrative agent under such credit facilities, though it does receive fees from the borrowers under certain credit facilities.

Management Compensation

Our Manager manages our day-to-day affairs.

The following table summarizes all of the compensation, fees and expense reimbursement that we pay to our Manager under our Management Agreement:

White and Mr.

Our Administration Agreement

Effective January 1, 2026, in connection with our Conversion to a BDC, we entered into an administration agreement (the “Administration Agreement”) with the Administrator.

Pursuant to the Administration Agreement, the Administrator performs, or oversees or arranges for the performance of, the Company’s required administrative services, which include, among other things, providing us with office facilities, equipment, clerical, bookkeeping, compliance, and recordkeeping services.

In addition, the Administrator conducts relations with custodians, depositories, transfer agents, dividend disbursing agents, other shareholder servicing agents, accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks, and other persons in any other capacity deemed by the Administrator to be necessary and desirable.

The Administrator will be responsible for the financial and other records that we are required to maintain, and under the 1940 Act, will prepare, print and disseminate reports to shareholders and reports and other materials filed with the SEC.

Further, the Administrator is responsible for assisting us in determining and publishing our net asset value, overseeing the preparation and filing of our tax returns, and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.

We do not pay the Administrator a separate fee for the services provided by the Administrator under the Administration Agreement, so long as the Adviser (or an affiliate) continues to serve as the investment adviser to the Company.

Notwithstanding the foregoing, we will reimburse the Administrator an amount equal to our allocable portion of certain expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including our fair and equitable allocable share of the compensation, including annual base salary, bonus, any related withholding taxes and employee benefits, paid to personnel providing finance, tax, accounting, internal audit, legal, risk management, operations, originations, marketing, investor relations, portfolio monitoring and servicing, compliance services and other non-investment personnel of the Adviser and its affiliates as reasonably determined by the Adviser to appropriately reflect the portion of time spent devoted by such personnel to our affairs, as well as the actual cost of goods and services used for us and obtained by the Administrator from entities not affiliated with us.

We will also reimburse the Administrator for the reasonably allocated actual costs of administrative services performed by Administrator for our operation.

Our Administrator has entered into an Administrative Services Agreement (the “Administrative Services Agreement”) with an affiliate of the Administrator and Mr.

Tannenbaum and Mrs.

The Administrative Services Agreement sets forth the terms on which the shared services provider provides certain administrative services, including providing personnel, office facilities, information technology and other equipment and legal, accounting, human resources, clerical, bookkeeping and record keeping services at such facilities and other services that are necessary or useful for us.

The Administration Agreement was approved by our Board of Directors, including a majority of the Independent Directors.

The Administration Agreement remains subject to the terms, conditions, and termination provisions set forth therein and to applicable requirements under the 1940 Act.

Management Compensation prior to January 1, 2026

During the year ended December 31, 2025 , while we operated as a REIT, our Manager managed our day-to-day affairs.

The following table summarizes all of the compensation, fees and expense reimbursement that we paid to our Manager under our Management Agreement:

Type Description Payment

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The Base Management Fees are payable independent of the performance of our portfolio.

For additional information, see “ Management Compensation—Base Management Fees .”

Quarterly in arrears in cash.

Base Management Fee Rebate An amount equal to 50% of the aggregate amount of any other fees earned and paid to our Manager during the applicable quarter resulting from the investment advisory services and general management services rendered by our Manager to us under our Management Agreement, including any agency fees relating to our loans, but excluding the Incentive Compensation and any diligence fees paid to and earned by our Manager and paid by third parties in connection with our Manager’s due diligence of potential loans.

For additional information, see “ Management Compensation — Base Management Fees .”

Reduces the Base Management Fees on a quarterly basis.

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Such compensation is subject to Clawback Obligations (as defined below), if any.

For additional information, see “ Management Compensation — Incentive Compensation ” and “ Management Compensation — Incentive Compensation—Incentive Compensation Clawback .”

Quarterly in arrears in cash.

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Prior to the consummation of our IPO, we were not obligated to reimburse our Manager or its affiliates, as applicable, for any compensation paid to Mr.

Tannenbaum, Mr.

Jonathan Kalikow, a former director and officer of the Company, or Mrs.

For the year ended December 31, 2024, our Manager did not seek reimbursement for our allocable share of Mr.

Tannenbaum’s compensation, but did seek reimbursement for our allocable share of Mrs.

Tannenbaum’s compensation.

For the year ended December 31, 2023, our Manager did not seek reimbursement for our allocable share of Mr.

Kalikow and Mr.

Tannenbaum or Mrs.

For the years ended December 31, 2025 and 2024, our Manager did not seek reimbursement for our allocable share of Mr.

Tannenbaum’s compensation, but did seek reimbursement for our allocable share of Mrs.

Tannenbaum’s compensation.

For additional information, see “— Expense Reimbursement .”

Monthly in cash.

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Such fee shall be payable upon termination of our Management Agreement in the event that (i) we decline to renew our Management Agreement, without cause, upon 180 days prior written notice and the affirmative vote of at least two-thirds of our independent directors that there has been unsatisfactory performance by our Manager that is materially detrimental to us taken as a whole, or (ii) our Management Agreement is terminated by our Manager (effective upon 60 days’ prior written notice) based upon our default in the performance or observance of any material term, condition or covenant contained in our Management Agreement and such default continuing for a period of 30 days after written notice thereof specifying such default and requesting that the same be remedied in such 30-day period.

For additional information, see “ Management Compensation — Termination Fee .”

Upon specified termination in cash.

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Any compensation previously earned by our Manager for services rendered prior to the consummation of our IPO was calculated and payable pursuant to the terms of, and in accordance with, our Management Agreement as in effect prior to the consummation of our IPO.

Pursuant to our Management Agreement, we are also obligated to reimburse our Manager or its affiliates for certain expenses of our Manager and its affiliates paid or incurred on our behalf.

We may also grant equity-based awards and incentives to our Manager and other eligible awardees under our 2020 Stock Incentive Plan (the “2020 Plan”) from time to time.

Pursuant to our Management Agreement, we were also obligated to reimburse our Manager or its affiliates for certain expenses of our Manager and its affiliates paid or incurred on our behalf.

We were also able to grant equity-based awards and incentives to our Manager and other eligible awardees under our 2020 Stock Incentive Plan (the “2020 Plan”) from time to time.

During the years ended December 31, 2025 and 2024, our Manager earned a Base Management Fee of approximately $2.9 million and $3.6 million respectively, which was net of a Base Management Fee Rebate of approximately $0.9 million and $0.9 million, respectively.

The Incentive Compensation fee payable to our Manager for the years ended December 31, 2024 and 2023 was approximately $6.8 million and $10.4 million, respective ly.

The Incentive Compensation fee payable to our Manager for the years ended December 31, 2025 and 2024 was zero and $6.8 million, respective ly.

Summary Compensation and Expenses Reimbursement Table

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General and administrative expenses reimbursable to Manager 2,384,000 2,880,680

Professional fees reimbursable to Manager 47,801 33,576

Total $ 5,359,668 $ 13,276,077

Base Management Fees

Base Management Fees prior to January 1, 2026

The following describes the base management fees that were payable to our Manager under the Management Agreement.

Initially, our Manager received base management fees (“Base Management Fees”) that were calculated and payable quarterly in arrears in cash, in an amount equal to 0.4375% of our Equity (as defined below), determined as of the last day of each such quarter.

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and (C) one-time events pursuant to changes in GAAP, and certain non-cash items not otherwise described above, through such date, in each case as determined after discussions between our Manager and our independent directors and approval by a majority of our independent directors.

Incentive Compensation

Incentive Compensation prior to January 1, 2026

The following describes the incentive compensation that was payable to our Manager under the Management Agreement.

In addition to the Base Management Fees, our Manager receives incentive compensation (“Incentive Compensation” or “Incentive Fees”) with respect to each fiscal quarter (or portion thereof that our Management Agreement is in effect) based upon our achievement of targeted levels of Core Earnings (as defined below).

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For the avoidance of doubt, Core Earnings shall not exclude under clause (iv) above, 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.

The calculation methodology for computing Incentive Compensation will look through any derivatives or swaps as if we owned the reference assets directly.

Therefore, net interest, if any, associated with a derivative or swap (which represents the difference between (i) the interest income and fees received in respect of the reference assets of such derivative or swap and (ii) the interest expense paid by us to the derivative or swap counterparty) will be included in the calculation of Core Earnings for purposes of the Incentive Compensation.

The calculation methodology for computing Incentive Compensation looked through any derivatives or swaps as if we owned the reference assets directly.

and (ii) the interest expense paid by us to the derivative or swap counterparty) will be included in the calculation of Core Earnings for purposes of the Incentive Compensation.

Incentive Compensation Clawback

The following describes the incentive compensation clawback provisions under the Management Agreement.

Initially, once Incentive Compensation is earned and paid to our Manager, it is not refundable, notwithstanding any losses incurred by us in subsequent periods, except that if our aggregate Core Earnings for any fiscal year do not exceed the amount equal to the product of (i) 7.0% and (ii) our Adjusted Capital as of the last day of the immediately preceding fiscal year (such amount, the “Annual Hurdle Amount”), our Manager will be obligated to pay us (such obligation to pay, the “Clawback Obligation”) an amount equal to the aggregate Incentive Compensation that was earned and paid to our Manager during such fiscal year (such amount, the “Clawback Amount”);

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Non-GAAP Metrics Used in Hypothetical Example

As used in this Annual Report, we use hypothetical Equity, Adjusted Capital, Catch-up Amount and Excess Earnings Amount only as measures in the calculation of the financial metrics that we are required to calculate under the terms of the Management Agreement.

As used in this Annual Report in respect of the Management Agreement in effect during the year ended December 31, 2025 , we use hypothetical Equity, Adjusted Capital, Catch-up Amount and Excess Earnings Amount only as measures in the calculation of the financial metrics that we are required to calculate under the terms of the Management Agreement.

All of the adjustments made in our calculation of these metrics are adjustments that were made in calculating our performance for purposes of the required financial metrics under the Management Agreement, and are presented in a manner consistent with the reporting of the metrics to the Manager.

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Expense Reimbursement

We pay all of our costs and expenses and reimburse our Manager and/or its affiliates for expenses of our Manager and/or its affiliates paid or incurred on our behalf, excepting only those expenses that are specifically the responsibility of our Manager pursuant to our Management Agreement.

