What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-10 · 293 added, 436 removed, 122 unchanged (86% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes and other information included in this Quarterly Report on Form 10-Q (the “Form 10-Q”).

This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Cautionary Note Regarding Forward-Looking Statements,” in this Form 10-Q.

Business Overview

AFC Gamma, Inc.

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

We originate, structure and underwrite, and invest in senior secured

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

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

of companies operating in the cannabis industry need financing.

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

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

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

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

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

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

Some of our borrowers have their equity securities listed for public trading on the Canadian Securities Exchange (“CSE”) in

Canada and/or over-the-counter (“OTC”) in the United States.

We originate, structure, underwrite, and invest in senior secured loans and other types of loans and debt securities for cannabis industry operators in states that have legalized medical and/or adult-use cannabis.

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

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

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

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

Some of our borrowers have their equity securities listed for public trading on the Canadian Securities Exchange (“CSE”) in Canada and/or over-the-counter (“OTC”) in the United States.

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

We commenced operations on July 31, 2020 and completed our initial public offering

(“IPO”) in March 2021 .

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

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

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

December 31, 2020.

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

We are a Maryland corporation and externally managed by our Manager, AFC Management, LLC, a Delaware limited liability company, pursuant to the terms of the Amended and Restated Management Agreement, dated March 10, 2022, by and between AFC Gamma, Inc.

and AFC Management, LLC (as amended, the “Management Agreement”).

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

We generally will not be subject to U.S.

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

federal income taxes on our taxable income to the extent that we annually distribute all or substantially all of our taxable income to shareholders and maintain our intended qualification as a REIT.

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

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Our investment in the equipment loan to Public Company A was transferred to TRS1 on July 31, 2021.

31, 2021 and constituted substantially all of the assets of TRS1 as of March 31, 2022.

On April 1, 2022, our investment in the senior secured loan to Private Company I was transferred to TRS1.

These two loans constituted substantially all of the assets of TRS1 as of June 30, 2022.

The financial statements of TRS1 have been consolidated within our consolidated financial statements.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies.

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

We could remain an “emerging growth company” for up to five years from our initial public offering, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

Developments during the Second Quarter of 2022:

Updates to our Loan Portfolio during the Second Quarter of 2022

During the second quarter of 2022, we closed two loans with new commitments of approximately $107.8 million and funded approximately $82.1 million of principal amount of new and existing commitments, including approximately $32.0 million which was refinanced from existing borrowers.

On April 1, 2022, our investment in the senior secured loan to Private Company I was transferred to TRS1.

We are an “emerging growth company,” as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are

not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our

periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, Section 107

of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

In other words, an

“emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have elected to take advantage of the extended transition period to comply with new or revised

accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies.

As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised

accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult.

Additionally, because we have taken advantage of certain reduced

reporting requirements available to smaller reporting companies and emerging growth companies, the information contained herein may be different from the information you receive from other public companies.

We could remain an “emerging growth company” for up to five years from our IPO, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the

date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most

recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

Developments in the First Quarter of 2022:

Equity and Debt Offerings

On January 10, 2022, we completed an underwritten offering of 3,000,000 shares of our common stock, at a price of $20.50 per share.

Our gross proceeds from the offering were $61.5 million, before deducting

underwriting discounts and commissions, a structuring fee and offering expenses.

In connection with the offering, the underwriters were granted an over-allotment option to purchase up to an additional 450,000 shares of our common stock.

14, 2022, the underwriters partially exercised the over-allotment option with respect to 291,832 shares of common stock, which was completed on January 19, 2022.

The underwriting commissions of approximately $3.5 million were reflected as a

reduction of additional paid-in capital in the first quarter of fiscal year 2022.

We incurred approximately $1.0 million of expenses in connection with the offering.

After giving effect to the partial exercise of the over-allotment option, the

total number of shares sold in the public offering was 3,291,832 shares and total gross proceeds, before deducting underwriting discounts and commissions, a structuring fee and other offering expenses, were approximately $67.5 million.

Pursuant to the Articles of Amendment, dated March 10, 2022, we increased the number of authorized shares of common stock from 25,000,000 to 50,000,000 shares at $0.01 par value per share.

Updates to Our Loan Portfolio during the First Quarter of 2022

During the first quarter of 2022, we increased commitments to three current borrowers in the amount of approximately $46.9 million and funded approximately $51.5 million of principal amount of new and existing

Additionally, we sold one investment in debt securities of $15.0 million, sold one loan of $10.0 million, and were repaid by Private Company E of approximately $20.0 million.

In February 2022, Private Company E repaid its loan in full.

The loan had an original maturity date of April 2026 and the outstanding principal on the date of repayment was approximately $20.0 million.

We received a

prepayment premium of approximately $1.3 million upon repayment of the loan.

In February 2022, we committed an additional $15.3 million under the expansion to the Private Company A Credit Facility, and now hold $77.8 million in total of the expanded credit facility, and an additional $1.0

million of the expansion was syndicated.

In February 2022, we sold our $15.0 million investment in the Public Company G debt securities for 106% of the face value, resulting in a loss of approximately $0.2 million.

This investment was classified as

available-for-sale as of December 31, 2021.

In March 2022, we entered into the fourth amendment of the Amended and Restated Credit Agreement with Public Company F to, among other things, increase the total loan commitments by $100 million, with approximately

(i) $26.6 million of the new loan commitments allocated to us;

(ii) $15.0 million of the new loan commitments allocated to Flower Loan Holdco LLC;

and (iii) the remaining loan commitments allocated to third-party lenders by the third-party agent.

In March 2022, we committed an additional $5.0 million under the Private Company B credit facility.

Following the expansion, we now hold $15.5 million in commitments, of which we funded approximately $12.9 million of

total principal amount.

In March 2022, we sold our $10.0 million investment in the Subsidiary of Public Company D for 106% of the par value, resulting in a gain of approximately $0.6 million.

Dividends Declared Per Share

In March 2022, we declared a regular cash dividend of $0.55 per share of our common stock, relating to the first quarter of 2022, which was paid on April 15, 2022 to stockholders of record as of March 31, 2022.

aggregate amount of the regular cash dividend payment was approximately $10.9 million.

Recent Developments

Subsequent to the end of the first quarter, the Company closed two new loans with commitments of approximately $107.3 million, and funded approximately $79.9 million of principal amount of new

and existing commitments.

In April 2022, each of the loans to Private Company D and Private Company F were repaid in full in connection with the Company’s new loan to Private Company L, an affiliate of Private Company D

and Private Company F.

In April 2022, each of the credit facilities with Private Company D and Private Company F were terminated and repaid in full in connection with the Company’s new loan to Private Company L, an affiliate of Private Company D and Private Company F.

The loans to Private Company D and Private Company F had original maturity dates of January 2026 and May 2026, respectively.

The outstanding principal of Private Company D and Private Company F on the date of repayment was

approximately $12.1 million and $12.9 million, respectively.

In addition to the repayment of outstanding principal amounts of the loan to Private Company D and Private Company F, the Company received approximately $0.2 million and $2.0 million

related to exit fees and other fees upon repayment of the loans, respectively.

In April 2022, the loan to Private Company K was repaid in connection with our refinancing and restructuring the loan under a new

credit facility with Private Company K.

Under the new credit facility with Private Company K, we increased the total loan commitment to approximately $24.8 million, from $19.8 million, and restructured the construction obligations of the

borrowers, among other things.

The outstanding principal of Private Company D and Private Company F on the date of repayment was approximately $12.1 million and $12.9 million, respectively.

In addition to the repayment of the outstanding principal amounts of the loans to Private Company D and Private Company F, the Company received approximately $0.2 million and $2.0 million related to exit fees and other fees upon repayment of the loans, respectively.

