What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2026-08-13 compared with 2026-05-07 · 299 added, 270 removed, 776 unchanged (42% of the section changed)

2 unchanged sentences

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES

March 31, 2026

June 30, 2026

Non-controlled, non-affiliated investments at fair value (cost of $ 354,320,536 )

11 unchanged sentences

Accounts payable and other liabilities 1,036,803

Amounts payable for common stock repurchased 26,234

Senior notes payable, net 76,575,336

4 unchanged sentences

Common stock, par value $ 0.01 per share, 50,000,000 shares authorized;

23,528,844 shares issued and outstanding at March 31, 2026

22,689,438 shares issued and outstanding at June 30, 2026

Additional paid-in capital 255,928,446

37 unchanged sentences

Three months ended

March 31, 2026

June 30, 2026 Six months ended

June 30, 2026

Investment income:

28 unchanged sentences

Three months ended

March 31, 2025

June 30, 2025 Six months ended

June 30, 2025

Interest income $ 8,061,509 $ 16,519,757

1 unchanged sentence

Net interest income 6,203,335 12,846,312

Management and incentive fees, net (less rebate of $ 128,580 )

Management and incentive fees, net (less rebate of $ 260,742 and $ 389,322 , respectively)

680,358 1,496,548

General and administrative expenses 845,750 1,580,707

1 unchanged sentence

Professional fees 361,104 733,040

BDC conversion expenses 226,780 226,780

Total expenses 2,598,494 5,075,326

Reversal of current expected credit losses 699,424

Provision for current expected credit losses ( 15,851,566 ) ( 15,152,142 )

Change in unrealized losses on loans at fair value, net ( 1,055,970 ) ( 1,741,448 )

Net income before income taxes 4,180,091

Income tax expense 112,406

Net income $ 4,067,685

Net loss before income taxes ( 13,302,695 ) ( 9,122,604 )

Income tax benefit ( 138,044 ) ( 25,638 )

Net loss $ ( 13,164,651 ) $ ( 9,096,966 )

Earnings per common share:

Basic $ ( 0.60 ) $ ( 0.42 )

Diluted $ ( 0.60 ) $ ( 0.42 )

6 unchanged sentences

Three months ended

March 31, 2026

June 30, 2026 Six months ended

June 30, 2026

Increase in net assets resulting from operations:

Net investment income $ 3,481,288 $ 8,307,419

Net change in unrealized appreciation on investments 6,601,216

Net unrealized gain on investments, net of taxes 1,878,760 8,479,976

Net increase in net assets resulting from operations 5,360,048 16,787,395

Distributions to shareholders:

Distributions declared ($ 0.05 per share)

Distributions declared ($ 0.05 and $ 0.10 per share, respectively)

( 1,134,883 ) ( 2,311,325 )

Net decrease in net assets resulting from distributions ( 1,134,883 ) ( 2,311,325 )

Share transactions:

Repurchases of common stock ( 2,774,557 ) ( 2,774,557 )

Net increase in net assets from share transactions ( 2,774,557 ) ( 2,774,557 )

Total increase in net assets 1,450,608 11,701,513

4 unchanged sentences

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Three months ended March 31, 2025

Three months ended June 30, 2025

Common Stock Additional

3 unchanged sentences

Shares Amount

Balance at March 31, 2025 22,596,007 $ 225,960 $ 252,416,881 $ ( 51,842,351 ) $ 200,800,490

Stock-based compensation, net of forfeitures ( 896 ) ( 9 ) 484,511 — 484,502

Dividends declared on common shares ($ 0.15 per share)

— — — ( 3,389,267 ) ( 3,389,267 )

Net loss — — — ( 13,164,651 ) ( 13,164,651 )

Balance at June 30, 2025 22,595,111 $ 225,951 $ 252,901,392 $ ( 68,396,269 ) $ 184,731,074

Six months ended June 30, 2025

Common Stock Additional

Capital Accumulated

(Deficit) Total

Shareholders’

Shares Amount

Balance at December 31, 2024 22,332,927 $ 223,329 $ 251,865,763 $ ( 50,712,954 ) $ 201,376,138

2 unchanged sentences

— — — ( 8,586,349 ) ( 8,586,349 )

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

Net loss — — — ( 9,096,966 ) ( 9,096,966 )

Balance at June 30, 2025 22,595,111 $ 225,951 $ 252,901,392 $ ( 68,396,269 ) $ 184,731,074

See accompanying notes to the consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENT OF CASH FLOWS

Three Months Ended

March 31, 2026

Six months ended

June 30, 2026

Operating activities:

21 unchanged sentences

Repayments on revolving credit facilities ( 203,700,000 )

Distributions paid to common shareholders ( 1,176,442 )

Repurchases of common stock ( 2,748,323 )

Net cash provided by financing activities 104,949,490

5 unchanged sentences

Distributions declared and not yet paid $ 1,134,883

Payable for common stock repurchased $ 26,234

Supplemental information:

4 unchanged sentences

CONSOLIDATED STATEMENT OF CASH FLOWS

Three Months Ended

March 31, 2025

Six months ended

June 30, 2025

Operating activities:

Net income $ 4,067,685

Net loss $ ( 9,096,966 )

Adjustments to reconcile net income to net cash provided by operating activities:

Reversal of current expected credit losses ( 699,424 )

Provision for current expected credit losses 15,152,142

Change in unrealized losses on loans at fair value, net 1,741,448

14 unchanged sentences

Issuance of and fundings on loans ( 29,183,647 )

Funding to title agent for loan closing ( 10,080,000 )

Principal repayment of loans 25,635,763

14 unchanged sentences

Interest paid during the period $ 3,144,421

Income taxes paid during the period $ 138

Income taxes paid (net of refunds received) during the period

See accompanying notes to the consolidated financial statements

1 unchanged sentence

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of March 31, 2026

As of June 30, 2026

Company (1)(2)

14 unchanged sentences

Justice Cannabis Company (9)(10)

Fixed 12.5 % 5/1/2026 78,768,556 77,323,709 42,889,479

Prime + 10.25 %

17.0 % 5/1/2026 78,768,556 77,323,709 41,983,641

DMA Holdings (MA), LLC (11)

SOFR + Cash 12.00 % + 2.00 % PIK

SOFR (M) + Cash 12.00 % + 2.00 % PIK

17.7 % 5/3/2027 12,195,762 11,513,143 5,073,437

Story of Natures Medicine LLC Fixed 15.0 % 7/31/2026 20,599,497 20,466,484 20,388,351

High End Holdings LLC SOFR + 8.00 %

High End Holdings LLC SOFR (M) + 8.00 %

12.5 % 12/15/2027 17,949,462 17,612,930 14,862,154

High End Holdings LLC SOFR + 8.00 %

High End Holdings LLC SOFR (M) + 8.00 %

12.5 % 12/15/2027 15,973,647 15,676,947 13,226,180

Theratrue, Inc.

SOFR + 8.75 %

SOFR (M) + 8.75 %

13.8 % 9/1/2028 7,970,970 7,732,637 7,528,581

Story of Maryland LLC SOFR + 7.50 %

Story of Maryland LLC SOFR (M) + 7.50 %

12.0 % 11/1/2027 29,394,299 29,039,704 29,262,025

4 unchanged sentences

271,468,963 263,141,003 198,410,636 105.9 %

Commercial & Professional Services

STAT Buyer, LLC SOFR (M) + 8.50 %

12.2 % 2/1/2031 57,600,000 56,500,000 56,620,800 30.2 %

BCIS AH Borrower LLC (12)

1 unchanged sentence

16.5 % 2/1/2030 30,386,082 29,710,537 29,763,167 15.9 %

Commercial & Professional Services

STAT Buyer, LLC SOFR + 8.50 %

Leisure Products

Kristoff Parent, LLC Fixed 15.0 % 10/18/2031 2,571,875 2,517,330 2,517,330

Kristoff Buyer, LLC SOFR (Q) + 5.75 %

9.5 % 4/21/2031 2,500,000 2,451,666 2,451,666

$ 5,071,875 $ 4,968,996 $ 4,968,996 2.7 %

Total investments (13)

$ 364,526,920 $ 354,320,536 $ 289,763,599 154.7 %

(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.

(3) As of June 30, 2026, the floating benchmark rates included one-month (“M”) and three-month (“Q”) Secured Overnight Financing Rate (“SOFR”) and U.S.

One-month SOFR was quoted at 3.7 % and subject to a weighted average floor of 3.7 % based on outstanding principal.

Three-month SOFR was quoted at 3.7 % and subject to a weighted average floor of 2.5 % based on outstanding principal.

prime rate was quoted at 6.75 % and subject to a weighted average floor of 4.5 % 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.

1 unchanged sentence

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.

(5) The difference between the amortized cost and the outstanding principal amount of the investments consists of unaccreted original issue discount 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.

4 unchanged sentences

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”).

(9) Represents co-investments made with the Company’s affiliates.

Refer to Note 3 Related Party Transactions.