Pursuant to our Management Agreement, we reimburse our Manager and/or its affiliates, as applicable, for our fair and equitable allocable share of the compensation, including annual base salary, bonus, any related withholding taxes and employee benefits, paid to (i) subject to review by the Compensation Committee of our Board, personnel of our Manager and/or its affiliates, as applicable, serving as our Chief Executive Officer (except when the Chief Executive Officer serves as a member of the Investment Committee prior to the

consummation of an internalization transaction of our Manager by us), General Counsel, Chief Compliance Officer, Chief Financial Officer, Chief Marketing Officer, Managing Director and any of our other officers based on the percentage of his or her time spent devoted to our affairs and (ii) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment personnel of the Manager and/or its affiliates who spend all or a portion of their time managing our affairs, with the allocable share of the compensation of such personnel described in this clause (ii) being as reasonably determined by our Manager to appropriately reflect the amount of time spent devoted by such personnel to our affairs.

During the year ended December 31, 2025 , we paid all of our costs and expenses and reimburse our Manager and/or its affiliates for expenses of our Manager and/or its affiliates paid or incurred on our behalf, excepting only those expenses that are specifically the responsibility of our Manager pursuant to our Management Agreement.

Pursuant to our Management Agreement, we reimbursed our Manager and/or its affiliates, as applicable, for our fair and equitable allocable share of the compensation, including annual base salary, bonus, any related withholding taxes and employee benefits, paid to (i) subject to review by the Compensation Committee of our Board, personnel of our Manager and/or its affiliates, as

applicable, serving as our Chief Executive Officer (except when the Chief Executive Officer serves as a member of the Investment Committee prior to the consummation of an internalization transaction of our Manager by us), General Counsel, Chief Compliance Officer, Chief Financial Officer, Chief Marketing Officer, Managing Director and any of our other officers based on the percentage of his or her time spent devoted to our affairs and (ii) other corporate finance, tax, accounting, internal audit, legal, risk management, operations, compliance and other non-investment personnel of the Manager and/or its affiliates who spend all or a portion of their time managing our affairs, with the allocable share of the compensation of such personnel described in this clause (ii) being as reasonably determined by our Manager to appropriately reflect the amount of time spent devoted by such personnel to our affairs.

The service by any personnel of our Manager and its affiliates as a member of the Investment Committee will not, by itself, be dispositive in the determination as to whether such personnel is deemed “investment personnel” of our Manager and its affiliates for purposes of expense reimbursement.

Prior to the consummation of our IPO, we were not obligated to reimburse our Manager or its affiliates, as applicable, for any compensation paid to Mr.

Tannenbaum, Mr.

Kalikow or Mrs.

For the year ended December 31, 2024, our Manager did not seek reimbursement for our allocable share of Mr.

Tannenbaum’s compensation, but did seek reimbursement for our allocable share of Mrs.

Tannenbaum’s compensation.

For the year ended December 31, 2023, our Manager did not seek reimbursement for our allocable share of Mr.

Kalikow and Mr.

Tannenbaum or Mrs.

For the years ended December 31, 2025 and 2024, our Manager did not seek reimbursement for our allocable share of Mr.

Tannenbaum’s compensation, but did seek reimbursement for our allocable share of Mrs.

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Costs and expenses paid or incurred by the Manager on our behalf are reimbursed monthly in cash to the Manager and are made regardless of whether any cash distributions are made to our shareholders.

Termination Fee

Upon termination of our Management Agreement, a Termination Fee will be payable to our Manager by us in cash in the event that (i) we decline to renew our Management Agreement, without cause, upon 180 days prior written notice and the affirmative vote of at least two-thirds of our independent directors that there has been unsatisfactory performance by our Manager that is materially detrimental to us taken as a whole, or (ii) our Management Agreement is terminated by our Manager (effective upon 60 days’ prior written notice) based upon our default in the performance or observance of any material term, condition or covenant contained in our Management Agreement and such default continuing for a period of 30 days after written notice thereof specifying such default and requesting that the same be remedied in such 30-day period.

The Termination Fee equals three times the sum of (A) the annual Base Management Fee and (B) the annual Incentive Compensation, in each case, earned by our Manager during the 12-month period immediately preceding the most recently completed fiscal quarter prior to the date of termination.

Grants of Equity Compensation to Our Manager

Pursuant to the 2020 Plan, we may grant equity-based awards and incentives to employees or executive officers of our Manager and other eligible awardees under the 2020 Plan from time to time.

These equity-based awards under our 2020 Plan create incentives to improve long-term stock price performance and focus on long-term business objectives, create substantial retention incentives for award recipients and enhance our ability to pay compensation based on our overall performance, each of which further align the interests of our Manager and the other eligible awardees with our shareholders.

Externally managed BDCs are not permitted under the 1940 Act to issue or have outstanding restricted stock or stock options as compensation for services.

Accordingly, the Company, in advance of the Conversion, accelerated or forfeited, as applicable, all awards previously issued under the 2020 Plan.

Stock-based compensation expense is not expected to continue following the Conversion.

Effective January 1, 2026, in connection with our Conversion to a BDC, the Management Agreement ceased to govern our operations.

Following the Conversion, our investment advisory and administrative services are provided pursuant to an Advisory Agreement and an Administration Agreement, respectively, and the compensation arrangements applicable to the Manager and the Administrator differ from those above.

The fees and expense reimbursement arrangements under the Advisory Agreement and the Administration Agreement did not apply during the year ended December 31, 2025 and are described in our governing documents.

Adviser Compensation subsequent to January 1, 2026

This section describes the compensation arrangement under the Advisory Agreement that took effect as of January 1, 2026.

Under the Advisory Agreement, we will pay the Adviser a base management fee (for purposes of this section only, the “Base Management Fee”) calculated at an annual rate of 1.50% of the average value of our average of gross assets at the end of the two most recently completed calendar quarters (excluding cash or cash equivalents but including assets purchased with borrowed funds) during the most recently completed calendar quarter;

provided, however, that the Base Management Fee shall be reduced by 50% (or such other amount as may be required under applicable law or as a condition to any exemptive relief on which we rely) of the sum of, without duplication, the aggregate amount of any other fees earned and paid to the Adviser or its affiliates from our portfolio companies on a pro rata basis relative to our hold size in the applicable investments during such quarter arising in connection with the investment advisory services rendered by the Adviser under the Advisory Agreement or the general management services rendered by the Administrator under the Administration Agreement (such other fees, “Outside Fees”), including any agency fees relating to our investments, but excluding the incentive fees payable to the Adviser based on (i) “pre-incentive fee net investment income” in respect of the current calendar quarter and the three preceding calendar quarters and (ii) capital gains, and any diligence fees paid and earned by the Adviser and paid by third parties in connection with the Adviser’s due diligence of potential investments for us;

provided further, that the Base Management Fee will be calculated at an annual rate equal to 1.00% of the average value of our gross assets (excluding cash or cash equivalents but including assets purchased with borrowed funds) during the most recently completed calendar quarter that exceeds an amount equal to the product of (i) 200% and (ii) our net asset value at the end of the most recently completed calendar quarter (for purposes of this section only, the “Leverage Break Point”).

Under the Advisory Agreement, we will pay the Adviser an incentive fee consisting of two parts (for purposes of this section only, the “Incentive Fees”).

The first part is determined and paid quarterly based on our pre-incentive fee net investment income in respect of the current calendar quarter and the three preceding calendar quarters (or the appropriate portion thereof in the case of any of our first three calendar quarters following the effective date of the Advisory Agreement (for purposes of this section only, the “Trailing Four Quarters”), and the second part is determined and payable

in arrears based on net capital gains as of the end of each calendar year or upon termination of the Advisory Agreement.

For purposes of this section only, “pre-incentive fee net investment income” is defined as interest income, dividend income and any other income accrued during the calendar quarter, minus operating expenses for the quarter, including the Base Management Fee, expenses payable to the Administrator under the Administration Agreement, any interest expense and distributions paid on any issued and outstanding preferred stock, but excluding the Incentive Fees.

Pre-incentive fee net investment income will be compared to a rate equal to the product of (i) 1.5% per quarter (6.0% annualized) and (ii) the sum of our net assets at the beginning of each applicable calendar quarter comprising the relevant Trailing Four Quarters (for purposes of this section only, the “Hurdle Rate”).

The Hurdle Rate will be calculated after making appropriate adjustments to our net asset value at the beginning of each applicable calendar quarter for all issuances by us of shares of common stock, including issuances pursuant to any dividend reinvestment plan, and distributions during the applicable calendar quarter.

We will pay the Adviser an incentive fee based on income with respect to its pre-incentive fee net investment income as follows:

• no incentive fee based on pre-incentive fee net investment income in any calendar quarter in which our aggregate pre-incentive fee net investment income in respect of the relevant Trailing Four Quarters does not exceed the Hurdle Rate in respect of the relevant Trailing Four Quarters;

• 100% of pre-incentive fee net investment income in respect that portion of such pre-incentive fee net investment income, if any, that exceeds the Hurdle Rate but is less than 1.8182% in any calendar quarter (7.2728% annualized).

For purposes of this section only, we refer to this portion of the pre-incentive fee net investment income (which exceeds the Hurdle Rate but is less than 1.8182%) as the “Catch-Up.” The Catch-Up is meant to provide the Adviser with approximately 17.5% of our pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 1.8182% in any calendar quarter;

• 17.5% of the pre-incentive fee net investment income in respect of the relevant Trailing Four Quarters that exceeds 1.8182% in respect of the relevant Trailing Four Quarters (7.2728% annualized), which reflects that once the Hurdle Rate is reached and the Catch-Up is achieved, 17.5% of the pre-incentive fee net investment income in respect of the relevant Trailing Four Quarters that exceeds the Catch-Up amounts is paid to the Adviser.

Under the Advisory Agreement, we will pay the Adviser an incentive fee on capital gains calculated and payable in arrears in cash as of the end of each calendar year or upon the termination of the Advisory Agreement in an amount equal to 17.5% of our realized capital gains, if any, on a cumulative basis from January 1, 2026 (the date on which we elected to be regulated as a BDC under the 1940 Act) through the end of a given calendar year or upon the termination of the Advisory Agreement, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees.