In April 2022, the credit facilitiy with Private Company K was terminated and repaid in full in connection with the Company’s refinancing and restructuring the loan under a new credit facility with Private Company K.

Under the new credit facility with Private Company K, the Company increased its total loan commitment to approximately $24.8 million, from $19.8 million, and restructured the construction obligations of the borrowers, among other things.

As restructured, the Private Company K loan accrues interest at a floating rate, with a floor of 13%, and matures in May 2027.

Following the repayment of Private Company K loan, five of our loans have been repaid

prior to maturity since March 2021.

Following the repayment of Private Company K loan, five of the Company’s loans have been repaid and/or refinanced prior to maturity since March 2021.

At-the-Market Offering Program

In April 2022, we filed our shelf registration statement on Form S-3 with the SEC, registering the offer and sale of up to $1.0 billion of securities (the “Shelf Registration Statement”).

Shelf Registration Statement enables us to issue shares of common stock, preferred stock, debt securities, warrants, rights, as well as units that include one or more of such securities.

The Shelf Registration Statement also included a prospectus

for an at-the-market offering program to sell up to an aggregate of $75.0 million of shares of our common stock (the “ATM Program”) that may be issued and sold from time to time under the Sales Agreement, dated April 5, 2022 (the “Sales

Agreement”), with Jefferies LLC and JMP Securities LLC, as Sales Agents.

Under the terms of the Sales Agreement, we have agreed to pay the Sales Agents a commission of up to 3.0% of the gross proceeds from each sale of common stock under the Sales

As of May 9, 2022, no securities have been issued pursuant to the Shelf Registration Statement or the ATM Program the date of this filing.

On April 29, 2022, we entered into the Loan and Security Agreement (the “Revolving Credit Agreement”) by and among us, the other loan

parties from time-to-time party thereto, the lenders party thereto, and the Lead Arranger, Bookrunner and Agent party thereto, pursuant to which, the Company obtained a $60.0 million senior-secured revolving credit facility (the “Revolving

Credit Facility”).

The Revolving Credit Facility contains aggregate commitments of $60.0 million from two FDIC-insured banking institutions, which may be increased to up to $100.0 million in aggregate (subject to available borrowing base and

additional commitments), with a maturity date of April 29, 2025.

Interest is payable on the Revolving Credit Facility at the greater of (1) the applicable base rate plus 0.50% and (2) 4.50%, as provided in the Revolving Credit Agreement,

payable in cash in arrears.

The Shelf Registration Statement enables us to issue shares of common stock, preferred stock, debt securities, warrants, rights, as well as units that include one or more of such securities.

The Shelf Registration Statement also included a prospectus for an at-the-market offering program to sell up to an aggregate of $75.0 million of shares of our common stock (the “ATM Program”) that may be issued and sold from time to time under the Sales Agreement, dated April 5, 2022 (the “Sales Agreement”), with Jefferies LLC and JMP Securities LLC, as Sales Agents.

Under the terms of the Sales Agreement, we have agreed to pay the Sales Agents a commission of up to 3.0% of the gross proceeds from each sale of common stock under the Sales Agreement.

During the three months ended June 30, 2022, we sold an aggregate of 114,932 shares of our common stock under the Sales Agreement at an average price of $18.08 per share.

The sales generated net proceeds of approximately $1.3 million.

Revolving Credit Facility

On April 29, 2022, we entered into the Revolving Credit Facility.

Interest is payable on the Revolving Credit Facility at the greater of (1) the applicable base rate plus 0.50% and (2) 4.50%, as provided in the Revolving Credit Agreement, payable in cash in arrears.

Upon our entry into the Revolving Credit Facility, we terminated the AFCF Revolving Credit Facility with AFC Finance, LLC, an affiliate of the Company’s management, which was secured by substantially all of the assets of the Company.

Dividends Declared Per Share

In June 2022, we declared a regular cash dividend of $0.56 per share of our common stock, relating to the quarter ended June 30, 2022, which was paid on July 15, 2022 to shareholders of record as of June 30, 2022.

The aggregate amount of the regular cash dividend payment was approximately $11.1 million.

For the six months ended June 30, 2022 and 2021, we paid the following cash dividends:

Date Declared Payable to Shareholders of Record at the Close of Business on Date Paid Amount per Share Aggregate Amount Paid

March 12, 2021 March 15, 2021 March 31, 2021 $0.36 $2.2 million

May 7, 2021 June 15, 2021 June 30, 2021 0.38 5.1 million

2021 Period Subtotal $0.74 $7.3 million

March 10, 2022 March 31, 2022 April 15, 2022 $0.55 $10.9 million

June 15, 2022 June 30, 2022 July 15, 2022 0.56 11.1 million

2022 Period Subtotal $1.11 $22.0 million

Recent Developments

Subsequent to th e end of the second quarter, we funded approximately $1.9 million of principal amount of existing commitments.

Based on current estimates and market conditions, we expect to target between $300.0 million and $500.0 million in originations with future new and existing borrowers for the fiscal year 2022 and expect between $100.0 million and $200.0 million in repayments by borrowers, in each case, for the fiscal year 2022.

However, our goals and expectations are preliminary and may change.

See the sections titled “ Cautionary Note Regarding Forward-Looking Statements ” in this Form 10-Q and “ Risk Factors ” located in our Annual Report on Form 10-K, filed with the SEC on March 10, 2022.

Key Financial Measures and Indicators

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

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

Non-GAAP Metrics

Distributable Earnings

transactions and GAAP adjustments we believe are not necessarily indicative of our current loan activity and operations.

In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use Distributable Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan activity and operations.

Distributable Earnings is a measure that is not prepared in accordance with GAAP.

We use these non-GAAP financial measures both

to explain our results to stockholders and the investment community and in the internal evaluation and management of our businesses.

Our management believes that these non-GAAP financial measures and the information they provide are useful to

investors since these measures permit investors and stockholders to assess the overall performance of our business using the same tools that our management uses to evaluate our past performance and prospects for future performance.

determination of Distributable Earnings is substantially similar to the determination of Core Earnings under our Management Agreement, provided that Core Earnings is a component of the calculation of any Incentive Compensation earned under the

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

such time period.

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

provided that Distributable Earnings does

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

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

We believe providing Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to stockholders in assessing the overall performance of our business.

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

requirements and our belief that dividends are generally one of the principal reasons that stockholders invest in our common stock, we generally intend to attempt to pay dividends to our stockholders in an amount at least equal to such REIT taxable

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

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

useful indicator of our dividends.

Distributable Earnings is a non-GAAP financial measure and should not be considered as substitutes for GAAP net income.

We caution readers that our methodology for calculating Distributable Earnings may differ from

the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our reported Distributable Earnings may not be comparable to similar measures presented by other REITs.

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

Our management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures permit investors and shareholders to assess the overall performance of our business using the same tools that our management uses to evaluate our past performance and prospects for future performance.

The determination of Distributable Earnings is substantially similar to the determination of Core Earnings under our Management Agreement, provided that Core Earnings is a component of the calculation of any Incentive Compensation earned under the Management Agreement for the applicable time period, and thus Core Earnings is calculated without giving effect to Incentive Compensation expense, while the calculation of Distributable Earnings accounts for any Incentive Compensation earned for such time period.

We define Distributable Earnings as, for a specified period, the net income (loss) computed in accordance with GAAP, excluding (i) stock-based compensation expense, (ii) depreciation and amortization, (iii) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss);

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

loss and (vi) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of such independent directors.

We believe providing Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to shareholders in assessing the overall performance of our business.

