Advanced Flower Capital Inc. 10-Q

Item 1. Financial Statements ADVANCED FLOWER CAPITAL INC. CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES (unaudited) As of March 31, 2026 Assets Non-controlled, non-affiliated investments at fair value (cost of $ 345,918,978 ) $ 279,237,624 Cash and cash equivalents 112,730,935 Interest receivable 1,290,660 Prepaid expenses and other assets 1,617,704 Total assets $ 394,876,923 Liabilities Accrued interest $ 2,065,620 Distribution payable 1,176,442 Management fee payable 739,247 Income based incentive fee payable 1,023,725 Accrued direct administrative expenses 717,039 Director fees payable 63,750 Accounts payable and other liabilities 823,992 Senior notes payable, net 76,448,216 Line of credit payable 106,000,000 Line of credit payable to affiliate 20,000,000 Total liabilities 209,058,031 Commitments and contingencies (Note 8) Net assets Common stock, par value $ 0.01 per share, 50,000,000 shares authorized; 23,528,844 shares issued and outstanding at March 31, 2026 235,288 Additional paid-in capital 258,694,609 Distributable (loss) earnings ( 73,111,005 ) Total net assets 185,818,892 Total liabilities and net assets $ 394,876,923 Net asset value per share $ 7.90 See accompanying notes to the consolidated financial statements 1 Index ADVANCED FLOWER CAPITAL INC. CONSOLIDATED BALANCE SHEET As of December 31, 2025 Assets Loans held for investment at fair value (cost of $ 53,744,253 ) $ 26,080,763 Loans held for investment at carrying value, net 253,625,119 Current expected credit loss reserve ( 46,059,838 ) Loans held for investment at carrying value, net of current expected credit loss reserve 207,565,281 Cash and cash equivalents 38,605,507 Interest receivable 899,382 Prepaid expenses and other assets 2,443,814 Total assets $ 275,594,747 Liabilities Accrued interest $ 763,180 Current expected credit loss reserve 76,469 Accrued management and incentive fees 716,181 Accrued direct administrative expenses 374,852 Accounts payable and other liabilities 773,585 Senior notes payable, net 76,322,493 Line of credit payable 21,000,000 Total liabilities 100,026,760 Commitments and contingencies (Note 8) Shareholders’ equity Preferred stock, par value $ 0.01 per share, 10,000 shares authorized; 0 shares issued and outstanding at December 31, 2025 — Common stock, par value $ 0.01 per share, 50,000,000 shares authorized; 23,528,844 shares issued and outstanding at December 31, 2025 235,288 Additional paid-in capital 258,694,609 Accumulated (deficit) earnings ( 83,361,910 ) Total shareholders’ equity 175,567,987 Total liabilities and shareholders’ equity $ 275,594,747 See accompanying notes to the consolidated financial statements 2 Index ADVANCED FLOWER CAPITAL INC. CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) Three Months Ended March 31, 2026 Investment income: From non-controlled/non-affiliated investments: Interest income $ 7,670,790 Payment-in-kind interest income 332,640 Other income 1,809,788 Total investment income 9,813,218 Expenses: Interest expense 1,726,540 Management fee 973,235 Incentive fee on net investment income 1,023,725 General and administrative expenses 860,496 Director fees 63,800 Professional fees 463,911 Total expenses 5,111,707 Management fee rebate ( 233,988 ) Net expenses 4,877,719 Net investment income before taxes 4,935,499 Income tax expense 109,368 Net investment income 4,826,131 Net change in unrealized appreciation on investments 7,118,443 Provision for taxes on unrealized appreciation on investments 517,227 Net unrealized gain on investments, net of taxes 6,601,216 Net increase in net assets resulting from operations $ 11,427,347 Per share data: Basic and diluted net investment income per share $ 0.21 Basic and diluted net increase in net assets resulting from operations per share $ 0.49 Basic and diluted weighted average shares of common stock outstanding 23,528,844 See accompanying notes to the consolidated financial statements 3 Index ADVANCED FLOWER CAPITAL INC. CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) Three Months Ended March 31, 2025 Revenue: Interest income $ 8,458,248 Interest expense ( 1,815,271 ) Net interest income 6,642,977 Expenses: Management and incentive fees, net (less rebate of $ 128,580 ) 816,190 General and administrative expenses 734,957 Stock-based compensation 553,749 Professional fees 371,936 Total expenses 2,476,832 Reversal of current expected credit losses 699,424 Change in unrealized losses on loans at fair value, net ( 685,478 ) Net income before income taxes 4,180,091 Income tax expense 112,406 Net income $ 4,067,685 Earnings per common share: Basic $ 0.18 Diluted $ 0.18 Weighted average number of common shares outstanding: Basic weighted average shares of common stock outstanding 22,097,979 Diluted weighted average shares of common stock outstanding 22,110,102 See accompanying notes to the consolidated financial statements 4 Index ADVANCED FLOWER CAPITAL INC. CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS (unaudited) Three Months Ended March 31, 2026 Increase in net assets resulting from operations: Net investment income $ 4,826,131 Net change in unrealized appreciation on investments 6,601,216 Net increase in net assets resulting from operations 11,427,347 Distributions to shareholders: Distributions declared ($ 0.05 per share) ( 1,176,442 ) Net decrease in net assets resulting from distributions ( 1,176,442 ) Total increase in net assets 10,250,905 Net assets, beginning of the period 175,567,987 Net assets, end of the period $ 185,818,892 See accompanying notes to the consolidated financial statements 5 Index ADVANCED FLOWER CAPITAL INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (unaudited) Three months ended March 31, 2025 Common Stock Additional Paid-In- Capital Accumulated Earnings (Deficit) Total Shareholders’ Equity Shares Amount Balance at December 31, 2024 22,332,927 $ 223,329 $ 251,865,763 $ ( 50,712,954 ) $ 201,376,138 Stock-based compensation, net of forfeitures 263,080 2,631 551,118 — 553,749 Dividends declared on common shares ($ 0.23 per share) — — — ( 5,197,082 ) ( 5,197,082 ) Net income — — — 4,067,685 4,067,685 Balance at March 31, 2025 22,596,007 $ 225,960 $ 252,416,881 $ ( 51,842,351 ) $ 200,800,490 See accompanying notes to the consolidated financial statements 6 Index ADVANCED FLOWER CAPITAL INC. CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) Three Months Ended March 31, 2026 Operating activities: Net increase in net assets resulting from operations $ 11,427,347 Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities: Net change in unrealized appreciation on investments ( 7,118,443 ) Net accretion of discount on investments ( 1,107,387 ) Amortization of deferred financing costs - revolving credit facilities 44,798 Amortization of deferred financing costs - senior notes 134,473 Payment-in-kind interest ( 327,524 ) Purchases of investments ( 78,866,344 ) Proceeds from principal repayments and sale of investments 41,751,649 Changes in operating assets and liabilities: Interest receivable ( 391,278 ) Prepaid expenses and other assets 802,986 Accrued interest 1,302,440 Management fee payable 23,066 Income based incentive fee payable 1,023,725 Accrued direct administrative expenses 342,187 Accounts payable and other liabilities 114,157 Net cash used in operating activities ( 30,844,148 ) Cash flows from financing activities: Payment of financing costs ( 30,424 ) Borrowings on revolving credit facilities 188,300,000 Repayments on revolving credit facilities ( 83,300,000 ) Net cash provided by financing activities 104,969,576 Net increase in cash and cash equivalents 74,125,428 Cash and cash equivalents, beginning of period 38,605,507 Cash and cash equivalents, end of period $ 112,730,935 Supplemental disclosure of non-cash activity: OID withheld from funding of loans $ 1,701,923 Distributions declared and not yet paid $ 1,176,442 Supplemental information: Interest paid during the period $ 244,829 Income taxes paid (net of refunds received) during the period $ 2,848 See accompanying notes to the consolidated financial statements 7 Index ADVANCED FLOWER CAPITAL INC. CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) Three Months Ended March 31, 2025 Operating activities: Net income $ 4,067,685 Adjustments to reconcile net income to net cash provided by operating activities: Reversal of current expected credit losses ( 699,424 ) Change in unrealized losses on loans at fair value, net 685,478 Accretion of deferred loan original issue discount and other discounts ( 873,806 ) Amortization of deferred financing costs - revolving credit facility 109,341 Amortization of deferred financing costs - senior notes 155,699 Stock-based compensation 553,749 Payment-in-kind interest ( 118,869 ) Changes in operating assets and liabilities: Interest receivable 166,813 Prepaid expenses and other assets ( 98,710 ) Accrued interest 1,405,842 Accrued management and incentive fees, net ( 1,116,056 ) Accrued direct administrative expenses ( 628,984 ) Accounts payable and other liabilities 312,616 Net cash provided by operating activities 3,921,374 Cash flows from investing activities: Issuance of and fundings on loans ( 15,472,181 ) Funding to title agent for loan closing ( 10,080,000 ) Principal repayment of loans 6,474,523 Net cash used in investing activities ( 19,077,658 ) Cash flows from financing activities: Payment of financing costs ( 16,007 ) Borrowings on revolving credit facilities 26,500,000 Repayments on revolving credit facilities ( 104,250,000 ) Dividends paid to common shareholders ( 7,369,866 ) Net cash used in financing activities ( 85,135,873 ) Net decrease in cash and cash equivalents ( 100,292,157 ) Cash and cash equivalents, beginning of period 103,610,460 Cash and cash equivalents, end of period $ 3,318,303 Supplemental disclosure of non-cash activity: OID withheld from funding of loans $ 375,000 Dividends declared and not yet paid $ 5,197,082 Supplemental information: Interest paid during the period $ 144,389 Income taxes paid during the period $ 138 See accompanying notes to the consolidated financial statements 8 Index ADVANCED FLOWER CAPITAL INC. CONSOLIDATED SCHEDULE OF INVESTMENTS As of March 31, 2026 (unaudited) Company (1)(2) Reference Rate and Spread (3) Interest Rate (3) Maturity Date (4) Principal (5)(6) Amortized Cost (5) Fair Value (7) % of Net Assets Non-controlled, non-affiliated debt investments Cannabis Devi Holdings Inc. (8)(9) Cash 13.00 % + 2.50 % PIK 15.5 % 5/8/2024 $ 40,556,807 $ 37,689,376 $ 17,763,882 MI Opportunity Fund I, LLC Fixed 10.0 % 12/8/2028 5,843,241 4,664,241 4,697,089 Trulieve Cannabis Corp. Fixed 10.5 % 12/17/2030 5,000,000 5,000,000 5,000,000 Justice Cannabis Company (9)(10) Fixed 12.5 % 5/1/2026 78,768,556 77,323,709 42,889,479 DMA Holdings (MA), LLC (10) SOFR + Cash 12.00 % + 2.00 % PIK 17.7 % 5/3/2027 12,195,762 11,513,143 5,103,926 Story of Natures Medicine LLC Fixed 9.0 % 7/31/2026 22,099,497 21,567,444 21,265,240 High End Holdings LLC SOFR + 8.00 % 12.5 % 4/1/2028 19,327,505 18,937,323 15,512,255 High End Holdings LLC SOFR + 8.00 % 12.5 % 4/1/2028 17,200,000 16,856,000 13,804,720 Theratrue, Inc. SOFR + 8.75 % 13.8 % 9/1/2028 7,970,970 7,705,137 7,702,747 Story of Maryland LLC SOFR + 7.50 % 12.0 % 11/1/2027 31,457,793 31,036,712 31,275,337 Story of Ohio LLC Fixed 14.0 % 3/1/2028 14,750,000 14,516,892 14,637,900 Standard Wellness Company, LLC Cash 12.50 % + 1.50 % PIK 14.0 % 4/1/2029 11,633,251 11,338,678 11,468,059 Cresco Labs, LLC Fixed 12.5 % 8/13/2030 10,000,000 9,653,333 10,000,000 276,803,382 267,801,988 201,120,634 108.2 % Insurance BCIS AH Borrower LLC (11) Cash 7.50 % + 9.00 % PIK 16.5 % 2/1/2030 20,358,000 19,876,990 19,876,990 10.7 % Commercial & Professional Services STAT Buyer, LLC SOFR + 8.50 % 12.2 % 2/1/2031 59,400,000 58,240,000 58,240,000 31.3 % Total investments $ 356,561,382 $ 345,918,978 $ 279,237,624 150.2 % (1) The Company’s investments are all first lien senior term loans that are geographically located in the United States. (2) All debt investments are income producing unless otherwise indicated. (3) As of March 31, 2026, the floating benchmark rate included one-month Secured Overnight Financing Rate (“SOFR”) quoted at 3.7 % and subject to a weighted average floor of 3.8 % based on outstanding principal. 