For the purpose of computing the incentive fee on capital gains, the calculation methodology looks through derivative financial instruments or swaps as if we owned the reference assets directly.

Therefore, realized gains and realized losses on the disposition of any reference assets, as well as unrealized depreciation on reference assets retained in the derivative financial instrument or swap, will be included on a cumulative basis in the calculation of the capital gains incentive fee.

With respect to investments we held at the time of the Conversion, such investments, for purposes of calculating the capital gains incentive fee, shall have a cost basis equal to the fair market value as of the date of the Conversion.

Fee Illustration

The following illustration sets forth a simplified graphical representation of the calculation of the Company’s quarterly income incentive fee in accordance with the Advisory Agreement.

Percentage of pre-incentive fee net income comprising the Advisory Agreement Incentive Fees based on Income

Incentive Fees Examples

The following are examples of the application of the income-related portion of the Advisory Agreement Incentive Fees.

Alternative 1— Three Quarters under Advisory Agreement in which Pre-Incentive Fee Net Investment Income Exceeds the Hurdle Amount and Catch-up Amount

Stable net asset value (NAV) of $500 million across all quarters with 1.0x leverage

Hurdle Rate( 1 ) = 1.5%

Catch-up Amount = 100% of pre-incentive fee net investment income that is greater than the hurdle amount but less than 1.8182%

Pre-incentive fee net investment income for each quarter = 5.0%( * )

No adjusted capital returns each quarter

Incentive fee for the first quarter

Aggregate pre-incentive fee net investment income during the relevant period = $12.5 million

Hurdle Amount = Q1 NAV × 1.5% = $500 million × 0.015 = $7.5 million

Excess income amount = pre-incentive fee net investment income during the relevant period — Hurdle Amount = $12.5 million — $7.5 million = $5.0 million

Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $7.5 million (the Hurdle Amount) but less than 1.8182% × Q1 NAV, or $9.091 million.

This Catch-up Fee Amount equals $1.591 million

Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($12.5 million — $9.091 million) = $596,591

Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $2.188 million

Income incentive fee previously paid during the relevant period = none

Incentive fee for the second quarter

Aggregate pre-incentive fee net investment income during the relevant period = $12.5 million + $12.5 million = $25.0 million

Hurdle Amount = (Q1 NAV + Q2 NAV) × 1.5% = $1 billion × 0.015 = $15 million

Excess income amount = aggregate pre-incentive fee net investment income during the relevant period (e.g., Q1 and Q2) — Hurdle Amount = $25.0 million — $15.0 million = $10.0 million

Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $15.0 million (the Hurdle Amount) but less than 1.8182% × (Q1 NAV + Q2 NAV), or $18.182 million.

This Catch-up Fee Amount equals $3.182 million

Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($25.0 million — $18.182 million) = $1.193 million

Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $4.375 million $2.188 million income incentive fee previously paid during the relevant period

Total income incentive fee payment for Q2 = income incentive fee payment — amount previously paid = $2.188 million

Incentive fee for third quarter

Aggregate pre-incentive fee net investment income during the relevant period = $12.5 million + $12.5 million + $12.5 million = $37.5 million

Hurdle Amount = (Q1 NAV + Q2 NAV + Q3 NAV) × 1.5% = $1.5 billion × 0.015 = $22.5 million

Excess Income Amount = aggregate pre-incentive fee net investment income during the relevant period (e.g., Q1, Q2 and Q3) — Hurdle Amount = $37.5 million — $22.5 million = $15 million

Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $22.5 million (the Hurdle Amount) but less than 1.8182% × (Q1 NAV + Q2 NAV + Q3 NAV), or $27.273 million.

This Catch-up Fee Amount equals $4.773 million

Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($37.5 million — $27.273 million) = $1.790 million

Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $6.563 million

$4.375 million income incentive fee previously paid during the relevant period

Total income incentive fee payment for Q3 = income incentive fee payment — amount previously paid = $2.188 million

Alternative 2—Three Quarters under Advisory Agreement, in which Pre-Incentive Fee Net Investment Income does not meet the Net Hurdle Amount for one Quarter

Stable NAV of $500 million across all quarters with 1.0x leverage

Hurdle Rate( 1 ) = 1.5%

Catch-up Amount = 100% of pre-incentive fee net investment income that is greater than the hurdle amount but less than 1.8182%

Pre-incentive fee net investment income for Q1 = 5.0%( * )

Pre-incentive fee net investment income for Q2 = 3.0%( * )

Pre-incentive fee net investment income for Q3 = 0.0%( * )

No adjusted capital Returns each quarter

Incentive fee for the first quarter

Aggregate pre-incentive fee net investment income during the relevant period = $12.5 million

Hurdle Amount = Q1 NAV × 1.5% = $500 million × 0.015 = $7.5 million

Excess Income Amount = pre-incentive fee net investment income during the relevant period — Hurdle Amount = $12.5 million — $7.5 million = $5.0 million

Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $7.5 million (the Hurdle Amount) but less than 1.8182% × Q1 NAV, or $9.091 million.

This Catch-up Fee Amount equals $1.591 million

Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($12.5 million — $9.091 million) = $596,591

Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $2.188 million

No income incentive fee previously paid during the relevant period

Incentive fee for second quarter

Aggregate pre-incentive fee net investment income during the relevant period = $12.5 million + $7.5 million = $20.0 million

Hurdle Amount = (Q1 NAV + Q2 NAV) × 1.5% = $1.0 billion × 0.015 = $15.0 million

Excess Income Amount = (aggregate pre-incentive fee net investment income during the relevant period (e.g., Q1 and Q2)) — Hurdle Amount — $20.0 million — $15.0 million = $5.0 million

Catch-up Fee Amount = 100% of pre-incentive fee net investment income that is greater than $15.0 million (the Hurdle Amount) but less than 1.8182% × (Q1 NAV + Q2 NAV), or $18.182 million.

This Catch-up Fee Amount equals $18.182 million — $15.0 million, or $3.182 million

Post Catch-up Fee Amount = 17.5% of pre-incentive fee net investment income that exceeds the Catch-up Amount = 0.175 × ($20 million — $18.182 million) = $318,182

Catch-up Fee Amount + Post Catch-up Fee Amount = income incentive fee payment = $3.5 million

$2.188 million income incentive fee previously paid during the relevant period

Total income incentive fee payment for Q2 = income incentive fee payment — amount previously paid = $1.312 million

Incentive fee for the third quarter

Aggregate pre-incentive fee net investment income during the relevant period = $12.5 million + $7.5 million + $0.0 million = $20.0 million

Hurdle Amount = Q1 NAV + Q2 NAV + Q3 NAV × 1.5% = $1.5 billion × 0.015 = $22.5 million

Catch-up Amount = 100% of pre-incentive fee net investment income that is greater than the hurdle amount but less than 1.8182%

Aggregate pre-incentive fee net investment income < Hurdle Amount.

Therefore, no income incentive fee is payable for the quarter

(1) Represents 6.0% annualized hurdle rate

* Hypothetical Pre incentive fee net investment income is comprised of investment income net of cost of debt, management fees, other expenses and before incentive fees

The Board of Directors

Overall responsibility for our oversight rests with the Board of Directors.

In connection with the Conversion, we have entered into the Advisory Agreement with the Adviser, pursuant to which the Adviser will manage the Fund on a day-to-day basis, as described in detail above.

The Board of Directors is responsible for overseeing the Adviser and other service providers, including the Administrator, in our operations in accordance with the provisions of the 1940 Act, our charter and bylaws and applicable provisions of state and other laws.

The Adviser will keep the Board of Directors well informed as to the Adviser’s activities on our behalf and our investment operations and provide the Board of Directors with additional information as the Board of Directors may, from time to time, request.

The Board of Directors is currently composed of 5 members, 4 of whom are Independent Directors.

Our Growth Strategy

Our objective is to provide attractive risk-adjusted returns over time through cash distributions and capital appreciation.

We intend to achieve this objective by sourcing, underwriting, structurin g and funding loans to state law compliant cannabis companies.

We draw upon our Manager’s expertise in sourcing, underwriting, structuring and funding capabilities to implement our growth strategy.

From January 1, 2020 to March 1, 2025, our Manager and its affiliates have had access to over $20.6 billion of potential loan opportunities.

During the year ended December 31, 2025 , we sought to achieve this objective primarily by sourcing, underwriting, structurin g and funding loans to state law compliant cannabis companies.

Going forward, we will seek to achieve this objective primarily by sourcing, underwriting, structurin g and funding loans to lower middle market companies across a broad range of industries.

We have drawn upon our Manager’s expertise in sourcing, underwriting, structuring and funding capabilities to implement our growth strategy.

For example, from January 1, 2020 to February 25, 2026, our Manager and its affiliates have had access to over $29 billion of potential loan opportunities, which we have historically focused on loans to cannabis operators.

We believe we continue to be well positioned to take advantage of the capital supply and demand imbalance that exists in the cannabis market.

As the cannabis industry continues to evolve and to the extent that additional states legalize cannabis, the demand for capital is expected to continue to increase as operators seek to enter and build out new markets.

We provide borrowers an institutional and flexible alternative for financing.

We provide borrowers across a broad range of industries in the lower middle market, an institutional and flexible alternative for financing.

As we continue to grow our available capital, we believe we can commit to additional transactions with strong risk-adjusted returns to diversify our portfolio.

In connection with, and effective upon the Spin-Off, the Amended and Restated Management Agreement was amended to update the investment guidelines to focus on our investments in first and second lien loans, typically secured by mortgages and other security interests, to cannabis operators in states that have legalized medical and/or adult use cannabis.

Therefore, the investment guidelines will no longer include loans and investments made in respect of (x) first lien or second lien loans secured by mortgages or mezzanine loans to commercial real estate owners, operators and related businesses and (y) the

ownership of non-cannabis related commercial real estate assets.

Our Manager regularly evaluates our loans and we currently retain an independent third-party valuation firm to provide input on the valuation of unquoted assets, which our Manager considers along with various other subjective and objective factors when making any such evaluation.

The collateral underlying our loans is located in states in the U.S.

that we believe have attractive regulatory environments for companies operating in the cannabis industry, economic conditions and commercial real estate fundamentals.

In August 2025, leading up to the Conversion, we entered into an amendment to our Management Agreement between us and our Manager.