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

Given these requirements and our belief that dividends are generally one of the principal reasons that shareholders invest in our common stock, we generally intend to attempt to pay dividends to our shareholders in an amount at least equal to such REIT taxable income, if and to the extent authorized by our Board.

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

Distributable Earnings is a non-GAAP financial measure and should not be considered as a substitute for GAAP net income.

We caution readers that our methodology for calculating Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our reported Distributable Earnings may not be comparable to similar measures presented by other REITs.

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

Three months ended

June 30, Six months ended

2022 2021 2022 2021

Net income $ 11,351,673 $ 4,627,787 $ 21,513,793 $ 6,028,542

Adjustments to net income:

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Depreciation and amortization — — — —

Unrealized (gain), losses or other non-cash items

Unrealized (gains), losses or other non-cash items 1,005,454 483,159 924,611 627,561

Provision for current expected credit losses 1,593,048 645,786 2,498,177 711,886

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

The book value per

share of our common stock as of March 31, 2022 and December 31, 2021 was approximately $17.04 and $16.61, respectively.

Dividends Declared Per Share

For the period ended March 31, 2022 and year ended December 31, 2021, we paid the following cash dividends:

Date Declared

Payable to Shareholders

of Record at the Close of

Amount Per Share

Aggregate Amount Paid

March 12, 2021

March 15, 2021

March 31, 2021

June 15, 2021

June 30, 2021

September 15, 2021

September 30, 2021

October 15, 2021

December 15, 2021

December 31, 2021

January 14, 2022

March 10, 2022

March 31, 2022

April 15, 2022

$10.9 million

The book value per share of our common stock as of June 30, 2022 and December 31, 2021 was approximately $17.03 and $16.61, respectively.

Factors Impacting our Operating Results

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

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

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

balance of the loans we originate.

The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest margin, the market value of our assets and the supply of, and demand for, commercial real estate debt and other financial assets in the marketplace.

Our net interest margin, which includes the accretion and amortization of OID, is recognized based on the contractual rate and the outstanding principal balance of the loans we originate.

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

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

Results of Operations

The comparative period for the three months ended March 31, 2022 is the three months ended March 31,

2021 (the “Prior Period ”).

For the three months ended March 31, 2022 and 2021

Our net income allocable to our common stockholders for the three months ended March 31, 2022 was approximately $10.2 million or $0.53 per basic weighted average common share, respectively,

compared to net income allocable to our common stockholders of $1.4 million or $0.20 per basic weighted average common share for the three months ended March 31, 2021.

Interest income increased approximately $13.9 million, from approximately $4.7 million for the three months ended March 31, 2021, to approximately $18.6 million for the three months ended March 31, 2022.

increase was primarily due to an increase in principal outstanding of approximately $98.4 million at March 31, 2021 to $373.7 million at March 31, 2022.

Interest expense increased approximately $1.7 million for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

This increase was due to interest expense incurred and

amortization of deferred financing costs relating to our AFCF Revolving Credit Facility, which was amended in November 2021, and our 2027 Senior Notes that were issued in November 2021.

General and administrative expenses increased approximately $0.7 million for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

This increase was primarily due to an increase

in expenses relating to personnel, overhead, and occupancy costs as the Company continues to expand.

Management fees increased approximately $0.7 million for the three months ended March 31, 2022 as compared to the three months ended March 31, 2021.

This increase was primarily due to an increase in the Company’s

Equity from approximately $216.3 million to $336.5 million and partially offset by a change in the management fee rate upon our IPO from 0.4375% to 0.375% post-IPO.

Incentive fees increased by approximately $2.3 million from approximately $0.7

million to $3.0 million for the three months ended March 31, 2022 and 2021, respectively.

Results of Operations f or the three and six months ended June 30, 2022 and 2021

Our net income allocable to our common shareholders for the three and six months ended June 30, 2022 was approximately $11.4 million and $21.5 million or $0.58 and $1.10 per basic weighted average common share, respectively, compared to net income allocable to our common shareholders of approximately $4.6 million and $6.0 million or $0.34 and $0.58 per basic weighted average common share for the prior year periods.

Interest income increased approximately $12.9 million and $26.9 million for the three and six months ended June 30, 2022 as compared to the three and six months ended June 30, 2021, respectively.

This increase was primarily due to an increase in principal outstanding of approximately $164.0 million at June 30, 2021 compared to $424.8 million at June 30, 2022.

Interest expense increased approximately $1.7 million and $3.4 million for the three and six months ended June 30, 2022 as compared to the three and six months ended June 30, 2021.

This increase was due to interest expense incurred and amortization of deferred financing costs relating to our AFCF Revolving Credit Facility, which was terminated in April 2022, our Revolving Credit Facility that began in April 2022 and our 2027 Senior Notes that were issued in November 2021.

General and administrative expenses increased approximately $0.5 million and $1.2 million for the three and six months ended June 30, 2022 as compared to the three and six months ended June 30, 2021, respectively.

This increase was primarily due to an increase in expenses relating to personnel, overhead, and occupancy costs as the Company continues to expand.

Management fees increased approximately $0.2 million and $0.8 million for the three and six months ended June 30, 2022 as compared to the three and six months ended June 30, 2021, respectively.

This increase was primarily due to an increase in the Company’s Equity from approximately $268.5 million to $338.2 million.

Incentive fees increased by approximately $2.0 million and $4.3 million for the three and six months ended June 30, 2022 as compared to the three and six months ended June 30, 2021, respectively.

This increase was driven by the increase in Core Earnings as defined in the Management Agreement.

Provision for Current Expected Credit Losses

For the three months ended March 31, 2022, the increase to our provision for current expected credit loss was approximately $0.9 million and the balance as of March 31, 2022 was approximately

$4.0 million or 150 basis points of our total loans held at carrying value and loans receivable at carrying value balance of approximately $267.4 million and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related

to outstanding balances on loans held at carrying value and loans receivable at carrying value of approximately $3.4 million and (ii) a liability for unfunded commitments of approximately $0.6 million.

For the three months ended March 31, 2021, the

increase to our provision for current expected credit loss was approximately $0.1 million and the balance as of March 31, 2021 was approximately $0.5 million or 125 basis points of our total loans held at carrying value and loans receivable at

carrying value balance of approximately $42.4 million and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loans receivable at carrying value of

approximately $0.2 million and (ii) a liability for unfunded commitments of approximately $0.3 million.

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

through a current obligation to extend credit.

For the three and six months ended June 30, 2022, the increase to our provision for current expected credit loss was approximately $1.6 million and $2.5 million, respectively.

The balance as of June 30, 2022 was approximatel y $5.6 million or 176 basis points of our total loans held at carrying value and loans receivable at carrying value balance of approximately $318.1 million and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loans receivable at carrying value of approximately $5.0 million and (ii) a liability for unfunded commitments of approximately $0.6 million.

For the six months ended June 30, 2021, the increase to our provision for current expected credit loss was approximately $0.7 million and the balance as of June 30, 2021 was approximately $1.2 million or 109 basis points of our total loans held at carrying value and loans receivable at carrying value balance of approximately $108.4 million and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loans receivable at carrying value of approximately $0.7 million and (ii) a liability for unfunded commitments of approximately $0.5 million.

The liability is based on the unfunded portion of loan commitments over the full contractual period over which we are exposed to credit risk through a current obligation to extend credit.

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

We continuously evaluate the credit quality of each loan by assessing the

risk factors of each loan.

The increase in the provision for current expected credit losses for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 is primarily due to changes in macroeconomic factors, changes to

the loan portfolio including new commitments and repayments, and changes in other datapoints we use in estimating the reserve.

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

The increase in the provision for current expected credit losses for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 is primarily due to changes in macroeconomic factors, changes to the loan portfolio including new commitments and repayments, and changes in other data points we use in estimating the reserve.