9 Index (4) Certain loans are subject to contractual extension options and may be subject to performance based or other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications. (5) The difference between the amortized cost and the outstanding principal amount of the investments consists of unaccreted original issue discount (“OID”) and loan origination costs. (6) Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may be subject to unused commitment fees. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. Refer to Note 8 for more information on the Company’s unfunded commitments. (7) Refer to Note 5. (8) Effective March 1, 2024, the Company placed the investment on nonaccrual status. The maturity date passed without repayment. (9) Represents co-investments made with the Fund’s affiliates in accordance with the terms of the exemptive relief received from the U.S. Securities and Exchange Commission (the “SEC”). Refer to Note 3 Related Party Transactions. (10) Effective December 1, 2023, the Company placed the investment on nonaccrual status. (11) The loan bears cash interest at a rate of 7.5 % and 9.0 % interest paid-in kind, with the option for the borrower to elect to pay cash interest at a rate of 5.5 % and 13.0 % interest paid-in kind until the end of the fiscal quarter following the first anniversary of the initial closing date. 10 Index ADVANCED FLOWER CAPITAL INC. CONSOLIDATED SCHEDULE OF INVESTMENTS As of December 31, 2025 (unaudited) 1 Company (1)(2) Reference Rate and Spread (3) Interest Rate (3) Maturity Date (4) Principal (5)(6) Amortized Cost (5) Fair Value (7) % of Net Assets Debt investments Cannabis Devi Holdings Inc. (8)(9) Cash 13.00 % + 2.50 % PIK 15.5 % 5/8/2024 $ 46,790,684 $ 43,923,253 $ 16,259,763 MI Opportunity Fund I, LLC Fixed 10.0 % 12/8/2028 6,000,000 4,821,000 4,821,000 Trulieve Cannabis Corp. Fixed 10.5 % 12/17/2030 5,000,000 5,000,000 5,000,000 Justice Cannabis Company (9)(10) Fixed 12.5 % 5/1/2026 78,768,556 77,323,709 43,907,721 DMA Holdings (MA), LLC (10) SOFR + Cash 12.00 % + 2.00 % PIK 17.7 % 5/3/2027 12,195,762 11,513,143 5,451,148 Bloom Hold Co. SOFR + 8.00 % 13.0 % 5/1/2026 25,146,957 25,029,524 25,029,524 Story of Natures Medicine LLC Fixed 9.0 % 7/31/2026 23,599,497 22,668,405 22,043,979 High End Holdings LLC SOFR + 8.00 % 12.5 % 4/1/2028 19,327,505 18,888,550 15,775,932 High End Holdings LLC SOFR + 8.00 % 12.5 % 4/1/2028 17,200,000 16,813,000 14,038,855 Gron Holdings, Inc. SOFR + 8.50 % 13.5 % 6/1/2028 5,358,890 5,111,731 5,111,731 Theratrue, Inc. SOFR + 8.75 % 13.8 % 9/1/2028 7,479,626 7,186,293 7,051,381 Story of Maryland LLC SOFR + 7.50 % 12.0 % 11/1/2027 33,179,518 32,691,950 32,691,950 Story of Ohio LLC Fixed 14.0 % 3/1/2028 15,000,000 14,736,486 14,736,486 Standard Wellness Company, LLC Cash 12.50 % + 1.50 % PIK 14.0 % 4/1/2029 12,370,245 12,028,995 12,016,772 Cresco Labs, LLC Fixed 12.5 % 8/13/2030 10,000,000 9,633,333 9,633,333 Total investments $ 317,417,240 $ 307,369,372 $ 233,569,575 133.0 % (1) The Company’s investments are all first lien senior term loans that are geographically located in the United States. (2) All debt investments are income producing unless otherwise indicated. (3) As of December 31, 2025 , the floating benchmark rate included one-month Secured Overnight Financing Rate (“SOFR”) quoted at 3.7 % and subject to a weighted average floor of 4.3 % based on outstanding principal. (4) Certain loans are subject to contractual extension options and may be subject to performance based or other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications. 1 The Consolidated Schedule of Investments as of December 31, 2025 is presented for comparative purposes only and is unaudited. The Company was not regulated as a business development company as of December 31, 2025 and therefore did not include a Consolidated Schedule of Investments in its Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The December 31, 2025 data presented herein has been prepared by management to conform to the investment company presentation requirements of Article 6 of Regulation S-X and has not been audited in this form. 11 Index (5) The difference between the amortized cost and the outstanding principal amount of the investments consists of unaccreted original issue discount (“OID”) and loan origination costs. (6) Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may be subject to unused commitment fees. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. Refer to Note 8 for more information on the Fund’s unfunded commitments. (7) Refer to Note 5. (8) Effective March 1, 2024, the Company placed the investment on nonaccrual status. The maturity date passed without repayment. (9) Represents co-investments made with the Fund’s affiliates in accordance with the terms of the exemptive relief received from the U.S. Securities and Exchange Commission (the “SEC”). Refer to Note 3 Related Party Transactions. (10) Effective December 1, 2023, the Company placed the investment on nonaccrual status. See accompanying notes to the consolidated financial statements 12 Index ADVANCED FLOWER CAPITAL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2026 (unaudited) 1. ORGANIZATION Advanced Flower Capital Inc. (the “Company” or “AFC”) is a Maryland corporation and an institutional lender that originates, structures, underwrites, and manages senior secured loans and other debt investments. The Company is externally managed by AFC Management, LLC (the “Adviser”) pursuant to an investment advisory agreement (the “Advisory Agreement”) . Effective January 1, 2026, the Company elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). As a BDC, the Company is now subject to the regulatory framework applicable to BDCs under the 1940 Act, including requirements relating to portfolio composition, asset coverage, affiliate transactions, governance, and compliance. For U.S. federal income tax purposes, the Company intends to elect to be treated as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ending December 31, 2026. The Company’s primary investment focus is on senior secured lending to lower middle market companies across industries. Prior to its election to be regulated as a BDC, the Company primarily focused on senior secured lending, including loans to cannabis industry operators in states that have legalized medical and/or adult-use cannabis. In August 2025, the Company expanded its investment strategy to include senior secured lending to companies ancillary to the cannabis industry, as well as to companies outside of the cannabis industry. These investments are generally held for investment and are typically secured, directly or indirectly, by real estate, equipment, cash flows, licenses (where applicable), and other borrower assets, depending on applicable laws and regulations governing such borrowers. The Company operates in one operating segment. The Company’s objective is to provide attractive risk-adjusted returns over time through cash distributions and capital appreciation, primarily by sourcing, underwriting, structuring and funding loans to lower middle market companies across a broad range of industries. The Company has formed wholly-owned subsidiaries, AFCG TRS1, LLC and TCGDL LLC, to facilitate certain investment and operational activities. The financial statements of these subsidiaries are consolidated in the Company’s consolidated financial statements. 2. SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and results of operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (“SEC”), which were prepared when the Company operated as a real estate investment trust (“REIT”) and prior to its election to be regulated as a BDC (“pre-Conversion”). Refer to Note 2 to the Company’s Annual Report on Form 10-K for a description of the Company’s significant accounting policies. The Company has included disclosures below regarding basis of presentation and other accounting policies that (i) are required to be disclosed quarterly, (ii) have material changes or (iii) the Company views as critical as of the date of this report. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q, ASC 946, Financial Services—Investment Companies (“ASC 946”), and Articles 6 and 10 of Regulation S-X. Accordingly, certain disclosures accompanying the annual consolidated financial statements prepared in accordance with GAAP are omitted. Basis of Presentation The accompanying unaudited interim consolidated financial statements and related notes have been prepared on the accrual basis of accounting in conformity with GAAP and include the accounts of the Company and its wholly-owned subsidiaries. As of January 1, 2026, the Company is an investment company under GAAP and follows the accounting and reporting guidance applicable to investment companies in ASC 946 and SEC Regulation S-X. 13 Index As the Company is an investment company, portfolio investments held by the Company and its subsidiaries are not consolidated into the Consolidated Financial Statements. The portfolio investments held by the Company and its subsidiaries are included on the Statement of Assets and Liabilities as investments at fair value. Effective January 1, 2026, the Company elected to be regulated as a BDC under the Investment Company Act of 1940 and adopted investment company accounting. As a result, the Company adopted ASC 946 from its prior accounting as a REIT to investment company accounting, which requires, among other things, that investments be carried at fair value with changes in fair value recognized in the statement of operations. Due to the prospective application of a change in accounting as required under ASC 946-10-25-3, the Company has determined that the presentation of its consolidated financial statements for periods beginning after December 31, 2025 are not comparable to the consolidated financial statements previously prepared for prior periods for which the Company did not apply ASC 946. As a result, the Company has provided separate consolidated financial statements for applicable prior periods in Item 1 of this Quarterly Report on Form 10-Q. Reclassifications and Presentation Effective January 1, 2026, the Company prospectively adopted ASC 946. Upon its change in status, the following significant changes and elections were made: • Loans previously held for investment at carrying value with related current expected credit loss reserves are now measured at fair value under ASC 946. The opening balance sheet adjustment was $ 207,488,812 . There was no impact to opening accumulated earnings related to this change; • Inclusion of Schedule of Investments; and • Change in presentation of Statement of Cash Flows to align with investment company activities. The unaudited interim consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and for the periods presented. All intercompany balances and transactions have been eliminated in consolidation. The Company’s results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results that may ultimately be realized for the full fiscal year ending December 31, 2026. Valuation of Portfolio Investments The Adviser shall value the investments owned by the Company, subject at all times to the oversight of the Company's Board of Directors (the “Board” or the “Board of Directors”). The Adviser shall follow its own written valuation policies and procedures as approved by the Board when determining valuations. Investments for which market quotations are readily available are typically valued at such market quotations. Pursuant to Rule 2a-5 under the 1940 Act, the Board designates the Adviser as Valuation Designee to perform fair value determinations for the Company for investments that do not have readily available market quotations. Market quotations are obtained from an independent pricing service, where