(10) Effective December 1, 2023, the Company placed the investment on nonaccrual status.

The maturity date passed without repayment.

(11) Effective December 1, 2023, the Company placed the investment on nonaccrual status.

(12) 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.

(13) Unless otherwise indicated, all of the Company’s investments or a portion thereof are pledged as collateral under the Revolving Credit Facility.

See Note 7 “Debt” included in these consolidated financial statements.

See accompanying notes to the consolidated financial statements

ADVANCED FLOWER CAPITAL INC.

43 unchanged sentences

Total investments (11)

$ 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.

7 unchanged sentences

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.

(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.

(5) The difference between the amortized cost and the outstanding principal amount of the investments consists of unaccreted original issue discount 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.

Refer to Note 8 for more information on the Company’s unfunded commitments.

(7) Refer to Note 5.

1 unchanged sentence

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”).

(9) Represents co-investments made with the Company’s affiliates.

Refer to Note 3 Related Party Transactions.

(10) Effective December 1, 2023, the Company placed the investment on nonaccrual status.

(11) Unless otherwise indicated, all of the Company’s investments or a portion thereof are pledged as collateral under the Revolving Credit Facility.

See Note 7 “Debt” included in these consolidated financial statements.

See accompanying notes to the consolidated financial statements

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2026

As of June 30, 2026

Advanced Flower Capital Inc.

14 unchanged sentences

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.

Securities and Exchange Commission (the “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 the fiscal year ended December 31, 2025 for a description of the Company’s significant accounting policies.

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, Accounting Standards Codification (“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.

3 unchanged sentences

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.

The portfolio investments held by the Company and its subsidiaries are included on the consolidated 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 1940 Act and adopted investment company accounting.

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.

6 unchanged sentences

There was no impact to opening accumulated earnings related to this change;

• Inclusion of Schedule of Investments;

• Change in presentation of Statement of Cash Flows to align with investment company activities.

• Inclusion of consolidated schedule of investments;

• Change in presentation of consolidated 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.

The Company’s results of operations for each of the three and six months ended June 30, 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

8 unchanged sentences

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.

With respect to investments for which market quotations are not readily available, in particular, illiquid/hard to value assets, the Adviser will typically undertake a multi-step valuation process.

The Company applies ASC 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.

17 unchanged sentences

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

Use of Estimates in the Preparation of the Consolidated 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.

12 unchanged sentences

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

special meeting of shareholders held on November 6, 2025.

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 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.

3 unchanged sentences

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”).

12 unchanged sentences

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;

• 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

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.

There was $ 0.7 million and $ 1.8 million of Incentive Fees on net investment income, respectively, for the three and six months ended June 30, 2026.

(ii) Capital gains incentive fee

3 unchanged sentences

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.

See “ Part 1, Item 1—Business—Adviser Compensation subsequent to January 1, 2026 ” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for more information.

For each of the three and six months ended June 30, 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.

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 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.

“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 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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 for more information.

There was no Incentive Compensation on Core Earnings during the three and six months ended June 30, 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.

In addition, the Administrator conducts relations with custodians, depositories, transfer agents, dividend disbursing agents, other shareholder servicing agents,

accountants, attorneys, underwriters, brokers and dealers, corporate fiduciaries, insurers, banks, and other persons in any other capacity deemed by the Administrator to be necessary and desirable.

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

Further, the Administrator is responsible for

assisting 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.

Further, the Administrator is responsible for 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.

3 unchanged sentences

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:

The following table summarizes the related party costs incurred by the Company for the three and six months ended June 30, 2026:

Three months ended

March 31, 2026

June 30, 2026 Six months ended

June 30, 2026

Affiliate Costs

6 unchanged sentences

Total $ 2,458,896 $ 4,927,813

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 amount payable to the Adviser as of June 30, 2026 was approximately $ 2.6 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.

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:

The following table summarizes the related party costs incurred by the Company under the Management Agreement prior to the Conversion for the three and six months ended June 30, 2025:

Three months ended

March 31, 2025

June 30, 2025 Six months ended

June 30, 2025

Affiliate Costs

6 unchanged sentences

Total $ 1,257,801 $ 2,642,525

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.

The amount 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 sheet.

Investments in Loans

4 unchanged sentences

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.

As of June 30, 2026, there were two co-invested loans held by the Company and affiliates of the Company.

Co-Investment Transactions

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

In an order dated March 11, 2026, the SEC granted exemptive relief that permits the Company, subject to the satisfaction of certain conditions, to co-invest in certain co-investment transactions with co-filing affiliated investment vehicles, including investments originated and directly negotiated by the Adviser with certain affiliates of the Adviser.