Pursuant to the amendment, the Management Agreement was updated to expand our investment strategy to additionally originate, structure, underwrite, invest in and manage senior secured mortgage loans and other types of loans and debt securities to companies ancillary to the cannabis industry as well as companies outside of the cannabis industry.

Business ancillary to the cannabis industry may include, but are not limited to, brand developers, business service providers, and equipment and consumables providers.

By expanding the investment mandate, we expect to be able to diversify its exposure across industries and credit risk profiles while maintaining deal selectivity.

While we have historically targeted lending to vertically integrated cannabis companies with significant real estate holdings, following the Conversion, we are no longer subject to constraints related to real property collateral coverage and in pursuit of our investment objective may invest in a much broader universe of assets, including both real estate and non-real estate related assets, including in private and public middle-market companies that may not have sufficient real property collateral coverage to satisfy REIT regulatory requirements.

This expanded mandate is expected to enhance portfolio diversification, increase investment flexibility, and support the pursuit of attractive risk-adjusted returns.

Our Adviser regularly evaluates our loans and we currently retain an independent third-party valuation firm to provide input on the valuation of assets without readily available market quotations, which our Adviser considers along with various other subjective and objective factors when making fair value determinations in its capacity as “valuation designee” pursuant to Rule 2a-5 under the 1940 Act.

Prior to the Conversion, the collateral underlying our loans was located in states in the U.S.

that we believed had attractive regulatory environments for companies operating in the cannabis industry, economic conditions and commercial real estate fundamentals.

Following the Conversion, we are no longer subject to geographic concentration parameters with respect to the location of underlying collateral, and may originate or acquire investments secured by assets located in any jurisdiction consistent with our investment mandate

Key elements of our strategy include:

• Targeting loans for origination and/or investment that typically have the following characteristics:

• Targeting loans for investment that typically have the following characteristics:

– principal balance greater than $10.0 million

– real estate collateral coverage of at least one times the principal balance;

– secured by commercial real estate properties;

– well-capitalized sponsors with substantial experience in particular relevant sectors and geographic markets.

– financing is often used for expansion capital, acquisitions, refinancings and recapitalizations;

– secured loans to cash flowing borrowers with at least one times enterprise value coverage.

• Targeting borrowers that typically have the following characteristics:

– generate EBITDA of $5 million to $50 million;

– operate across a diverse range of industry sectors in the United States;

– substantial experience in relevant sectors, either directly or through well-capitalized sponsors.

• Diversifying our financing sources with increased access to equity and debt capital, which may provide us with a lower overall cost of funding and the ability to hold larger loan sizes, among other things.

Underwriting and Investment Process

Pursuant to the Management Agreement, our Manager manages our loans and day-to-day operations, subject at all times to the further terms and conditions set forth in the Management Agreement and such further limitations or parameters as may be imposed from time to time by our Board.

Our Manager’s rigorous underwriting and investment process enables us to source, screen and ultimately provide debt capital to established cannabis industry participants in states that have legalized medical and/or adult use cannabis.

During the year ended December 31, 2025, pursuant to the Management Agreement, our Manager managed our loans and day-to-day operations, subject at all times to the further terms and conditions set forth in the Management Agreement and such further limitations or parameters as were imposed from time to time by our Board.

Our Manager employed a rigorous underwriting and investment process enables us to source, screen and ultimately provide debt capital to established cannabis industry participants in states that have legalized medical and/or adult use cannabis.

Our Manager as well as our management team provided by our Manager and our Board strive to be attuned to the macro-environment and political environment as they relate to the lending and cannabis industries.

We expect to benefit from the tested method of capital allocation and on-going investment monitoring developed by our Manager.

The primary objectives of the investment process are for it to be repeatable, dependable, and able to produce attractive risk-adjusted returns.

During 2025, we believe that we benefited from the Manager’s, and following the Conversion expect to continue benefiting from the tested method of capital allocation and on-going investment monitoring developed by our Adviser.

The primary objectives of the investment process were for it to be repeatable, dependable, and able to produce attractive risk-adjusted returns.

The primary components of the investment process are as follows:

Origination Underwriting Investment Committee Legal Documentation and

• Direct origination platform works to create enhanced yields and allows us to put in greater controls for loans in which our Manager originates and structures

• Direct origination platform works to create enhanced yields and allows us to put in greater controls for loans in which our Adviser originates and structures

• Disciplined underwriting process leads to a highly selective approach

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• Allows for specific portfolio construction and a focus on higher quality companies

• For the cannabis pipeline, as of March 1, 2025 since January 1, 2020, we had 9 active loans in our pipeline at various stages in the diligence process, and we had passed on 828 of 871 sourced loan opportunities due to, among other reasons, lack of collateral, lack of cash flow, stage of company, state dynamics and lack of cash flow

• Other tools that we frequently use to verify data include, but are not limited to:

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• Members of the Investment Committee currently include:

Tannenbaum, Daniel Neville, Bernard D.

Daniel Neville, Johanna White, Bernard D.

Berman and Robyn Tannenbaum

• Portfolio is proactively managed to monitor ongoing performance, in some instances, through seats on borrowers’ boards of directors or board observer rights

Our Manager’s origination team meets regularly to evaluate new loan opportunities, employing a highly collaborative approach to investing.

Upon its receipt of an actionable request, our Manager’s deal team prepares a standardized memorandum (an “Early Read Memorandum”) that serves as the initial recommendation to the Investment Committee with respect to initially pursuing such opportunity.

Our Adviser’s origination team meets regularly to evaluate new loan opportunities, employing a highly collaborative approach to investing.

Upon its receipt of an actionable request, our Adviser’s deal team prepares a standardized memorandum (an “Early Read Memorandum”) that serves as the initial recommendation to the Investment Committee with respect to initially pursuing such opportunity.

This Early Read Memorandum contains key property metrics, typically including, without limitation, property characteristics, preliminary loan terms and structure.

Our Manager’s origination team takes a bottom-up, enterprise value-oriented approach to underwriting, focusing on collateral valuation, multiple exit strategies and downside principal protection.

The goal of our Manager is to identify key issues and decisions early in the process, including, without limitation, issues relating to the preliminary pricing, asset quality, market, borrower or capital structure.

Our Manager also evaluates the Early Read Memorandum prepared by the deal team to evaluate the likely financing terms, comparable market transactions and the impact of the loan on our overall portfolio construction from a diversification and return standpoint.

Loans are priced based on our Manager’s view of risk and market conditions.

Our Manager confirms that the applicable pricing generates an appropriate expected return on any given loan.

Our Adviser’s origination team takes a bottom-up, enterprise value-oriented approach to underwriting, focusing on collateral valuation, multiple exit strategies and downside principal protection.

The goal of our Adviser is to identify key issues and decisions early in the process, including, without limitation, issues relating to the preliminary pricing, asset quality, market, borrower or capital structure.

Our Adviser also evaluates the Early Read Memorandum prepared by the deal team to evaluate the likely financing terms, comparable market transactions and the impact of the loan on our overall portfolio construction from a diversification and return standpoint.

Loans are priced based on our Adviser’s view of risk and market conditions.

Our Adviser confirms that

the applicable pricing generates an appropriate expected return on any given loan.

Key model inputs typically include:

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and an estimate of our management, general and administrative expenses.

Model assumptions and pricing methodology are adjusted as needed based on prevailing market conditions, investor sentiment and activity and

portfolio allocations and concentrations at the time of pricing.

Model assumptions and pricing methodology are adjusted as needed based on prevailing market conditions, investor sentiment and activity and portfolio allocations and concentrations at the time of pricing.

Returns on targets are not a reliable indicator of future performance and no guarantee or assurance is given that such returns will be achieved or that an investment will not result in losses.

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Actual events or conditions may differ materially from these assumptions, and therefore, actual returns could be substantially lower.

We operate in a competitive market for the origination and acquisition of attractive lending opportunities.

We compete with a variety of institutional investors, including other REITs, debt funds, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, investment banking firms, financial institutions, private equity and hedge funds, and other entities.

Some of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do.

Election to be Regulated as a Business Development Company and Regulation as a Business Development Company

We were organized and have operated as a REIT for U.S.

federal income taxes purposes during the year ended December 31, 2025.

On January 1, 2026, we elected to be regulated as a BDC under Section 54(a) of the 1940 Act, and, as of that date, became subject to the provisions of the 1940 Act applicable to BDCs.

As a BDC, we are subject to Sections 55 through 65 of the 1940 Act and the rules and regulations promulgated thereunder.

These provisions impose, among other things, requirements relating to portfolio composition, asset coverage, transactions with affiliates, governance, and compliance policies.

Unless otherwise noted, the following discussions related to our regulation as a BDC under the 1940 Act did not apply to us, and we were not otherwise regulated as a BDC under the 1940 Act, during the year ended December 31, 2025.

As a BDC, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC unless authorized by vote of a majority of the outstanding voting securities, as required by the 1940 Act.

A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of:

(a) 67% or more of such company’s voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy, or (b) more than 50% of the outstanding voting securities of such company.

We do not anticipate any substantial change in the nature of our business.

As with other companies regulated by the 1940 Act, a BDC must adhere to certain substantive regulatory requirements.

A majority of our directors must be persons who are not “interested persons”, as that term is defined in the 1940 Act.

Additionally, we are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the BDC.

Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our shareholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

We do not intend to acquire securities issued by any investment company that exceed the limits imposed by the 1940 Act.

Under these limits, except for registered money market funds, we generally cannot acquire more than 3% of the voting stock of any investment company, invest more than 5% of the value of our total assets in the securities of one investment company or invest more than 10% of the value of our total assets in the securities of investment companies in the aggregate.

The portion of our portfolio invested in securities issued by investment companies ordinarily will subject our shareholders to additional expenses.

Our investment portfolio is also subject to diversification requirements by virtue of our intention to qualify as a RIC for U.S.

tax purposes.

As discussed in further detail below, effective January 1, 2026, as a result of obtaining approval by our Board, including a majority of the Independent Directors, and our shareholders, obtained at the special meeting of shareholders held on November 6, 2025, we must maintain an asset coverage ratio of 150%.

We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our directors who are not “interested persons” and, in some cases, prior approval by the SEC.

