What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-08 compared with 2022-08-09 · 221 added, 200 removed, 676 unchanged (38% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2022 December 31, 2021

Loans held for investment at fair value (cost of $ 93,940,582 and $ 74,913,157 at June 30, 2022 and December 31, 2021, respectively, net)

September 30, 2022 December 31, 2021

Loans held for investment at fair value (cost of $ 93,454,875 and $ 74,913,157 at September 30, 2022 and December 31, 2021, respectively, net)

$ 94,076,146 $ 77,096,319

21 unchanged sentences

Shareholders’ equity

Preferred stock, par value $ 0.01 per share, 10,000 shares authorized at June 30, 2022 and December 31, 2021 and 125 shares issued and outstanding at June 30, 2022 and December 31, 2021

Common stock, par value $ 0.01 per share, 50,000,000 and 25,000,000 shares authorized at June 30, 2022 and December 31, 2021, respectively, and 19,857,872 and 16,442,812 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Preferred stock, par value $ 0.01 per share, 10,000 shares authorized at September 30, 2022 and December 31, 2021 and 125 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Common stock, par value $ 0.01 per share, 50,000,000 and 25,000,000 shares authorized at September 30, 2022 and December 31, 2021, respectively, and 20,364,000 and 16,442,812 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

203,640 163,866

8 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

24 unchanged sentences

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

8 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three months ended June 30, 2022

Three months ended September 30, 2022

Stock Common Stock Additional

3 unchanged sentences

Shares Amount

Balance at March 31, 2022 $ 1 19,742,940 $ 196,784 $ 338,102,982 $ — $ ( 1,789,374 ) $ 336,510,393

Balance at June 30, 2022 $ 1 19,857,872 $ 197,933 $ 339,568,041 $ — $ ( 1,565,610 ) $ 338,200,365

Issuance of common stock, net of offering costs — 506,466 5,065 9,018,824 — — 9,023,889

2 unchanged sentences

— — — — — ( 11,403,840 ) ( 11,403,840 )

Dividends declared on preferred shares ($ 60 per share)

— — — — — ( 7,500 ) ( 7,500 )

Net income — — — — — 11,480,519 11,480,519

Balance at June 30, 2022 $ 1 19,857,872 $ 197,933 $ 339,568,041 $ — $ ( 1,565,610 ) $ 338,200,365

Three months ended June 30, 2021

Balance at September 30, 2022 $ 1 20,364,000 $ 203,640 $ 348,700,927 $ — $ ( 1,488,931 ) $ 347,415,637

Three months ended September 30, 2021

Stock Common Stock Additional

3 unchanged sentences

Shares Amount

Balance at March 31, 2021 $ 1 13,366,877 $ 133,669 $ 216,504,726 $ — $ ( 306,391 ) $ 216,332,005

Issuance of common stock, net of offering costs — 2,750,000 27,500 52,544,886 — — 52,572,386

Balance at June 30, 2021 $ 1 16,116,877 $ 161,169 $ 269,061,069 $ — $ ( 765,517 ) $ 268,456,722

Issuance of common stock, net of offering cost — 269,650 2,697 5,035,825 — — 5,038,522

Stock-based compensation — 56,285 — 51,429 — — 51,429

1 unchanged sentence

— — — — — ( 7,070,409 ) ( 7,070,409 )

Dividends declared on preferred shares ($ 60 per share)

— — — — — ( 7,500 ) ( 7,500 )

Net income — — — — — 7,930,680 7,930,680

Balance at June 30, 2021 $ 1 16,116,877 $ 161,169 $ 269,061,069 $ — $ ( 765,517 ) $ 268,456,722

Balance at September 30, 2021 $ 1 16,442,812 $ 163,866 $ 274,148,323 $ — $ 94,754 $ 274,406,944

(See accompanying notes to the consolidated financial statements)

1 unchanged sentence

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Six months ended June 30, 2022

Nine months ended September 30, 2022

Stock Common Stock Additional

12 unchanged sentences

Net income — — — — — 32,994,312 32,994,312

Balance at June 30, 2022 $ 1 19,857,872 $ 197,933 $ 339,568,041 $ — $ ( 1,565,610 ) $ 338,200,365

Six months ended June 30, 2021

Balance at September 30, 2022 $ 1 20,364,000 $ 203,640 $ 348,700,927 $ — $ ( 1,488,931 ) $ 347,415,637

Nine months ended September 30, 2021

Stock Common Stock Additional

11 unchanged sentences

Net income — — — — — 13,959,222 13,959,222

Balance at June 30, 2021 $ 1 16,116,877 $ 161,169 $ 269,061,069 $ — $ ( 765,517 ) $ 268,456,722

Balance at September 30, 2021 $ 1 16,442,812 $ 163,866 $ 274,148,323 $ — $ 94,754 $ 274,406,944

(See accompanying notes to the consolidated financial statements)

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

Nine months ended

September 30,

Operating activities:

36 unchanged sentences

OID withheld from funding of loans $ 5,607,675 $ 12,391,624

Loans funded from amounts due to affiliate $ — $ 9,549,625

Change in other comprehensive income (loss) during the period $ 168,750 $ —

5 unchanged sentences

AFC GAMMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2022

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2022

AFC Gamma, Inc.

(the “Company” or “AFCG”) is an institutional lender to the cannabis industry that was founded in July 2020 by a veteran team of investment professionals.

The Company originates, structures, underwrites, and invests 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.

(the “Company” or “AFCG”) is an institutional lender primarily to the cannabis industry that was founded in July 2020 by a veteran team of investment professionals.

The Company primarily originates, structures, underwrites, and invests 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.

The Company is a Maryland corporation and completed its initial public offering (the “IPO”) in March 2021.

The Company is externally managed by AFC Management, LLC (the Company’s “Manager”), a Delaware limited liability company, pursuant to the terms of the Amended and Restated Management Agreement, dated March 10, 2022 (as amended, the “Management Agreement”).

The Company’s wholly-owned subsidiary, AFCG TRS1, LLC (“TRS1”), a Delaware limited liability company, operates as a taxable real estate investment trust subsidiary (a “TRS”).

The Company is externally managed by AFC Management, LLC, a Delaware limited liability company (the Company’s “Manager”), pursuant to the terms of the Amended and Restated Management Agreement, dated January 14, 2021, between the parties (as amended from time-to-time, the “Management Agreement”).