Unsecured Revolving Credit Facility with Affiliate

4 unchanged sentences

Refer to Note 7 for more information.

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.

The following table summarizes the Company’s investments as of March 31, 2026:

As of March 31, 2026

As of June 30, 2026, the Company’s investment portfolio included 17 loans, comprised of first lien senior term loans that are geographically headquartered in the United States.

The aggregate commitment under these loans was approximately $ 378.7 million and outstanding principal was approximately $ 364.5 million as of June 30, 2026.

For the six months ended June 30, 2026, the Company funded $ 98.1 million of new loans and additional principal and capitalized PIK and received approximately $ 51.0 million of principal repayments.

As of June 30, 2026, on a fair value basis, 55.4 % of performing debt investments bore interest at a floating rate and 44.6 % of performing debt investments bore interest at a fixed rate, respectively.

The following table summarizes the Company’s investments as of June 30, 2026:

As of June 30, 2026

Amortized cost (1)

5 unchanged sentences

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

The industrial composition of the Company’s portfolio at fair value as of June 30, 2026 was as follows:

As of June 30, 2026

Investment Type Fair Value % of Total Investments at Fair Value

2 unchanged sentences

Commercial & Professional Services 56,620,800 19.5 %

Leisure Products 4,968,996 1.7 %

Total investments $ 289,763,599 100.0 %

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.

As of June 30, 2026 , the Company had certain investments in three portfolio companies on nonaccrual status, which represented 22.7 % of total debt investments at fair value.

As of June 30, 2026 , investments on nonaccrual status had an aggregate amortized cost and fair value of approximately $ 126.5 million and $ 65.9 million , respectively.

Loans Held for Investment

5 unchanged sentences

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.

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

The following table presents fair value measurements of investments and cash and cash equivalents as of June 30, 2026:

Fair Value Measurement as of June 30, 2026

Total Level 1 Level 2 Level 3

8 unchanged sentences

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

The following table presents changes in investments that use Level 3 inputs as of and for the six months ended June 30, 2026:

Six months ended

June 30, 2026

Fair value, at December 31, 2025 $ 26,080,763

5 unchanged sentences

PIK interest (2)

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

Fair value, at June 30, 2026 $ 289,763,599

Net change in unrealized appreciation on investments still held as of June 30, 2026 $ 9,242,860

(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

(2) During the six months ended June 30, 2026, the Company had three investments with capitalized PIK interest of approximately $ 1.1 million.

During the same period, from these investments, the Company collected $ 1.4 million of principal repayments in cash.

The following table presents changes in investments that use Level 3 inputs pre-Conversion as of and for the six months ended June 30, 2025 :

Six months ended

June 30, 2025

Fair value, at December 31, 2024 $ 30,510,804

1 unchanged sentence

Loan repayments ( 1,922,134 )

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 )

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.

Fair value, at June 30, 2025 $ 26,847,222

Net change in unrealized losses on loans still held as of June 30, 2025 $ ( 1,741,448 )

The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of June 30, 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

As of June 30, 2026

Unobservable Input

22 unchanged sentences

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.

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

As of June 30, 2026

Carrying Value Fair Value

16 unchanged sentences

INTEREST RECEIVABLE

The following table summarizes the interest receivable by the Company as of March 31, 2026:

March 31, 2026

The following table summarizes the interest receivable by the Company as of June 30, 2026:

June 30, 2026

Interest receivable $ 1,692,473

PIK receivable 25,040

Unused fees receivable 2,044

Total interest receivable $ 1,717,513

6 unchanged sentences

Revolving Credit Facility

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.

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 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 ($ 110.0 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.

4 unchanged sentences

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.

During the three and six months ended June 30, 2026, the Company incurred an unused line fee of approximately $ 33.5 thousand and $ 52.9 thousand, respectively.

The Company’s obligations under the Revolving Credit Facility are secured by substantially all of the Company’s assets.

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.

To the best of our knowledge, as of June 30, 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.

3 unchanged sentences

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 %.

Upon expiration of the Amendment Number Eight Temporary Increase Period, the aggregate revolving commitments and the maximum revolver amount under the facility was automatically reduced to $ 80.0 million.

In June 2026, the Company entered into Amendment Number Nine to the Loan and Security Agreement (“Amendment Number Nine”), by and among the Company, as borrower, the lenders party thereto, and the lead arranger, bookrunner and administrative party thereto.