Loan Portfolio

As of March 31, 2022 and December 31, 2021, our portfolio included three loans held at fair value.

The aggregate originated commitment under these loans was approximately $96.2 million and $75.9

million as of March 31, 2022 and December 31, 2021, respectively, and outstanding principal was approximately $95.6 million and $77.6 million as of March 31, 2022 and December 31, 2021, respectively.

For the three months ended March 31, 2022, we

funded approximately $17.3 million of additional principal of loans held at fair value and we had no repayments of loans held at fair value.

As of March 31, 2022 and December 31, 2021, none of our loans held at fair value had floating interest

The following tables summarize our loans held at fair value as of March 31, 2022 and December 31, 2021:

As of March 31, 2022

As of June 30, 2022 and December 31, 2021, our portfolio included three loans held at fair value.

The aggregate originated commitment under these loans was approximately $96.2 million and $75.9 million as of June 30, 2022 and December 31, 2021, respectively, and outstanding principal was approximately $96.4 million and $77.6 million as of June 30, 2022 and December 31, 2021, respectively.

For the six months ended June 30, 2022, we funded approximately $17.3 million of additional principal of loans held at fair value and we had no repayments of loans held at fair value.

As of June 30, 2022 and December 31, 2021, none of our loans held at fair value had floating interest rates.

The following tables summarize our loans held at fair value as of June 30, 2022 and December 31, 2021:

As of June 30, 2022

Fair Value (1)

Carrying Value (2)

Principal (2)

Weighted Average

Remaining Life

2 unchanged sentences

As of December 31, 2021

Fair Value (1)

Carrying Value (2)

Principal (2)

Weighted Average

Remaining Life

3 unchanged sentences

(2) The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted OID and loan origination costs.

Weighted average remaining life is calculated based on the fair value of the loans as of March 31, 2022 and December 31, 2021.

The following table presents changes in loans held at fair value as of and for the three months ended March 31, 2022:

Original Issue

Unrealized Gains

(3) Weighted average remaining life is calculated based on the fair value of the loans as of June 30, 2022 and December 31, 2021.

The following table presents changes in loans held at fair value as of and for the six months ended June 30, 2022:

Principal Original Issue

Discount Unrealized Gains (Losses) Fair Value

Total loans held at fair value at December 31, 2021 $ 77,630,742 $ (2,717,584) $ 2,183,161 $ 77,096,319

Change in unrealized gains (losses) on loans at fair value, net

Change in unrealized (losses) gains on loans at fair value, net — — (924,611) (924,611)

New fundings 17,285,000 (429,275) — 16,855,725

Accretion of original issue discount — 704,458 — 704,458

Total loans held at fair value at March 31, 2022

As of March 31, 2022 and December 31, 2021, our portfolio included zero and one investments in debt securities, respectively, held at fair value.

We sold our investment in debt securities in the first quarter of 2022

for approximately $15.9 million, which was previously designated as available-for-sale as of December 31, 2021.

For the period ended March 31, 2022 and 2021, the realized loss on the sale of marketable securities was approximately $0.2 million and

$0.0 million, respectively.

We did not hold any investments in debt securities as of March 31, 2022.

The following table summarizes our debt securities held at fair value as of March 31, 2022 and December 31, 2021.

PIK interest 1,467,241 — — 1,467,241

Total loans held at fair value at June 30, 2022 $ 96,382,983 $ (2,442,401) $ 1,258,550 $ 95,199,132

As of June 30, 2022 and December 31, 2021, our portfolio included zero and one investments in debt securities, respectively, held at fair value.

We sold our investment in debt securities in the first quarter of 2022 for approximately $15.9 million, which was previously designated as available-for-sale as of December 31, 2021, recognizing a loss on the sale of marketable securities of approximately $0.2 million in the first quarter of 2022.

The following table summarizes our debt securities held at fair value as of December 31, 2021.

We did not hold any investments in debt securities as of June 30, 2022.

As of December 31, 2021

Fair Value (1)

Carrying Value (2)

Principal (2)

Weighted Average

Remaining Life

Debt securities $ 15,881,250 $ 16,050,000 $ 15,000,000 2.9

Total debt securities held at fair value $ 15,881,250 $ 16,050,000 $ 15,000,000 2.9

The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted purchase premium and loan origination costs.

(1) The difference between the carrying value and the outstanding principal amount of the securities consists of unaccreted purchase premium and loan origination costs.

(2) Weighted average remaining life is calculated based on the fair value of the loans as of December 31, 2021.

The following table presents changes in debt securities held at fair value as of and for the three months ended March 31, 2022:

The following table presents changes in debt securities held at fair value as of and for the six months ended June 30, 2022:

Principal Original Issue Discount Unrealized Gains (Losses) Fair Value

Total debt securities held at fair value at December 31, 2021 $ 15,000,000 $ 1,050,000 $ (168,750) $ 15,881,250

Realized gains (losses) on securities at fair value, net

Change in unrealized gains (losses) on securities at fair value, net

Sale of loans

Total debt securities held at fair value at March 31, 2022

As of March 31, 2022 and December 31, 2021, our portfolio included ten and twelve loans, respectively, held at carrying value.

The aggregate originated commitment under these loans was

approximately $319.9 million and $324.3 million, respectively, and outstanding principal was approximately $275.8 million and $270.8 million, respectively, as of March 31, 2022 and December 31, 2021.

During the three months ended March 31, 2022, we

funded approximately $34.2 million of additional principal.

As of March 31, 2022 and December 31, 2021, approximately 42% and 48%, respectively, of our loans held at carrying value have floating interest rates.

These floating rates are subject to

LIBOR floors, with a weighted average floor of 1.0% and 1.0%, respectively, calculated based on loans with LIBOR floors.

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

The following tables summarize our loans held at carrying value as of March 31, 2022 and December 31, 2021:

As of March 31, 2022

Realized (losses) gains on securities at fair value, net — (150,000) — (150,000)

Change in accumulated other comprehensive income — — 168,750 168,750

Sale of securities (15,000,000) (900,000) — (15,900,000)

Total debt securities held at fair value at June 30, 2022 $ — $ — $ — $ —

As of June 30, 2022 and December 31, 2021, our portfolio included nine and twelve loans, respectively, held at carrying value.

The aggregate originated commitment under these loans was approximately $383.0 million and $324.3 million, respectively, and outstanding principal was approximately $326.2 million and $270.8 million, respectively, as of June 30, 2022 and December 31, 2021.

During the six months ended June 30, 2022, we funded approximately $116.2 million of additional principal.

As of June 30, 2022 and December 31, 2021, approximately 38% and 48%, respectively, of our loans held at carrying value have floating interest rates.

As of June 30, 2022, t hese floating benchmark rates include one-month LIBOR subject to a weighted average floor of 1.0% and quoted at 1.787%, one-month Secured Overnight Financing Rate (“SOFR”) subject to a weighted average floor of 1.0% and quoted at 1.686% and U.S.

Prime Rate subjected to a weighted average floor of 4.0% quoted at 4.750%.

The following tables summarize our loans held at carrying value as of June 30, 2022 and December 31, 2021:

As of June 30, 2022

Principal (1)

Original Issue

Weighted Average

Discount Carrying

Remaining Life

3 unchanged sentences

Principal (1)

Original Issue

Weighted Average

Discount Carrying

Remaining Life

2 unchanged sentences

(1) The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted OID and loan origination costs.

Weighted average remaining life is calculated based on the carrying value of the loans as of March 31, 2022 and December 31, 2021.

The following table presents changes in loans held at carrying value as of and for the three months ended March 31, 2022:

Original Issue

(2) Weighted average remaining life is calculated based on the carrying value of the loans as of June 30,2022 and December 31, 2021.