The Company’s wholly owned subsidiary, AFCG TRS1, LLC, a Delaware limited liability company (“TRS1”), operates as a taxable real estate investment trust subsidiary (a “TRS”).

TRS1 began operating in July 2021, and the financial statements of TRS1 have been consolidated within the Company’s consolidated financial statements beginning with the quarter ended September 30, 2021.

The Company operates as one operating segment and is primarily focused on financing senior secured loans and other types of loans to cannabis industry operators in states where medical and/or adult-use cannabis is legal.

The Company operates in one operating segment and is primarily focused on financing senior secured loans and other types of loans primarily to cannabis industry operators in states where medical and/or adult-use cannabis is legal.

These loans are generally held for investment and are secured, directly or indirectly, by real estate, equipment, the value associated with licenses and/or other assets of borrowers depending on the applicable laws and regulations governing such borrowers.

15 unchanged sentences

Significant estimates include the valuation of loans held for investment at fair value and current expected credit losses (“CECL”).

Over the course of the coronavirus (“COVID-19”) pandemic, medical cannabis companies have been deemed “essential” by almost all states with legalized cannabis and stay-at-home orders.

Consequently, the impact of the COVID-19 pandemic and the related regulatory and private sector response on our financial and operating results for the periods ended June 30, 2022 and 2021 was somewhat mitigated as all of our borrowers were permitted to continue to operate during this pandemic.

Regardless, the full extent of the economic impact of the business disruptions caused by COVID-19 is uncertain.

The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets.

The global impact of the outbreak has been rapidly evolving, and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel.

As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including the regulated cannabis industry.

Although most of these measures have been lifted or scaled back, surges of COVID-19 in certain parts of the world, including the United States, have resulted and may in the future result in the re-imposition of certain restrictions and may lead to more restrictions to reduce the spread of COVID-19.

The full effect that these disruptions may have on the operations and financial performance of the Company will depend on future developments, including possible impacts on the performance of the Company’s loans, general business activity, and ability to generate revenue, which cannot be determined.

Recent Accounting Pronouncements

4 unchanged sentences

2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022.

The Company does not believe the adoption of this ASU will have a material impact on its consolidated financial statements.

In January 2021, the FASB issued ASU No.

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They do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship including periods after December 31, 2022.

The Company is currently evaluating the impact, if any, of this ASU on its consolidated financial statements.

The Company h as evaluated the impact of this ASU and has determined that this ASU does not have a material effect on the Company’s consolidated financial statements.

LOANS HELD FOR INVESTMENT AT FAIR VALUE

As of June 30, 2022 and December 31, 2021, the Company’s portfolio included three loans held at fair value.

The aggregate originated commitment under these loans was approximately $ 96.2 million and $ 75.9 million, 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, the Company funded approximately $ 17.3 million of additional principal and had no repayments.

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

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

As of June 30, 2022

As of September 30, 2022 and December 31, 2021, the Company’s portfolio included three loans held at fair value.

The aggregate originated commitment under these loans was approximately $ 97.1 million and $ 75.9 million, respectively, and outstanding principal was approximately $ 95.6 million and $ 77.6 million, as of September 30, 2022 and December 31, 2021, respectively.

For the nine months ended September 30, 2022, the Company funded approximately $ 18.7 million of additional principal and had approximately $ 3.0 million of principal repayments of loans held at fair value.

As of September 30, 2022 and December 31, 2021, none of the Company’s loans held at fair value had floating interest rates.

The following tables summarize the Company’s loans held at fair value as of September 30, 2022 and December 31, 2021:

As of September 30, 2022

Fair Value (1)

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(2) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discount (“OID”) and loan origination costs.

(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:

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

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

Principal Original Issue

3 unchanged sentences

New fundings 18,737,988 ( 479,276 ) — 18,258,712

Loan repayments ( 1,960,000 ) — — ( 1,960,000 )

Loan amortization payments ( 1,089,776 ) — — ( 1,089,776 )

Accretion of original issue discount — 1,076,212 — 1,076,212

PIK interest 2,256,569 — — 2,256,569

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

A more detailed listing of the Company’s loans held at fair value portfolio based on information available as of June 30, 2022 is as follows:

Total loans held at fair value at September 30, 2022 $ 95,575,523 $ ( 2,120,648 ) $ 621,271 $ 94,076,146

A more detailed listing of the Company’s loans held at fair value portfolio based on information available as of September 30, 2022 is as follows:

Collateral Location Collateral

4 unchanged sentences

9/30/2023 I/O

B MI C 12,868,721 12,556,852 13,011,852 17.0 % (8)

B MI C, D 14,457,869 14,200,574 14,603,908 18.7 % (8)

Total loans held at fair value $ 94,076,146 $ 93,454,875 $ 95,575,523

9 unchanged sentences

(7) Base interest rate of 7.5 % and PIK interest rate of 7.5 %.

(8) Base interest rate of 13 % and PIK interest rate of 4 %.

As amended, cash interest is deferred from July 1, 2022 until November 1, 2022.

(8) Base weighted interest rate of 14.7 % and PIK interest rate of 4.0 %.

LOANS HELD FOR INVESTMENT AT CARRYING VALUE

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

The aggregate originated commitment amount 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, as of June 30, 2022 and December 31, 2021, respectively.

For the six months ended June 30, 2022, the Company funded approximately $ 116.2 million of outstanding principal.

As of June 30, 2022 and December 31, 2021, approximately 38 % and 48 %, respectively, of the Company’s 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 the Company’s loans held at carrying value as of June 30, 2022 and December 31, 2021:

As of June 30, 2022

As of September 30, 2022 and December 31, 2021, the Company’s portfolio included ten and twelve loans, respectively, held at carrying value.

The aggregate originated commitment amount under these loans was approximately $ 401.1 million and $ 324.3 million, respectively, and outstanding principal was approximately $ 349.3 million and $ 270.8 million, as of September 30, 2022 and December 31, 2021, respectively.

For the nine months ended September 30, 2022, the Company funded approximately $ 139.6 million of outstanding principal.

As of September 30, 2022 and December 31, 2021, approximately 39 % and 48 %, respectively, of the Company’s loans held at carrying value have floating interest rates.

As of September 30, 2022, t hese floating benchmark rates include one-month LIBOR subject to a weighted average floor of 1.0 % and quoted at 3.143%, one-month Secured Overnight Financing Rate (“SOFR”) subject to a weighted average floor of 1.0 % and quoted at 3.042% and U.S.