Amendment Number Nine, among other things, conformed certain reporting information to market standard for BDCs, set certain conditions for including specific credit facilities in the borrower base, and increased the aggregate revolver commitments under the facility to $ 110.0 million, consisting of a $ 30.0 million temporary increase in revolver commitments during a specified temporary increase period beginning on June 26, 2026 and ending on July 3, 2026 (the “Amendment Number Nine Temporary Increase Period”).

Upon expiration of the Amendment Number Nine Temporary Increase Period, the aggregate revolving commitments and the maximum revolver amount under the facility will automatically be reduced to $ 80.0 million.

As of June 30, 2026 and December 31, 2025, outstanding borrowings under the Revolving Credit Facility were $ 110.0 million and $ 21.0 million, respectively, and $ 0 and $ 29.0 million, respectively, were available for borrowing as of June 30, 2026 and December 31, 2025.

As of each of June 30, 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

AFC Finance, LLC is wholly owned by Leonard M.

10 unchanged sentences

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.

As of June 30, 2026, outstanding borrowings on the TCGSL Credit Facility were $ 20.0 million and $ 0 was available for borrowing.

As of December 31, 2025, the TCGSL Credit Facility was not in place and $ 0 was outstanding or available for borrowing thereunder.

2027 Senior Notes

12 unchanged sentences

In addition, the Indenture also provides for customary events of default.

If any event of default occurs, any amount then outstanding under the Indenture may

immediately become due and payable.

If any event of default occurs, any amount then outstanding under the Indenture may immediately become due and payable.

These events of default are subject to a number of important exceptions and qualifications set forth in the Indenture.

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.

As of each of June 30, 2026 and December 31, 2025, the Company had $ 77.0 million in principal amount of the 2027 Senior Notes outstanding.

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:

Scheduled principal payments on the 2027 Senior Notes as of June 30, 2026 are as follows:

2027 Senior Notes

4 unchanged sentences

Senior notes payable, net $ 76,575,336

The following table reflects a summary of interest expense incurred during the three months ended March 31, 2026:

The following table reflects a summary of interest expense incurred during the three and six months ended June 30, 2026:

Three months ended

March 31, 2026

2027 Senior Notes Revolving Credit Facility TCGSL Revolving Credit Facility Total Borrowings

June 30, 2026

2027 Senior Notes Revolving Credit Facility TCGSL Credit Facility Total

Interest expense $ 1,106,875 $ 562,927 $ 10,444 $ 1,680,246

2 unchanged sentences

Total interest expense $ 1,242,745 $ 668,690 $ 10,444 $ 1,921,879

The following table reflects a summary of interest expense incurred pre-Conversion during the three months ended March 31, 2025:

Six months ended

June 30, 2026

2027 Senior Notes Revolving Credit Facility TCGSL Credit Facility

Total Borrowings

Interest expense $ 2,213,750 $ 971,515 $ 22,833 $ 3,208,098

Unused fee expense — 52,916 — 52,916

Amortization of deferred financing costs 270,343 117,062 — 387,405

Total interest expense $ 2,484,093 $ 1,141,493 $ 22,833 $ 3,648,419

The following table reflects a summary of interest expense incurred pre-Conversion during the three and six months ended June 30, 2025:

Three months ended

March 31, 2025

2027 Senior Notes Revolving Credit Facility AFCF Revolving Credit Facility Total Borrowings

June 30, 2025

2027 Senior Notes Revolving Credit Facility AFCF Credit Facility

Interest expense $ 1,293,750 $ 328,789 $ — $ 1,622,539

2 unchanged sentences

Total interest expense $ 1,451,081 $ 407,093 $ — $ 1,858,174

Six months ended

June 30, 2025

2027 Senior Notes Revolving Credit Facility AFCF Credit Facility

Total Borrowings

Interest expense $ 2,587,500 $ 520,122 $ 8,889 $ 3,116,511

Unused fee expense — 74,511 — 74,511

Amortization of deferred financing costs 313,030 169,393 — 482,423

Total interest expense $ 2,900,530 $ 764,026 $ 8,889 $ 3,673,445

COMMITMENTS AND CONTINGENCIES

As of March 31, 2026, the Company had the following commitments to fund various investments:

March 31, 2026

As of June 30, 2026, the Company had the following commitments to fund various investments:

June 30, 2026

Total loan commitments $ 378,661,201

2 unchanged sentences

See below for more information on the Company’s unfunded commitments:

March 31, 2026

June 30, 2026

Unfunded Commitment Balances

1 unchanged sentence

Theratrue, Inc.