The following table presents changes in loans held at carrying value as of and for the six months ended June 30, 2022:

Principal Original Issue

Discount Carrying Value

Total loans held at carrying value at December 31, 2021 $ 270,841,715 $ (13,678,219) $ 257,163,496

New fundings 116,200,972 (4,253,401) 111,947,571

Accretion of original issue discount — 7,632,435 7,632,435

1 unchanged sentence

Sale of loans (10,000,000) — (10,000,000)

PIK interest 1,981,755 — 1,981,755

Loan amortization payments (829,002) — (829,002)

Total loans held at carrying value at March 31, 2022

As of March 31, 2022 and December 31, 2021, our portfolio included one loan receivable at carrying value.

The originated commitment under this loan was approximately $4.0 million and outstanding

principal was approximately $2.3 million and $2.5 million as of March 31, 2022 and December 31, 2021, respectively.

During the three months ended March 31, 2022, we received repayments of approximately $0.3 of outstanding principal.

The following table presents changes in loans receivable as of and for the three months ended March 31, 2022:

Original Issue

Total loans receivable at carrying value at December 31, 2021

Total loans held at carrying value at June 30, 2022 $ 326,181,229 $ (10,299,185) $ 315,882,044

As of June 30, 2022 and December 31, 2021, our portfolio included one loan receivable at carrying value.

The originated commitment under this loan was approximately $4.0 million and outstanding principal was approximately $2.2 million and $2.5 million as of June 30, 2022 and December 31, 2021, respectively.

During the six months ended June 30, 2022, we received repayments of approximately $0.3 of outstanding principal.

The following table presents changes in loans receivable as of and for the six months ended June 30, 2022:

Principal Original Issue

Discount Carrying

Total loan receivable at carrying value at December 31, 2021 $ 2,533,266 $ (2,678) $ 2,530,588

Principal repayment of loans (337,114) — (337,114)

Accretion of original issue discount — 618 618

Total loans receivable at carrying value at March 31, 2022

The below table summarizes our total loan portfolio as of March 31, 2022:

A - Real Estate Loan

A - Equipment Loans

PIK interest 26,187 — 26,187

Total loan receivable at carrying value at June 30, 2022 $ 2,222,339 $ (2,060) $ 2,220,279

The below table summarizes our total loan portfolio as of June 30, 2022:

Loan Names Original

Maturity AFCG Loan,

Syndication % of

AFCG Principal

of 6/30/2022 Cash

Rate PIK Fixed/

Floating Amortization

A - Real Estate Loan 7/3/2019 1/26/2023 $ 2,940,000 0.6 % $ 3,069,437 10.0 % 4.0% Fixed No 19 %

A - Equipment Loans 8/5/2019 3/3/2025 4,000,000 0.8 % 2,222,339 12.0 % N/A Fixed Yes 19 %

5/8/2020 5/8/2024 77,785,000 16.1 % 80,301,694 12.8 % 2.7% Fixed Yes 22 %

B 9/10/2020 9/1/2023 15,500,000 3.2 % 13,011,852 13.0 % 4.0% Fixed Yes 28 %

C 11/5/2020 12/1/2025 24,000,000 5.0 % 24,534,371 13.8 % 4.0% Floating Yes 23 %

Sub of Private Co.

4/30/2021 5/1/2026 65,400,000 13.5 % 55,349,240 13.2 % 1.8% Floating Yes 21 %

Sub of Private Co.

5/11/2021 5/11/2023 5,781,250 1.2 % 5,781,250 15.0 % N/A Fixed No 20 %

5/21/2021 5/30/2023 86,600,000 17.9 % 86,600,000 8.6 % N/A Fixed No 11 %

I 7/14/2021 8/1/2026 10,430,144 2.2 % 10,661,155 13.8 % 2.5% Floating Yes 22 %

K 4/28/2022 5/3/2027 25,245,000 5.2 % 9,730,000 13.7 % N/A Floating Yes 18 %

J 8/30/2021 9/1/2025 23,000,000 4.8 % 23,525,212 13.8 % 4.0% Floating Yes 22 %

Sub of Public Co.

Information is as of March 31, 2022 unless otherwise specified.

H 12/16/2021 1/1/2026 60,000,000 12.4 % 60,000,000 9.8 % N/A Fixed No 14 %

L 4/20/2022 5/1/2026 82,500,000 17.1 % 50,000,000 12.0 % N/A Fixed Yes 16 %

$ 483,181,394 100.0 % $ 424,786,550 11.6 % 1.4% 18 %

Information is as of June 30, 2022 unless otherwise specified.

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

1 unchanged sentence

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

OID is recognized as a discount to the

funded loan principal and is accreted to income over the term of the loan.

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

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

In some cases,

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

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

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

For example, certain credit agreements contain provisions pursuant to which certain PIK interest

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

To be conservative, we have not assumed any

prepayment penalties or early payoffs in our estimated YTM calculation.

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

The estimated YTM calculations require management to make estimates and assumptions, including, but not limited to, the timing and amounts of loan draws on delayed draw loans, the timing and collectability of exit fees, the probability and timing of prepayments and the probability of contingent features occurring.

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

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

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

Actual results could differ from those estimates and assumptions.

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

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

(3) Estimated YTM for the loan with Private Company A is enhanced by purchase discounts attributed to the fair value of equity warrants that were separated from the loan prior to our acquisition of such loan.

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

(4) PIK interest rate for Private Co.

may be amended, supplemented, amended and restated or otherwise modified from time to time, the ‘‘Private Company A Credit Facility’’) .

A represents a blended rate of differing PIK interest rates applicable to each of the three tranches to which we are a lender under the senior secured term loan credit facility with Private Company A (as may be amended, supplemented, amended and restated or otherwise modified from time to time, the ‘‘Private Company A Credit Facility’’).

(5) Cash interest and PIK interest rates for the Subsidiary of Private Company G and Public Co.

F represents a blended rate of differing cash interest and PIK interest rates applicable to each of the three tranches with differing rates.

Loan to Subsidiary of Private Company H does not reflect the

borrower’s option to request up to two maturity extensions each for an additional six months from the then-existing loan maturity date.

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

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

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

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

(7) The interest and PIK subtotal rates are weighted average rates.

Collateral Overview

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

by applicable laws and the regulations governing our borrowers.

We do not have liens on cannabis inventory and are generally restricted from taking ownership of state licenses by current statutory prohibitions and exchange listing standards.

documents governing our loans also include a variety of provisions intended to provide remedies against the value associated with licenses.

For example, some loan documents require a grant of a security interest in all property of the entities

holding licenses to the extent not prohibited by applicable law or regulations (or requiring regulatory approval), equity pledges of entities holding licenses, receivership remedies and/or other remedies to secure the value associated with the

borrowers’ licenses.

foreclosure proceeding to have such collateral sold, in each case, to generate funds towards the payoff of the loan.

While we believe that the appraised value of any real estate assets or other collateral securing our loans may impact the amount of

the recovery in each such scenario, the amount of any such recovery from the sale of such real estate or other collateral may be less than the appraised value of such collateral and the sale of such collateral may not be sufficient to pay off the

remaining balance on the defaulted loan.

The documents governing our loans also include a variety of provisions intended to provide remedies against the value associated with licenses.

example, some loan documents require a grant of a security interest in all property of the entities holding licenses to the extent not prohibited by applicable law or regulations (or requiring regulatory approval), equity pledges of entities holding licenses, receivership remedies and/or other remedies to secure the value associated with the borrowers’ licenses.

Upon default of a loan, we may seek to sell the loan to a third party or have an affiliate or a third-party work with the borrower to have the borrower sell collateral securing the loan to a third party or institute a foreclosure proceeding to have such collateral sold, in each case, to generate funds towards the payoff of the loan.