Prime Rate subject to a weighted average floor of 4.4 % quoted at 6.250%.

The following tables summarize the Company’s loans held at carrying value as of September 30, 2022 and December 31, 2021:

As of September 30, 2022

Principal (1)

10 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.

(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:

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

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

Principal Original Issue

7 unchanged sentences

Loan amortization payments ( 1,830,286 ) — ( 1,830,286 )

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

A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of June 30, 2022 is as follows:

Total loans held at carrying value at September 30, 2022 $ 349,337,390 $ ( 10,173,360 ) $ 339,164,030

A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of September 30, 2022 is as follows:

Collateral Location Collateral

5 unchanged sentences

of Private Co.

G NJ C, D 55,349,240 ( 2,089,607 ) 53,259,633 14.9 % (6)

G NJ, PA C, D 67,912,444 ( 1,953,328 ) 65,959,116 16.5 % (6)

05/01/2026 P/I

8 unchanged sentences

08/01/2026 P/I

J MO C 23,525,213 ( 623,185 ) 22,902,028 17.8 % (11)

J MO C, D 23,568,458 ( 573,986 ) 22,994,472 19.1 % (11)

09/01/2025 P/I

of Public Co.

H IA, IL, MI, NJ, PA C, D 60,000,000 ( 2,057,143 ) 57,942,857 9.8 % (12)

H CT, IA, IL, ME, MI, NJ, PA C, D 60,000,000 ( 1,910,204 ) 58,089,796 9.8 % (12)

01/01/2026 I/O

1 unchanged sentence

05/01/2026 P/I

of Public Co.

M IL, MI, MA, NJ, OH, PA C, D 10,000,000 ( 827,703 ) 9,172,297 9.5 % (14)

08/27/2025 I/O

Total loans held at carrying value $ 349,337,390 $ ( 10,173,360 ) $ 339,164,030

7 unchanged sentences

(5) Base interest rate of 9.0 % plus Prime (Prime floor of 4.0 %) and PIK interest rate of 4.0 %.

(6) Base weighted average interest rate of 11.5 % plus LIBOR (LIBOR floor of 1.0 %) and PIK interest rate of 1.8 %.

(6) Base interest rate of 10.25 % plus Prime (Prime floor of 4.5 %).

(7) Base weighted average interest rate of 8.6 %.

5 unchanged sentences

(13) Base interest rate of 12.0 %.

(14) Base interest rate of 9.5 %.

LOAN RECEIVABLE AT CARRYING VALUE

As of June 30, 2022 and December 31, 2021, the Company’s 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, the Company received repayments of approximately $ 0.3 million of outstanding principal.

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

As of September 30, 2022 and December 31, 2021, the Company’s portfolio included one loan receivable at carrying value.

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

During the nine months ended September 30, 2022, the Company received repayments of approximately $ 0.3 million of outstanding principal.

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

Principal Original Issue

4 unchanged sentences

PIK interest 26,187 — 26,187

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

Total loan receivable at carrying value at September 30, 2022 $ 2,222,339 $ ( 1,873 ) $ 2,220,466

CURRENT EXPECTED CREDIT LOSSES

The Company estimates its current expected credit losses (“CECL”) on both the outstanding balances and unfunded commitments on loans held for investment and requires consideration of a broader range of historical experience adjusted for current conditions and reasonable and supportable forecast information to inform credit loss estimates (the “CECL Reserve”) using a model that considers multiple datapoints and methodologies that may include the likelihood of default and expected loss given default for each individual loan, discounted cash flows (“DCF”), and other inputs which may include the risk rating of the loan, how recently the loan was originated compared to the measurement date, and expected prepayment if applicable.

Calculation of the CECL Reserve requires loan specific data, which includes fixed charge coverage ratio, loan-to-value, property type and geographic location.

Estimating the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of the Company’s loan portfolio and (iv) the Company’s current and future view of the macroeconomic environment.

Calculation of the CECL Reserve requires loan specific data, which may include fixed charge coverage ratio, loan-to-value, property type and geographic location.

Estimating the CECL Reserve also requires significant judgment with respect to various factors, including but not limited to (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of the Company’s loan portfolio and (iv) the Company’s current and future view of the macroeconomic environment.

The Company may consider loan-specific qualitative factors on certain loans to estimate its CECL Reserve, which may include (i) whether cash from the borrower’s operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and (iii) the liquidation value of collateral.

1 unchanged sentence

In order to estimate the future expected loan losses relevant to the Company’s portfolio, the Company may consider historical market loan loss data provided by a third-party data service.

The third party’s loan database includes historical loss data for commercial mortgage-backed securities, or CMBS which the Company believes is a reasonably comparable and available data set to its type of loans.

The CECL Reserve takes into consideration the macroeconomic impact of the COVID-19 pandemic on commercial real estate properties and is not specific to any loan losses or impairments on the Company’s loans held for investment.

As of June 30, 2022 and December 31, 2021, the Company’s CECL Reserve for its loans held at carrying value and loan receivable at carrying value is approximately $ 5.6 million and $ 3.1 million, respectively, or 176 and 120 basis points, respectively, of the Company’s total loans held at carrying value and loans receivable at carrying value of approximately $ 318.1 million and $ 259.7 million, respectively, and is bifurcated between 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 $ 2.4 million, respectively, and a liability for unfunded commitments of approximately $ 0.6 million and $ 0.7 million, respectively.

The third party’s loan database includes historical loss data for commercial mortgage-backed securities (“CMBS”), which the Company believes is a reasonably comparable and available data set to its type of loans.

As of September 30, 2022 and December 31, 2021, the Company’s CECL Reserve for its loans held at carrying value and loan receivable at carrying value is approximately $ 6.2 million and $ 3.1 million, respectively, or 1.80 % and 1.20 %, respectively, of the Company’s total loans held at carrying value and loans receivable at carrying value of approximately $ 341.4 million and $ 259.7 million, respectively, and is bifurcated between 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 $ 5.5 million and $ 2.4 million, respectively, and a liability for unfunded commitments of approximately $ 0.7 million and $ 0.7 million, respectively.