available. If a price cannot be obtained from an independent pricing service or if the independent pricing service is not deemed to be current with the market, certain investments held by the Company will be valued on the basis of prices provided by principal market makers. Generally, investments marked in this manner will be marked at the mean of the bid and ask of the independent broker quotes obtained. To validate market quotations, the Company utilizes a number of factors to determine if the quotations are representative of fair value. Debt and equity securities that are not publicly traded or whose market prices are not readily available will be valued at a price that reflects such security’s fair value. With respect to investments for which market quotations are not readily available, in particular, illiquid/hard to value assets, the Advisor will typically undertake a multi-step valuation process. The Company applies ASC Topic 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value in accordance with US GAAP and required disclosures of fair value measurements. The fair value of a financial instrument is the amount that would be received in an orderly transaction between market participants at the measurement date. The Company determines the fair value of investments consistent with its valuation policy. The Company discloses the fair value of its investments in a hierarchy which prioritizes and ranks the level of market observability used in the determination of fair value. In accordance with ASC 820, these levels are summarized below: • Level 1 — Valuations based on quoted prices (unadjusted) in active markets for identical assets or liabilities at the measurement date. 14 Index • Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly. • Level 3 — Valuations based on inputs that are unobservable and significant to the fair value measurement. A financial instrument’s level within the hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuations of Level 2 investments are generally based on quotations received from pricing services, dealers or brokers. Consideration is given to the source and nature of the quotations and the relationship of recent market activity to the quotations provided. Transfers between levels, if any, are recognized at the beginning of the reporting period in which the transfers occur. The Company evaluates the source of inputs used in the determination of fair value, including any markets in which the investments, or similar investments, are trading. When the fair value of an investment is determined using inputs from a pricing service (or principal market makers), the Company considers various criteria in determining whether the investment should be classified as a Level 2 or Level 3 investment. Criteria considered includes the pricing methodologies of the pricing services (or principal market makers) to determine if the inputs to the valuation are observable or unobservable, as well as the number of prices obtained and an assessment of the quality of the prices obtained. The level of an investment within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment. The fair value assigned to these investments is based upon available information and may fluctuate from period to period. In addition, it does not necessarily represent the amount that might ultimately be realized upon sale. Due to inherent uncertainty of valuation, the estimated fair value of investments may differ from the value that would have been used had a ready market for the security existed, and the difference could be material. Use of Estimates in the Preparation of Financial Statements The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Significant estimates include the valuation of loans held for investment at fair value. Recent Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025, the FASB issued ASU 2025-01—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”), which requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The adoption of ASU 2024-03 is not expected to have a material impact on the Company’s consolidated financial statements. 3. RELATED PARTY TRANSACTIONS Advisory Agreement Effective January 1, 2026, in connection with the Company’s conversion to a BDC (the “Conversion”), the Company entered into an Advisory Agreement with the Adviser, pursuant to which the Adviser serves as the Company’s investment adviser. As of such date, the Advisory Agreement replaced the prior management agreement between the Company and AFC Management, LLC, as amended (the “Management Agreement”) (in such capacity under the Management Agreement, the “Manager”), which ceased to govern our operations as of that date, 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”). Pursuant to the Advisory Agreement, the Adviser manages the investment activities and day-to-day operations of the Company, subject to the oversight of the Board and in accordance with the requirements of the 1940 Act. The Advisory Agreement was approved by our Board of Directors, including a majority of the Directors who are not “interested persons” of the Company (as such term is defined in the 1940 Act) (the “Independent Directors”), and by our shareholders at a 15 Index special meeting of shareholders 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. Adviser Compensation subsequent to January 1, 2026 The following compensation arrangements under the Advisory Agreement took effect on January 1, 2026. The Adviser receives base management fees (the “Management Fee”) that are calculated at a quarterly rate of 0.375 % 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; less 50 % of the a ggregate amount of any other fees (“Outside Fees”), including any agency fees relating to our investments, but excluding the incentive fees payable to the Adviser (as defined below) 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; provided further, that the 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”). In addition to the Management Fee, pursuant to the Advisory Agreement, the Company will pay the Adviser an incentive fee consisting of two parts (the “Incentive Fees”). The first part is determined and paid quarterly based on the Company’s 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 the Company’s first three calendar quarters following the effective date of the Advisory Agreement (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. (i) Income based incentive fee 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 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 includes, in the case of investments with a deferred interest feature (such as debt instruments with payment-in-kind (“PIK”) interest and zero coupon securities), accrued income that the Company has not yet received in cash. The Adviser is not obligated to return to the Company the Incentive Fee it receives on PIK interest that is later determined to be uncollectible in cash. For the avoidance of doubt, Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income will be compared to a new hurdle rate (the “New Hurdle Rate”) equal to the product of (i) 1.5 % per quarter ( 6.0 % annualized) and (ii) the sum of the Company’s net assets at the beginning of each applicable calendar quarter comprising the relevant Trailing Four Quarters. The New 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. The Company 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 the Company’s aggregate pre-incentive fee net investment income in respect of the relevant Trailing Four Quarters does not exceed the New 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 New Hurdle Rate but is less than 1.8182 % in any calendar quarter ( 7.2728 % annualized). The Company refers to this portion of the pre-incentive fee net investment income (which exceeds the New Hurdle Rate but is less than 1.8182 %) as the catch-up (the “New Catch-Up”). The New Catch-Up is meant to provide the Adviser with approximately 17.5 % of the Company’s 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; and • 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 New Hurdle Rate is reached and the New Catch-Up is achieved, 17.5 % of the pre-incentive fee net investment 16 Index income in respect of the relevant Trailing Four Quarters that exceeds the New Catch-Up amounts is paid to the Adviser. These calculations are adjusted for all issuances by the Company of shares of its common stock, including issuances pursuant to any dividend reinvestment plan and distributions during the applicable calendar quarter. There was $ 1.0 million of Incentive Fees on net investment income for the three months ended March 31, 2026. (ii) Capital gains incentive fee The incentive fee on capital gains is 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 the Company’s realized capital gains, if any, on a cumulative basis from January 1, 2026 (the date on which the Company 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 the Company 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 the Company 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. See “ Part 1, Item 1—Business—Adviser Compensation subsequent to January 1, 2026 ” in the Company’s Annual Report Form 10-K for the period ended December 31, 2025 for more information. For the three months ended March 31, 2026, there was no Incentive Fees on capital gains. Manager Compensation prior to January 1, 2026 The Manager received base management fees (the “Base Management Fee”) that were calculated and payable quarterly in arrears, in an amount equal to 0.375 % of the Company’s Equity (as defined in the Management Agreement), subject to certain adjustments, less 50 % of the aggregate amount of any other fees (“Outside Fees”), including any agency fees relating to our loans, but excluding the Incentive Compensation (as defined below) and any diligence fees paid to and earned by the Manager and paid by third parties in connection with the Manager’s due diligence of potential loans. In addition to the Base Management Fee, the Manager was entitled to receive incentive compensation (the “Incentive Compensation”) under the Management Agreement. Under the Management Agreement, the Company paid Incentive Fees to the Manager based upon the Company’s achievement of targeted levels of Core Earnings. “Core Earnings” is defined in the Management Agreement as, for a given period, the net income (loss) for such period, computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) the Incentive Compensation, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other non-cash items that were included in net income for the applicable reporting period, regardless of whether such items were included in other comprehensive income or loss, or in net income and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between the Manager and the Company’s independent directors and approved by a majority of the independent directors. See “ Part 1, Item 1—Business—Management Compensation prior to January 1, 2026 ” in our Annual Report on Form 10-K for the period ended December 31, 2025 for more information. There was no Incentive Compensation on Core Earnings during the three months ended March 31, 2025. Administration Agreement 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 17 Index assisting the Company in determining and publishing the Company’s net asset value, overseeing the preparation and filing of the Company’s tax returns, and generally overseeing the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. No separate fee is paid by the Company 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, the Company will reimburse the Administrator an amount equal to the Company’s allocable portion of certain expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including the Company’s 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 the Company’s affairs, as well as the actual cost of goods and services used for the Company and obtained by the Administrator from entities not affiliated with the Company. The Company will also reimburse the Administrator for