As a BDC, we are limited in our ability to invest in any portfolio company in which the Adviser or any of its affiliates currently has an investment or to make any co-investments with the Adviser or its affiliates without an exemptive order from the SEC, subject to certain exceptions (see “Allocation of Investment Opportunities and Potential Conflicts of Interest—Co-Investment Relief” below for more information).

We will generally not be able to issue and sell our common stock at a price below net asset value per share.

We may, however, sell our common stock, or warrants, options or rights to acquire our common stock, at a price below the then-current net asset value of our common stock if the Board determines that such sale is in our best interests and the best interests of our shareholders, and our shareholders approve such sale.

In addition, we may generally issue new shares of

our common stock at a price below net asset value in rights offerings to existing shareholders, in payment of distributions and in certain other limited circumstances.

Qualifying Asset Requirements

As a BDC, we are required to invest at least 70% of our total assets in “qualifying assets,” as defined in the 1940 Act.

We may invest up to 30% of our portfolio opportunistically in “non-qualifying assets”, which will be driven primarily through opportunities sourced through the Advisor.

However, under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as “qualifying assets,” unless, at the time the acquisition is made, qualifying assets represent at least 70% of the BDC’s total assets.

The principal categories of qualifying assets relevant to our proposed business are the following:

securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC.

An eligible portfolio company is defined in the 1940 Act as any issuer which:

is organized under the laws of, and has its principal place of business in, the United States;

is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act;

satisfies either of the following:

does not have any class of securities that is traded on a national securities exchange or has any class of securities listed on a national securities exchange subject to a $250.0 million market capitalization maximum;

is controlled by a BDC or a group of companies including a BDC the BDC actually exercises a controlling influence over the management or policies of the eligible portfolio company, and, as a result, the BDC has an affiliated person who is a director of the eligible portfolio company.

securities of any eligible portfolio company which we control;

securities purchased in a private transaction from a U.S.

issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities, was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements;

securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company;

securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities;

cash, cash equivalents, U.S.

government securities or high-quality debt securities maturing in one year or less from the time of investment.

These qualifying asset requirements became applicable to us as of January 1, 2026 and did not apply to our portfolio composition during the year ended December 31, 2025.

Managerial Assistance

As a BDC, we must offer, and provide upon request, significant managerial assistance to certain of our portfolio companies, except where the Fund purchases securities of an issuer in conjunction with one or more other persons acting together, one of the other persons in the group makes available such managerial assistance.

This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance.

The Adviser will provide such managerial assistance to portfolio companies that request this assistance.

To the extent fees are paid for these services, the Fund, rather than the Adviser, will retain any fees paid for such assistance.

Temporary Investments

Pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash equivalents, U.S.

government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as “temporary investments,” so that 70% of our assets are qualifying assets.

A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous

agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate.

There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements.

However, if more than 25% of our gross assets constitute repurchase agreements from a single counterparty, we may not satisfy the diversification tests in order to qualify as a RIC.

Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit.

The Adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.

Senior Securities

Historically, the 1940 Act has permitted BDCs to issue “senior securities,” including borrowing money from banks or other financial institutions, only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after such incurrence or issuance.

In March 2018, the Small Business Credit Availability Act, or the SBCAA, was enacted into law.

The SBCAA, among other things, amended the 1940 Act to reduce the asset coverage requirements applicable to business development companies from 200% to 150% so long as the business development company meets certain disclosure requirements and obtains certain approvals.

On August 12, 2025, effective as of the effective date of the Conversion, and subject to shareholder approval, the Board approved the reduction of our asset coverage requirements in Section 61(a)(2) of the 1940 Act to 150% and recommended that our shareholders vote in favor of the proposal at the special shareholder meeting on November 6, 2025.

On November 6, 2025, our shareholders approved the application of the reduced asset coverage.

While any senior securities remain outstanding, we must make provisions to prohibit any distribution to our shareholders or the repurchase of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase.

We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage.

The 1940 Act imposes limitations on a BDC’s issuance of preferred shares, which are considered “senior securities” and thus are subject to the 150% asset coverage requirement described above.

In addition, (i) preferred shares must have the same voting rights as the common shareholders (one share, one vote);

and (ii) preferred shareholders must have the right, as a class, to appoint directors to the Board.

Code of Ethics

As required by Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, we and the Adviser have adopted codes of ethics which apply to, among others, our and the Adviser’s executive officers, including our Chief Executive Officer and Chief Financial Officer, as well as the Adviser’s officers, directors and employees.

Our codes of ethics generally will not permit investments by our and the Adviser’s personnel in securities that may be purchased or sold by us.

We hereby undertake to provide a copy of the codes to any person, without charge, upon request.

Requests for a copy of the codes may be made in writing addressed to our Administrator at AFC Management, LLC, Attention:

Investor Relations, or by emailing us at IR@Advancedflowercapital.com.

Compliance Policies and Procedures

We and the Adviser have adopted and implemented written policies and procedures reasonably designed to detect and prevent violation of the federal securities laws and we are required to review these compliance policies and procedures annually for their adequacy and the effectiveness of their implementation and designate a chief compliance officer to be responsible for administering the policies and procedures.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”) imposes a wide variety of regulatory requirements on publicly-held companies and their insiders.

Many of these requirements may affect us.

pursuant to Rule 13a-14 under the Exchange Act, our Chief Financial Officer must certify the accuracy of the consolidated financial statements contained in our periodic reports;

pursuant to Item 307 of Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”), our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures;

pursuant to Rule 13a-15 under the Exchange Act, our management must prepare an annual report regarding its assessment of our internal control over financial reporting, which must be audited by our independent public accounting firm;

and pursuant to Item 308 under Regulation S-K under the Securities Act and Rule

13a-15 under the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder.

We will continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith.

Proxy Voting Policies and Procedures

We have adopted the Proxy Voting Policy and Procedures set forth below, in recognition of the fact that proxy voting is an important component of investment management and must be performed in a dutiful and purposeful fashion in order to advance the best interests of our shareholders.

The Adviser will seek to ensure that proxies are voted in our and our shareholders’ best interests except where we may be required by law to vote proxies in the same proportion as the vote of all other shareholders (i.e., “echo vote”).

The Adviser shall vote all proxies relating to securities held by us and shall use proxy voting policies and procedures adopted by the Adviser in conformance with Rule 206(4)-6 under the Advisers Act.

If (i) the Adviser knows that a vote presents a material conflict between the interests of:

(a) our shareholders, and (b) the Adviser or any of affiliated persons;

and (ii) the Adviser proposes to vote on the particular issue in the manner not prescribed by its proxy voting policies and procedures, then the Adviser will follow the material conflict of interest procedures set forth in the Adviser’s proxy voting policies and procedures when voting such proxies.

Consistent with our delegation to the Adviser to vote proxies relating to securities held by us, the Adviser is responsible for the following:

• Implementing written policies and procedures, in compliance with Rule 206(4)-6 under the Advisers Act, reasonably designed to ensure that the Adviser votes portfolio securities in the best interest of shareholders of the Company owning the portfolio securities voted.

• Providing a summary of the material changes to its proxy voting policies and procedures during the period covered by the Adviser’s chief compliance officer’s annual compliance report to the Board and to the our Chief Compliance Officer, and a redlined copy of such proxy voting policies and procedures as applicable.

• The Adviser’s chief compliance officer shall review each applicable proxy voting policy and procedure at least annually to ensure compliance with Rule 206(4)-6 under the Adviser’s Act and to confirm each appear reasonably designed to ensure that the Adviser votes portfolio securities in the best interest of shareholders which owns the portfolio securities voted, as applicable.

The Adviser may retain a third-party proxy-voting service to coordinate, collect, and maintain all proxy-related information.

If the Adviser retains a third-party proxy-voting service, the Adviser will inquire with the service provider to confirm, at least annually, that any proxy votes for the Company were voted in compliance with the Proxy Policy.

You may obtain information about how we voted proxies by sending a written request for proxy voting information to our Administrator, AFC Management, LLC, at the following mailing address:

AFC Management, LLC

Rosemary Ave., Suite 301

West Palm Beach, FL 33401

Investor Relations

IR@Advancedflowercapital.com

Allocation of Investment Opportunities and Potential Conflicts of Interest

From time to time, during the period prior to our Conversion to a BDC, we may have co-invested with other investment vehicles managed by our Manager or its affiliates, including our Manager, and their portfolio companies, including by means of splitting loans, participating in loans or other means of syndicating loans.

We were not obligated to provide, nor did we provided, any financial support to the other managed investment vehicles.

As such, our risk was limited to the

carrying value of our investment in any such loan.

As of December 31, 2025 , there were two co-invested loans held by us and our affiliates.

Certain investment opportunities in loans, which were suitable for us, may also be suitable for other accounts, private funds, pooled investment vehicles or other entities managed or advised, directly or indirectly, by our Manager, Mr.

Tannenbaum or Mrs.

Tannenbaum, or any of their or our respective affiliates or entities in which any such person is an executive, in each case (such accounts, private funds, pooled investment vehicles and other entities, collectively, the “Ancillary Entities”), and, subject to compliance with our Manager’s Conflict of Interest Policy, our related persons transaction policy, our code of business conduct and ethics and applicable regulatory considerations, our Manager during such period could allocate such loans and participate in such loans on behalf of Ancillary Entities under such allocation process as our Manager deemed reasonable under the circumstances in good faith.

Additionally, subject to the foregoing policies, codes and considerations, our Manager or its affiliates, including AFC Agent LLC (“AFC Agent”), during such period served as administrative agent to the lenders under our co-investments, which as of December 31, 2025 included Private Company A and Subsidiary of Private Company G.

AFC Agent, an entity wholly-owned by Mr.

Tannenbaum, during such period served as the administrative agent to all respective lenders under the majority of our credit facilities.

We did not pay any consideration to AFC Agent for its services as administrative agent under such credit facilities, though it received fees from the borrowers under certain credit facilities.

Diamond Foundation Title LLC (“Diamond Foundation”), a title agent company in which certain directors and officers of the Company and its affiliates hold a minority ownership, may act as an agent for one or more underwriters in issuing title policies and/or providing support services in connection with investments made by us, or their affiliates and related parties, and third parties.

Diamond Foundation primarily focuses on transactions in rate-regulated states where the cost of tile insurance is non-negotiable.