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

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

Activity related to the CECL Reserve for outstanding balances and unfunded commitments on the Company’s loans held at carrying value and loans receivable at carrying value as of and for the three and six months ended June 30, 2022 was as follows:

Outstanding (1)

Balance at March 31, 2022 $ 3,390,676 $ 629,188 $ 4,019,864

Balance at June 30, 2022 $ 5,018,072 $ 594,840 $ 5,612,912

Provision for current expected credit losses 448,122 93,836 541,958

1 unchanged sentence

Recoveries — — —

Balance at June 30, 2022 $ 5,018,072 $ 594,840 $ 5,612,912

Balance at September 30, 2022 $ 5,466,194 $ 688,676 $ 6,154,870

Outstanding (1)

3 unchanged sentences

Recoveries — — —

Balance at June 30, 2022 $ 5,018,072 $ 594,840 $ 5,612,912

(1) As of June 30, 2022 and December 31, 2021, the CECL Reserve related to outstanding balances on loans at carrying value and loans receivable at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets.

(2) As of June 30, 2022 and December 31, 2021, the CECL Reserve related to unfunded commitments on loans held at carrying value is recorded within current expected credit loss reserve as a liability in the Company’s consolidated balance sheets.

Balance at September 30, 2022 $ 5,466,194 $ 688,676 $ 6,154,870

(1) As of September 30, 2022 and December 31, 2021, the CECL Reserve related to outstanding balances on loans at carrying value and loans receivable at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets.

(2) As of September 30, 2022 and December 31, 2021, the CECL Reserve related to unfunded commitments on loans held at carrying value is recorded within current expected credit loss reserve as a liability in the Company’s consolidated balance sheets.

The Company continuously evaluates the credit quality of each loan by assessing the risk factors of each loan and assigning a risk rating based on a variety of factors.

13 unchanged sentences

The risk ratings are primarily based on historical data as well as taking into account future economic conditions.

As of June 30, 2022, the carrying value, excluding the CECL Reserve, of the Company’s loans held at carrying value and loans receivable at carrying value within each risk rating by year of origination is as follows:

As of September 30, 2022, the carrying value, excluding the CECL Reserve, of the Company’s loans held at carrying value and loans receivable at carrying value within each risk rating by year of origination is as follows:

2022 2021 2020 Total

5 unchanged sentences

INTEREST RECEIVABLE

The following table summarizes the interest receivable by the Company as of June 30, 2022 and December 31, 2021:

June 30, 2022 As of

The following table summarizes the interest receivable by the Company as of September 30, 2022 and December 31, 2021:

September 30, 2022 As of

December 31, 2021

4 unchanged sentences

INTEREST RESERVE

At June 30, 2022 and December 31, 2021, the Company had two and seven loans, respectively, that included a loan-funded interest reserve.

For the three and six months ended June 30, 2022, approximately $ 1.4 million and $ 5.6 million, respectively, of aggregate interest income was earned and disbursed from the interest reserves.

The following table presents changes in the interest reserve as of and for the three and six months ended June 30, 2022 and 2021:

At September 30, 2022 and December 31, 2021, the Company had three and seven loans, respectively, that included a loan-funded interest reserve.

For the three and nine months ended September 30, 2022, approximately $ 3.0 million and $ 8.6 million, respectively, of aggregate interest income was earned and disbursed from the interest reserves.

For the three and nine months ended September 30, 2021, approximately $ 1.8 million and $ 2.5 million, respectively, of aggregate interest income was earned and disbursed from the interest reserves.

The following table presents changes in the interest reserve as of and for the three and nine months ended September 30, 2022 and 2021:

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

6 unchanged sentences

The Revolving Credit Facility has a maturity date of April 29, 2025.

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) which may be borrowed, repaid and redrawn, subject to a borrowing base based on eligible loan obligations held by the Company and subject to the satisfaction of other conditions provided under the Revolving Credit 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.

obligations held by the Company and subject to the satisfaction of other conditions provided under 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.

The Company incurred a one-time commitment fee expense of approximately $ 0.5 million, which is amortized over the life of the facility.

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

For the three and six months ended June 30, 2022, the Company had not drawn on the Revolving Credit Facility or incurred any interest expense related to the Revolving Credit Facility.

For the three and nine months ended September 30, 2022, the Company had not drawn on the Revolving Credit Facility or incurred any interest expense related to the Revolving Credit Facility.

The Company amortized $ 40,130 and $ 67,610 of deferred financing costs for the three and nine months ended September 30, 2022, respectively.

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

9 unchanged sentences

Under the Second Amendment, payments to AFC Finance, LLC for interest, commitment fees and unused fees (net applicable taxes) were required to be paid directly or indirectly through AFC Finance, LLC to charitable organizations designated by AFC Finance, LLC.

The Second Amendment also (i) increased the loan commitment from $ 50.0 million to $ 75.0 million (ii) decreased the interest rate from 6 % per annum to 4.75 % per annum;

(iii) introduced a one-time commitment fee of 0.25 %, to be paid in three equal quarterly installments, and an unused line fee of 0.25 % per annum, to be paid quarterly in arrears;

(iv) provided an optional buyout provision for the holders of the 2027 Senior Notes upon an event of default under the AFCF Revolving Credit Agreement;

(v) extended the fixed element of the maturity date from December 31, 2021 to September 30, 2022.

The Second Amendment also (i) increased the loan commitment from $ 50.0 million to $ 75.0 million, (ii) decreased the interest rate from 6 % per annum to 4.75 % per annum, (iii) introduced a one-time commitment fee of 0.25 %, to be paid in three equal quarterly installments, and an unused line fee of 0.25 % per annum, to be paid quarterly in arrears, (iv) provided an optional buyout provision for the holders of the 2027 Senior Notes upon an event of default under the AFCF Revolving Credit Agreement and (v) extended the fixed element of the maturity date from December 31, 2021 to September 30, 2022.

Pursuant to the Second Amendment, the Company incurred a one-time commitment fee expense of $ 187,500 in November 2021, payable in three quarterly installments that began in the first quarter of 2022, which is amortized over the life of the loan.

As of June 30, 2022 and December 31, 2021, the outstanding loan balance under the AFCF Revolving Credit Facility was $ 0.0 million and $ 75.0 million, respectively.

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

For the three and six months ended June 30, 2022, the Company incurred interest expense on the AFCF Revolving Credit Facility of $ 0 and $ 19,792 , respectively.

For the three and six months ended June 30, 2021, the Company did not incur any interest expense on the AFCF Revolving Credit Facility.

On April 29, 2022, upon the Company’s entry into the Revolving Credit Facility, the Company terminated the AFCF Revolving Credit Agreement.

In connection with the termination, the Company paid the remaining amount of the commitment fee outstanding 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.