the reasonably allocated actual costs of administrative services performed by Administrator for the operation of the Company. The Administration Agreement has an initial term expiring on December 31, 2027 unless terminated earlier in accordance with its terms. Thereafter, the Administration Agreement will renew automatically for successive annual periods, provided that such continuance is specifically approved at least annually by (a) the vote of the Board or the vote of a majority of the outstanding voting securities of the Company and (b) the vote of a majority of the Independent Directors. The following table summarizes the related party costs incurred by the Company for the three months ended March 31, 2026: Three Months Ended March 31, 2026 Affiliate Costs Management fees before rebate $ 973,235 Less: outside fees earned ( 233,988 ) Management fees 739,247 Incentive fee on net investment income 1,023,725 General and administrative expenses reimbursable to Adviser 685,922 Professional fees reimbursable to Adviser 20,023 Total $ 2,468,917 Amounts payable to the Adviser as of March 31, 2026 was approximately $ 2.5 million and is recorded within management fee payable, income based incentive fee payable and accrued direct administrative expenses in the Company’s consolidated statement of assets and liabilities . The Adviser is a wholly-owned subsidiary of Castleground Holdings LLC, a majority of the outstanding equity of which is beneficially owned by certain officers and directors as of the date of this Quarterly Report on Form 10-Q. 18 Index The following table summarizes the related party costs incurred by the Company under the Management Agreement prior to the Conversion for the three months ended March 31, 2025: Three Months Ended March 31, 2025 Affiliate Costs Management fees $ 944,770 Less: outside fees earned ( 128,580 ) Base management fees 816,190 Incentive fees earned — General and administrative expenses reimbursable to Manager 562,496 Professional fees reimbursable to Manager 6,038 Total $ 1,384,724 Amounts payable to the Manager as of December 31, 2025 was approximately $ 1.1 million, and is recorded within accrued management fees and incentive fees and accrued direct administrative expenses in the Company’s consolidated Balance Sheets. Investments in Loans From time to time, the Company may co-invest with other investment vehicles managed by the Adviser or its affiliates, including the Adviser, and their portfolio companies, including by means of splitting loans, participating in loans or other means of syndicating loans. The Company is not obligated to provide, nor has it provided, any financial support to the other managed investment vehicles. As such, the Company’s risk is limited to the carrying value of its investment in any such loan. Additionally, the Adviser or its affiliates, including AFC Agent LLC (“AFC Agent”), an entity wholly owned by Mr. and Mrs. Tannenbaum, may from time to time serve as administrative and collateral agent to the lenders under the Company’s loans. As of March 31, 2026, there were two co-invested loans held by the Company and affiliates of the Company. Unsecured Revolving Credit Facility with Affiliate In December 2024, the Company entered into the AFCF Credit Facility with AFC Finance LLC, an affiliate of the Company and Mr. and Mrs. Tannenbaum. The AFCF Credit Facility was terminated in April 2025. Refer to Note 7 for more information. In January 2026, the Company entered into the TCGSL Credit Facility with TCGSL LLC, an affiliate of the Company and Mr. and Mrs. Tannenbaum. Refer to Note 7 for more information. 4. INVESTMENTS As of March 31, 2026, the Company’s investment portfolio included 15 loans, comprised of first lien senior term loans that are geographically headquartered in the United States. The aggregate commitment under these loans was approximately $ 375.7 million and outstanding principal was approximately $ 356.6 million as of March 31, 2026. For the three months ended March 31, 2026, the Company funded $ 80.6 million of new loans and additional principal and received approximately $ 41.8 million of principal repayments. As of March 31, 2026, on a fair value basis, 59.3 % of performing debt investments bore interest at a floating rate and 40.7 % of performing debt investments bore interest at a fixed rate, respectively. 19 Index The following table summarizes the Company’s investments as of March 31, 2026: As of March 31, 2026 Amortized cost (1) Fair Value (2) First lien senior term loans $ 345,918,978 $ 279,237,624 Total investments $ 345,918,978 $ 279,237,624 (1) The difference between the amortized cost and the outstanding principal amount of the loans consists of unaccreted original issue discount (“OID”) and loan origination costs. (2) Refer to Note 5. The Company uses Global Industry Classification Standards for classifying the industry groupings of its portfolio companies. The industrial composition of the Company’s portfolio at fair value as of March 31, 2026 were as follows: As of March 31, 2026 Investment Type Fair Value % of Total Investments at Fair Value Cannabis $ 201,120,634 72.0 % Insurance 19,876,990 7.1 % Commercial & Professional Services 58,240,000 20.9 % Total investments $ 279,237,624 100.0 % As of March 31, 2026 , the Company had certain investments in three portfolio companies on nonaccrual status, which represented 23.5 % of total debt investments at fair value. As of March 31, 2026 , investments on nonaccrual status had an aggregate amortized cost and fair value of approximately $ 126.5 million and $ 65.8 million , respectively. 5. FAIR VALUE Loans Held for Investment The Company’s loans are typically valued using a yield analysis, which is typically performed for non-credit impaired loans to borrowers where the Company does not own a controlling equity position. Alternative valuation methodologies may be used as appropriate, and can include a market analysis, income analysis, or recovery analysis. To determine fair value using a yield analysis, a current price is imputed for the loan based upon an assessment of the expected market yield for a similarly structured loan with a similar level of risk. In the yield analysis, the Company considers the current contractual interest rate, the maturity and other terms of the loan relative to risk of the company and the specific loan. A key determinant of risk, among other things, is the leverage through the loan relative to the enterprise value of the borrower. As loans held by the Company are substantially illiquid with no active loan market, the Company depends on primary market data, including newly funded loans, as well as secondary market data with respect to high-yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable. 20 Index The following table presents fair value measurements of investments and cash and cash equivalents as of March 31, 2026: Fair Value Measurement as of March 31, 2026 Total Level 1 Level 2 Level 3 First lien senior term loans $ 279,237,624 $ — $ — $ 279,237,624 Cash and cash equivalents 112,730,935 112,730,935 — — Total portfolio investments, cash and cash equivalents $ 391,968,559 $ 112,730,935 $ — $ 279,237,624 The following table presents fair value measurements of investments and cash and cash equivalents pre-Conversion as of December 31, 2025: Fair Value Measurement as of December 31, 2025 Total Level 1 Level 2 Level 3 First lien senior term loans $ 26,080,763 $ — $ — $ 26,080,763 Cash and cash equivalents 38,605,507 38,605,507 — — Total portfolio investments, cash and cash equivalents $ 64,686,270 $ 38,605,507 $ — $ 26,080,763 The following table presents changes in investments that use Level 3 inputs as of and for the three months ended March 31, 2026: Three Months Ended March 31, 2026 Fair value, at December 31, 2025 $ 26,080,763 Conversion fair value adjustment (1) 207,488,812 Net change in unrealized appreciation on investments 7,118,443 Purchases of investments 78,866,344 Proceeds from principal repayments and sales of investments ( 41,751,649 ) Net accretion of discount on investments 1,107,387 PIK interest 327,524 Fair value, at March 31, 2026 $ 279,237,624 Net change in unrealized appreciation on investments still held as of March 31, 2026 $ 7,118,443 (1) Refer to Note 2 for more information on the Conversion. The following table presents changes in investments that use Level 3 inputs pre-Conversion as of and for the three months ended March 31, 2025 : Three Months Ended March 31, 2025 Fair value, at December 31, 2024 $ 30,510,804 Change in unrealized losses on loans at fair value, net ( 685,478 ) Loan repayments ( 1,252,941 ) Fair value, at March 31, 2025 $ 28,572,385 Net change in unrealized losses on loans still held as of March 31, 2025 $ ( 685,478 ) 21 Index The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of March 31, 2026 and December 31, 2025. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values. As of March 31, 2026 Unobservable Input Asset Category Fair Value Primary Valuation Techniques Input Estimated Range Weighted Average (1) First lien term loan $ 17,763,882 Recovery analysis Recovery rate 39.40 % - 48.20 % 43.80 % 198,480,337 Yield analysis Market yield 12.76 % - 28.14 % 18.08 % 15,000,000 Market quotes Broker/dealer bids or quotes N/A N/A 47,993,405 Market approach Revenue multiple 0.40 x - 0.95 x 0.79 x Total investments $ 279,237,624 As of December 31, 2025 Unobservable Input Asset Category Fair Value Primary Valuation Techniques Input Estimated Range Weighted Average (1) First lien term loan $ 16,259,763 Recovery analysis Recovery rate 31.60 % - 37.90 % 34.75 % 4,821,000 Yield analysis Market yield 19.50 % - 21.50 % 20.50 % 5,000,000 Market quotes Broker/dealer bids or quotes N/A N/A Total investments $ 26,080,763 (1) Unobservable inputs were weighted by the relative fair value of the investments. Changes in market yields, revenue multiples, and recovery rates may change the fair value of certain of the Company’s loans. Generally, an increase in market yields may result in a decrease in the fair value of certain of the Company’s loans, while a decrease in revenue multiples and recovery rates may result in a decrease in the fair value of certain of the Company’s loans. Due to the inherent uncertainty of determining the fair value of loans that do not have a readily available market value, the fair value of the Company’s loans may fluctuate from period to period. Additionally, the fair value of the Company’s loans may differ significantly from the values that would have been used had a ready market existed for such loans and may differ materially from the values that the Company may ultimately realize. Further, such loans are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate a loan in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it. In addition, changes in the market environment and other events that may occur over the life of the loans may cause the gains or losses ultimately realized on these loans to be different than the unrealized gains or losses reflected in the valuations currently assigned. Fair Value of Financial Instruments GAAP requires disclosure of fair value information about financial instruments, whether or not recognized at fair value in the balance sheets, for which it is practicable to estimate that value. 22 Index The following table details the carrying value and fair value of the Company’s debt obligations not recognized at fair value in the unaudited interim consolidated statement of assets and liabilities as of March 31, 2026: As of March 31, 2026 Carrying Value Fair Value Financial assets: Cash and cash equivalents $ 112,730,935 $ 112,730,935 Financial liabilities: Senior notes payable, net $ 76,448,216 $ 74,305,000 The following table details the carrying value and fair value of the Company’s financial instruments not recognized at fair value in the consolidated balance sheet as of December 31, 2025: As of December 31, 2025 Carrying Value Fair Value Financial assets: Cash and cash equivalents $ 38,605,507 $ 38,605,507 Loans held for investment at carrying value, net $ 253,625,119 $ 207,805,490 Financial liabilities: Senior notes payable, net $ 76,322,493 $ 74,151,000 Cash and cash equivalents have a carrying value which approximates their fair value due to the short-term nature of these instruments. The Company categorizes the fair value measurement of these assets as Level 1. The Company’s loans held for investment are measured using unobservable inputs, or Level 3 inputs. The fair value of the Company’s 2027 Senior Notes is estimated using a market bid technique based on observable inputs of the last available bid price in the market at the end of the period, or Level 2 inputs. 