Diamond Foundation will not perform services in non-regulated states for us, unless (i) in the context of a portfolio transaction that includes properties in rate-regulated states, (ii) as part of a syndicate of title insurance companies where the rate is negotiated by other insurers or their agents, (iii) when a borrower or other third party is paying all or a material portion of the premium or (iv) when providing only support services to the underwriter.

Diamond Foundation earns fees, which would have otherwise been paid to third parties, by providing title agency services and facilitating placement of title insurance with underwriters.

The affiliates may receive distributions from Diamond Foundation in connection with investments made by us based on its equity interest in Diamond Foundation.

In certain cases, there may be a related expense offset to us.

The Company has not incurred any expense and Diamond Foundation has not received any income in connection with a loan held by the Company.

Effective January 1, 2026, in connection with our Conversion to a BDC, we became subject to the co-investment restrictions under the 1940 Act, as amended.

We have filed an application with the SEC seeking exemptive relief that, if granted, would permit us to engage in certain co-investment transactions with co-filing affiliated investment vehicles.

There can be no assurance that such relief will be granted on the terms requested or at all.

Pending receipt of such relief, we do not expect to engage in co-investment transactions that would otherwise require exemptive relief under the 1940 Act.

During the year ended December 31, 2025, we operated in a competitive market for the origination and acquisition of attractive lending opportunities.

We competed with a variety of institutional investors, including other REITs, debt funds, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, investment banking firms, financial institutions, private equity and hedge funds, and other entities.

Some of our competitors were substantially larger and had considerably greater financial, technical and marketing resources than we do.

Several of our competitors, including other REITs, have recently raised, or are expected to raise, significant amounts of capital and may have investment objectives that overlap with our investment objectives, which may create additional competition for lending and other investment opportunities.

Some of our competitors may have a lower cost of funds and access to funding sources that may not be available to us or are only available to us on substantially less attractive terms.

Many of our competitors are not subject to the operating constraints associated with REIT tax compliance or maintenance of an exemption from the Investment Company Act.

In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more lending relationships than we do.

Competition may result in realizing fewer investments, higher prices, acceptance of greater risk, greater defaults, lower yields or a narrower spread of yields over our borrowing costs.

In addition, competition for attractive investments could delay the investment of our capital.

In the face of this competition, we have access to our Manager’s professionals and their financing industry expertise and relationships, which may provide us with a competitive advantage in competing effectively for attractive investment opportunities and help us assess risks and determine appropriate pricing for certain potential investments.

We also believe we have a more flexible funding structure than our competitors with typical REIT land ownership models, given our ability to redeploy funds more quickly.

This model also allows our borrowers to retain control of their real estate assets, which is important to their businesses and allows for more flexibility regarding their capital structure.

Although we believe our Manager’s expertise and our flexible funding structure provide us with valuable competitive advantages, we may not be able to achieve our business goals or expectations due to the competitive risks that we face.

Some of our competitors may have had a lower cost of funds and access to funding sources that may not be available to us or are only available to us on substantially less attractive terms.

Many of our competitors were not subject to the operating constraints associated with REIT tax compliance or maintenance of an exemption from the 1940 Act.

In addition, some of our competitors may have had higher risk tolerances or different risk assessments, which allowed them to consider a wider variety of investments and establish more lending relationships than we do.

Competition may have resulted in realizing fewer investments, higher prices, acceptance of greater risk, greater defaults, lower yields or a narrower spread of yields over our borrowing costs.

In addition, competition for attractive investments could have delayed the investment of our capital.

In the face of this competition, we had access to our Manager’s professionals and their financing industry expertise and relationships, which provided us with a competitive advantage in competing effectively for attractive investment opportunities and help us assess risks and determine appropriate pricing for certain potential investments.

We also believe we had a more flexible funding structure than our competitors with typical REIT land ownership models, given our ability to redeploy funds more quickly.

The duration of our loans, as compared to the length of leases usually employed by REIT land ownership models, allowed us to redeploy our capital with more flexibility as market changes occur instead of being locked in for longer periods of time.

This model also allowed our borrowers to retain control of their real estate assets, which is important to their businesses and allowed for more flexibility regarding their capital structure.

Although we believe our Manager’s expertise and our flexible funding structure provided us with valuable competitive advantages, we may not have been able to achieve our business goals or expectations due to the competitive risks that we faced.

Following the Conversion, we compete for investments with other BDCs and investment funds (including private equity funds, mezzanine funds, performing and other credit funds, and funds that invest in CLOs, structured notes, derivatives and other types of collateralized securities and structured products), as well as traditional financial services companies such as commercial banks and other sources of funding.

These other BDCs and investment funds might be reasonable investment alternatives to us and may be less costly or complex with fewer and/or different risks than we have.

Moreover, alternative investment vehicles, such as hedge funds, have begun to invest in areas in which they have not traditionally invested, including making investments in private U.S.

As a result of these new entrants, competition for investment opportunities in private U.S.

companies may intensify.

We may lose investment opportunities if we do not match our competitors’ pricing, terms or structure.

If we are forced to match our competitors’ pricing, terms or structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss.

A significant part of our competitive advantage stems from the fact that the market for investments in private U.S.

companies is underserved by traditional commercial banks and other financial sources.

A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms.

Furthermore, many of our competitors have greater experience operating under, or are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC.

Regulatory Environment

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federal income tax purposes, commencing with our taxable year ended December 31, 2020.

We generally must distribute annually at least 90% of our net taxable income, subject to certain adjustments and excluding any net capital gain, in order for us to continue to qualify as a REIT for U.S.

During the year ended December 31, 2025, we generally were required to distribute annually at least 90% of our net taxable income, subject to certain adjustments and excluding any net capital gain, in order for us to continue to qualify as a REIT for U.S.

federal income tax purposes.

To the extent that we satisfy this distribution requirement but distribute less than 100% of our net taxable income, we will be subject to U.S.

To the extent that we satisfied this distribution requirement but distributed less than 100% of our net taxable income, we were subject to U.S.

federal income tax on our undistributed taxable income.

In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under U.S.

In addition, we were subject to a 4% nondeductible excise tax if the actual amount that we

paid out to our shareholders in a calendar year is less than a minimum amount specified under U.S.

federal tax laws.

Our qualification as a REIT also depends on our ability to meet various other requirements imposed by the Internal Revenue Code of 1986, as amended (the “Code”), which relate to organizational structure, diversity of stock ownership, and certain restrictions with regard to the nature of our assets and the sources of our income.

Even if we continue to qualify as a REIT, we may be subject to certain U.S.

Our qualification as a REIT also depended on our ability to meet various other requirements imposed by the Internal Revenue Code of 1986, as amended (the “Code”), which relate to organizational structure, diversity of stock ownership, and certain restrictions with regard to the nature of our assets and the sources of our income.

Even while qualifying as a REIT, we were subject to certain U.S.

federal excise taxes and state and local taxes on our income and assets.

If we fail to qualify as a REIT in any taxable year, we will be subject to U.S.

federal income tax at regular corporate rates, and applicable state and local taxes, and will not be able to qualify as a REIT for the subsequent four years.

Furthermore, we have a taxable REIT subsidiary (“TRS”), which when active, pays U.S.

If we had failed to qualify as a REIT in any taxable year, we would have been subject to U.S.

federal income tax at regular corporate rates, and applicable state and local taxes, and would not have been able to qualify as a REIT for the subsequent four years.

Furthermore, during this period, we had a taxable REIT subsidiary (“TRS”), which when active, was subject to U.S.

federal, state, and local income tax on its net taxable income.

Investment Company Act

We have not been and are not currently required to be registered under the Investment Company Act pursuant to Section 3(c)(5) (the “Section 3(c)(5) Exemption”) of the Investment Company Act.

Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities.

Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities;

Effective January 1, 2026, in connection with our Conversion to a BDC, the Company ceased to operate and qualify as a REIT.

During the year ended December 31, 2025, we were not required to be registered under the 1940 Act pursuant to Section 3(c)(5) (the “Section 3(c)(5) Exemption”) of the 1940 Act.

Section 3(a)(1)(A) of the 1940 Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities.

Section 3(a)(1)(C) of the 1940 Act defines an investment company as any issuer that is or holds itself out as being engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities;

or owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S.

government securities and cash items) on an unconsolidated basis.

We intend to conduct our operations so that we will be exempt from the provisions of the Investment Company Act pursuant to the Section 3(c)(5) Exemption.

We intend to conduct our operations so that any wholly owned or majority owned subsidiary does not come within the definition of an investment company or will be exempt from the provisions of the Investment Company Act pursuant to an exemption contained in 3(c)(1), 3(c)(5) or 3(c)(7) thereunder.

During the year ended December 31, 2025, we conducted our operations so as to be exempt from the provisions of the 1940 Act pursuant to the Section 3(c)(5) Exemption.

We also conducted our operations so that any wholly owned or majority owned subsidiary did not meet the definition of an investment company or was exempt from the provisions of the 1940 Act pursuant to an exemption contained in 3(c)(1), 3(c)(5) or 3(c)(7) thereunder.

The Section 3(c)(5) Exemption is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” On the basis of no-action letters and interpretive guidance provided by the SEC and its staff, this exemption generally requires that at least 55% of an entity’s assets must be comprised of qualifying assets and at least 80% of such entity’s assets must be comprised of qualifying assets and real estate-related assets (and no more than 20% of such entity’s assets may be comprised of non-qualifying or non-real estate-related assets).

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Investments that do not satisfy the “qualifying asset” conditions set forth in the relevant SEC staff no-action letters and other guidance, may be classified as real estate-related or non-real estate-related assets, depending upon applicable SEC guidance, if any.

We classify our assets for purposes of our Section 3(c)(5) Exemption based upon no-action positions taken by the SEC staff and interpretive guidance provided by the SEC and its staff.

We are seeking to maintain an exemption from registration under the Investment Company Act on an ongoing basis.

Thus, maintaining our exemption from registration under the Investment Company Act may hinder our ability to operate solely on the basis of maximizing profits.

For more information on regulatory risks, see “Risk Factors—Risks Related to Our Organization and Structure—Maintenance of our exemption from registration under the Investment Company Act may impose significant limits on our operations.

Your investment return in our common stock may be reduced if we are required to register as an investment company under the Investment Company Act.”

The Investment Company Act provides certain protections and imposes certain restrictions on registered investment companies, none of which are currently applicable to us.