As of December 31, 2021, the outstanding loan balance under the AFCF Revolving Credit Facility was $ 75.0 million.

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

For the three and nine months ended September 30, 2022, the Company incurred interest expense on the AFCF Revolving Credit Facility of $ 0 and $ 19,792 , respectively.

For the three and nine months ended September 30, 2021, the Company did no t incur any interest expense on the AFCF Revolving Credit Facility.

2027 Senior Notes

2 unchanged sentences

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 offering were approximately $ 97.0 million, after deducting the initial purchasers’ discounts and commissions and estimated offering fees and expenses payable by the Company.

The Company intends to use the proceeds from the issuance of the 2027 Senior Notes (i) to fund loans related to unfunded commitments to existing borrowers, (ii) to originate and participate in commercial loans to companies operating in the cannabis industry that are consistent with the

Company’s investment strategy and (iii) for working capital and other general corporate purposes.

proceeds from the offering were approximately $ 97.0 million, after deducting the initial purchasers’ discounts and commissions and estimated offering fees and expenses payable by the Company.

The terms of the 2027 Senior Notes are governed by an indenture, dated November 3, 2021, among us, as issuer, and TMI Trust Company, as trustee (the “Indenture”).

1 unchanged sentence

Subsequent to the Company’s investment in the senior secured loan to Private Company I being transferred 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.

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

Prior to February 1, 2027, the Company may redeem the 2027 Senior Notes in whole or in part at a price equal to the greater of 100 % of the principal amount of the 2027 Senior Notes being redeemed or a make-whole premium set forth in the Indenture, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date.

1 unchanged sentence

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

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

and (4) merge, consolidate or sell substantially all of the Company’s assets.

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

2 unchanged sentences

The 2027 Senior Notes are due on May 1, 2027.

Scheduled principal payments on the 2027 Senior Notes as of June 30, 2022 are as follows:

Scheduled principal payments on the 2027 Senior Notes as of September 30, 2022 are as follows:

2027 Senior Notes

2 unchanged sentences

Total principal $ 100,000,000

The following table reflects a summary of interest expense incurred during the three and six months ended June 30, 2022.

There was no interest expense incurred during the three and six months ended June 30, 2021.

The following table reflects a summary of interest expense incurred during the three and nine months ended September 30, 2022.

There was no interest expense incurred during the three and nine months ended September 30, 2021.

Three months ended

June 30, 2022

September 30, 2022

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

3 unchanged sentences

Total interest expense $ 1,603,958 $ 40,130 $ — $ 1,644,088

Six months ended

June 30, 2022

Nine months ended

September 30, 2022

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

4 unchanged sentences

COMMITMENTS AND CONTINGENCIES

As of June 30, 2022 and December 31, 2021, the Company had the following commitments to fund various senior term loans, investment in debt securities, equipment loans and bridge loans:

June 30, 2022 As of

As of September 30, 2022 and December 31, 2021, the Company had the following commitments to fund various investments:

September 30, 2022 As of

December 31, 2021

3 unchanged sentences

The Company from time to time may be a party to litigation in the normal course of business.

As of June 30, 2022, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

The Company provides loans to companies operating in the cannabis industry which involves significant risks, including the risk of strict enforcement against the Company’s borrowers of the federal illegality of cannabis, the Company’s borrowers’ inability to renew or otherwise maintain their licenses or other requisite authorizations for their cannabis operations, and such loans lack of liquidity, and the Company could lose all or part of any of the Company’s loans.

The Company’s ability to grow or maintain its business depends on state laws pertaining to the cannabis industry.

As of September 30, 2022, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

The Company primarily provides loans to companies operating in the cannabis industry which involves significant risks, including the risk of strict enforcement against the Company’s borrowers of the federal illegality of cannabis, the Company’s borrowers’ inability to renew or otherwise maintain their licenses or other requisite authorizations for their cannabis operations, and such loans lack of liquidity, and the Company could lose all or part of any of the Company’s loans.

The Company’s ability to grow or maintain its business with respect to the loans it makes to companies operating in the cannabis industry depends on state laws pertaining to the cannabis industry.

New laws that are adverse to the Company’s borrowers may be enacted, and current favorable state or national laws or enforcement guidelines relating to cultivation, production and distribution of cannabis may be modified or eliminated in the future, which would impede the Company’s ability to grow and could materially adversely affect the Company’s business.

3 unchanged sentences

Series A Preferred Stock

As of June 30, 2022 and December 31, 2021, the Company has authorized 10,000 preferred shares and issued 125 of the preferred shares designated as 12.0 % Series A Cumulative Non-Voting Preferred Stock, par value $ 0.01 per share (the “Series A Preferred Stock”).

As of September 30, 2022 and December 31, 2021, the Company has authorized 10,000 preferred shares and issued 125 of the preferred shares designated as 12.0 % Series A Cumulative Non-Voting Preferred Stock, par value $ 0.01 per share (the “Series A Preferred Stock”).

The Series A Preferred Stock entitles the holders thereof to receive cumulative cash dividends at a rate per annum of 12.0 % of the liquidation preference of $ 1,000 per share plus all accumulated and unpaid dividends thereon.

The Company generally may not declare or pay, or set apart for payment, any dividend or other distribution on any shares of the Company’s stock ranking junior to the Series A Preferred Stock as to dividends, including the Company’s common stock, or redeem, repurchase or otherwise make payments on any such shares, unless full, cumulative dividends on all outstanding shares of Series A Preferred Stock have been declared and paid or set apart for payment for all past dividend periods.

The holders of the Series A Preferred Stock generally have no voting rights except in limited circumstances, including certain

amendments to the Company’s charter and the authorization or issuance of equity securities senior to or on parity with the Series A Preferred Stock.

The holders of the Series A Preferred Stock generally have no voting rights except in limited circumstances, including certain amendments to the Company’s charter and the authorization or issuance of equity securities senior to or on parity with the Series A Preferred Stock.

The Series A Preferred Stock is not convertible into shares of any other class or series of our stock.

18 unchanged sentences

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

The gross proceeds to the Company from the offering were $ 61.5 million, before deducting underwriting discounts and commissions, a structuring fee and offering expenses payable by the Company.

The gross proceeds to the Company from the offering were $ 61.5 million, before

deducting underwriting discounts and commissions, a structuring fee and offering expenses payable by the Company.