6. INTEREST RECEIVABLE The following table summarizes the interest receivable by the Company as of March 31, 2026: As of March 31, 2026 Interest receivable $ 1,267,521 PIK receivable 21,095 Unused fees receivable 2,044 Total interest receivable $ 1,290,660 The following table summarizes the interest receivable by the Company pre-Conversion as of December 31, 2025: As of December 31, 2025 Interest receivable $ 859,123 PIK receivable 15,977 Unused fees receivable 24,282 Total interest receivable $ 899,382 7. DEBT Revolving Credit Facility On April 29, 2022, the Company entered into the Loan and Security Agreement (the “Revolving Credit Agreement”) by and among the Company, the other loan parties from time to time party thereto, the lenders party thereto, and the lead 23 Index arranger, bookrunner and administrative agent party thereto, pursuant to which, the Company obtained a $ 80.0 million senior secured revolving credit facility (as amended from time to time, the “Revolving Credit Facility”). The Revolving Credit Facility’s initial maturity date of April 29, 2025 was extended to April 29, 2028 under Amendment Number Four to the Revolving Credit Agreement, as described further below. As amended, the Revolving Credit Facility contains aggregate commitments of $ 80.0 million ($ 106.0 million solely during the 2026 temporary increase period (defined below) from a FDIC-insured banking institution (which may be increased up to $ 100.0 million in aggregate, subject to available borrowing base and additional commitments) which may be borrowed, repaid and redrawn, subject to a borrowing base based on eligible loan obligations held by the Company and subject to the satisfaction of other conditions provided under the Revolving Credit Agreement. Interest is payable on the Revolving Credit Facility at the greater of (1) the applicable base rate plus 0.50 % and (2) 7.00 %, as provided in the Revolving Credit Agreement, as amended, payable in cash in arrears. In connection with the Revolving Credit Agreement and related amendments, the Company incurred certain closing costs of approximately $ 0.1 million, which were included in prepaid expenses and other assets on the Company’s consolidated statement of assets and liabilities and amortized over the life of the Revolving Credit Facility. The Company is required to pay certain fees to the agent and the lenders under the Revolving Credit Agreement, including a $ 75.0 thousand agent fee payable to the agent and a 0.25 % per annum loan fee payable ratably to the lenders, in each case, payable on the closing date and on the annual anniversary thereafter. Commencing on the six-month anniversary of the closing date, the Revolving Credit Facility has an unused line fee of 0.25 % per annum, payable semi-annually in arrears, which is included within interest expense in the Company’s unaudited interim consolidated statement of operations. Based on the terms of the Revolving Credit Agreement, the unused line fee is waived if our average revolver usage exceeds the minimum amount required per the Revolving Credit Agreement. During the three months ended March 31, 2026 and 2025, the Company incurred an unused line fee of approximately $ 19.4 thousand and $ 56.3 thousand, approximately. The obligations of the Company under the Revolving Credit Facility are secured by certain assets of the Company comprising of or relating to loan obligations designated for inclusion in the borrowing base. In addition, the Company is subject to various financial and other covenants, including: (1) liquidity of at least $ 5.0 million, (2) annual debt service coverage of at least 1.5 to 1.0 and (3) secured debt not to exceed 25 % of total consolidated assets of the Company and its subsidiaries. To the best of our knowledge, as of March 31, 2026, we were in compliance in all material respects with all covenants contained in our Revolving Credit Agreement. In January 2026, the Company entered into Amendment Number Six to the Loan and Security Agreement (“Amendment Number Six”), by and among the Company, as borrower, the lenders party thereto, and the lead arranger, bookrunner and administrative party thereto. Amendment Number Six, among other things, includes provisions relevant in light of the Company’s conversion from a REIT to a BDC. In March 2026, the Company entered into Amendment Number Seven to the Loan and Security Agreement (“Amendment Number Seven”), by and among the Company, as borrower, the lenders party thereto and the lead arranger, bookrunner and administrative agent party thereto. Amendment Number Seven, among other things, added TCGDL LLC, a subsidiary of the Company, as a borrower under the Revolving Credit Facility and amended certain provisions related to the inclusion of TCGDL LLC as a Borrower. In March 2026, the Company entered into Amendment Number Eight to the Loan and Security Agreement (“Amendment Number Eight”), by and among the Company, as borrower, the lenders party thereto, and the lead arranger, bookrunner and administrative party thereto. Amendment Number Eight, among other things, increased the commitment from the lenders by $ 56.0 million, from $ 50.0 million to $ 106.0 million, consisting of (i) a $ 30.0 million permanent increase in revolver commitments and (ii) a $ 26.0 million increase in revolver commitments during a specified temporary increase period beginning on March 27, 2026 and ending on April 10, 2026 (the “Temporary Increase Period”). Upon expiration of the Temporary Increase Period, the aggregate revolving commitments and the maximum revolver amount under the facility was automatically reduced to $ 80.0 million. As of March 31, 2026 and December 31, 2025, outstanding borrowings under the Revolving Credit Facility were $ 106.0 million and $ 21.0 million, respectively, and zero and $ 29.0 million were available for borrowing as of March 31, 2026 and December 31, 2025, respectively. As of each of March 31, 2026 and December 31, 2025, the interest rate on the Company’s borrowings under the Revolving Credit Facility was 7.25 %. AFCF Credit Facility In December 2024, the Company entered into an unsecured revolving credit agreement (the “AFCF Credit Agreement”), by and among the Company, as borrower, the lenders party thereto from time to time, and AFC Finance, LLC, as agent and 24 Index lender. AFC Finance, LLC is wholly owned by Leonard M. Tannenbaum, Chairman of the Company’s Board of Directors. The AFCF Credit Agreement provides for an unsecured revolving credit facility (the “AFCF Credit Facility”) with a $ 40.0 million commitment, which may be borrowed, repaid and redrawn, subject to a draw fee and the other conditions provided in the AFCF Credit Agreement. Interest is payable on the AFCF Credit Facility at a rate per annum equal to 8.00 %. The AFCF Credit Facility matures on the earlier of (i) December 31, 2025 and (ii) the date of the closing of any unsecured debt with principal of at least $ 40.0 million used to refinance the AFCF Credit Agreement. In April 2025, in conjunction with the entry by the Company into Amendment Number Four to the Revolving Credit Agreement, the Company terminated that certain AFCF Credit Agreement, by and among the Company, as borrower, the lenders party thereto from time to time, and AFC Finance, LLC, as agent and lender. There were no outstanding borrowings under the AFCF Credit Agreement at the time of its termination. TCGSL In January 2026, the Company entered into an unsecured revolving credit agreement (the “TCGSL Credit Agreement”), by and among the Company, as borrower, the lenders party thereto from time to time, and TCGSL LLC, as agent and lender. TCGSL is wholly owned by Leonard M. Tannenbaum, Chairman of the Company’s Board of Directors. The TCGSL Credit Agreement provides for an unsecured revolving credit facility (the “TCGSL Credit Facility”) with a $ 20.0 million commitment, which may be borrowed, repaid and redrawn, subject to a draw fee and the other conditions provided in the TCGSL Credit Agreement. Interest is payable on the TCGSL Credit Facility at a rate per annum equal to 8.5 % and matures on August 1, 2028. As of March 31, 2026, outstanding borrowings on the TCGSL Credit Facility were $ 20.0 million and zero was available for borrowing. As of December 31, 2025, the TCGSL Credit Facility was not in place and no amounts were outstanding or available for borrowing thereunder. 2027 Senior Notes On November 3, 2021, the Company issued $ 100.0 million in aggregate principal amount of senior unsecured notes due in May 2027 (the “2027 Senior Notes”). The 2027 Senior Notes accrue interest at a rate of 5.75 % per annum. Interest on the 2027 Senior Notes is due semi-annually on May 1 and November 1 of each year, which began on May 1, 2022. The net proceeds from the offering were approximately $ 97.0 million, after deducting the initial purchasers’ discounts and commissions and estimated offering fees and expenses payable by the Company. The Company used the proceeds from the issuance of the 2027 Senior Notes (i) to fund loans related to unfunded commitments to existing borrowers, (ii) to originate and participate in commercial loans to companies operating in the cannabis industry that are consistent with the Company’s investment strategy and (iii) for working capital and other general corporate purposes. The terms of the 2027 Senior Notes are governed by an indenture, dated November 3, 2021, among us, as issuer, and TMI Trust Company, as trustee (the “Indenture”). Under the Indenture, the Company is required to cause all of its existing and future subsidiaries to guarantee the 2027 Senior Notes, other than certain immaterial subsidiaries as set forth in the Indenture. TRS1 is currently a subsidiary guarantor under the Indenture. Prior to February 1, 2027, the Company may redeem the 2027 Senior Notes in whole or in part, at a price equal to the greater of 100 % of the principal amount of the 2027 Senior Notes being redeemed or a make-whole premium set forth in the Indenture, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date. On or after February 1, 2027, we may redeem the 2027 Senior Notes in whole or in part at a price equal to 100 % of the principal amount of the 2027 Senior Notes being redeemed, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. The Indenture also requires us to offer to purchase all of the 2027 Senior Notes at a purchase price equal to 101 % of the principal amount of the 2027 Senior Notes, plus accrued and unpaid interest if a “change of control triggering event” (as defined in the Indenture) occurs. The Indenture contains customary terms and restrictions, subject to a number of exceptions and qualifications, including restrictions on the Company’s ability to (1) incur additional indebtedness unless the Annual Debt Service Charge (as defined in the Indenture) is no less than 1.5 to 1.0, (2) incur or maintain total debt in an aggregate principal amount greater than 60 % of the Company’s consolidated Total Assets (as defined in the Indenture), (3) incur or maintain secured debt in an aggregate principal amount greater than 25 % of the Company’s consolidated Total Assets (as defined in the Indenture), and (4) merge, consolidate or sell substantially all of the Company’s assets. In addition, the Indenture also provides for customary events of default. If any event of default occurs, any amount then outstanding under the Indenture may 25 