Our governing documents do not permit any transfer of shares of our common stock that would result in us becoming subject to regulation as an investment company.

If we were required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), portfolio composition, including restrictions with respect to diversification and industry concentration, and other matters.

During the year ended December 31, 2025, we classified our assets for purposes of our Section 3(c)(5) Exemption based upon no-action positions taken by the SEC staff and interpretive guidance provided by the SEC and its staff.

We were seeking during the year to maintain an exemption from registration under the 1940 Act.

Thus, maintaining our exemption from registration under the 1940 Act may have hindered our ability to operate solely on the basis of maximizing profits.

Effective January 1, 2026, in connection with our Conversion to a BDC, the Company became subject to the 1940 Act and ceased to rely on the Section 3(c)(5) Exemption.

Beginning with our taxable year ending December 31, 2026, we intend to elect to be treated as a RIC under Subchapter M of the Code.

To maintain our qualification as a RIC, we generally must distribute 90% of our investment company taxable income each taxable year and meet certain source-of-income, asset diversification, and other requirements.

Federal Laws Applicable to the Regulated Cannabis Industry

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The legal status of cannabis at the federal level could soon change.

On August 29, 2023, HHS issued a letter to the DEA recommending that cannabis be reclassified as a Schedule III controlled substance under the CSA.

On August 29, 2023, HHS issued a letter to the DEA recommending that cannabis be reclassified as a Schedule III

controlled substance under the CSA.

Following that recommendation, DOJ issued a Notice of Proposed Rulemaking (the “NPRM”) proposing to reschedule cannabis, and DEA issued a notice for a hearing.

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The NPRM hearing commenced in November 2024, but the hearing is currently stayed pending an administrative interlocutory appeal.

It is unclear when the hearing will recommence.

If this move is confirmed, it would be a momentous change whose full implications are currently unknown.

The DEA’s decision to reclassify cannabis would neither legalize nor likely eliminate current state cannabis program.

It is unclear when or if the hearing will recommence.

On December 18, 2025, President Trump issued an Executive Order directing that cannabis be rescheduled from Schedule I to Schedule III.

The Order directs the Attorney General to “take all necessary steps to complete the rulemaking process related to rescheduling marijuana to Schedule III of the Controlled Substances Act in the most expeditious manner.” If this move is confirmed, it would be a momentous change whose full implications are currently unknown.

The decision to reclassify cannabis would neither legalize nor likely eliminate current state cannabis programs.

If placed under Schedule III, cannabis will remain a controlled substance and state-legal programs will continue to operate outside of federally legal channels in their distribution of the substance, particularly because no state operator holds a DEA registration to possess or distribute cannabis.

The new administration under President Trump has yet to make a public statement regarding the federal legal status of cannabis and its position regarding the NPRM is unknown.

In addition to potentially reclassifying cannabis under the CSA, the federal government has made several public statements around state legalization, discussed below, that indicate a willingness to allow the state programs to continue to develop, and, further federal reforms are expected over the next several years.

Consistent with that, the federal government has chosen not to interfere with the state-regulated cannabis programs and has not brought criminal enforcement against state law compliant cannabis licensees or those doing business with them for the past ten years.

Nonetheless, the federal government could enforce U.S.

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Department of Justice (“DOJ”) and the Drug Enforcement Agency (“DEA”), may reverse course and strictly enforce current federal law against state law compliant cannabis companies.

It is unclear whether that policy of prosecutorial discretion will continue under the new Trump administration;

It is uncertain whether that policy of prosecutorial discretion will continue under the new Trump administration;

despite positive statements concerning cannabis during the campaign, his Attorney General and DEA Administrator appointees have not supported cannabis in the past.

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State Regulation of the Cannabis Industry

Forty-one states, the District of Columbia, Puerto Rico, the Virgin Islands, and Guam have legalized the commercial sale of cannabis for certain medical purposes.

Forty-two states, the District of Columbia, Puerto Rico, the Virgin Islands, and Guam have legalized the commercial sale of cannabis for certain medical purposes.

Twenty-four of those states, the District of Columbia, Guam, and Northern Mariana have legalized cannabis for adults for non-medical purposes as well (sometimes referred to as adult or recreational use).

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Human Capital

We are externally-managed by our Manager and do not have any employees.

Our officers also serve as officers or employees of our Manager and/or its affiliates.

Our Manager’s employees have extensive financing capabilities and experience in originating, underwriting and managing real estate and cash flow financings.

We believe our relationship with our Manager provides us with an robust relationship network of cannabis industry operators as well as significant back-office personnel to assist in origination and management of loans.

Our Manager’s employees are a valuable asset to our operations, and we believe each person is an integrated member of the team and is meaningful to our continued success.

Our Manager’s team meets regularly as a full team where each member is encouraged to actively participate in a wide range of topics relating to our operations.

We believe that our Manager’s ability to attract, develop, engage and retain key personnel is essential to our operations.

While we are a young company, having commenced operations in July 2020 and completed our IPO in March 2021, we believe our Manager provides a committed team of employees with substantial experience in each aspect of our operations, including cash flow and real estate lending, construction and real estate development, portfolio management, corporate finance and capital markets.

We are externally-managed and do not have any employees.

Our officers also serve as officers or employees of our Adviser and/or its affiliates.

Certain investment personnel also serve as investment personnel of affiliates.

Our Adviser’s employees and personnel have extensive financing capabilities and experience in originating, underwriting and managing real estate and cash flow financings.

We believe our relationship with our Adviser provides us with an robust relationship network of cannabis industry operators as well as significant back-office personnel to assist in origination and management of loans.

Our Adviser’s employees are a valuable asset to our operations, and we believe each person is an integrated member of the team and is meaningful to our continued success.

Our Adviser’s team meets regularly as a full team where each member is encouraged to actively participate in a wide range of topics relating to our operations.

We believe that our Adviser’s ability to attract, develop, engage and retain key personnel is essential to our operations.

We believe our Adviser provides a committed team of employees with substantial experience in each aspect of our operations, including cash flow and real estate lending, construction and real estate development, portfolio management, corporate finance and capital markets.

Following the Conversion, services necessary for our business will be provided by individuals who are employees of the Adviser or the Administrator, as applicable, and/or its affiliates pursuant to the terms of the Advisory Agreement and the Administration Agreement.

The services necessary for the sourcing and administration of our investment portfolio will be provided by investment professionals employed by the Adviser or its affiliates.

The investment team will focus on origination, non-originated investments and transaction development and the ongoing monitoring of our investments.

In addition, we will reimburse the Administrator for its costs, expenses and allocable portion of overhead, including compensation paid by the Administrator to administrative and other personnel, in accordance with the terms of the Administration Agreement described above and applicable law.

Our Administrator receives certain administrative services, including personnel, legal, accounting, human resources, clerical, bookkeeping and record keeping services from an affiliate of the Administrator.

Adviser Succession Plan

The members of the Adviser have delegated the management of the business and affairs of the Adviser to Mrs.

Tannenbaum, as manager (the “Managing Member”).

Pursuant to our Manager’s operating agreement, the Managing Member will hold office until such Managing Member resigns or is removed pursuant to our Manager’s operating agreement.

The Managing Member shall be automatically removed as such in the event of his or her death, permanent physical or mental disability.

Upon the resignation or removal of Mrs.

Tannenbaum as the Managing Member, the members of our Manager will appoint Mr.

Tannenbaum as the Managing Member.

Federal Income Tax Consequences Applicable to Regulated Investment Companies (RICs)

In connection with the Conversion, we and our shareholders are not expected to recognize any gain or loss for U.S.

federal income tax purposes.

However, prior to qualifying as a RIC, we may temporarily operate as a taxable C-Corporation, and its income may be taxable at regular corporate rates.

Distributions of earnings and profits while we operate as a taxable C-Corporation will be taxable to its shareholders as dividend income and generally will be eligible (i) to be treated as qualified dividend income in the case of shareholders taxed as individuals and (ii) for the dividends received deduction in the case of corporate shareholders, in each case, subject to certain holding period and other requirements.

Distributions in excess of earnings and profits will be treated as a return of shareholder’s capital.

To be eligible to be treated as a RIC, as discussed in greater detail below, we would be required to distribute to shareholders any earnings and profits that remained undistributed from any year in which it did not qualify as a RIC, including from the period it operated as a taxable C-Corporation.

In addition, we may elect to recognize and pay tax on net built-in gains (i.e., the excess of the aggregate gains over aggregate losses that would have been realized if we had sold its assets), if any, on the last day of its last tax year as a C-Corporation before it intends to qualify to be taxed as a RIC.

The actual tax impact of operating as a taxable C-Corporation will depend on the circumstances following the Conversion.

As a RIC, we generally would not be subject to U.S.

federal income tax on taxable income that is distributed to our shareholders, so long as it maintains qualification as a RIC by complying with a number of organizational and operational requirements, including sources of income, asset diversification, and annual minimum distribution requirements.

The following discussion is a general summary of the material U.S.

federal income tax considerations applicable to us following the Conversion and to an investment in shares of our common stock.

This summary does not purport to be a complete description of the income tax considerations applicable to such an investment.

For example, we have not

described certain considerations that may be relevant to certain types of holders subject to special treatment under U.S.

federal income tax laws, including stockholders subject to the alternative minimum tax, tax-exempt organizations, insurance companies, dealers in securities, traders in securities that elect to mark-to-market their securities holdings, pass-through entities (including S-corporations), pension plans and trusts, financial institutions, real estate investment trusts, RICs, persons that have a functional currency (as defined in Section 985 of the Code) other than the U.S.

dollar and financial institutions.

This summary assumes that investors hold shares of our common stock as capital assets (within the meaning of Section 1221 of the Code).

The discussion is based upon the Code, Treasury regulations, and administrative and judicial interpretations, each as of the date of the filing of this Annual Report and all of which are subject to change, possibly retroactively, which could affect the continuing validity of this discussion.

We have not sought and will not seek any ruling from the Internal Revenue Service (the “IRS”), regarding any offering of our securities.

This summary does not discuss any aspects of U.S.

estate or gift tax or foreign, state or local tax.

It does not discuss the special treatment under U.S.

federal income tax laws that could result if we were to invest in tax-exempt securities or certain other investment assets.