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

13 unchanged sentences

Sales of common stock, if any, may be made in transactions that are deemed to be “at-the-market” offerings, as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

During the three and six months ended June 30, 2022, the Company 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.

As of June 30, 2022, the shares of common stock sold under the ATM Program are the only offerings that have been initiated under the Shelf Registration Statement.

During the three and nine months ended September 30, 2022, the Company sold an aggregate of 506,466 and 621,398 shares of the Company’s common stock under the Sales Agreement at an average price of $ 18.35 and $ 18.30 per share, respectively.

The sales generated net proceeds of approximately $ 9.0 million and $ 10.4 million for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2022, the shares of common stock sold under the ATM Program are the only offerings that have been initiated under the Shelf Registration Statement.

Equity Incentive Plan

7 unchanged sentences

In January 2022, the Company granted an aggregate of 8,296 shares of restricted stock and 742,000 stock options to certain of our officers and other eligible persons.

The restricted stock granted under the 2020 Stock Incentive Plan vest over a four-year period with approximately 33 % vesting on each of the second, third and fourth anniversaries of the vesting commencement date.

The stock options granted under the 2020 Stock Incentive Plan have a strike price of $ 20.18 and contain vesting periods that vary from immediately vested to vesting over a four-year period.

As of June 30, 2022, there were 2,380,687 shares of common stock granted under the 2020 Plan, underlying 2,316,106 options and 64,581 shares of restricted stock.

As of June 30, 2022, the maximum number of shares of the Company’s common stock that may be delivered pursuant to awards under the 2020 Plan (the “Share Limit”) equals 2,742,641 shares, which is an increase of 11,493 shares compared to March 31, 2022.

This Share Limit increased in the second quarter of 2022 under the evergreen provision in the 2020 Plan in connection with the shares issued under the ATM Program during such time.

The restricted stock granted in January 2022 under the 2020 Plan vests over a four-year period with approximately 33 % vesting on each of the second, third and fourth anniversaries of the vesting commencement date.

The stock options granted in January 2022 under the 2020 Plan have a strike price of $ 20.18 and contain vesting periods that vary from immediately vested to vesting over a four-year period.

As of September 30, 2022, there were 2,350,815 shares of common stock granted under the 2020 Plan, underlying 2,287,472 options and 63,343 shares of restricted stock.

As of September 30, 2022, the maximum number of shares of the Company’s common stock that may be delivered pursuant to awards under the 2020 Plan (the “Share Limit”) equals 2,793,288 shares, which is an increase of 50,647 shares compared to June 30, 2022.

This Share Limit increased in the third quarter of 2022 under the evergreen provision in the 2020 Plan in connection with the shares issued under the ATM Program during such time.

Shares that are subject to or underlie awards that expire or for any reason are cancelled, terminated, forfeited, fail to vest, or for any other reason are not paid or delivered under the 2020 Plan will not be counted against the Share Limit and will again be available for subsequent awards under the 2020 Plan.

The following table summarizes the (i) non-vested options granted, (ii) vested options granted and (iii) forfeited options granted for the Company’s directors and officers and employees of the Manager as of June 30, 2022 and December 31, 2021:

June 30, 2022 As of

September 30, 2022 As of

December 31, 2021

10 unchanged sentences

Restricted stock grant expense is based on the Company’s stock price at the time of the grant and amortized over the vesting period.

The stock-based compensation expense for the Company was $ 117,397 and $ 1,107,420 for the three and six months ended June 30, 2022, respectively, and $ 11,457 and $ 1,610,572 for the three and six months ended June 30, 2021, respectively.

The stock-based compensation expense for the Company was approximately $ 0.1 million and $ 1.2 million for the three and nine months ended September 30, 2022, respectively, and approximately $ 0.1 million and $ 1.7 million for the three and nine months ended September 30, 2021, respectively.

The following table presents the assumptions used in the option pricing model of options granted under the 2020 Plan:

4 unchanged sentences

Expected forfeiture rate 0 %

The following tables summarize stock option activity during the three and six months ended June 30, 2022 and 2021:

The following tables summarize stock option activity during the three and nine months ended September 30, 2022 and 2021:

Three months ended

June 30, 2022 Weighted Average

September 30, 2022 Weighted-average

grant date fair

value per option

Balance as of March 31, 2022 2,321,106 $ 1.21

Balance as of June 30, 2022 2,316,106 $ 1.21

Exercised ( 5,511 ) 0.90

Forfeited ( 24,023 ) 1.20

Balance as of June 30, 2022 2,316,106 $ 1.21

Balance as of September 30, 2022 2,286,572 $ 1.21

Three months ended

June 30, 2021 Weighted Average

September 30, 2021 Weighted-average

grant date fair

value per option

Balance as of March 31, 2021 1,616,098 $ 1.08

Balance as of June 30, 2021 1,613,098 $ 1.08

Exercised — —

Forfeited ( 8,862 ) 0.90

Balance as of June 30, 2021 1,613,098 $ 1.08

Six months ended

June 30, 2022 Weighted Average

Balance as of September 30, 2021 1,604,236 $ 1.08

Nine months ended

September 30, 2022 Weighted-average

grant date fair

4 unchanged sentences

Forfeited ( 54,153 ) 1.12

Balance as of June 30, 2022 2,316,106 $ 1.21

Six months ended

June 30, 2021 Weighted Average

Balance as of September 30, 2022 2,286,572 $ 1.21

Nine months ended

September 30, 2021 Weighted-average

grant date fair

4 unchanged sentences

Forfeited ( 11,862 ) 1.01

Balance as of June 30, 2021 1,613,098 $ 1.08

The following table summarizes the (i) non-vested restricted stock granted, (ii) vested restricted stock granted and (iii) forfeited restricted stock granted for the Company’s directors and officers and employees of the Manager as of June 30, 2022 and December 31, 2021:

June 30, 2022 As of

Balance as of September 30, 2021 1,604,236 $ 1.08

September 30, 2022 As of

December 31, 2021

3 unchanged sentences

The fair value of the Company’s restricted stock awards is based on the Company’s stock price on the date of grant.