Standard Wellness Company, LLC 1,750,000

BCIS AH Borrower LLC 9,666,666

Total $ 3,029,030

14 unchanged sentences

Refer to Part II.

Item 1 – Legal Proceedings for information regarding certain material developments in pending litigation during the quarter ended March 31, 2026.

Item 1 – Legal Proceedings for information regarding certain material developments in pending litigation during the quarter ended June 30, 2026.

The Company is required to establish reserves for litigation matters where those matters present loss contingencies that are both probable and estimable.

1 unchanged sentence

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

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.

3 unchanged sentences

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.

As of each of June 30, 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 each of June 30, 2026 and December 31, 2025, there were zero shares of Series A Preferred Stock issued and outstanding.

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.

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.

3 unchanged sentences

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.

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.

As of each of June 30, 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 June 30, 2026 and December 31, 2025, 22,689,438 and 23,528,844 shares of Common Stock were issued and outstanding, respectively.

During each of the three and six months ended June 30, 2026 and year ended December 31, 2025, the Company did not issue any shares of its common stock, other than shares of restricted stock awards granted under the 2020 Plan.

Share Repurchase Program

On May 4, 2026, the Company’s Board authorized a program for the purpose of repurchasing up to $ 5.0 million of the Company's common stock (the “Repurchase Program”).

Under the Repurchase Program, the Company may, but is not obligated to, repurchase its outstanding common stock in the open market from time to time, provided that the Company complies with the prohibitions under its compliance policies and procedures adopted in accordance with Rule 38a-1 under the 1940 Act and a code of ethics adopted pursuant to Rule 17j-1 under the 1940 Act.

and the guidelines specified in Rule 10b-18 under the Securities Exchange Act of 1934, as amended, including certain price, market, volume, and timing constraints.

In addition, any repurchases will be conducted in accordance with the 1940 Act.

Unless amended or extended by the Company’s Board, the Company expects the Repurchase Program to be in place until the earlier of such time that $ 5.0 million of the Company’s outstanding shares of common stock have been repurchased, or May 4, 2027.

During the three and six months ended June 30, 2026, the Company repurchased 839,406 shares of its common stock, totaling $ 2.8 million, including commissions, at a weighted average net price of $ 3.29 .

The repurchased shares were immediately canceled and thus the Company holds no treasury stock.

There were no share repurchases for the three and six months ended June 30, 2025.

For the three months ended June 30, 2026, the shares were repurchased at a weighted-average discount of approximately 58 % to the net asset value per share applicable to such shares at the dates of repurchase.

Shelf Registration Statement

7 unchanged sentences

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

3 unchanged sentences

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.

Persons eligible to receive awards under the 2020 Plan included officers or employees of the Company or any of its subsidiaries, Directors, employees of the Adviser and certain directors, consultants and other service providers to the Company or any of its subsidiaries.

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).

Prior to the Conversion, a cumulative 1,646,127 shares of common stock had been granted under the 2020 Plan, comprising 900 options and 1,645,227 shares of restricted stock.

Following the Conversion, no awards remained outstanding and there was no stock-based compensation activity during the three and six months ended June 30, 2026.

T he Company did not grant any options and no options were exercised d uring the six months ended June 30, 2025 .

The total fair value of shares vested during the six months ended June 30, 2025, was approximately $ 1.1 million.

During the six months ended June 30, 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.

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:

The following table summarize s the stock-based compensation expense incurred by the Company for the three and six months ended June 30, 2026 and 2025:

Three months ended

June 30, Six months ended

2026 2025 2026 2025

Stock-based compensation $ — $ 484,502 $ — $ 1,038,251

Distributions

The following table summarizes the Company’s distributions declared during the three months ended March 31, 2026 and 2025:

The following table summarizes the Company’s distributions declared during the six months ended June 30, 2026 and 2025:

Declaration Date Record Date Payment

2 unchanged sentences

3/11/2025 3/31/2025 4/15/2025 $ 0.23 $ 5,197,082

6/13/2025 6/30/2025 7/15/2025 0.15 3,389,267

2025 Period Subtotal $ 0.38 $ 8,586,349

3/2/2026 3/31/2026 4/15/2026 $ 0.05 $ 1,176,442

6/15/2026 6/30/2026 7/15/2026 0.05 1,134,883

2026 Period Subtotal $ 0.10 $ 2,311,325

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:

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 and six months ended June 30, 2026:

Three months ended

March 31, 2026

June 30, 2026 Six months ended

June 30, 2026

Net increase in net assets resulting from operations $ 5,360,048 $ 16,787,395

1 unchanged sentence

Basic and diluted net increase in net assets resulting from operations per common share $ 0.23 $ 0.72

The following information sets forth the computations of basic and diluted earnings per common share for the three months ended March 31, 2025:

The following information sets forth the computations of basic and diluted earnings per common share for the three and six months ended June 30, 2025:

Three months ended

March 31, 2025

Net income $ 4,067,685

June 30, 2025 Six months ended

June 30, 2025

$ ( 13,164,651 ) $ ( 9,096,966 )

Dividends paid on unvested restricted stock ( 110,783 ) ( 225,138 )

6 unchanged sentences

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.