Index immediately become due and payable. These events of default are subject to a number of important exceptions and qualifications set forth in the Indenture. As of March 31, 2026 and December 31, 2025, the Company had $ 77.0 million in principal amount of the 2027 Senior Notes outstanding, respectively. The 2027 Senior Notes are due on May 1, 2027. Scheduled principal payments on the 2027 Senior Notes as of March 31, 2026 are as follows: 2027 Senior Notes Year 2026 (remaining) $ — 2027 77,000,000 2028 — 2029 — 2030 — Thereafter — Total principal 77,000,000 Deferred financing costs included in senior notes payable ( 551,784 ) Senior notes payable, net $ 76,448,216 The following table reflects a summary of interest expense incurred during the three months ended March 31, 2026: Three Months Ended March 31, 2026 2027 Senior Notes Revolving Credit Facility TCGSL Revolving Credit Facility Total Borrowings Interest expense $ 1,106,875 $ 408,588 $ 12,389 $ 1,527,852 Unused fee expense — 19,417 — 19,417 Amortization of deferred financing costs 134,473 44,798 — 179,271 Total interest expense $ 1,241,348 $ 472,803 $ 12,389 $ 1,726,540 The following table reflects a summary of interest expense incurred pre-Conversion during the three months ended March 31, 2025: Three Months Ended March 31, 2025 2027 Senior Notes Revolving Credit Facility AFCF Revolving Credit Facility Total Borrowings Interest expense $ 1,293,750 $ 191,333 $ 8,889 $ 1,493,972 Unused fee expense — 56,259 — 56,259 Amortization of deferred financing costs 155,699 109,341 — 265,040 Total interest expense $ 1,449,449 $ 356,933 $ 8,889 $ 1,815,271 26 Index 8. COMMITMENTS AND CONTINGENCIES As of March 31, 2026, the Company had the following commitments to fund various investments: As of March 31, 2026 Total loan commitments $ 375,661,201 Less: drawn commitments ( 361,215,505 ) Total undrawn commitments $ 14,445,696 See below for more information on the Company’s unfunded commitments: As of March 31, 2026 Unfunded Commitment Balances First lien delayed draw term loan: Theratrue, Inc. $ 3,029,030 Standard Wellness Company, LLC 1,750,000 BCIS AH Borrower LLC 9,666,666 Total $ 14,445,696 As of December 31, 2025, the Company had the following commitments to fund various investments pre-Conversion: As of December 31, 2025 Total loan commitments $ 332,631,207 Less: drawn commitments ( 322,339,968 ) Total undrawn commitments $ 10,291,239 See below for more information on the Company’s unfunded commitments pre-Conversion: As of December 31, 2025 Unfunded Commitment Balances First lien delayed draw term loan: Theratrue, Inc. $ 3,520,374 Gron Holdings, Inc. 5,141,110 Standard Wellness Company, LLC 1,629,755 Total $ 10,291,239 The Company from time to time may be a party to litigation or other legal proceedings relating to claims arising from the ordinary course of business. Refer to Part II. Item 1 – Legal Proceedings for information regarding certain material developments in pending litigation during the quarter ended March 31, 2026. The Company is required to establish reserves for litigation matters where those matters present loss contingencies that are both probable and estimable. When loss contingencies are not both probable and estimable, we do not establish reserves. Because each of these actions are in their early stages, no reasonable estimate of possible outcomes resulting from these legal actions can be made at this time. Historically, the Company provided loans to companies operating in the cannabis industry which involved significant risks, including the risk of strict enforcement against the Company’s borrowers on the federal illegality of cannabis, the Company’s borrowers’ inability to renew or otherwise maintain their licenses or other requisite authorizations for their 27 Index cannabis operations, and such loans lack of liquidity, and the Company could lose all or part of any of the Company’s loans. The Company’s ability to grow or maintain its business with respect to the loans it makes to companies operating in the cannabis industry depends on state laws pertaining to the cannabis industry. New laws that are adverse to the Company’s borrowers may be enacted, and current favorable state or national laws or enforcement guidelines relating to cultivation, production and distribution of cannabis may be modified or eliminated in the future, which would impede the Company’s ability to grow and could materially adversely affect the Company’s business. Management’s plan to mitigate risks include monitoring the legal landscape as deemed appropriate. Also, should a loan default or otherwise be seized, the Company may be prohibited from owning cannabis assets and thus could not take possession of collateral, in which case the Company would look to sell the loan, which could result in the Company realizing a loss on the transaction. 9. NET ASSETS Series A Preferred Stock As of March 31, 2026 and December 31, 2025 , the Company authorized 10,000 preferred shares designated as 12.0 % Series A Cumulative Non-Voting Preferred Stock, par value $ 0.01 per share (the “Series A Preferred Stock”). As of March 31, 2026 and December 31, 2025, there were zero shares of Series A Preferred Stock issued and outstanding, respectively. The Series A Preferred Stock entitles the holders thereof to receive cumulative cash dividends at a rate per annum of 12.0 % of the liquidation preference of $ 1,000 per share plus all accumulated and unpaid dividends thereon. The Company generally may not declare or pay, or set apart for payment, any dividend or other distribution on any shares of the Company’s stock ranking junior to the Series A Preferred Stock as to dividends, including the Company’s common stock, or redeem, repurchase or otherwise make payments on any such shares, unless full, cumulative dividends on all outstanding shares of Series A Preferred Stock have been declared and paid or set apart for payment for all past dividend periods. The holders of the Series A Preferred Stock generally have no voting rights except in limited circumstances, including certain amendments to the Company’s charter and the authorization or issuance of equity securities senior to or on parity with the Series A Preferred Stock. The Series A Preferred Stock is not convertible into shares of any other class or series of our stock. The Series A Preferred Stock is senior to all other classes and series of shares of the Company’s stock as to dividend and redemption rights and rights upon the Company’s liquidation, dissolution and winding up. Upon written notice to each record holder of the Series A Preferred Stock as to the effective date of redemption, the Company may redeem the shares of the outstanding Series A Preferred Stock at the Company’s option, in whole or in part, at any time for cash at a redemption price equal to $ 1,000 per share, plus all accrued and unpaid dividends thereon up to and including the date fixed for redemption. Shares of the Series A Preferred Stock that are redeemed shall no longer be deemed outstanding shares of the Company and all rights of the holders of such shares will terminate. Common Stock As of March 31, 2026 and December 31, 2025 , the Company authorized 50,000,000 shares of common stock at $ 0.01 par value per share, pursuant to the Articles of Amendment, dated March 10, 2022 (“Common Stock”). As of March 31, 2026 and December 31, 2025, 23,528,844 shares of Common Stock were issued and outstanding, respectively. During the three months ended March 31, 2026 and year ended December 31, 2025, the Company did not issue any shares of its common stock, other than shares of common stock sold under the ATM Program (hereinafter defined) and restricted stock awards granted under the 2020 Plan. Shelf Registration Statement On April 5, 2022, the Company filed a shelf registration statement on Form S-3 (File No. 333-264144) (the “Prior Shelf Registration Statement”), which was declared effective on April 18, 2022. Under the Prior Shelf Registration Statement, the Company was able, from time to time, issue and sell up to $ 1.0 billion of the Company’s common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of the Company’s common stock or preferred stock. The Prior Shelf Registration Statement expired on April 18, 2025. 28 Index On April 17, 2025, the Company filed a shelf registration statement on Form S-3 (File No. 333-286604) (the “Shelf Registration Statement”), which was declared effective on April 25, 2025. Under the Shelf Registration Statement, the Company may, from time to time, issue and sell up to $ 1.0 billion of the Company’s common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of the Company’s common stock or preferred stock. Following its election to be regulated as a BDC, the Company is no longer eligible to issue securities pursuant to the Shelf Registration Statement. At-the-Market Offering Program (“ATM Program”) On April 5, 2022, the Company entered into an Open Market Sales Agreement (the “Sales Agreement”) with Jefferies LLC and Citizens JMP Securities LLC, as Sales Agents, under which the Company may, from time to time, offer and sell shares of Common Stock, having an aggregate offering price of up to $ 75.0 million. As of March 31, 2026, the ATM Program was no longer in effect. The ATM Program and related Sales Agreement expired in April 2025, in connection with the expiration of the Company’s Prior Shelf Registration Statement in conjunction with its election to be regulated as a BDC. The Company does not currently have an ATM Program, but may enter into a new ATM Program and related sales agreement in the future pursuant to which sales may be made under the Shelf Registration Statement. Prior to commencing a new ATM Program, the Company would need to register the offering on a new registration statement on Form N-2, which would be subject to review and would need to be declared effective by the SEC . Under the terms of the Sales Agreement, the Company agreed to pay the Sales Agents a commission of up to 3.0 % of the gross proceeds from each sale of Common Stock sold through the Sales Agents. Sales of common stock, if any, were to be made in transactions that are deemed to be “at-the-market” offerings, as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). During the three months ended March 31, 2026, the Company did not sell any shares of the Company’s common stock under the Sales Agreement. At the time of termination, the Company’s remaining authorization under the Sales Agreement was approximately $ 47.4 million. Stock Incentive Plan The Company previously established a stock incentive compensation plan (the “2020 Plan”). The 2020 Plan authorized stock options, stock appreciation rights, restricted stock, stock bonuses, stock units and other forms of awards granted or denominated in the Company’s common stock or units of common stock. The 2020 Plan maintained flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. The Company previously granted stock options and restricted stock awards to participants in the 2020 Plan. Persons eligible to receive awards under the 2020 Plan included officers or employees of the Company or any of its subsidiaries, directors of the Company, employees of the Adviser and certain directors, consultants and other service providers to the Company or any of its subsidiaries. T he Company did not grant any options and no options were exercised d uring the three months ended March 31, 2025 . The total fair value of shares vested during the three months ended March 31, 2025, was approximately $ 1.1 million. During the three months ended March 31, 2025, 271,497 shares of restricted stock were granted with a weighted-average grant date fair value of $ 8.37 per share, and 127,944 shares of restricted stock vested with a weighted-average grant date fair value of $ 8.68 per share. As of March 31, 2026, there were 1,646,127 shares of common stock granted under the 2020 Plan, underlying 900 options and 1,645,227 shares of restricted stock that had been granted under the 2020 Plan prior to Conversion. Because externally managed BDCs are not permitted under the 1940 Act to issue or have outstanding restricted stock or stock options, the Company’s Board, in advance of the Conversion, approved the accelerated vesting of its outstanding restricted stock and cancelled its outstanding stock options. The Company accounted for this modification as a Type I modification (probable to probable). 