The following tables summarize the restricted stock activity during the three and six months ended June 30, 2022 and 2021:

The following tables summarize the restricted stock activity during the three and nine months ended September 30, 2022 and 2021:

Three months ended

June 30, 2022

Balance as of March 31, 2022 64,581

September 30, 2022

Balance as of June 30, 2022 64,581

Forfeited ( 1,238 )

Balance as of September 30, 2022 63,343

Three months ended

June 30, 2021

Balance as of March 31, 2021 —

September 30, 2021

Balance as of June 30, 2021 —

Six months ended

June 30, 2022

Granted 56,285

Balance as of September 30, 2021 56,285

Nine months ended

September 30, 2022

Balance as of December 31, 2021 56,285

Granted 8,296

Balance as of June 30, 2022 64,581

Six months ended

June 30, 2021

Forfeited ( 1,238 )

Balance as of September 30, 2022 63,343

Nine months ended

September 30, 2021

Balance as of December 31, 2020 —

Balance as of June 30, 2021 —

Granted 56,285

Balance as of September 30, 2021 56,285

EARNINGS PER SHARE

The following information sets forth the computations of basic and diluted weighted average earnings per common share for the three and six months ended June 30, 2022 and 2021:

The following information sets forth the computations of basic and diluted weighted average earnings per common share for the three and nine months ended September 30, 2022 and 2021:

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

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

Net income $ 11,480,519 $ 7,930,680 $ 32,994,312 $ 13,959,222

Basic weighted average shares of common stock outstanding 20,019,760 16,402,984 19,687,730 12,368,977

7 unchanged sentences

The income tax provision is included in the line item income tax expense, including excise tax in the consolidated statements of operations included in these unaudited interim consolidated financial statements.

The income tax provision for the Company was $ 164,315 and $ 182,599 for the three and six months ended June 30, 2022, respectively.

The Company did not incur any tax expense for the three and six months ended June 30, 2021.

For the three and six months ended June 30, 2022 and 2021, the Company incurred no expense for United States federal excise tax.

The income tax provision for the Company was approximately $ 0.2 million and $ 0.3 million for the three and nine months ended September 30, 2022, respectively.

The income tax expense for the three and nine months ended September 30, 2022 primarily relates to activities of the Company’s taxable REIT subsidiary.

The Company did no t incur any tax expense for the three and nine months ended September 30, 2021.

For the three and nine months ended September 30, 2022 and 2021, the Company incurred no expense for United States federal excise tax.

Excise tax represents a 4 % tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the period.

8 unchanged sentences

As loans held by the Company are substantially illiquid with no active loan market, the Company depends on primary market data, including newly funded loans, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.

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

Fair Value Measurement as of June 30, 2022

The following tables present fair value measurements of loans held at fair value as of September 30, 2022 and December 31, 2021:

Fair Value Measurement as of September 30, 2022

Total Level 1 Level 2 Level 3

5 unchanged sentences

Total $ 77,096,319 $ — $ — $ 77,096,319

The following table presents changes in loans that use Level 3 inputs as of and for the six months ended June 30, 2022:

Six months ended

June 30, 2022

The following table presents changes in loans that use Level 3 inputs as of and for the nine months ended September 30, 2022:

Nine months ended

September 30, 2022

Total loans using Level 3 inputs at December 31, 2021 $ 77,096,319

2 unchanged sentences

Original issue discount and other discounts, net of costs ( 479,276 )

Loan repayments ( 1,960,000 )

Loan amortization payments ( 1,089,776 )

Accretion of original issue discount 1,076,212

PIK interest 2,256,569

Total loans using Level 3 inputs at June 30, 2022 $ 95,199,132

The change in unrealized depreciation included in the unaudited interim consolidated statement of operations attributable to loans held at fair value, categorized as Level 3, held at June 30, 2022 is $( 924,611 ).

The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of June 30, 2022 and December 31, 2021.

Total loans using Level 3 inputs at September 30, 2022 $ 94,076,146

The change in unrealized losses included in the unaudited interim consolidated statement of operations attributable to loans held at fair value, categorized as Level 3, held at September 30, 2022 is $( 1,561,890 ).

The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of September 30, 2022 and December 31, 2021.

The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values.

As of June 30, 2022

As of September 30, 2022

Unobservable Input

Fair Value Primary Valuation

Techniques Input Estimated Range Weighted

Fair Value Primary Valuation Techniques Input Estimated Range Weighted Average

Senior term loans $ 94,076,146 Yield analysis Market yield 17.92 % - 26.48 %

13 unchanged sentences

Investment in Marketable Securities

As of June 30, 2022, the Company’s portfolio did not include any debt securities.

As of September 30, 2022, the Company’s portfolio did not include any debt securities.

As of December 31, 2021, the Company’s portfolio included one investment in debt securities held at fair value of approximately $ 15.9 million.

The Company sold the investment in debt securities in March of 2022, which was previously designated as available-for-sale as of December 31, 2021.

For the six months ended June 30, 2022, the realized loss on the sale of debt securities was approximately $ 0.2 million.

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

For the nine months ended September 30, 2022, the realized loss on the sale of debt securities was approximately $ 0.2 million.

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

Principal Original Issue Discount Unrealized Gains (Losses) Fair Value

3 unchanged sentences

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

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

The following table presents fair value measurements of debt securities held at fair value as of June 30, 2022 and December 31, 2021:

Fair Value Measurement as of June 30, 2022

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

The following table presents fair value measurements of debt securities held at fair value as of September 30, 2022 and December 31, 2021:

Fair Value Measurement as of September 30, 2022

Total Level 1 Level 2 Level 3

8 unchanged sentences

The following table details the book value and fair value of the Company’s financial instruments not recognized at fair value in the balance sheet:

As of June 30, 2022

As of September 30, 2022

Carrying Value Fair Value

3 unchanged sentences

Loan receivable at carrying value $ 2,220,466 $ 2,147,890

Financial liabilities:

Senior unsecured notes, net $ 96,964,872 $ 85,034,060

Estimates of fair value for cash and cash equivalents are measured using observable, quoted market prices, or Level 1 inputs.

1 unchanged sentence

The Company’s investments in debt securities are measured using readily available quoted prices for similar assets, or Level 2 inputs.

The fair value of the Company’s unsecured senior notes is estimated by discounting expected cash flows using readily available quoted prices for similar debt, or Level 2 inputs.

RELATED PARTY TRANSACTIONS

6 unchanged sentences

“Core Earnings” is defined in the Management Agreement as, for a given period means the net income (loss) for such period, computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) the Incentive Compensation, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between the Manager and the Company’s independent directors and approved by a majority of the independent directors.

The Incentive Compensation for the three and six months ended June 30, 2022 was approximately $ 3.4 million and $ 6.4 million, respectively.