For purposes of this discussion, a “U.S.

stockholder” is a beneficial owner of shares of our common stock that is, for U.S.

federal income tax purposes:

• an individual who is a citizen or resident of the United States;

• a corporation, or other entity treated as a corporation for U.S.

federal income tax purposes, created or organized in or under the laws of the United States or any state thereof, including, for this purpose, the District of Columbia;

• a trust if (i) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more “United States persons” (as defined in the Code) have the authority to control all substantive decisions of the trust, or (ii) the trust has in effect a valid election to be treated as a domestic trust for U.S.

federal income tax purposes;

• an estate, the income of which is subject to U.S.

federal income taxation regardless of its source.

For purposes of this discussion, a “Non-U.S.

stockholder” is a beneficial owner of shares of our common stock that is not a U.S.

stockholder or a partnership (or an entity or arrangement treated as a partnership) for U.S.

federal income tax purposes.

If a partnership (including an entity treated as a partnership for U.S.

federal income tax purposes) holds shares of our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership.

A prospective investor that is a partner in a partnership that will hold shares of our common stock should consult its tax advisors with respect to the purchase, ownership and disposition of shares of our common stock.

Tax matters are very complicated and the tax consequences to each stockholder of the ownership and disposition of shares of our common stock will depend on the facts of his, her or its particular situation.

You should consult your own tax adviser regarding the specific tax consequences of the ownership and disposition of shares of our common stock to you, including tax reporting requirements, the applicability of U.S.

federal, state and local tax laws and non-U.S.

tax laws, eligibility for the benefits of any applicable income tax treaty and the effect of any possible changes in the tax laws.

Election to be Taxed as a RIC

We have elected to be treated as a RIC under Subchapter M of the Code, beginning with our taxable year ended December 31, 2026.

As a RIC, we generally will not have to pay corporate-level U.S.

federal income taxes on any net ordinary income or capital gains that we timely distribute to our stockholders as dividends.

To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below).

In addition, we must distribute to our stockholders, for each taxable year, dividends of an amount at least equal to 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses and determined without regard to any deduction for dividends paid (the “Annual Distribution Requirement”).

Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute to our stockholders in respect of each calendar year dividends of an amount at least equal to the sum of (1) 98% of our net ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of the excess (if any) of our realized capital gains over our realized capital losses, or capital gain net income (adjusted for certain ordinary losses), generally for the one-year period ending on October 31 of the calendar year and (3) the sum of any net ordinary income plus capital gains net income for preceding years that were not distributed during such years and on which we paid no federal income tax (the “Excise Tax Avoidance Requirement”).

If we qualify as a RIC and satisfy the Annual Distribution Requirement, then we will not be subject to U.S.

federal income tax on the portion of our investment company taxable income and net capital gain (generally, net long-term capital gain in excess of net short-term capital loss) that we timely distribute (or are deemed to

timely distribute) as dividends to our shareholders.

We will be subject to U.S.

federal income tax at the regular corporate rates on any income or capital gain not distributed (or deemed distributed) to our stockholders.

In order to qualify as a RIC for U.S.

federal income tax purposes, we must, among other things:

• qualify and have in effect an election to be treated as a BDC under the 1940 Act at all times during each taxable year;

• derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities, net income derived from an interest in a “qualified publicly traded partnership” (as defined in the Code), or other income derived with respect to our business of investing in such stock or securities (the “90% Income Test”);

• diversify our holdings so that at the end of each quarter of the taxable year (i) at least 50% of the value of our assets consists of cash, cash equivalents, U.S.

government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer;

and (ii) no more than 25% of the value of our assets is invested in the securities, other than U.S.

government securities or securities of other RICs, of one issuer or of two or more issuers that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades or businesses or in the securities of one or more qualified publicly traded partnerships (collectively, the “Diversification Tests”).

We may invest in partnerships, including qualified publicly traded partnerships, which may result in our being subject to state, local or foreign income, franchise or other tax liabilities.

For the purpose of determining whether we satisfy the 90% Income Test and the Diversification Tests described above, the character of our distributive share of items of income, gain, losses, deductions and credits derived through any investments in companies that are treated as partnerships for U.S.

federal income tax purposes (other than certain publicly traded partnerships), or are otherwise treated as disregarded from us for U.S.

federal income tax purposes, generally will be determined as if we realized these tax items directly.

Further, for purposes of calculating the value of our investment in the securities of an issuer for purposes of determining the 25% requirement described above, our proper proportion of any investment in the securities of that issuer that are held by a member of our “controlled group” must be aggregated with our investment in that issuer.

A controlled group is one or more chains of corporations connected through stock ownership with us if (a) at least 20% of the total combined voting power of all classes of voting stock of each of the corporations is owned directly by one or more of the other corporations, and (b) we directly own at least 20% or more of the combined voting stock of at least one of the other corporations.

In addition, as a RIC we are subject to ordinary income and capital gain distribution requirements under U.S.

federal excise tax rules for each calendar year.

If we do not meet the required distributions, we will be subject to a 4% nondeductible federal excise tax on the undistributed amount.

The failure to meet U.S.

federal excise tax distribution requirements will not cause us to lose our RIC status.

Although we currently intend to make sufficient distributions each taxable year to satisfy the U.S.

federal excise tax requirements, under certain circumstances, we may choose to retain taxable income or capital gains in excess of current year distributions into the next tax year in an amount less than what would trigger payments of federal income tax under Subchapter M of the Code.

We may then be required to pay a 4% excise tax on such income or capital gains.

A RIC is limited in its ability to deduct expenses in excess of its investment company taxable income.

If our deductible expenses in a given taxable year exceed our investment company taxable income, we may incur a net operating loss for that taxable year.

However, a RIC is not permitted to carry forward net operating losses to subsequent taxable years and such net operating losses do not pass through to its stockholders.

In addition, deductible expenses can be used only to offset investment company taxable income, not net capital gain.

A RIC may not use any net capital losses (that is, the excess of realized capital losses over realized capital gains) to offset its investment company taxable income, but may carry forward such net capital losses, and use them to offset future capital gains, indefinitely.

Any underwriting fees paid to us are not deductible.

Due to these limits on deductibility of expenses and net capital losses, we may for tax purposes have aggregate taxable income for several taxable years that we are required to distribute and that is taxable to our stockholders even if such taxable income is greater than the net income we actually earn during those taxable years.

We may be required to recognize taxable income in circumstances in which we do not receive cash.

For example, if we hold debt obligations that are treated under applicable tax rules as having OID (such as debt instruments with PIK interest or, in certain cases, with increasing interest rates or issued with warrants), we must include in income each year a portion of the OID that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year.

Because any OID accrued will be included in our investment company taxable income for the taxable year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual

Distribution Requirement or the Excise Tax Avoidance Requirement, even though we will not have received any corresponding cash amount.

Furthermore, a portfolio company in which we hold equity or debt instruments may face financial difficulty that requires us to work out, modify, or otherwise restructure such equity or debt instruments.

Any such restructuring could, depending upon the terms of the restructuring, cause us to incur unusable or nondeductible losses or recognize future non-cash taxable income.

Certain of our investment practices may be subject to special and complex U.S.

federal income tax provisions that may, among other things, produce income that will not be qualifying income for purposes of the 90% Income Test.

We intend to monitor our transactions and may make certain tax elections that are intended to maintain our status as a RIC and avoid a fund-level tax.

Gain or loss realized by us from warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will be treated as capital gain or loss.

Such gain or loss generally will be long term or short term, depending on how long we held a particular warrant.

Although we do not presently expect to do so, we are authorized to borrow funds and to sell assets in order to satisfy distribution requirements.

However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt obligations and other senior securities are outstanding unless certain “asset coverage” tests are met.

Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our qualification as a RIC, including the Diversification Tests.

If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.

Some of the income and fees that we may recognize, such as fees for providing managerial assistance, certain fees earned with respect to our investments, income recognized in a work-out or restructuring of a portfolio investment, or income recognized from an equity investment in an operating partnership, will not satisfy the 90% Income Test.

In order to manage the risk that such income and fees might disqualify us as a RIC for a failure to satisfy the 90% Income Test, we may be required to recognize such income and fees indirectly through one or more entities treated as corporations for U.S.

federal income tax purposes.

Such corporations will be required to pay U.S.

corporate income tax on their earnings, which ultimately will reduce our return on such income and fees.

Failure to Qualify as a RIC

If we were unable to qualify for treatment as a RIC and are unable to cure the failure, for example, by disposing of certain investments quickly or raising additional capital to prevent the loss of RIC status, we would be subject to tax on all of our taxable income at regular corporate rates (and any applicable U.S.

state and local taxes).

The Code provides some relief from RIC disqualification due to failures to comply with the 90% Income Test and the Diversification Tests, although there may be additional taxes due in such cases.

We cannot assure you that we would qualify for any such relief should we fail the 90% Income Test or the Diversification Tests.

Should failure occur, not only would all our taxable income be subject to tax at regular corporate rates (as well as any applicable U.S.

state and local taxes), we would not be able to deduct dividend distributions to stockholders, nor would they be required to be made.

Distributions, including distributions of net long-term capital gain, would generally be taxable to our stockholders as ordinary dividend income to the extent of our current and accumulated earnings and profits.

Subject to certain limitations under the Code, certain corporate stockholders would be eligible to claim a dividends received deduction with respect to such dividends and non-corporate stockholders would generally be able to treat such dividends as “qualified dividend income,” which is subject to reduced rates of U.S.

federal income tax.

Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis, and any remaining distributions would be treated as a capital gain.

If we fail to qualify as a RIC, we may be subject to regular corporate tax on any net built-in gains with respect to certain of our assets (i.e., the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if we had been liquidated) that we elect to recognize on requalification or when recognized over the next five taxable years.

Our intention to elect RIC status is independent of our prior qualification as a REIT, which applied during the year ended December 31, 2025.

Additional Information

We file with or submit to the SEC annual, quarterly, and current periodic reports, proxy statements and other information meeting the informational requirements of the Securities Exchange Act of 1934 (the “Exchange Act”).

This information is available on our website at www.advancedflowercapital.com.

This information is

available on our website at www.advancedflowercapital.com.

The information on our website is not, and shall not be deemed to be, a part of this Annual Report or incorporated into any other filings that we make with the SEC.

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What changed 10-K

Item 1. Business