29 Index Stock Compensation The following table summarize s the stock-based compensation expense incurred by the Company for the three months ended March 31, 2026 and 2025: Three months ended March 31, 2026 2025 Stock-based compensation $ — $ 553,749 Distributions The following table summarizes the Company’s distributions declared during the three months ended March 31, 2026 and 2025: Declaration Date Record Date Payment Date Per Common Share Distribution Amount Total Distribution Amount 3/11/2025 3/31/2025 4/15/2025 $ 0.23 $ 5,197,082 2025 Period Subtotal $ 0.23 $ 5,197,082 3/2/2026 3/31/2026 4/15/2026 $ 0.05 $ 1,176,442 2026 Period Subtotal $ 0.05 $ 1,176,442 10. EARNINGS PER SHARE The following information sets forth the computations of basic and diluted net increase in net assets resulting from operations per common share for the three months ended March 31, 2026: Three Months Ended March 31, 2026 Net increase in net assets resulting from operations $ 11,427,347 Basic weighted average shares of common stock outstanding 23,528,844 Basic and diluted net increase in net assets resulting from operations per common share $ 0.49 30 Index The following information sets forth the computations of basic and diluted earnings per common share for the three months ended March 31, 2025: Three Months Ended March 31, 2025 Net income $ 4,067,685 Dividends paid on unvested restricted stock ( 114,355 ) Net income attributable to common shareholders 3,953,330 Divided by: Basic weighted average shares of common stock outstanding 22,097,979 Weighted average unvested restricted stock and dilutive stock options 12,123 Diluted weighted average shares of common stock outstanding 22,110,102 Basic earnings per common share $ 0.18 Diluted earnings per common share $ 0.18 Diluted EPS was computed using the treasury stock method for stock options and restricted stock. Diluted earnings per common share excluded 2,320,290 weighted average shares of unvested restricted stock and stock options due to anti-dilutive effect for the three months ended March 31, 2025. 11. INCOME TAX A TRS is an entity taxed as a corporation that has not elected to be taxed as a REIT, in which a REIT directly or indirectly holds equity, and that has made a joint election with such REIT to be treated as a TRS. A TRS generally may engage in any business, including investing in assets and engaging in activities that could not be held or conducted directly by the Company without jeopardizing its qualification as a REIT. TRS1 was subject to applicable United States federal, state and local income tax on its taxable income. In addition, while the Company was a REIT, it was subject to a 100% excise tax on certain transactions between it and TRS1 that were not conducted on an arm’s-length basis. The income tax provision is included in the line item income tax expense, including excise tax. Effective January 1, 2026, in connection with the Conversion to a BDC, the Company became subject to the 1940 Act and ceased to rely on the exclusion from the definition of an “investment company” in Section 3(c)(5) of the 1940 Act. Beginning with taxable year ending December 31, 2026, the Company intends to elect to be treated as a RIC under Subchapter M of the Code. To maintain qualification as a RIC, the Company generally must distribute 90% of investment company taxable income each taxable year and meet certain source-of-income, asset diversification, and other requirements. The income tax (benefit) provision for the Company was approximately $ 0.1 million and $ 0.2 million for the three months ended March 31, 2026 and 2025 , respectively. The income tax benefit/expense for the three months ended March 31, 2026 and 2025 primarily related to activities of the Company’s TRS1 subsidiary. 31 Index The income tax provision for the Company and TRS1 consisted of the following for the three months ended March 31, 2026: Three Months Ended March 31, 2026 Net investment income taxes: Current: Federal $ 86,090 State 23,278 Excise tax — Total current income tax expense (benefit) 109,368 Investment valuation related taxes: Total deferred income tax expense (benefit) 517,227 Total income tax expense (benefit), including excise tax $ 626,595 The income tax provision for the Company and TRS1 pre-Conversion consisted of the following for the three months ended March 31, 2025: Three Months Ended March 31, 2025 Current: Federal $ 100,000 State 64,981 Total current income tax expense (benefit) 164,981 Total deferred income tax expense (benefit) ( 52,575 ) Excise tax — Total income tax expense (benefit), including excise tax $ 112,406 The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months. As of March 31, 2026, tax years 2022-2025 remain subject to examination by taxing authorities. The federal statutory rate was 21% for the three months ended March 31, 2026 and 2025. The primary difference between the Company’s statutory rate and effective tax rate is largely determined by the amount of income subject to tax by TRS1 . TRS1 is a corporate subsidiary that was formerly treated as a taxable REIT subsidiary prior to the Conversion. Following the Conversion, TRS1 is a taxable corporation. The Company expects that its future effective tax rate will be determined in a similar manner. Excise Tax For the three months ended March 31, 2026, the Company did not incur United States federal excise tax expense. A s a RIC, the Company is subject to ordinary income and capital gain distribution requirements under U.S. federal excise tax rules for each calendar year. If the Company does not meet the required distributions, the Company will be subject to a 4 % nondeductible federal excise tax on the undistributed amount . If it is determined that an excise tax liability exists for the current period, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The expense is calculated in accordance with applicable tax regulations. Pre-Conversion Excise Tax For the three months ended March 31, 2025 , the Company did not incur United States federal excise tax expense. As previously taxed as a REIT, excise tax represents a 4 % tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the period. If it is determined that an excise tax liability exists for the current period, the Company accrued excise tax on estimated excess taxable income as such taxable income is earned. The expense is calculated in accordance with applicable tax regulations. 32 Index Deferred Tax As of March 31, 2026 and 2025, the Company’s deferred tax assets were $ 0.8 million and $ 1.4 million, respectively, and are included in prepaid expenses and other assets in the Company’s consolidated statements of assets and liabilities . The Company believes it is more likely than not that the deferred tax assets will be realized in the future. Realization of the deferred tax assets is dependent upon the Company’s generation of sufficient taxable income in future years in appropriate tax jurisdictions to benefit from the reversal of temporary differences. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change. The Company recorded deferred tax assets related to temporary differences related to the change in unrealized appreciation and depreciation on investments held in TRS1. There were no valuation allowances for deferred tax assets during the three months ended March 31, 2026 and 2025. 12. REPORTABLE SEGMENTS ASC 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company generates revenue from loans to senior secured mortgage loans and other types of loans and debt securities to public and privately held lower-middle-market companies, including state law-compliant cannabis operators and ancillary cannabis companies. Businesses ancillary to the cannabis industry may include, but are not limited to, brand developers, business services providers, and equipment and consumables providers. These investments typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates. The accounting policies of the direct lending segment are the same as those described in the summary of significant accounting policies. The presentation of financial results as one reportable segment is consistent with the way the Company operates its business and is consistent with the manner in which the Company’s Chief Operating Decision Maker (“CODM”), the Company’s Chief Executive Officer, evaluates performance and makes resource and operating decisions for the business. The Company has no operations outside of the United States. The Company’s portfolio exhibits similar economic characteristics, similar yields and is operated using consistent business strategies. The Company operates as one operating segment and has one reportable operating segment for activities related to direct lending. The CODM assesses performance and evaluates the allocation of resources of the Company on a consolidated basis, based on the Company’s net income from continuing operations, which is reported on the Company’s consolidated statements of operations. The CODM is regularly provided with only the consolidated expenses, as noted on the consolidated statements of operations. Significant segment expenses are listed on the accompanying consolidated statements of operations. The measure of segment assets is reported on the consolidated statements of assets and liabilities as total assets. The CODM uses net investment income to evaluate income generated from segment assets and in deciding the amount of distributions, as well as using net investment income as a basis for evaluating lender terms for loans with public and privately held lower-middle-market companies, including state law-compliant cannabis operators and ancillary cannabis companies. During the three months ended March 31, 2026 and 2025, interest income earned on the Company’s portfolio was concentrated with five and five borrowers, respectively, each comprising more than 10% of consolidated interest income for an aggregate amount of $ 6.7 million, or 68 %, and $ 5.9 million, or 70 %, of consolidated interest income, respectively. 33 Index 13. FINANCIAL HIGHLIGHTS The following is a schedule of financial highlights for the three months ended March 31, 2026 (1) : Three months ended March 31, 2026 Per Share Data (2) : Net asset value at beginning of period $ 7.46 Net investment income 0.21 Net unrealized gain on investments 0.28 Net increase in net assets resulting from operations 0.49 Distributions declared ( 0.05 ) Total increase in net assets 0.44 Net asset value at end of period $ 7.90 Per share market price, beginning of period $ 2.85 Per share market price, end of period $ 2.82 Total return based on market value (3) 0.70 % Total return based on net asset value (4) 6.57 % Shares outstanding at end of period 23,528,844 Ratios/Supplemental Data: Ratio of operating expenses to average net assets (5) 10.80 % Ratio of net operating expenses to average net assets (5) 11.04 % Ratio of debt related expenses to average net assets (5) 3.82 % Ratio of net investment income to average net assets (5) 6.68 % Portfolio turnover rate (6) 16.28 % (1) Prior period financial highlights have not been presented as the Company was not regulated as a BDC under the 1940 Act prior to January 1, 2026. (2) Per share data amount is based on the basic weighted average number of common shares outstanding for the year/period presented (except for distributions to shareholders which is based on actual rate per share). (3) Total return equals the increase or decrease of ending market value over beginning market value, plus declared dividends per share assuming reinvestment of dividends, divided by the beginning market value. Total return does not include sales load. (4) Total return based on net asset value is calculated as the change in net asset value per share during the period, plus declared and payable distributions per share for the period, divided by beginning net asset value per share. (5) Amounts are annualized except for non-recurring income and expenses (other income). (6) The portfolio turnover rate is calculated based on the lesser of purchases or sales of investments year to date divided by the average fair value of the portfolio. 