The Incentive Compensation for the three and six months ended June 30, 2021 was approximately $ 1.4 million and $ 2.1 million, respectively.

The Incentive Compensation for the three and nine months ended September 30, 2022 was approximately $ 2.9 million and $ 9.3 million, respectively.

The Incentive Compensation for the three and nine months ended September 30, 2021 was approximately $ 1.8 million and $ 3.9 million, respectively.

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

With respect to certain office expenses incurred by the Manager on behalf of the Company and other funds managed by the Manager or its affiliates, such as rent, the Manager determines each fund’s pro rata portion of such expenses based on the fair value of the fund’s assets under management, excluding cash and cash equivalents, as a percentage of the total assets under management by all such related funds.

The following table summarizes the related party costs incurred by the Company for the three and six months ended June 30, 2022 and 2021:

management, excluding cash and cash equivalents, as a percentage of the total assets under management by all such related funds.

The following table summarizes the related party costs incurred by the Company for the three and nine months ended September 30, 2022 and 2021:

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

1 unchanged sentence

Management fees $ 1,318,563 $ 1,030,718 $ 3,869,023 $ 2,301,924

Less outside fees earned ( 488,050 ) ( 182,707 ) ( 875,543 ) ( 420,450 )

outside fees earned ( 432,426 ) ( 256,989 ) ( 1,307,969 ) ( 677,439 )

Base management fees 886,137 773,729 2,561,054 1,624,485

2 unchanged sentences

Total $ 4,734,978 $ 3,168,647 $ 14,664,362 $ 6,913,686

Amounts payable to the Company’s Manager as of June 30, 2022 and December 31, 2021 were $ 5,407,360 and $ 4,147,501 , respectively.

Amounts payable to the Company’s Manager as of September 30, 2022 and December 31, 2021 were approximately $ 5.2 million and $ 4.1 million, respectively.

Due to Affiliate

Amounts due to an affiliate of the Company as of June 30, 2022 and December 31, 2021 were $ 6,140 and $ 0 , respectively.

Amounts due to an affiliate of the Company as of September 30, 2022 and December 31, 2021 were $ 17,640 and $ 0 , respectively.

Investments in Loans

2 unchanged sentences

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

As of June 30, 2022, there were five co-invested loans held by the Company and an affiliate of the Company.

As of September 30, 2022, there were five co-invested loans held by the Company and an affiliate of the Company.

In March 2022, the Company 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 $ 100.0 million, with approximately (i) $ 26.6 million of the new loan commitments allocated to us;

3 unchanged sentences

The Company may sell the Assigned Right, and the sale may be to an affiliate of the Company.

During the three and six months ended June 30, 2022, the Company neither received no r sold any Assigned Right.

For the three and six months ended June 30, 2021, the Company sold approximately $ 1.1 million and $ 2.3 million, respectively, of Assigned Rights to an affiliate which are accounted for as additional original issue discount and accreted over the life of the loans.

During the three and nine months ended September 30, 2022, the Company neither received no r sold any Assigned Right.

During the three months ended September 30, 2021, the Company neither received no r sold any Assigned Right.

During the nine months ended September 30, 2021, the Company sold approximately $ 2.3 million of Assigned Rights to an affiliate which are accounted for as additional original issue discount and accreted over the life of the loans.

Secured Revolving Credit Facility From Affiliate

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DIVIDENDS AND DISTRIBUTIONS

The following table summarizes the Company’s dividends declared during the six months ended June 30, 2022 and 2021:

The following table summarizes the Company’s dividends declared during the nine months ended September 30, 2022 and 2021:

Record Date Payment

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Regular cash dividend 6/15/2021 6/30/2021 $ 0.38 $ 0.38 $ — $ 0.38

Regular cash dividend 9/30/2021 10/15/2021 $ 0.43 $ 0.43 $ — $ 0.43

2021 Period Subtotal $ 1.17 $ 1.17 $ — $ 1.17

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Regular cash dividend 6/30/2022 7/15/2022 $ 0.56 $ 0.56 $ — $ 0.56

Regular cash dividend 9/30/2022 10/14/2022 $ 0.56 $ 0.56 $ — $ 0.56

2022 Period Subtotal $ 1.67 $ 1.67 $ — $ 1.67

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The Company has evaluated subsequent events through the date the financial statements were available to be issued.

There were no material subsequent events that required disclosure in these financial statements.

There were no material subsequent events, other than those described below, that required disclosure in these financial statements.

Subsequent to the end of the third quarter, the Company increased its commitment to one borrower in the amount of $ 30.0 million, were repaid $ 86.6 million in full by Public Company F, reduced its commitment to one borrower by $ 19.5 million, and funded approximately $ 9.2 million of principal amount of new and existing commitments.

In October 2022, the Credit Agreement with the Subsidiary of Public Company H was amended to, among other things, increase the total loan commitment by $ 50.0 million, of which $ 30.0 million of the new loan commitment was allocated to the Company and $ 7.8 million was funded by the Company.

As part of the expansion, the interest rate increased from a fixed rate of 9.8 % to U.S.

Prime plus 5.8 %, subject to a Prime floor of 5.5 %.

In October 2022, Public Company F repaid its loan in full.

The loan was comprised of three tranches with original maturity dates of May 30, 2023, April 28, 2023 and August 28, 2023.

The aggregate amount of outstanding principal on the date of repayment was $ 86.6 million.

The Company received a prepayment premium and make-whole premium of approximately $ 0.1 million and $ 0.6 million, respectively.

Following the repayment of Public Company F, six of the Company’s loans have repaid prior to maturity since the Company’s IPO in March 2021.

In November 2022, the Company and Private Company L agreed to reduce the total loan commitment under the credit facility from $ 82.5 million to $ 63.0 million.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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(viii) our expected ranges of originations and repayments;

and (ix) estim ates relating to our ability to make distributions to our shareholders in the f uture.

(ix) estim ates relating to our ability to make distributions to our shareholders in the f uture;

and (x) our expanded investment strategy.

These forward-looking statements reflect management’s current views about future events, and are subject to risks, uncertainties and assumptions.

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The most important factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:

• the ability of the Manager to locate suitable investments for us and to monitor and administer our investments;

• the ability of the Manager to locate suitable investments for us and to monitor and administer our investments, especially with respect to investments as part of our expanded investment strategy;

• changes in, and volatility of the general economy and its impact on the industries in which we invest;

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

What changed 10-Q

Item 1. Financial Statements