While we believe that the appraised value of any real estate assets or other collateral securing our loans may impact the amount of the recovery in each such scenario, the amount of any such recovery from the sale of such real estate or other collateral may be less than the appraised value of such collateral and the sale of such collateral may not be sufficient to pay off the remaining balance on the defaulted loan.

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

As of March 31, 2022,

our portfolio of loans had a weighted average real estate collateral coverage of approximately 1.2 times our aggregate committed principal amount of such loans.

Our real estate collateral coverage for each of our loans was measured at the time of

underwriting and based on various sources of data available at such time.

We calculate our weighted average real estate collateral coverage by estimating the underlying value of our real estate collateral based on various objective and subjective

factors, including, without limitation, third-party appraisals, total cost basis of the subject property and/or our own internal estimates.

We may pursue a sale of a defaulted loan if we believe that a sale would yield higher proceeds or that a sale could be accomplished more quickly than a foreclosure proceeding while yielding proceeds comparable to

what would be expected from a foreclosure sale.

rules and regulations under state law that govern foreclosure sales and Nasdaq listing standards that do not permit us to take title to real estate while it is involved in commercial sales of cannabis.

In addition, the sale of the collateral

securing our loans may be difficult and may be to a party outside of the cannabis industry.

Therefore, any appraisal-based value of our real estate and other collateral may not equal the value of such collateral if it were to be sold to a third

party in a foreclosure or similar proceeding.

As of June 30, 2022, our portfolio of loans had a weighted average real estate collateral coverage of approximately 1.1 times our aggregate committed principal amount of such loans.

Our real estate collateral coverage for each of our loans was measured at the time of underwriting and based on various sources of data available at such time.

We calculate our weighted average real estate collateral coverage by estimating the underlying value of our real estate collateral based on various objective and subjective factors, including, without limitation, third party appraisals, total cost basis of the subject property and/or our own internal estimates.

To the extent that we determine that the proceeds are more likely to be maximized through instituting a foreclosure sale or through taking title to the underlying collateral, we will be subject to the rules and regulations under state law that govern foreclosure sales and Nasdaq listing standards that do not permit us to take title to real estate while it is involved in commercial sales of cannabis.

In addition, the sale of the collateral securing our loans may be difficult and may be to a party outside of the cannabis industry.

Therefore, any appraisal-based value of our real estate and other collateral may not equal the value of such collateral if it were to be sold to a third party in a foreclosure or similar proceeding.

We may seek to sell a defaulted loan prior to commencing a foreclosure proceeding or during a foreclosure proceeding to a purchaser that is not required to comply with Nasdaq listing standards.

believe a third-party purchaser that is not subject to Nasdaq listing standards may be able to realize greater value from real estate and other collateral securing our loans.

However, we can provide no assurances that a third party would buy such

loans or that the sales price of such loans would be sufficient to recover the outstanding principal balance, accrued interest, and fees.

We will not own real estate as long as it is used in the commercial sale of cannabis due to current statutory

prohibitions and exchange listing standards, which may delay or limit our remedies in the event that any of our borrowers default under the terms of their loans with us.

We believe a third-party purchaser that is not subject to Nasdaq listing standards may be able to realize greater value from real estate and other collateral securing our loans.

However, we can provide no assurances that a third party would buy such loans or that the sales price of such loans would be sufficient to recover the outstanding principal balance, accrued interest, and fees.

We will not own real estate as long as it is used in the commercial sale of cannabis due to current statutory prohibitions and exchange listing standards, which may delay or limit our remedies in the event that any of our borrowers default under the terms of their loans with us.

Liquidity and Capital Resources

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

our stockholders and meet other general business needs.

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

The sources of

financing for our target investments are described below.

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

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

Our Shelf Registration Statement became effective on April 18, 2022, allowing us to sell, from time to time in one or more offerings, up to $1.0 billion of our

securities, including common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of our common stock or preferred stock.

The specifics of any future offerings, along with the use of proceeds

of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

We may also access liquidity through our ATM Program, which was established in April 2022 pursuant to which

we may sell, from time to time, up to $75.0 million of our common stock.

As of May 9, 2022, no sales of common stock have been made under the ATM program.

We expect that our primary sources of financing will be, to the extent available to us,

through (a) credit facilities, (b) public and private offerings of our equity and debt securities, and (c) ATM Program.

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

As the cannabis industry continues to

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

We expect the principal amount of the loans we originate to increase and that we

will need to raise additional equity and/or debt funds to increase our liquidity in the near future.

As of March 31, 2022 and December 31, 2021, all of our cash was unrestricted and totaled approximately $63.6 million and $109.2 million, respectively.

As of March 31, 2022, we believe that our cash on hand, capacity available under our line of credit and cash flows from operations will be sufficient to satisfy the operating requirements of our business through at

least the next twelve months.

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

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

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

Our primary sources of cash generally consist of unused borrowing capacity under our Revolving Credit Facility, the net proceeds of future debt or equity offerings, including in connection with the ATM Program, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating results.

Our net cash provided by operating activities for the six months ended June 30, 2022 of approximately $15.2 million was less than our dividend payments of $19.1 million made during the same period due to earned OID of $8.3 million and PIK repayments of $1.2 million related to repayments from Private Company D, Private Company F and Private Company E during such period.

OID relates to cash withheld by the Company upon funding of its investments and is included under the ‘Supplemental disclosure of non-cash activity’ on the Consolidated Statements of Cash Flows.

Capital Markets

Our Shelf Registration Statement became effective on April 18, 2022, allowing us to sell, from time to time in one or more offerings, up to $1.0 billion of our securities, including common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of our common stock or preferred stock.

The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

We may also access liquidity through our ATM Program, which was

established in April 2022 pursuant to which we may sell, from time to time, up to $75.0 million of our common stock.

As of June 30, 2022, we sold an aggregate of 114,932 shares of the Company’s common stock under the Sales Agreement at an average price of $18.08 per share.

The sales generated net proceeds of approximately $1.3 million.

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

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

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

As of June 30, 2022 and December 31, 2021, all of our cash was unrestricted and totaled approximately $45.6 million and $109.2 million, respectively.

As of June 30, 2022, we believe that our cash on hand, capacity available under our line of credit and cash flows from operations will be sufficient to satisfy the operating requirements of our business through at least the next twelve months.

Revolving Credit Facility

On April 29, 2022, we entered into Revolving Credit Agreement by and among us, the other loan parties from time-to-time party thereto,

the lenders party thereto, and the Lead Arranger, Bookrunner and Agent party thereto, pursuant to which, we obtained a $60.0 million senior-secured revolving credit facility.

The Revolving Credit Facility contains aggregate commitments of $60.0 million from two FDIC-insured banking institutions, which may be

increased to up to $100.0 million in aggregate (subject to available borrowing base and additional commitments), and contains a maturity date of April 29, 2025.

Interest is payable on the Revolving Credit Facility at the greater of (1) the

applicable base rate plus 0.50% and (2) 4.50%, as provided in the Revolving Credit Agreement, payable in cash in arrears.

We incurred a one-time commitment fee expense of approximately $0.4 million, which will be amortized over the life of the

Commencing on the six-month anniversary of the closing date, the Revolving Credit Facility has an unused line fee of 0.25% per annum, to be paid semi-annually in arrears, which will be included within interest expense in the Company’s

consolidated statements of operations.

On April 29, 2022, we entered into a Revolving Credit Agreement by and among us, the other loan parties from time to time party thereto, the lenders party thereto, and the lead arranger, bookrunner and administrative agent party thereto, pursuant to which, we obtained a $60.0 million senior-secured revolving credit facility.