Diluted earnings per common share excluded 2,571,834 and 2,480,235 weighted average shares of unvested restricted stock and stock options, respectively, due to anti-dilutive effect for the three and six months ended June 30, 2025.

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.

6 unchanged sentences

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.

The income tax provision for the Company and TRS1 consisted of the following for the three months ended March 31, 2026:

The current income tax (ben efit) provision for the Company was approximately $ 0.2 million and $ 0.3 million, respectively, for the three and six months ended June 30, 2026 and $( 0.2 ) million and $( 0.02 ) million, respectively, for the three and six months ended June 30, 2025.

The income tax benefit/expense for each of the three and six months ended June 30, 2026 and 2025 primarily related to activities of the Company’s TRS1 subsidiary.

The income tax provision for the Company and TRS1 consisted of the following for the three and six months ended June 30, 2026:

Three months ended

March 31, 2026

June 30, 2026 Six months ended

June 30, 2026

Net investment income taxes:

Federal $ 181,946 $ 268,036

State 28,750 52,028

Excise tax — —

Total current income tax expense (benefit) 210,696 320,064

2 unchanged sentences

Total income tax expense (benefit), including excise tax $ 456,353 $ 1,082,948

The income tax provision for the Company and TRS1 pre-Conversion consisted of the following for the three months ended March 31, 2025:

The income tax provision for the Company and TRS1 pre-Conversion consisted of the following for the three and six months ended June 30, 2025:

Three months ended

March 31, 2025

June 30, 2025 Six months ended

June 30, 2025

Federal $ ( 27,302 ) $ 72,698

State ( 42,950 ) 22,031

Total current income tax expense (benefit) ( 70,252 ) 94,729

Total deferred income tax expense (benefit) 43,873 ( 8,702 )

Excise tax ( 111,665 ) ( 111,665 )

Total income tax expense (benefit), including excise tax $ ( 138,044 ) $ ( 25,638 )

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.

As of June 30, 2026, tax years 2022-2025 remain subject to examination by taxing authorities.

The federal statutory rate was 21% for each of the three and six months ended June 30, 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 .

2 unchanged sentences

The Company expects that its future effective tax rate will be determined in a similar manner.

For the three months ended March 31, 2026, the Company did not incur United States federal excise tax expense.

For each of the three and six months ended June 30, 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.

4 unchanged sentences

Pre-Conversion Excise Tax

For the three months ended March 31, 2025 , the Company did not incur United States federal excise tax expense.

For each of the three and six months ended June 30, 2025 , the Company did not incur United States federal excise tax expense.

During the six months ended June 30, 2025 , the Company received a partial refund of previously paid excise tax relating to the 2023 tax year, which was received in the second quarter of 2025.

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.

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.

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 .

As of June 30, 2026 and December 31, 2025, the Company’s deferred tax assets were $ 0.6 million and $ 1.4 million, respectively, and are included in prepaid expenses and other assets in the Company’s consolidated statement of assets and liabilities .

The Company believes it is more likely than not that the deferred tax assets will be realized in the future.

2 unchanged sentences

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.

There were no valuation allowances for deferred tax assets during each of the three and six months ended June 30, 2026 and 2025.

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.

The Company generates revenue from loans to senior secured loans and other types of loans and debt securities to public and privately held lower-middle-market companies across a broad range of industries, 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.

1 unchanged sentence

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 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 (the “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.

1 unchanged sentence

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 assesses performance and evaluates the allocation of resources of the Company on a consolidated basis, based on the Company’s net increase in net assets resulting from operations, which is reported on the Company’s consolidated statement of operations.

The CODM is regularly provided with only the consolidated expenses, as noted on the consolidated statement of operations.

Significant segment expenses are listed on the accompanying consolidated statement of operations.

The measure of segment assets is reported on the consolidated statement 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.