14. CURRENT EXPECTED CREDIT LOSSES As of March 31, 2026, the Company did not have a CECL Reserve, as all investments are held at fair value. As of December 31, 2025, the Company’s CECL Reserve for its loans held at carrying value was approximately $ 46.1 million, or 18.19 % of the Company’s total loans held at carrying value of approximately $ 253.6 million, and is bifurcated between the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loan receivable held at carrying value of approximately $ 46.1 million and a liability for unfunded commitments of approximately $ 0.1 million, respectively. The liability was based on the unfunded portion of the loan commitment over the full contractual period over which the Company is exposed to credit risk through a current obligation to extend credit. Management considered the likelihood that funding will occur and, if funded, the expected credit loss on the funded portion when determining the amount to allocate to its CECL Reserve. 15. LOANS HELD FOR INVESTMENT AT CARRYING VALUE As of March 31, 2026, the Company did not hold any loans at carrying value. 34 Index As of December 31, 2025, t he Company’s portfolio included 12 loans held at carrying value. A s of December 31, 2025, t he aggregate commitment under these loans was $ 283.5 million and outstanding principal was $ 259.6 million. As of December 31, 2025, approximately 46 % of the Company’s loans held at carrying value had floating interest rates. The following tables summarize the Company’s loans held at carrying value as of December 31, 2025: As of December 31, 2025 Outstanding Principal (1) Original Issue Discount Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior term loans $ 259,626,556 $ ( 6,001,437 ) $ 253,625,119 1.4 Total loans held at carrying value $ 259,626,556 $ ( 6,001,437 ) $ 253,625,119 1.4 (1) The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted OID and loan origination costs. (2) Weighted average remaining life is calculated based on the carrying value of the loans as of December 31, 2025. 16. SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date the consolidated financial statements were available to be issued. There were no material subsequent events, other than those described below, that required disclosure in these unaudited interim consolidated financial statements. In February 2026, the Company delivered a notice of default and reservation of rights to High End Holdings LLC under the credit facilities governing the real estate and non-real estate loans, following the breach of certain financial covenants. Subsequently, in April 2026, the Company entered into a forbearance agreement with High End Holdings LLC, under which the Company agreed to forbear from exercising its rights and remedies with respect to the specified defaults for a defined forbearance period, subject to High End Holdings LLC’s compliance with certain payment and other obligations. In May 2026, after failing to meet certain milestones under the forbearance agreement, the Company entered into a forbearance and modification agreement, which extended the forbearance period through June 8, 2026, subject to High End Holdings LLC’s compliance with certain payment, capital raise, and other obligations, and amended certain provisions of the credit facilities, including, but not limited to, adjusted monthly amortization payments and amended maturity date to December 15, 2027. High End Holdings LLC is current on all interest and amortization obligations under the credit facilities. In April 2026, the Company funded the remaining unfunded commitment on our investment with BCIS AH Borrower LLC. The Company funded approximately $ 9.7 million of additional principal. In April 2026, the Company committed $ 2.5 million to each of the notes with Kristoff Buyer, LLC and Kristoff Parent, LLC, respectively. The Company committed $ 2.5 million to a $ 50.0 million term loan as part of a $ 80.0 million senior secured credit facility with Kristoff Buyer, LLC, with the commitment fully funded at closing. The loan was originated at a discount of 2.0 % and matures April 2031. The loan bears cash interest at a rate of SOFR plus 5.75 %, with a rate index floor of 2.50 %. Concurrently, the Company committed $ 2.5 million of a $ 25.0 million senior secured credit facility with Kristoff Parent, LLC, which was fully funded at closing. The loan was originated at a discount of 2.25 % and matures October 2031. The loan bears cash interest at a rate of 10.0 % and 3.0 % interest paid-in kind, with the option for the borrower to elect to pay interest at a rate of 15.0 % paid-in kind. In May 2026, the Company’s credit facility to Justice Cannabis Company matured without repayment. The Company is pursuing all rights and remedies against the borrowers under the credit facility. 35 Index CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (this “Quarterly Report”), filed by Advanced Flower Capital Inc. (the “Company,” “AFC”, “we,” “us,” and “our”), and the information incorporated by reference herein, or made in other reports, filings with the SEC, and press releases contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we intend such statements to be covered by the safe harbor provisions contained therein. These forward-looking statements are based on our current intent, belief, expectations and views of future events. The forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results or performance, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “could,” “would,” “will,” “can,” “continuing,” “may,” “aim,” “intend,” “ongoing,” “plan,” “predict,” “potential,” “should,” “seeks,” “likely to” or words or phrases of similar meaning. Specifically, this Quarterly Report includes forward-looking statements regarding (i) the conversion to a business development company (“BDC”) (the “Conversion”) and the other related transactions, as well as the future financial and operating results, plans, objectives, expectations and intentions of the Company, (ii) our portfolio and strategies for the growth of our lending business; (iii) our working capital, liquidity and capital requirements; (iv) potential state and federal legislative and regulatory matters; (v) our expectations and estimates regarding certain tax, legal and accounting matters, including the impact on our financial statements and/or those of our borrowers; (vi) the amount, collectability and timing of cash flows, if any, from our loans; (vii) our expected ranges of originations and repayments; (viii) estimates relating to our ability to make distributions to our shareholders in the future; and (ix) our investment strategy. These forward-looking statements reflect management’s current views about future events, and are subject to risks, uncertainties and assumptions. Our actual results may differ materially from the future results and events expressed or implied by the forward-looking statements. Key factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following: • our expanded business and investment strategy; • our ability to maintain our status as a BDC; • our ability to maintain our status under Subchapter M of the Code of 1986, as amended (the “Code”) as a regulated investment company (“RIC”) and our qualification for tax treatment as a RIC; • the ability of our Adviser (as defined below) to locate suitable loan opportunities for us and to monitor and actively manage our portfolio and implement our expanded investment strategy; • our expectations for origination targets and repayments; • our ability to obtain our target mix of loan and collateral types with our expected ranges of yields; • the allocation of loan opportunities to us by our Adviser; • actual and potential conflicts of interest with our Adviser and its affiliates; • our projected operating results; • the state of the U.S. economy generally or in the specific geographic regions in which we operate, including as a result of the impact of natural disasters; • the impact of a protracted decline in the liquidity of credit markets on our business; • the amount, collectability and timing of our cash flows, if any, from our loans; • our ability to obtain and maintain competitive financing arrangements; • our ability to achieve expected leverage; • changes in the value of our loans; • our being subject to regulations and SEC oversight as a BDC, including limits on affiliated transactions, co-investments, asset diversification requirements, and limits on issuance of debt. If we fail to comply with applicable requirements, it may adversely impact our results relative to companies that are not subject to such regulations; • losses that may arise due to the concentration of our portfolio in a limited number of loans and borrowers; • our investment and underwriting process; 36 Index • the rates of default or recovery rates on our loans; • the estimated growth in and evolving market dynamics of private credit, including in the cannabis market; • changes in general economic conditions, in our industry and in the commercial finance and real estate markets; • the demand for cannabis cultivation and processing facilities; • shifts in public opinion and state regulation regarding cannabis; • actions and initiatives of the U.S. or state governments and changes to government policies and the execution and impact of these actions, initiatives and policies, including the fact that cannabis remains illegal under federal law and certain state laws; • the degree to which our hedging strategies may or may not protect us from interest rate volatility; • the availability of investment opportunities for us within our investment guidelines; • changes in interest rates and impacts of such changes on our results of operations, cash flows and the market value of our loans; • interest rate mismatches between our loans and our borrowings used to fund such loans; • the departure of any of the executive officers or key personnel supporting and assisting us from our Adviser, Administrator (as defined below) and/or their affiliates; • impact of and changes in governmental regulations, tax law and rates, accounting guidance, tariffs and similar matters; • estimates relating to our ability to make distributions to our shareholders in the future; • our understanding of our competition; and • market trends in our industry, interest rates, real estate values, the securities markets or the general economy. The above list of factors is not exhaustive or necessarily in order of importance. The above list of factors is not exhaustive or necessarily in order of importance. Although we believe that the assumptions on which these forward-looking statements are based are reasonable, some of those assumptions may be based on the work of third parties and any of those assumptions could prove to be inaccurate; as a result, forward-looking statements based on those assumptions also could prove to be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report should not be regarded as a representation by us that our plans and objectives will be achieved. You should not place undue reliance on these forward-looking statements. Please see the section entitled “ Risk Factors ” located in our Annual Report on Form 10-K, filed with the SEC on March 4, 2026, for further discussion of these and other risks and uncertainties which could affect our future results. These forward-looking statements apply only as of the date of this report and we undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except to the extent we are legally required to disclose certain matters in SEC filings or otherwise.