We incurred a one-time commitment fee expense of approximately $0.4 million, which is amortized over the life of the facility.

Our obligations under the Revolving Credit Facility are secured by certain assets of ours comprising of or relating to loan obligations designated for inclusion in the borrowing base.

addition, we are subject to various financial and other covenants, including:

(1) liquidity of at least $5.0 million, (2) annual debt service coverage of at least 1.50 to 1.0 and (3) secured debt not to exceed 25% of total consolidated assets of us

and our subsidiaries.

In addition, we are subject to various financial and other covenants, including:

(1) liquidity of at least $5.0 million, (2) annual debt service coverage of at least 1.50 to 1.0 and (3) secured debt not to exceed 25% of total consolidated assets of us and our subsidiaries.

Termination of AFC Finance Credit Facility

Pursuant to the terms of the AFCF Revolving Credit Agreement, as amended, the AFCF Revolving Credit Facility provided revolving loan commitments of up to $75.0 million and bears interest at a

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

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

As of March 31, 2022 and December 31, 2021, we

had $0.0 million and $75.0 million of borrowings outstanding under our Revolving Credit Agreement, respectively.

All outstanding borrowings as of December 31, 2021 were repaid in full on January 3, 2022.

Future proceeds under the Revolving Credit

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

In connection with the Second Amendment of the Revolving Credit Agreement (“the Second Amendment”), we incurred a one-time commitment fee

of 0.25%, or $187,500, which is payable in three quarterly installments, beginning in the first quarter of 2022.

Following the Second Amendment, the Revolving Credit Facility has an unused fee of 0.25% per annum on the undrawn amount of the

revolving loan commitments, to be paid quarterly in arrears.

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

all of our existing and future assets.

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

The Revolving Credit Agreement provides for certain covenants, including

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

To the best of our knowledge, as of March 31, 2022, we were in compliance in all material respects with all covenants

contained in our Revolving Credit Agreement.

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

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

facility and require immediate repayment of all outstanding borrowings.

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

On April 29, 2022, upon our entry into the Revolving Credit Facility, we terminated the AFCF Revolving Credit Agreement.

On April 29, 2022, upon our entry into the Revolving Credit Facility, we terminated the AFCF Revolving Credit Facility with AFC Finance, LLC.

In connection with the termination, we paid the outstanding amounts remaining in connection with the commitment fee of approximately $0.1 million and accelerated the remaining deferred financing costs of approximately $0.1 million.

There were no other payments, premiums or penalties required to be paid in connection with the termination.

2027 Senior Notes

On November 3, 2021, we issued $100.0 million in aggregate principal amount of the 2027 Senior Notes.

On November 3, 2021, we issued $100.0 million in the aggregate principal amount of the 2027 Senior Notes.

The 2027 Senior Notes accrue interest at a rate of 5.75% per annum.

Interest on the 2027 Senior Notes is due

semi-annually on May 1 and November 1 of each year, beginning on May 1, 2022.

The net proceeds from the issuance of the 2027 Senior Notes were approximately $97.0 million, after deducting the initial purchasers’ discounts and commissions and

estimated offering fees and expenses payable by us.

We intend to use the net proceeds from the issuance of the 2027 Senior Notes (i) to fund loans related to unfunded commitments to existing borrowers, (ii) to originate and participate in

commercial loans to companies operating in the cannabis industry that are consistent with our investment strategy and (iii) for working capital and other general corporate purposes.

The terms of the 2027 Senior Notes are governed by the Indenture.

Under the Indenture governing the 2027 Senior Notes, we are required to cause all of our existing and future subsidiaries to guarantee the 2027 Senior Notes, other than certain immaterial subsidiaries as set forth in the Indenture.

As of March 31,

2022, the 2027 Senior Notes are not guaranteed by any of our subsidiaries.

premium set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

On or after February 1, 2027, we may redeem the 2027 Senior Notes in whole or in part at a price equal to 100% of the principal

amount of the 2027 Senior Notes being redeemed, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

The Indenture also requires us to offer to purchase all of the 2027 Senior Notes at a purchase price equal

to 101% of the principal amount of the 2027 Senior Notes, plus accrued and unpaid interest if a “change of control triggering event” (as defined in the Indenture) occurs.

The Indenture governing the 2027 Senior Notes contains customary terms and restrictions, subject to a number of exceptions and qualifications, including restrictions on our ability to (1) incur additional

indebtedness unless the Annual Debt Service Charge (as defined in the Indenture) is no less than 1.5 to 1.0, (2) incur or maintain total debt in an aggregate principal amount greater than 60% of our consolidated Total Assets (as defined in the

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

Interest on the 2027 Senior Notes is due semi-annually on May 1 and November 1 of each year, beginning on May 1, 2022.

The net proceeds from the issuance of the 2027 Senior Notes were approximately $97.0 million, after deducting the initial purchasers’ discounts and commissions and estimated offering fees and expenses payable by us.

Under the Indenture, we are required to cause all of our existing and future subsidiaries to guarantee the 2027 Senior Notes, other than certain immaterial subsidiaries as set forth in the Indenture.

Subsequent to the transfer of our investment in the senior secured loan to Private Company I to TRS1 on April 1, 2022, TRS1 was added as a subsidiary guarantor under the Indenture.

As of June 30, 2022, the 2027 Senior Notes are guaranteed by TRS1.

Prior to February 1, 2027, we may redeem the 2027 Senior Notes at any time, in whole or from time to time in part, at a redemption price equal to the greater of 100% of the principal amount thereof or a make-whole premium set forth in the Indenture, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

On or after February 1, 2027, we

may redeem the 2027 Senior Notes in whole or in part at a price equal to 100% of the principal amount of the 2027 Senior Notes being redeemed, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

The Indenture also requires us to offer to purchase all of the 2027 Senior Notes at a purchase price equal to 101% of the principal amount of the 2027 Senior Notes, plus accrued and unpaid interest if a “change of control triggering event” (as defined in the Indenture) occurs.

The Indenture contains customary terms and restrictions, subject to a number of exceptions and qualifications, including restrictions on our ability to (1) incur additional indebtedness unless the Annual Debt Service Charge (as defined in the Indenture) is no less than 1.5 to 1.0, (2) incur or maintain total debt in an aggregate principal amount greater than 60% of our consolidated Total Assets (as defined in the Indenture), (3) incur or maintain secured debt in an aggregate principal amount greater than 25% of our consolidated Total Assets (as defined in the Indenture);

and (4) merge, consolidate or sell substantially all of our assets.

In addition, the

Indenture also provides for customary events of default.

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

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

These events of default are subject to a number of important exceptions

and qualifications set forth in the Indenture.

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

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

The table below sets forth the material terms of our outstanding senior notes as of the date of this quarterly report:

Senior Notes Issue

Outstanding Interest

Rate Coupon Maturity

Date Interest

Due Dates Optional

Redemption Date

2027 Senior Notes

$100.0 million

February 1, 2027

2027 Senior Notes November 3, 2021 $100.0 million 5.75% May 1, 2027 May 1 and November 1 February 1, 2027

Other Credit Facilities, Warehouse Facilities and Repurchase Agreements

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

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

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

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

As of March 31, 2022, we believe that our cash on hand, capacity available under our Revolving Credit Facility, and cash flows from operations will be sufficient to service our outstanding debt

during the next twelve months.

Capital Markets

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

The following table sets forth changes in cash, cash equivalents and restricted cash for the three months ended March 31, 2022 and 2021:

Three months ended

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

As of June 30, 2022, we believe that our cash on hand, capacity available under our Revolving Credit Facility, and cash flows from operations will be sufficient to service our outstanding debt during the next twelve months.