During the three and six months ended June 30, 2026, interest income earned on the Company’s portfolio was concentrated with five and four borrowers, respectively, each comprising more than 10% of consolidated interest income for an aggregate amount of $ 6.6 million, or 76 %, and $ 10.3 million, or 56 %, of consolidated interest income, respectively.

During the three and six months ended June 30, 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 $ 5.8 million, or 72 %, and $ 11.7 million, or 71 %, of consolidated interest income, respectively.

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

The following is a schedule of financial highlights for the six months ended June 30, 2026 (1) :

Six months ended

June 30, 2026

Per Share Data (2) :

4 unchanged sentences

Distributions declared ( 0.10 )

Repurchase of common stock (3)

Total increase in net assets 0.79

6 unchanged sentences

Ratios/Supplemental Data:

Ratio of operating expenses to average net assets (5)

Ratio of net operating expenses to average net assets (5)

Ratio of total expenses to average net assets (6)(7)

Ratio of net expenses to average net assets (6)(7)

Ratio of debt related expenses to average net assets (6)

2 unchanged sentences

(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).

(2) Per share data amount is based on the basic weighted average number of common shares outstanding for the period presented (except for distributions to shareholders which is based on actual rate per share).

(3) Repurchases of common stock may have caused an incremental decrease or increase in net asset value per share due to the repurchase of shares at a price in excess of or below net asset value per share, respectively, on each repurchase date.

(4) 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.

Total return is not annualized.

(5) 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).

Total return is not annualized.

(6) Amounts are annualized.

Non-recurring other income of $ 1,809,788 is excluded from the ratio of net investment income to average net assets.

(7) The ratio of total expenses to average net assets is presented before the effect of the management fee rebate;

the ratio of net expenses to average net assets is presented after the rebate, which was $( 410,408 ) for the six months ended June 30, 2026.

Both ratios include income tax expense.

(8) 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.

The portfolio turnover rate is not annualized.

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.

As of June 30, 2026, the Company did not have a CECL Reserve, as all investments are held at fair value.

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.

1 unchanged sentence

LOANS HELD FOR INVESTMENT AT CARRYING VALUE

As of March 31, 2026, the Company did not hold any loans at carrying value.

As of June 30, 2026, the Company did not hold any loans at carrying value.

As of December 31, 2025, t he Company’s portfolio included 12 loans held at carrying value.

13 unchanged sentences

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.

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;

• 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;

• 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.

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.

In July 2026, a borrower, Devi Holdings Inc.

(“Devi”) entered into a binding term sheet, through its court-appointed receiver, to sell its Massachusetts and New Mexico assets to J Brrothers LLC for $ 12.5 million, of which the Company expects to be allocated its pro rata portion of the sale proceeds.

Devi earned a non-refundable deposit of $ 2.0 million in connection with entering into the binding term sheet.

The transaction remains subject to definitive documentation and court approval.

No assurance can be provided that it will be consummated by the terms described herein, or at all.

AFC Agent continues to monitor the court-appointed receivership installed to maintain the borrower’s operations and maximize value for the benefit of its creditors.

In July 2026, the Company committed $ 7.0 million of a $ 25.0 million senior secured credit facility with CM Counsel Management LLC, of which $ 3.1 million was funded at closing.

The loan was originated at a discount of 3.0 % and matures July 10, 2030.

The loan bears cash interest at a rate of three-month SOFR plus 4.5 %, with a rate index floor of 4.0 %, and 5.0 % interest paid-in kind.

In July 2026, the Company entered into an amendment with Story of Natures Medicine LLC (“Story of Natures Medicine”) to extend the maturity date from July 31, 2026 to December 31, 2026 in exchange for an amendment fee of 1.5 % of the outstanding principal balance and the addition of an exit fee of 1.5 % of the outstanding principal balance.

Story of Natures Medicine is current on all interest and amortization obligations under the credit facility.

On July 1, 2026, the Company repaid $ 84.4 million and $ 20.0 million, respectively, on the Company’s outstanding debt obligations under the Revolving Credit Facility and TCGSL Credit Facility.

In August 2026, the Company entered into a forbearance agreement under the existing credit facility with Theratrue, Inc.

and its affiliates (“Theratrue”), as borrowers, whereby the Company agreed to waive certain financial covenants and forbear from exercising certain rights, subject to certain conditions.

In exchange, the parties amended certain terms regarding Theratrue’s repayment obligations thereunder and Theratrue paid an amendment fee and will pay an exit fee,

totaling approximately $ 0.4 million in the aggregate.

Approximately $ 8.0 million remains outstanding under the credit facility.

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

What changed 10-Q

Item 1. Financial Statements