The following table sets forth changes in cash and cash equivalents for the three and six months ended June 30, 2022 and 2021:

Six months ended June 30,

Net income $ 21,513,793 $ 6,028,542

Adjustments to reconcile net income to net cash (used in) provided by operating activities and changes in operating assets and liabilities (6,287,571) 1,467,345

Net cash provided by (used in) operating activities 15,226,222 7,495,887

Net cash provided by (used in) investing activities

Net cash provided by (used in) financing activities

Net cash (used in) provided by investing activities (49,122,968) (61,684,731)

Net cash (used in) provided by financing activities (29,765,769) 169,169,896

Change in cash and cash equivalents $ (63,662,515) $ 114,981,052

Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities during the three months ended March 31, 2022 was approximately $4.7 million, compared to approximately $2.4 million for the same period in 2021.

The increase from March 31,

2021 to March 31, 2022 was primarily due to an increase in net income of approximately $8.8 million, increase in accrued interest of approximately $1.4 million, offset by an increase in accretion of OID of approximately $(3.3) million, increase in

PIK interest of approximately $(1.1) million, and decrease in the interest reserve balance of approximately $(4.1) million.

Net cash provided by operating activities during the six months ended June 30, 2022 was approximately $15.2 million, compared to approximately $7.5 million for the same period in 2021.

The increase from June 30, 2021 to June 30, 2022 was primarily due to an increase in net income of approximately $15.5 million, offset by an increase in accretion of OID of approximately $(6.1) million and increase in PIK interest of approximately $(2.2) million.

Net Cash Provided by (Used in) Investing Activities

Net cash used in investing activities during the three months ended March 31, 2022 was approximately $30.0 million, compared to approximately $6.9 million for the same period in 2021.

The change was caused primarily

by loan issuance and fundings of approximately $50.5 million in this period versus the Prior Period of approximately $7.1 million, offset by repayment of loans of approximately $20.4 million this period versus $0.1 million in the Prior Period,

respectively.

Net cash used in investing activities during the six months ended June 30, 2022 was approximately $49.1 million, compared to approximately $61.7 million for the same period in 2021.

The change was caused primarily by loan issuance and fundings of approximately $103.8 million during the six months ended June 30, 2022, compared to approximately $76.9 million for the same period in 2021, offset by repayment of loans of approximately $28.2 million during the six months ended June 30, 2022, compared to $12.9 million during the six months ended June 30, 2021, and proceeds received from the sale of loans and marketable securities of approximately $26.5 million during the six months ended June 30, 2022, compared to $0 for the same period in 2021.

Net Cash Provided by (Used in) Financing Activities

Net cash used in financing activities during the three months ended March 31, 2022 was approximately $20.2 million, compared to net cash provided by financing activities of approximately $121.7 million for the same

period in 2021.

The change was caused primarily by the change in proceeds from the sale of common stock of approximately $63.9 million in this period versus approximately $127.0 million in the Prior Period as well as the repayments on the Revolving

Credit Facility of approximately $75.0 million in the current period, versus $0 in the Prior Period.

Net cash used in financing activities during the six months ended June 30, 2022 was approximately $29.8 million, compared to net cash provided by financing activities of approximately $169.2 million for the same period in 2021.

The change was caused primarily by the change in proceeds from the sale of common stock of approximately $66.0 million in the current period versus approximately $180.3 million in the prior year period as well as the repayments on the AFCF Revolving Credit Facility of approximately $75.0 million in the current period, versus $0 for the same period in 2021.

Contractual Obligations, Other Commitments, and Off-Balance Sheet Arrangements

Our contractual obligations as of March 31, 2022 and December 31, 2021 are as follows:

As of March 31, 2022

Unfunded commitments

As of December 31, 2021

Our contractual obligations as of June 30, 2022 are as follows:

As of June 30, 2022

1 year 1-3 years 3-5 years More than

5 years Total

Unfunded commitments $ 61,982,107 $ — $ — $ — $ 61,982,107

As of March 31, 2022 and December 31, 2021, all unfunded commitments relate to our total loan commitments and were available for funding in less than one year.

The Company also had the following contractual obligations as of March 31, 2022 and December 31, 2021 relating to the senior unsecured notes:

As of March 31, 2022

Contractual obligations (1)

As of December 31, 2021

Total $ 61,982,107 $ — $ — $ — $ 61,982,107

As of June 30, 2022, all unfunded commitments relate to our total loan commitments and were available for funding in less than one year.

We also had the following contractual obligations as of June 30, 2022 relating to the 2027 Senior Notes:

As of June 30, 2022

1 year 1-3 years 3-5 years More than

5 years Total

Contractual obligations (1)

Amounts include projected interest payments during the period based on interest rates in effect as of March 31, 2022 and December 31, 2021, respectively.

$ 6,229,167 $ 11,500,000 $ 111,020,833 $ — $ 128,750,000

Total $ 6,229,167 $ 11,500,000 $ 111,020,833 $ — $ 128,750,000

(1) Amounts include projected interest payments during the period based on interest rates in effect as of June 30, 2022.

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

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

obligations may be unlimited.

The maximum potential future payment amounts we could be required to pay under these indemnification obligations may be unlimited.

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

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

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

contractually narrow or limited purposes.

Other than as set forth in this quarterly report on Form 10-Q, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, special purpose entities or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.

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

Leverage Policies

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

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

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

We currently do not intend to have leverage of more than one times equity.

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

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

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

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

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

of the Code), we will pay tax at regular corporate rates on that undistributed portion.

Furthermore, if we distribute less than the sum of (i) 85% of our ordinary income for the calendar year, (ii) 95% of our capital gain net income for the

calendar year and (iii) any undistributed shortfall from our prior calendar year (the “Required Distribution”) to our stockholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the

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

Any of these taxes would decrease cash available for distribution

to our stockholders.

We have elected to be taxed as a REIT for United States federal income tax purposes and, as such, intend to annually distribute to our shareholders at least 90% of our REIT taxable income, prior to the deduction for dividends paid and excluding our net capital gain.

If we distribute less than 100% of our REIT taxable income in any tax year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858 of the Code), we will pay tax at regular corporate rates on that undistributed portion.

Furthermore, if we distribute less than the sum of (i) 85% of our ordinary income for the calendar year, (ii) 95% of our capital gain net income for the calendar year and (iii) any undistributed shortfall from our prior calendar year (the “Required Distribution”) to our shareholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the subsequent year), then we are required to pay non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed.

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

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

However, if we elect to retain any of our net capital gain for any tax year, we must notify our stockholders and pay tax at regular

corporate rates on the retained net capital gain.

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

proportionate share of the retained capital gain.

However, if we elect to retain any of our net capital gain for any tax year, we must notify our shareholders and pay tax at regular corporate rates on the retained net capital gain.

The shareholders must include their proportionate share of the retained net capital gain in their taxable income for the tax year, and they are deemed to have paid the REIT’s tax on their proportionate share of the retained capital gain.

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

If we determine that our estimated current year taxable income (including net capital gain) will be in

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

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

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

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

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

To the extent that our cash available for distribution is less than the amount required to be distributed under the REIT provisions of the Code, we may be required to fund distributions from working capital or through equity, equity-related or debt financings or, in certain circumstances, asset sales, as to which our ability to consummate transactions in a timely manner on favorable terms, or at all, cannot be assured, or we may make a portion of the Required Distribution in the form of a taxable stock distribution or distribution of debt securities.

Critical Accounting Policies and Estimates

As of March 31, 2022, there were no significant changes in or changes in the application of our critical accounting policies or estimates from those presented in our Annual Report on Form 10-K.

As of June 30, 2022, there were no significant changes in or changes in the application of our critical accounting policies or estimates from those presented in our Annual Report on Form 10-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis