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Item 7. Management’s Discussion and Analysis

2023-03-07 compared with 2022-03-10 · 508 added, 937 removed, 173 unchanged (89% of the section changed)

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

The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and related notes

that are included elsewhere in this Annual Report.

The following discussion and analysis of our financial condition and results of operations should be read together with the consolidated financial statements and related notes that are included elsewhere in this Annual Report.

This discussion contains forward-looking statements that reflect our current expectations and views of future events, which involve risks and uncertainties.

Unless the context otherwise requires, as

used in this section the terms “we,” “us,” “our,” or “AFCG,” refers to AFC Gamma, Inc.

Unless the context otherwise requires, as used in this section the terms “we,” “us,” “our,” or “AFCG,” refers to AFC Gamma, Inc.

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.

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.

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

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 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 as a REIT.

is an institutional lender to the commercial real estate sector that was founded in July 2020 by a veteran team of investment professionals.

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

We have recently expanded our investment guidelines to deploy capital in attractive lending opportunities secured by commercial real estate.

Our expanded investment guidelines now include (i) first and second lien loans secured by mortgages to commercial real estate owners, operators and related businesses that are not related to the cannabis industry, (ii) the ownership of non-cannabis related real property assets, and (iii) mortgage-backed securities, in addition to our prior sole focus on first lien loans secured by mortgages to cannabis operators in states that have legalized medical and/or adult-use cannabis.

We expect the underwriting and investment process for these investments under our expanded guidelines to be substantially similar to the process we deploy for our loans to cannabis operators.

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

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

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

We have expanded our investment guidelines to invest in attractive commercial real estate financing opportunities emerging from the current interest rate environment.

As the Federal Reserve began to increase interest rates in 2022 to curb rising inflation, we believe the higher interest rates and associated pressures have created an opportunity in real estate lending, where there is currently less capital available in the marketplace to finance real estate projects.

As a result of these market dynamics, we have identified a number of opportunities to provide acquisition and construction financing for real estate owners, operators and related businesses at attractive rates and secured by valuable real estate collateral.

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

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

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

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

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

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

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

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

Our wholly-owned subsidiary, AFCG TRS1, LLC, operates as a taxable REIT subsidiary.

The TRS began operating in July 2021.

Our investment in the equipment loan

to Public Company A was transferred to the TRS on July 31, 2021 and constituted substantially all of the assets of the TRS as of December 31, 2021.

The financial statements of the TRS have been consolidated within our consolidated financial

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.

Our wholly-owned subsidiary, TRS1, operates as a taxable REIT subsidiary.

TRS1 began operating in July 2021 and 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 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

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.

We operate as one operating segment and are primarily focused on financing senior secured loans and other types of loans for established cannabis industry

operators in states where medical and/or adult use cannabis is legal.

These loans are generally held for investment and are secured by real estate, equipment, value associated with licenses and/or other assets of the loan parties to the extent

permitted by the applicable laws and the regulations governing such loan parties.

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 $1.235 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.

We operate as one operating segment and are primarily focused on financing senior secured loans and other types of loans for established cannabis industry operators in states where medical and/or adult use cannabis is legal.

These loans are generally held for investment and are secured by real estate, equipment, value associated with licenses (where applicable) and/or other assets of the loan parties to the extent permitted by the applicable laws and the regulations governing such loan parties.

We generate revenue primarily in the form of interest income on loans.

The majority of our loans currently accrue interest at a fixed rate.

As of December 31,

2021, six of our loans, representing approximately 35% of our portfolio based on aggregate outstanding principal balances, paid interest at a variable rate tied to LIBOR.

Going forward, we intend to have the majority of our loans accrue at floating

As of December 31, 2022, six of our loans, representing approximately 54% of our portfolio based on aggregate outstanding principal balances, paid interest at a variable rate tied to either LIBOR, SOFR, or U.S.

Going forward, we intend to have the majority of our loans accrue at floating rates.

Interest on our loans is generally payable monthly or quarterly.

The principal amount of our loans and any accrued but unpaid interest thereon generally become due at the applicable maturity date.

In many cases, our interest income includes a

paid-in-kind (“PIK”) component for a portion of the total interest.

The PIK interest, computed at the contractual rate specified in each applicable loan agreement, is accrued in accordance with the terms of such loan agreement and added to the

principal balance of the loan and recorded as interest income.

In many cases, our interest income includes a paid-in-kind (“PIK”) component for a portion of the total interest.

The PIK interest, computed at the contractual rate specified in each applicable loan agreement, is accrued in accordance with the terms of such loan agreement and added to the principal balance of the loan and recorded as interest income.

The PIK interest added to the principal balance is typically amortized and paid in accordance with the applicable loan agreement.

In cases where the loans do not amortize, the PIK

interest is collected upon repayment of the outstanding principal.

In cases where the loans do not amortize, the PIK interest is collected upon repayment of the outstanding principal.

We also generate revenue from OID, which is also recognized as interest income from loans over the initial term of the applicable loans.

Delayed draw loans earn interest or unused

fees on the undrawn portion of the loan, which is recognized as interest income and ordinary fee income, respectively, in the period earned.

Delayed draw loans earn interest or unused fees on the undrawn portion of the loan, which is recognized as interest income and ordinary fee income, respectively, in the period earned.

Other fees, including prepayment fees and exit fees, are also recognized as interest income when received.

Any such fees will be generated in connection with our loans and recognized as earned in accordance with GAAP.

Our primary operating expenses are the payment of Base Management Fees and Incentive Compensation under our Management Agreement with our Manager and the

allocable portion of overhead and other expenses paid or incurred on our behalf, including reimbursing our Manager for a certain portion of the compensation of certain personnel of the Manager who assist in the management of the Company’s affairs,

excepting only those expenses that are specifically the responsibility of our Manager pursuant to our Management Agreement.

We bear all other costs and expenses of our operations and transactions, including (without limitation) fees and expenses

Any such fees will be generated in connection with our loans and recognized as earned in accordance with generally accepted accounting principles in the United States (“GAAP”).

Our primary operating expenses are the payment of Base Management Fees and Incentive Compensation under our Management Agreement with our Manager and the allocable portion of overhead and other expenses paid or incurred on our behalf, including reimbursing our Manager for a certain portion of the compensation of certain personnel of the Manager who assist in the management of the Company’s affairs, excepting only those expenses that are specifically the responsibility of our Manager pursuant to our Management Agreement.

We bear all other costs and expenses of our operations and transactions, including (without limitation) fees and expenses relating to:

• organizational and offering expenses;

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• brokerage commissions;

costs of proxy statements, stockholders’ reports and notices;

• costs of proxy statements, shareholders’ reports and notices;

• costs of preparing government filings, including periodic and current reports with the SEC.

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

compensation paid to Mr.

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

Tannenbaum, Mr.

Kalikow or Mrs.

For the 2021 fiscal year, our Manager did not seek reimbursement for our allocable share of Mr.

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

For the years ended December 31, 2022 and 2021, our Manager did not seek reimbursement for our allocable share of Mr.

Kalikow and Mr.

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

Tannenbaum’s compensation.

We are a Maryland corporation and have elected to be taxed as a REIT under the Code, commencing with our taxable year ended December 31, 2020.

We believe that

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

However, no assurances can be given that our beliefs or expectations will be fulfilled, since qualification as a

REIT depends on us satisfying numerous asset, income and distribution tests which depends, in part, on our operating results.

To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute annually to our

stockholders at least 90% of our REIT taxable income, as adjusted, prior to the deduction for dividends paid.

To the extent that we distribute less than 100% of such 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 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 a non-deductible excise tax equal to 4% of any shortfall between such Required Distribution and the amount that was actually distributed.

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

stockholders.

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

However, no assurances can be given that our beliefs or expectations will be fulfilled, since qualification as a REIT depends on us satisfying numerous asset, income and distribution tests which depend, in part, on our operating results.

To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute annually to our shareholders at least 90% of our REIT taxable income, as adjusted, prior to the deduction for dividends paid.

To the extent that we distribute less than 100% of such 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 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 a non-deductible excise tax equal to 4% of any shortfall between such 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.

Our stockholders must include their proportionate share of the retained net capital gain in their taxable income for the tax year, and they will be 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.

Our shareholders must include their proportionate share of the retained net capital gain in their taxable income for the tax year, and they will be 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 it is determined 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 accrue excise tax on a portion of the estimated excess taxable income as such taxable income is earned.

The annual expense is calculated in

accordance with applicable tax regulations.

Excise tax expense is included in the line item income tax expense.

Our wholly-owned subsidiary, TRS1, operates as a TRS and began operating in July 2021.

A TRS is an entity taxed as a corporation that has not elected to be taxed as a REIT, in which a REIT directly or indirectly holds equity, and that has made a joint election with such REIT to be treated as a TRS.

A TRS generally may engage in any business, including investing in assets and engaging in activities that could not be held or conducted directly by us without jeopardizing our qualification as a REIT.

A TRS is subject to applicable United States federal, state and local income tax on its taxable income.

In addition, as a REIT, we also may be subject to a 100% excise tax on certain transactions between us and our TRS that are not conducted on an arm’s-length basis.

If it is determined 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 accrue excise tax on a portion of the estimated excess taxable income as such taxable income is earned.

The annual expense is calculated in accordance with applicable tax regulations.

The income tax provision is included in the line item income tax expense, including excise tax in the consolidated statements of operations included in this Annual Report on Form 10-K.

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.

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.

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.

Changes in Fair Value of Our Assets

We generally hold our target investments as long-term loans;

however, we may occasionally classify some of our loans as held for sale.

We may carry our loans

at fair value or carrying value in our consolidated balance sheet.

As of December 31, 2021, three of our loans held for investment were carried at fair value within loans held at fair value in our consolidated balance sheets, with changes in fair

value recorded through earnings.

As of December 31, 2021, the Company had one investment in debt securities held at fair value classified as available-for-sale.

We evaluate our loans on a quarterly basis and fair value is determined by our Board through its independent Audit and Valuation Committee.

independent third-party valuation firm to provide input in the valuation of all of our unquoted investments, which we consider along with other various subjective and objective factors in making our evaluations.

Our loans are typically valued using a yield analysis, which is typically performed for non-credit impaired loans to borrowers.

To determine fair value using a

yield analysis, a current price is imputed for the loan based upon an assessment of the expected market yield for a similarly structured loan with a similar level of risk.

In the yield analysis, we consider the current contractual interest rate, the

maturity and other terms of the loan relative to risk of the borrower and the specific loan.

A key determinant of risk, among other things, is the leverage through the loan relative to the enterprise value of the borrower.

As loans held by us are

substantially illiquid with no active transaction market, we depend 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.

Changes in market yields may change the fair value of certain of our loans.

Generally, an increase in market yields may result in a decrease in the fair value of certain of our loans, however this is mitigated

to the extent our loans bear interest at a floating rate.

Due to the inherent uncertainty of determining the fair value of loans that do not have a readily available market value, the fair value of our loans may

fluctuate from period to period.

Additionally, the fair value of our loans may differ significantly from the values that would have been used had a ready market existed for such loans and may differ materially from the values that we may ultimately

Further, such loans are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities.

If we were required to liquidate our investment in a loan in a forced or liquidation sale, we

could realize significantly less than the value at which we had recorded such loan investment.

Recent Developments

Subsequent to the end of the fourth quarter , we increased commitments to three current borrowers in the amount of approximately $46.9 million and funded approximately $ 49.4 million of principal amount of new and unfunded commitments.

Additionally, we sold one investment in debt securities of $15.0

million and were repaid by Private Company E of approximately $20.0 million.

In January 2022, Public Company A and the agent to the real estate loan entered into an amendment decreasing cash interest from 12%

per annum to 10% per annum and increasing accrual interest from 2% per annum to 4% per annum on the real estate loan subsequent to the amendment.

Additionally, the outstanding balance of accrual interest was capitalized as of January 1, 2022 into

the outstanding principal balance of the real estate loan.

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

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.

On January 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 will be 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.

On December 28, 2022, we drew $60.0 million on our Revolving Credit Facility.

All outstanding borrowings were subsequently repaid in full on January 3, 2023.

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 $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 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 FLH;

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

total principal amount.

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 will be paid on April

15, 2022 to stockholders of record as of March 31, 2022.

In January 2023, TRS1 agreed with Private Company I, subject to certain terms and conditions (including payment of full cash interest, rather than partial PIK interest, which was previously agreed to), to defer an upcoming principal payment.

In March 2023, TRS1 agreed, subject to certain terms and conditions, to defer an upcoming principal payment and permit a portion of an upcoming cash interest payment to instead be paid in kind.

In February 2023, the Company entered into an amendment with Private Company K, which reduced its total loan commitment under the credit facility with Private Company K from approximately $25.2 million to $14.5 million.

Among other things, the amendment increased the PIK rate from 0.0% to 2.0%, removed the unused fee going forward on the remaining undrawn commitment, and established a $1.5 million interest reserve.

In February 2023, we sold $15.0 million of our investment in Subsidiary of Public Company M, which was purchased at a blended weighted-average discount of 90.9% and sold for 91.4% of face value.

The sale proceeds approximated the carrying value at the time of sale.

In March 2023, we ente red into a forbearance and modification agreement with Private Company B, pursuant to which we agreed to, subject to additional 4.0% capitalized PIK interest and certain other terms and conditions, forbear from exercising our rights and remedies with respect to specified defaults under the applicable Private Company B loan documents until the earlier of (i) March 31, 2023, (ii) certain refinancing or cash equity contribution events, and (iii) any new event of default thereunder.

In connection with such forbearance and modification agreement, the Company also agreed to, subject to certain terms and conditions, waive compliance with certain covenants for one fiscal quarter and defer specified principal payments.

In March 2023, we declared a regular cash dividend of $0.56 per share of our common stock, relating to the first quarter of 2023, which will be paid on April 14, 2023 to shareholders of record as of March 31, 2023.

The estimated aggregate amount of the regular cash dividend payment is approximately $11.5 million.

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Developments During 2022

On March 23, 2021, we completed our IPO of 6,250,000 shares of our common stock at a price of $19.00 per share, raising $118.8 million

in gross proceeds.

The underwriters also exercised their over-allotment option to purchase up to an additional 937,500 shares of our common stock at a price of $19.00 per share, which was completed on May 26, 2021, raising $17.8 million in gross

The underwriting commissions of $8.3 million and $1.2 million, respectively, are reflected as a reduction of additional paid-in capital on the consolidated statements of stockholders’ equity.

We incurred approximately $3.1 million of

expenses in connection with the IPO, which is reflected as a reduction in additional paid-in capital.

The net proceeds to us totaled approximately $123.9 million.

On June 28, 2021, we completed a public offering of 2,750,000 shares of our common stock at a price of $20.50 per share, raising approximately $56.4 million in

gross proceeds.

The underwriting commissions of approximately $3.1 million are reflected as a reduction of additional paid-in capital on the consolidated statements of stockholders’ equity.

We incurred approximately $0.7 million of expenses in

connection with the offering, which is reflected as a reduction in additional paid-in capital.

The net proceeds to us totaled approximately $52.6 million.

On July 6, 2021, in connection with our June 28, 2021 public offering, the underwriters partially exercised their over-allotment option to purchase 269,650 shares of our common stock at a price of

$20.50 per share, raising approximately $5.5 million in additional gross proceeds or approximately $5.2 million in net proceeds after underwriting commissions of approximately $0.3 million, which is reflected as a reduction of additional paid-in

capital on the consolidated statements of stockholders’ equity.

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

The 2027 Senior Notes accrue interest

at a rate of 5.750% 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 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 to fund debt investments and for general corporate

The 2027 Senior Notes are required to be guaranteed by our existing and future subsidiaries, other than Immaterial Subsidiaries (as defined in the Indenture), and we currently do not have any subsidiaries other than Immaterial

Subsidiaries.

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.

In November 2021, we entered into the Second Amendment (the ‘‘Second Amendment’’) to the Revolving Credit Agreement to, among other things:

(i) decrease the interest rate to 4.75% per annum;

extend the maturity date to the earlier of September 30, 2022 and the closing date of any credit facility where the proceeds are incurred to refund, refinance or replace such Revolving Credit Agreement;

(iii) add an unused fee of 0.25% per annum on

the undrawn amount of the revolving loan commitments;

(iv) add a one-time commitment fee of 0.25% of the total revolving loan commitments, payable in three quarterly installments, beginning in the first quarter of 2022;

(v) increase the aggregate

revolving credit commitments to $75.0 million;

(vi) provide holders of the 2027 Senior Notes, on the occurrence of certain events of default and subject to certain terms and conditions, the option to purchase all outstanding obligations under the

Revolving Credit Agreement;

and (vii) require all payments of interest, the commitment fee and unused fee (in each case, net of applicable taxes) to be paid, directly or indirectly, to a charitable foundation to be designated by AFC Finance, LLC in

its sole discretion.

On January 10, 2022, we completed an underwritten offering of 3,000,000 shares of our common stock, at a price to the public 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.

On January 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 was 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.

The net proceeds to the Company totaled approximately $63.0 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.

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”).

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 year ended December 31, 2022 , the Company sold an aggregate of 621,398 shares of the Company’s common stock under the Sales Agreement at an average price of $18.30 per share generating net proceeds of approximately $10.4 million.

On April 29, 2022, we entered into 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.

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.

In December 2022, we drew $60.0 million on our Revolving Credit Facility.

All outstanding borrowings were subsequently repaid in full on January 3, 2023.

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

Consequently, the impact of the COVID-19 pandemic and the related regulatory and private sector response on our financial and operating results for the period ended December 31, 2021 was somewhat mitigated as all of our borrowers were

permitted to continue to operate during this pandemic and we have not experienced any payment defaults by our borrowers nor have we made any concessions on any payments due, in each case, related to the COVID-19 pandemic.

Regardless, the full extent of the economic impact of the business disruptions caused by COVID-19, and variants of 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 has impacted 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 our operations and financial performance will depend on future developments, including possible impacts on the performance of our loans, general

business activity, and ability to generate revenue, which cannot be determined.

For more information see “ Risk Factors—Risks Related to Our Business and Growth Strategy—The current outbreak of COVID-19, or the future

outbreak of any other highly infectious or contagious diseases, could materially and adversely impact or cause disruption to our borrowers and their operations, and in turn our ability to continue to execute our business plan .”

Results of Operations

We commenced operations on July 31, 2020 and therefore, the comparative period for the year ended December 31, 2021 is from July 31, 2020 to December 31, 2020

(the “Prior Period” or “period ended December 31, 2020”).

Differences in the results of operations compared to the Prior Period are mainly due to the Prior Period only including approximately five months of operations compared to the year ended

December 31, 2021.

Results for the initial periods of our operations are not indicative of the results we expect when our investment strategy has been fully implemented.

For the year ended December 31, 2021 and period ended December 31, 2020

Our net income allocable to our common stockholders for the year ended December 31, 2021 was approximately $21.0 million or $1.57 per basic weighted average

common share, respectively, compared to net income allocable to our common stockholders of $4.3 million or $0.76 per basic weighted average common share for the period ended December 31, 2020.

Net income of approximately $21.0 million for the year

ended December 31, 2021, was comprised of approximately $38.1 million of interest income, interest expense of approximately $1.1 million, operating expenses of approximately $4.3 million, stock-based compensation expense of approximately $1.7

million, management and incentive fees of approximately $8.3 million, change in the provision for current expected credit losses of approximately $2.6 million, realized gains on loans of $0.5 million, and a net change in unrealized gain on loans of

approximately $0.6 million.

Net income of approximately $4.3 million for the period ended December 31, 2020 was comprised of approximately $5.3 million in total revenues, operating expenses of approximately $2.0 million, management and incentive fees

of approximately $0.4 million, change in the provision for current expected credit losses of approximately $0.5 million, realized gains on loans of $0.4 million, and a net change in unrealized gain on loans of approximately $1.6 million.

For the year ended December 31, 2021, we incurred fees payable to our manager for a Base Management Fee of approximately $2.3 million, which was net of a Base

Management Fee Rebate of approximately $1.0 million.

The Incentive Compensation fee payable to our manager for the year ended December 31, 2021 was approximately $6.0 million.

For the period ended December 31, 2020, we incurred fees earned by our

Manager for a Base Management Fee of approximately $0.4 million, which was net of a Base Management Fee Rebate of approximately $0.3 million.

Our Manager agreed to waive the Incentive Compensation for the period from July 31, 2020 through December

31, 2020, which was approximately $0.5 million for the period.

For the year ended December 31, 2021, our Manager will be reimbursed for approximately $2.3 million for out-of-pocket costs incurred on our behalf.

For the period ended December 31, 2020,

our Manager was reimbursed for approximately $0.7 million for out-of-pocket costs incurred on our behalf.

For the year ended December 31, 2021, the increase to our provision for current expected credit loss was approximately $2.6 million and the balance as of

December 31, 2021 was approximately $3.1 million or 120 basis points of our total loans held at carrying value and loans receivable at carrying value commitment balance of approximately $259.7 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 $2.4 million and (ii) a liability for unfunded commitments of approximately $0.7

For the period ended December 31, 2020, our provision for current expected credit loss was approximately $0.5 million or 132 basis points of our total loans held at carrying value and loans receivable at carrying value commitment balance of

approximately $35.2 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 $0.4 million

and (ii) a liability for unfunded commitments of approximately $0.1 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 years ended December 31, 2022 and 2021

Our net income allocable to our common shareholders for the year ended December 31, 2022 was approximately $35.9 million or $1.80 per basic weighted average common share compared to net income allocable to our common shareholders of $21.0 million or $1.57 per basic weighted average common share for the year ended December 31, 2021.

Interest income increased approximately $43.4 million, or 113.7%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

This increase was primarily due to an increase in the average principal outstanding of approximately $193.6 million, or 88.7%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

Interest expense increased approximately $5.7 million, or 504.7%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

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

For the year ended December 31, 2022, total interest expense for the 2027 Senior Notes, Revolving Credit Facility and AFCF Revolving Credit Facility was approximately $6.4 million, $0.2 million and $0.2 million, respectively.

For the year ended December 31, 2021, total interest expense for the 2027 Senior Notes, Revolving Credit Facility and AFCF Revolving Credit Facility was approximately $1.0 million, $0.0 million and $0.1 million, respectively.

General and administrative expenses increased approximately $1.5 million, or 46.3%, for the year ended December 31, 2022 as compared to the year ended December 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 $1.1 million, or 48.3%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

This increase was primarily due to an increase in the Company’s Equity from approximately $273.1 million as of December 31, 2021 to $339.1 million as of December 31, 2022.

Incentive fees increased approximately $6.3 million, or 105.3%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021, which was driven by the increase in Core Earnings, as defined in the Management Agreement.

Investments in loans held at fair value are recorded on the trade date at cost, which reflects the amount of principal funded net of any original issue discounts.

An unrealized gain arises when the fair value of the loan portfolio exceeds its cost and an unrealized loss arises when the fair value of the loan portfolio is less than its cost.

The net change in unrealized (loss) gain of approximately $(3.6) million and $0.6 million for the years ended December 31, 2022 and 2021, respectively, was mainly driven by the net change in the valuation of the loans.

Provision for Current Expected Credit Losses

The provision for current expected credit losses increased approximately $8.5 million, or 321.9%, for the year ended December 31, 2022 as compared to the year ended December 31, 2021.

The balance as of December 31, 2022 was approximately $14.3 million, or 4.97%, of our total loans held at carrying value and loans receivable held at carrying value balance of approximately $287.4 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 $13.5 million and (ii) a liability for unfunded commitments of approximately $0.8 million.

The balance as of December 31, 2021 was approximately $3.1 million, or 1.20%, of our total loans held at carrying value and loans receivable held at carrying value balance of approximately $259.7 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 $2.4 million and (ii) a liability for unfunded commitments of approximately $0.7 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.

Investments in loans held at fair value are recorded on the trade date at cost, which reflects the amount of principal funded net of any original issue

An unrealized gain arises when the fair value of the loan portfolio exceeds its cost and an unrealized loss arises when the fair value of the loan portfolio is less than its cost.

The net change in unrealized gain of approximately $0.6

million and $1.6 million for the year ended December 31, 2021 and period ended December 31, 2020, respectively, was mainly driven by the net change in the valuation of the loans.

The increase in the provision for current expected credit losses for the year ended December 31, 2022 compared to the year ended December 31, 2021 was 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 December 31, 2021, our portfolio was comprised of loans to 15 different borrowers and one short-term investment in senior secured notes of one issuer,

totaling approximately $366.0 million in total principal amount, with approximately $55.5 million in additional unfunded loan commitments to our borrowers.

As of December 31, 2021, our portfolio had a weighted-average estimated YTM of approximately

19% and was secured by real estate, cash flows, value associated with licenses and with respect to certain of our loans, substantially all assets of the borrowers and certain of their subsidiaries.

Estimated YTM includes a variety of fees and

features that enhance the total yield, which may include, but is not limited to, OID, exit fees, prepayment fees, and unused fees.

We recognize OID as a discount to the funded loan principal and accrete it to income over the term of the loan.

cases, we may receive the option to assign the right (each an ‘‘Assigned Right’’) to acquire warrants and/or equity of the borrower as part of the consideration for us to provide a loan to such borrower, which we promptly sell and recognize as

additional OID.

During the period from July 31, 2020 (date of commencement of operations) through December 31, 2021, we sold all of our Assigned Rights to either (a) our affiliate, AFC Warehouse Holding, LLC (‘‘AFC Warehouse’’), using a sale price

based on fair value as determined by the Audit and Valuation Committee of our Board based on various subjective and objective factors, including input from an independent third-party valuation firm that we currently retain to provide input on the

valuation of such assets or (b) the third-party administrative agent under the applicable loans.

As of December 31, 2022, our portfolio was comprised of loans to 12 different borrowers totaling approximately $401.2 million in total principal amount, with approximately $45.6 million in additional unfunded loan commitments to our borrowers.

As of December 31, 2022, our portfolio had a weighted-average estimated YTM of approximately 21% and was secured by various types of assets of our borrowers, including real property and personal property, such as the value associated with licenses (where applicable), equipment, and other assets to the extent permitted by applicable laws and the regulations governing our borrowers.

In some cases, we may receive the option to assign the right (each an ‘‘Assigned Right’’) to acquire warrants and/or equity of the borrower as part of the consideration for us to provide a loan to such borrower, which we promptly sell and recognize as additional OID.

During the year ended December 31, 2022 the Company neither received nor sold any Assigned Right.

During the period from July 31, 2020 (date of commencement of operations) through December 31, 2021, we sold all of our Assigned Rights to either (a) our affiliate, AFC Warehouse, using a sale price based on fair value as determined by the Audit and Valuation Committee of our Board based on various subjective and objective factors, including input from an independent third-party valuation firm that we currently retain to provide input on the valuation of such assets or (b) the third-party administrative agent under the applicable loans.

The below summarizes our portfolio as of December 31, 2022, unless otherwise specified.

Original Funding Date (1)

Maturity Date

AFCG Commitment, net of Syndication

% of Total AFCG

Principal Balance as of 12/31/2021

Cash Interest Rate

Paid In Kind (“PIK”) (7)

Fixed/ Floating

Amortization During Term

Loan Names Original Funding Date (1)

Loan Maturity AFCG Loan, net of Syndication % of Total AFCG Principal Balance as of 12/31/2022 Cash Interest Rate PIK Fixed/ Floating Amortization During Term YTM (2)(3)

A - Real Estate Loan (4)

7/3/2019 9/30/2023 $ 2,940,000 0.7% $ 1,213,416 7.5% 7.5% Fixed No 21%

A - Equipment Loan (4)

of Public Co.

8/5/2019 3/31/2025 4,000,000 0.9% 2,222,339 12.0% N/A Fixed Yes 18%

5/8/2020 5/8/2024 84,908,680 19.0% 85,664,884 12.4% 3.5% Fixed Yes 24%

9/10/2020 9/1/2023 16,402,989 3.8% 15,498,246 14.7% 4.0% Fixed Yes 30%

C 11/5/2020 12/1/2025 24,000,000 5.4% 23,583,502 16.0% 4.0% Floating Yes 25%

Sub of Private Co.

G 4/30/2021 5/1/2026 73,500,000 16.4% 72,346,562 17.8% N/A Floating Yes 25%

Sub of Private Co.

5/11/2021 5/11/2023 5,781,250 1.3% 5,781,250 15.0% N/A Fixed No 20%

I 7/14/2021 8/1/2026 10,501,945 2.3% 10,930,892 16.4% 4.5% Floating Yes 25%

J 8/30/2021 9/1/2025 23,000,000 5.1% 23,409,452 16.4% 4.0% Floating Yes 25%

K 4/28/2022 5/3/2027 25,245,000 5.6% 10,765,379 16.4% N/A Floating Yes 22%

L 4/20/2022 5/1/2026 63,000,000 14.1% 50,945,492 12.0% N/A Fixed Yes 16%

Sub of Public Co.

Info rmation as of December 31, 2021 unless otherwise specified.

Borrower names have been kept confidential due to confidentiality agreement

(1) All loans originated prior to July 31, 2020 were purchased from an affiliated entity at fair value which approximated accreted and/or

amortized cost plus accrued interest on July 31, 2020.

(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.

H 12/16/2021 1/1/2026 90,000,000 20.1% 75,000,000 13.3% N/A Floating No 18%

Sub of Public Co.

M 8/26/2022 8/27/2025 23,822,000 5.3% 23,822,000 9.5% N/A Fixed No 14%

$ 447,101,864 100.0% $ 401,183,414 14.1% 1.5% 21%

Information as of December 31, 2022 unless otherwise specified.

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

(1) All loans originated prior to July 31, 2020 were purchased from an affiliated entity at fair value which approximated accreted and/or amortized cost plus accrued interest on July 31, 2020.

(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.

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.

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.

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

Estimated YTM is calculated using the interest rate as of December 31, 2022 applied through maturity.

Actual results could differ from those estimates and assumptions.

(3) Estimated YTM for the loans with Public Company A, Private Company A, Private Company D, and Private Company E is enhanced by purchase

discounts attributed to the fair value of equity warrants that were separated from the loans prior to our acquisition of such loans.

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

(4) Loan to Subsidiary of Public Company D does not reflect the borrower’s option to request a maturity extension for an additional 364 days

from the original loan maturity date, which we are not obligated to grant.

(5) Cash interest and PIK interest rates for the Subsidiary of Private Company G represents a blended rate of differing cash interest and

PIK interest rates applicable to each of the three tranches included in the senior secured term loan credit facility with Subsidiary of Private Company G (the ‘‘Sub.

Of Private Co.

G Credit Facility’’).

(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.

(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) As of October 1, 2022, these loans were placed on non-accrual status.

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

(6) Cash interest and PIK interest rates for Private Company B are weighted average rates.

(7) 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) PIK interest rate for Private Co.

A represents a blended rate of differing PIK interest rates applicable to each of the two 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’’).

(8) In February 2022, Private Company E repaid its loan in

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 $1.3 million upon repayment of the loan.

(9) In February 2022, we sold our $15.0 million investment in the Public Company G debt securities on February 3, 2022, that was

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

Based on current estimates, we intend to target between $500 million and $700 million in originations with future new and existing

borrowers in 2022 and expect between $100 million and $200 million in repayments by borrowers, in each case, for the fiscal year 2022.

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

See “ Special Note Regarding Forward-Looking Statements ” and “ Risk Factors .”

As of December 31, 2021 and December 31, 2020, our portfolio included three and four loans, respectively, held at fair value.

The aggregate originated

commitment under these loans was approximately $75.9 million and $59.9 million, respectively, and outstanding principal was approximately $77.6 million and $50.8 million as of December 31, 2021 and December 31, 2020, respectively.

For the year ended

December 31, 2021, we funded approximately $37.7 million of outstanding principal of loans held at fair value and we had repayments of approximately $13.1 million of principal of loans held at fair value.

As of December 31, 2021 and December 31,

2020, 0.0% and approximately 6.0%, respectively, of our loans held at fair value had floating interest rates.

As of December 31, 2020, these floating rates were subject to LIBOR floors, with a weighted average floor of 2.5%, calculated based on loans with LIBOR floors.

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

The following table summarizes our loans held at fair value as of December 31, 2021 and December 31, 2020:

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

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

The aggregate originated commitment under these loans was approximately $104.3 million and $75.9 million as of December 31, 2022 and 2021, respectively, and outstanding principal was approximately $102.4 million and $77.6 million as of December 31, 2022 and 2021, respectively.

For the year ended December 31, 2022, we gross funded approximately $26.6 million of additional principal of loans held at fair value and we had principal repayments of approximately $6.5 million of loans held at fair value.

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

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

As of December 31, 2022

1 unchanged sentence

Life (Years) (3)

Senior Term Loan

Senior term loans $ 99,226,051 $ 100,635,985 $ 102,376,546 1.2

Total loans held at fair value $ 99,226,051 $ 100,635,985 $ 102,376,546 1.2

The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted OID, PIK and loan origination costs.

Refer to Note 14 to our annual consolidated financial statements titled “Fair Value.”

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

As of December 31, 2021

1 unchanged sentence

Life (Years) (3)

Senior Term Loan

Senior term loans $ 77,096,319 $ 74,913,157 $ 77,630,742 2.2

Total loans held at fair value $ 77,096,319 $ 74,913,157 $ 77,630,742 2.2

The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted OID, PIK and loan origination costs.

(1) Refer to Note 14 to our annual consolidated financial statements titled “Fair Value” .

Weighted average remaining life is calculated based on the fair value of the loans as of December 31, 2020.

The following table presents changes in loans held at fair value as of and for the year ended December 31, 2021:

Gains (Losses)

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

(3) Weighted average remaining life is calculated based on the fair value of the loans as of December 31, 2022 and 202 1.

The following tables present changes in loans held at fair value as of and for the years ended December 31, 2022 and 2021:

Year ended December 31, 2022

Principal Original

Discount Unrealized

Gains (Losses) Fair

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 — — (3,593,095) (3,593,095)

New fundings 26,605,796 (479,275) — 26,126,521

Loan repayments (5,397,191) — — (5,397,191)

1 unchanged sentence

Accretion of original issue discount — 1,456,298 — 1,456,298

PIK interest 4,626,975 — — 4,626,975

Total loans held at fair value at December 31, 2022 $ 102,376,546 $ (1,740,561) $ (1,409,934) $ 99,226,051

The following table presents changes in loans held at fair value as of and for the period from July 31, 2020 (commencement of operations) to December 31, 2020:

Loans acquired at July 31, 2020

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

Year ended December 31, 2021

Principal Original

Discount Unrealized

Gains (Losses) Fair

Total loans held at fair value at December 31, 2020 $ 50,831,235 $ (3,836,524) $ 1,563,340 $ 48,558,051

Change in unrealized gains (losses) on loans at fair value, net — — 619,821 619,821

New fundings 37,701,104 (1,130,623) — 36,570,481

Loan repayments (12,000,000) — — (12,000,000)

Sale of loans

Loan amortization payments (1,093,659) — — (1,093,659)

Accretion of original issue discount — 2,249,563 — 2,249,563

PIK interest 2,192,062 — — 2,192,062

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

As of December 31, 2021 and December 31, 2020, our portfolio included twelve and three loans, respectively, held at carrying value.

The aggregate originated

commitment under these loans was approximately $324.3 million and $44.0 million, respectively, and outstanding principal was approximately $270.8 million and $33.9 million, respectively, as of December 31, 2021 and December 31, 2020.

During the year

ended December 31, 2021, we funded approximately $249.6 million of outstanding principal.

As of December 31, 2021 and December 31, 2020, approximately 48% and 35%, respectively, of our loans held at carrying value have floating interest rates.

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 December 31, 2021 and December 31, 2020:

As of December 31, 2022 and 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 December 31, 2022 .

As of December 31, 2021

Value Carrying

Principal (1)

Life (Years) (2)

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

(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, 202 1.

The following table presents changes in debt securities held at fair value as of and for the years ended December 31, 2022 and 2021:

Year ended December 31, 2022

Principal Premium Unrealized

Gains (Losses) Fair

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

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

Change in accumulated other comprehensive income (loss) — — 168,750 168,750

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

Total debt securities held at fair value at December 31, 2022 $ — $ — $ — $ —

Year ended December 31, 2021

Principal Premium Unrealized

Gains (Losses) Fair

Total debt securities held at fair value at December 31, 2020 $ — $ — $ — $ —

Purchase of securities 15,000,000 1,050,000 — 16,050,000

Change in accumulated other comprehensive (loss) income — — (168,750) (168,750)

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

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

The aggregate originated commitment under these loans was approximately $338.9 million and $324.3 million, respectively, and outstanding principal was approximately $296.6 million and $270.8 million, respectively, as of December 31, 2022 and 2021.

During the year ended December 31, 2022, we funded approximately $173.7 million of additional principal and we had repayments of approximately $151.7 million of principal repayments.

As of December 31, 2022 and 2021, approximately 73% and 48%, respectively, of our loans held at carrying value have floating interest rates.

As of December 31, 2022, these floating benchmark rates include one-month LIBOR subject to a weighted average floor of 1.0% and quoted at 4.392%, one-month Secured Overnight Financing Rate (“SOFR”) subject to a weighted average floor of 1.0% and quoted at 4.358% and U.S.

prime rate subject to a weighted average floor of 4.9% quoted at 7.500%.

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

As of December 31, 2022

Principal (1)

Discount Carrying

Life (Years) (2)

Senior term loans $ 296,584,529 $ (11,407,417) $ 285,177,112 3.1

Total loans held at carrying value $ 296,584,529 $ (11,407,417) $ 285,177,112 3.1

The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted OID, PIK and loan origination costs.

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

As of December 31, 2021

Principal (1)

Discount Carrying

Life (Years) (2)

1 unchanged sentence

Total loans held at carrying value $ 270,841,715 $ (13,678,219) $ 257,163,496 3.4

The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted OID, PIK and loan origination costs.

Weighted average remaining life is calculated based on the carrying value of the loans as of December 31, 2020.

The following table presents changes in loans held at carrying value as of and for the year ended December 31, 2021:

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

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

The following tables present changes in loans held at carrying value as of and for the years ended December 31, 2022 and 2021:

Year ended December 31, 2022

Principal Original

Discount Carrying

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

New fundings 173,685,505 (8,035,600) 165,649,905

Accretion of original issue discount — 10,306,402 10,306,402

Realized gain on sale of loans

Loan repayments (138,807,472) — (138,807,472)

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

PIK interest 3,715,966 — 3,715,966

Loan amortization payments (2,851,185) — (2,851,185)

Total loans held at carrying value at December 31, 2022 $ 296,584,529 $ (11,407,417) $ 285,177,112

The following table presents changes in loans held at carrying value as of and for the period from July 31, 2020 (commencement of operations) to December 31,

Loans at July 31, 2020

Year ended December 31, 2021

Principal Original

Discount Carrying

Total loans held at carrying value at December 31, 2020 $ 33,907,763 $ (2,070,732) $ 31,837,031

New fundings 249,591,644 (14,941,001) 234,650,643

Accretion of original issue discount — 3,333,514 3,333,514

Realized gain on sale of loans 450,000 — 450,000

Sale of loans (15,450,000) — (15,450,000)

PIK interest 2,342,308 — 2,342,308

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

As of December 31, 2021 and December 31, 2020, 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 $2.5 million and $3.4 million as of December 31, 2021 and December 31, 2020, respectively.

During the year ended December 31, 2021, we received repayments of approximately $0.8

million of outstanding principal.

The following table presents changes in loans receivable as of and for the year ended December 31, 2021:

Total loans receivable at carrying value at December 31, 2020

As of December 31, 2022 and 2021, our portfolio included one loan receivable held 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 December 31, 2022 and 2021, respectively.

During the years ended December 31, 2022 and 2021, we received repayments of approximately $0.3 million and $0.8 million of outstanding principal, respectively.

The following tables present changes in loans receivable as of and for the years ended December 31, 2022 and 2021:

Year ended December 31, 2022

Principal Original

Discount Carrying

Total loan receivable held 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 — 992 992

Total loans receivable at carrying value at December 31, 2021

The following table presents changes in loans receivable as of and for the period from July 31, 2020 (commencement of operations) to December 31, 2020:

Loan receivable acquired at July 31, 2020

PIK interest 26,187 — 26,187

Total loan receivable held at carrying value at December 31, 2022 $ 2,222,339 $ (1,686) $ 2,220,653

Year ended December 31, 2021

Principal Original

Discount Carrying

Total loan receivable held at carrying value at December 31, 2020 $ 3,352,176 $ (3,913) $ 3,348,263

Principal repayment of loans (818,910) — (818,910)

Accretion of original issue discount — 1,235 1,235

Total loans receivable at carrying value at December 31, 2020

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

We may make modifications to loans, including loans that are in default.

Loan terms that may be modified include interest rates, required prepayments, maturity

dates, covenants, principal amounts and other loan terms.

Loan terms that may be modified include interest rates, required prepayments, maturity dates, covenants, principal amounts and other loan terms.

The terms and conditions of each modification vary based on individual circumstances and will be determined on a case-by-case basis.

Our Manager monitors and evaluates each of our loans held

for investment and has maintained regular communications with borrowers regarding the potential impacts of the COVID-19 pandemic on our loans.

Our Manager monitors and evaluates each of our loans held for investment and has maintained regular communications with borrowers.

Updates to Our Loan Portfolio During 2022

For the year ended December 31, 2021, our gross funding was $302.5 million and our net funding, taking into account loan repayments and amortization, was

$275.5 million.

In total, we closed on total new debt commitments of $341.3 million during the year ended December 31, 2021.

Total loan commitments and contingencies as of December 31, 2021 is approximately $419.2 million, of which approximately $55.0 million is unfunded.

In January 2021, Public Company A and its related loan parties entered into Modification Agreements for each of the Public Company A loans pursuant to which we

agreed, subject to certain terms and conditions, to forbear from exercising our rights and remedies regarding defaults by the loan parties resulting from, among other things, the loan parties’ failure to timely pay taxes due, incurrence of mechanic’s

liens and tax liens on assets, failure to notify the lenders of such failure to pay and incurrence of liens, failure to make payments due in January 2021 under the Public Company A loans in an aggregate amount of $789,177 owed to all lenders, failure

to make payment obligations owed to third party creditors and failure to enter into specified debt restructuring transactions.

In exchange for such agreement to forbear, we and the other lenders received certain consideration.

Such defaults were

unrelated to the COVID-19 pandemic.

Under the RE Modification Agreement, we and the other lenders agreed to forbear until the earlier of December 21, 2021 and the existence of any new event of default, and the terms of the real estate loan were

modified to, among other things, (i) extend the maturity date from June 27, 2021 to December 21, 2021, (ii) modify the interest rate to 14.0%, with 12.0% paid monthly and 2.0% paid at maturity and (iii) add an exit fee of $1.0 million payable upon

payment in full of the real estate loan on the maturity date.

The RE Modification Agreement also provided for the establishment of an interest reserve for the payment of the last three months of interest on the real estate loan.

consideration for the RE Modification Agreement included (w) a modification fee in an amount equal to 3.0% per annum on the outstanding principal of the real estate loan from May 19, 2020 to the effective date of the RE Modification Agreement less

certain fees previously paid, (x) the right to acquire common shares of Public Company A in an aggregate amount equal to $1.2 million, (y) the right to acquire warrants to purchase common shares of Public Company A and (z) reimbursement of certain

We sold our portion of the rights to acquire the common shares and warrants received as considerations for the RE Modification Agreement to the administrative agent under the Public Company A real estate loan documents.

Under the Equipment Modification Agreement, we and the other lenders agreed to forbear until the earlier of February 5, 2024 and the existence of any new event

of default, and the terms of the equipment loan were modified to, among other things, (i) amend the payment schedule allowing for reduced monthly payments for three months, with the reduced amounts amortized equally over the remaining monthly

payments, (ii) add an exit fee of $500,000 due at the end of the term of the agreement governing the equipment loan, (iii) release a certain guarantor, and (iv) add a new parent company guarantee.

Additional consideration for the Equipment

Modification Agreement included (x) a modification fee in an amount equal to 6.0% per annum on the outstanding principal of the equipment loan from May 19, 2020 through and including the effective date of the Equipment Modification Agreement less

certain fees previously paid, (y) an additional fee of $500,000 payable in equal monthly installments commencing April 5, 2021 and (z) reimbursement of certain expenses.

In connection with the Modification Agreements, Public Company A consummated the

initial closing of $10.1 million of its non-brokered convertible debenture offering for up to $25.0 million of debenture units.

The net proceeds received by Public Company A from the convertible debenture offering are intended to be used for working

capital, previous debt obligations and general corporate purposes.

The loan parties have since paid the January 2021 payments under the Public Company A loans and there are no delinquent payment obligations owed to us under the agreements governing

the Public Company A loans.

To the best of our knowledge, Public Company A has repaid in full the other monetary obligations it owed under the Modification Agreement.

While Public Company A was able to obtain these modifications and consummate the

above-referenced convertible debentures offering, Public Company A and its related loan parties may have difficulty meeting their future obligations.

None of our other borrowers are now, or have previously been, in default under their respective loan

agreements with us.

In March 2021, we entered into a commitment to Private Co.

E for a $21.0 million senior term loan and funded $7.0 million at closing, including a $2.0 million

interest reserve.

The loan has an interest rate of 12% plus LIBOR per annum with a LIBOR floor of 1% and PIK interest of 4%.

The loan has a maturity date of April 2026, an unused fee of 3.0% and OID of 8.7%.

E is a single-state medical

cannabis operator in Ohio.

Its operations consist of a cultivation facility currently in construction and an operational dispensary.

The real estate collateral for this senior term loan includes both the dispensary and cultivation facility in Ohio.

E repaid its loan in full in February 2022.

In April 2021, Sub.

of Public Co.

C repaid its loan in full.

The loan had an original maturity date of February 2025 and the outstanding principal on the date

of repayment was approximately $12.1 million.

We received an exit fee of $750,000 and a prepayment premium of $750,000 upon repayment of the loan.

In April 2021, we entered into a commitment with Private Co.

F to fund a $13.0 million senior secured term loan and funded approximately $5.23 million at

closing, including approximately a $0.9 million interest reserve.

The loan has an interest rate of 13.0% and PIK interest rate of 4.0% with a step down to a rate of 2.0% once certain criteria are met as defined in the loan agreement.

The loan has a

maturity date of May 2026, an unused fee of 3.0%, an exit fee of 15.0% and OID of 15.5%.

The borrower is a medical cannabis operator in Missouri.

The real estate collateral for this senior term loan includes the borrower’s cultivation and two

dispensary facilities in Missouri.

In April 2021, we entered into a commitment with Public Co.

E to fund a $15.0 million senior secured term loan and funded $15.0 million at closing.

has an interest rate of 13.0%.

The loan has a maturity date of April 2025, which is subject to an optional maturity extension for 364 days, and OID of 7.0%.

The borrower is a multi-state medical and recreational cannabis provider with operations in

Florida, Texas, Michigan and Pennsylvania.

The real estate collateral for this senior term loan includes the borrower’s cultivation facility in Michigan.

In April 2021, we entered into a commitment with Sub of Private Co.

G to fund a $22.0 million senior secured term loan and funded $22.0 million at closing,

including a $2.0 million interest reserve.

The loan has an interest rate of 12.0% plus LIBOR, with a 1.0% LIBOR floor, and PIK interest rate of 4.0% with step downs to 2.0% and 1.5% once certain criteria are met as defined in the loan agreement.

loan has a maturity date of May 2026, an exit fee of 10.0%, provided that if certain criteria are met as defined in the loan agreement the exit fee is 2.0%, and OID of 4.0%.

The borrower’s parent entity has licenses across nine states, and the real

estate collateral for this senior term loan includes the borrower’s retail facility in New Jersey and its cultivation facility under construction in New Jersey.

This senior term loan relates to certain syndication letter agreements by and among our

Manager, AFC Investments, one of our affiliates that is beneficially owned by Mr.

Tannenbaum, and us, whereby the loan was initially contemplated as an approximately $46.2 million commitment and our Manager had syndicated $22.0 million to us

and approximately $24.2 million to an affiliate, AFC Investments, subject to satisfactory diligence and definitive loan documentation.

The final negotiated loan commitment was for $22.0 million and AFCG holds the entire amount, with no portion

syndicated to AFC Investments.

In May 2021, we entered into a syndicated senior secured term loan facility with a commitment with Sub of Private Co.

H to fund approximately $5.8 million out

of a total aggregate principal amount of $37.0 million.

We funded our loan commitment at closing.

The loan has an interest rate of 15.0% per annum.

The loan has an initial maturity date of May 2023, which is subject to two optional maturity

extensions of six months each, subject to payment of a 2.0% fee in the case of the first optional extension and approval of all lenders in the case of the second optional extension.

The loan has an OID of approximately 2.8% and an exit fee of 3.0%.

The borrower is a subsidiary of a multi-state operator with assets in Arkansas, Florida and Illinois.

The borrower is a single-state operator that is currently expanding their cultivation facility in Illinois, which is licensed to grow both

recreational and medical use cannabis.

The borrower also operates two additional dispensaries in the state, one licensed to sell medical use cannabis and the other licensed to sell both recreational and medical use cannabis.

The real estate

collateral for the borrower consists of a cultivation facility in Illinois.

In May 2021, we entered into a commitment with Public Co.

F to fund a $10.0 million senior secured term loan and funded $10.0 million at closing.

an interest rate of 9.75% per annum.

The loan has a maturity date of May 2023 and OID of 2.0%.

The borrower is a multi-state operator with operations across 14 states.

The real estate collateral for the borrower includes five cultivation facilities

across Illinois, Florida, Nevada, Ohio, and Massachusetts and eight dispensaries across Illinois, Michigan, Maryland, Arkansas, Ohio, Nevada, Florida, and Arizona.

In June 2021, we entered into a commitment with Private Co.

I to fund a $5.5 million secured bridge loan and funded $5.5 million at closing.

The loan has a

short-term maturity date of July 9, 2021 in anticipation of refinancing under a larger credit facility.

The loan has an interest rate of 13.0% per annum, with OID of 4.0%, and an agent fee of 1.0%.

The loan also has an exit fee of 10.0% if the loan

is not refinanced by us and/or one of our affiliates.

The borrower is a single state operator in Maryland, a limited license state, with an existing cultivation and processing operation in the state, as well as one operational dispensary.

In July 2021, we entered into a commitment to fund a $19.75 million senior secured term loan to Private Company K contingent on the borrower raising additional

equity as required by the loan agreement.

Until the borrower met the required criteria for funding under the loan agreement, the commitment had a ticking fee based on the aggregate commitment amount as follows:

(a) 6.0% per annum from the date of

closing through July 26, 2021 and (b) 6.5% per annum from and after July 27, 2021 through the initial funding date.

In August 2021, the borrower met the required criteria and we funded $7.0 million of the loan commitment.

The loan has a per annum

interest rate of 12.0% plus LIBOR with a LIBOR floor of 1.0%.

The loan has a maturity date of August 3, 2026, an unused line fee of 3.0%, an exit fee of 3.0%, OID of 4.0%, an annual agent fee of 0.75% of the total loan commitment amount and an

interest reserve of $0.75 million.

In July 2021, we entered into a commitment to fund a $3.0 million bridge loan to Private Company J and funded $3.0 million at closing of such bridge loan.

bridge loan had an original interest rate of 13.0% per annum, an original maturity date of August 31, 2021, an agent fee of 1.0% of the principal amount of the bridge loan, an exit fee of 10.0% (which would be reduced to 2.0% upon refinancing with

us), and original OID of 4.0%.

In August 2021, we refinanced the bridge loan with a senior secured term loan pursuant to which we committed to fund $23.0 million and $18.0 million of which was funded on the closing date.

The refinancing senior

secured term loan has a per annum interest rate of LIBOR plus 12.0% with a LIBOR floor of 1.0% and PIK interest rate of 2.0% per annum.

The PIK interest rate will step down to 0.0% once certain criteria are met in accordance with the loan agreement.

The loans under the refinancing senior secured term loan facility have a maturity date of September 1, 2025 and an agent fee of 1.0% of the total loan commitment amount payable on the closing date and 1.0% of the outstanding principal balance of the

term loans payable annually thereafter.

The loans also have an exit fee of 4.0% (which may be reduced to 2.0% once certain criteria are met as defined in the loan agreement (including the meeting of certain financial metrics), OID of 4.0% and an

interest reserve of $1.5 million.

As part of the agreement to refinance the bridge loan, the borrower was credited for a portion of the original OID and agent fee paid in connection with the bridge loan.

In July 2021, Private Company I refinanced their bridge loan, which had a maturity date of July 9, 2021, an interest rate of 13.0% and

The new senior secured loan of $15.5 million was syndicated by our Manager between us and ABW, ABW subsequently transferred its commitment to ABDCW, with ABDCW holding approximately one-third of the principal amount.

We committed and

funded approximately $10.1 million of the new loan which has a per annum interest rate of 12.0% plus LIBOR, with a LIBOR floor of 1.0%, and PIK interest rate of 2.5%.

The loan has a maturity date of August 1, 2026, an exit fee of 3.0% and OID of

As part of the refinancing agreement, the exit fee on the bridge loan was waived and the borrower was credited for a portion of the original OID on the bridge loan.

In July 2021, FLH, an affiliated entity in which Mr.

Tannenbaum is the majority ultimate beneficial owner, purchased approximately $8.5 million of the Private

Company A Credit Facility from a third-party lender, and we had a 30-day option to purchase such amount from FLH.

The A&R Private Company A Credit Agreement was amended to, among other things, add an additional tranche of loans, which increased

the aggregate loan commitments thereunder by $30.0 million, $10.0 million of which our Manager syndicated to ABW, and $20.0 million of which are held by us, as designee of the Agent.

The A&R Private Company A Credit Agreement has a maturity date

of May 8, 2024.

The original tranche of term loans has an exit fee of 2.0% of the original tranche term loan amount (excluding any unfunded portions of the original tranche term loan amount) and the additional tranche of term loans has an exit fee of

2.0% of the total amount of such additional tranches (excluding any unfunded portions of the additional tranche term loan amount).

The original tranche of term loans has an agent fee of 1.0% of the total loan commitment amount payable annually.

second tranche of term loans has an agent fee of (i) 0.3333% of the total loan commitment amount of the additional tranche of term loans payable on the closing date of the A&R Private Company A Credit Agreement and (ii) 0.6667% of the total loan

commitment amount of the additional tranche payable subject to the satisfaction of certain conditions precedent.

The Private Company A Credit Facility bears interest at (i) a fixed interest rate of 13.0% per annum, payable in cash, and (ii) a blended

PIK interest rate of 3.4% per annum, payable in kind, across the two tranches of loans under the Private Company A Credit Facility.

The Private Company A Credit Facility included an upfront fee of 4.0% on the aggregate amount funded of the original

tranche of term loans payable on the closing date of the original tranche of term loans and an unused line fee of 2.0% of the amount of any unfunded portion of the term loans payable annually.

In connection with certain financing accommodations, a

fee of $750,000 was payable to the Agent by the borrower on the closing date thereof.

The A&R Private Company A Credit Agreement also included an OID of $0.2 million payable on the closing date of the A&R Private Company A Credit Agreement

and $0.4 million payable to lenders, subject to the satisfaction of certain conditions precedent.

See ‘‘ Certain Relationships and Related Party Transactions—Transactions With Related Parties—Private Company A

Transactions ’’ for more information.

In September 2021, we entered into a September Loan Assignment with FLH, Private Company A, as borrower, and our Manager, as the agent, pursuant to which we

acquired FLH’s interest in the $8.5 million portion of the loan to Private Company A under the Private Company A Credit Facility, for a purchase price of approximately $8.5 million (which equaled the outstanding principal amount of the loan plus any

accrued and unpaid interest and less any unaccreted original issue discount) and (ii) the September Commitment Assignment with our Manager, pursuant to which our Manager assigned to us its commitment to make loans to Private Company A in a principal

amount of up to $20.0 million under the Private Company A Credit Facility, which was funded in September 2021.

We did not pay any consideration to our Manager for our acquisition of our Manager’s loan commitments under the A&R Private Company A

Credit Agreement pursuant to the September Commitment Assignment.

As a result of the September Commitment Assignment, the total loan commitments to Private Company A under the Private Company A Credit Facility increased to an aggregate commitment

amount of $72.5 million, of which our total loan commitments accounted for $62.5 million.

In September 2021, we entered into the A&R Sub.

of Private Co.

G Credit Agreement to, among other things, increase the total loan commitments by $53.4

million across three tranches, with approximately $10.0 million of new loan commitments allocated to ABW and the remaining $43.4 million of new loan commitments allocated to us.

The loan has a maturity date of May 1, 2026, an annual agent fee of 1.0%

of the total loan commitment amount and an exit fee of 10.0%, which will be reduced to 5.0% upon the satisfaction of certain specified criteria.

One of the tranches of loans, representing $10.0 million in total commitments of which we funded

approximately $8.1 million, has a per annum interest rate of 9.0%.

The other two tranches of loans have a per annum interest rate of 12.0% plus LIBOR, with a 1.0% LIBOR floor, and PIK interest rate of 2.0% per annum.

As a result of the increased loan

commitments, the total loan commitments under the A&R Sub.

of Private Co.

G Credit Agreement equal $75.4 million, of which our total loan commitments account for $65.4 million.

In September 2021, we sold $10.0 million of our $15.0 million loan to Public Company E for 104% of par amount generating a realized gain of $0.4 million.

October 2021, we sold our remaining investment in the loan to Public Company E to a third party in a private transaction.

We received net proceeds from the sale of approximately $5.1 million.

In October 2021, we entered into an additional commitment for a $50.0 million senior term loan with Public Company F, as part of a $120.0 million third tranche

under Public Company F’s senior secured credit facility and funded approximately $50.0 million of principal less OID of $1.2 million for net funding of $48.8 million at closing.

The additional commitment of this loan has an interest rate of 8.5%.

Following the expansion, our total loan commitments to Public Company F increased to an aggregate principal amount of $60.0 million, including $10.0 million of the second tranche funded in May 2021.

In November 2021, we purchased $15.0 million in outstanding principal amount of 12.5% senior secured notes issued at a premium by Public

Company G, an operator publicly listed in Canada.

Subsequent to the end of the year, we sold our investment in the Public Company G 12.5% senior secured notes on February 3, 2022, which had been classified as available-for-sale as of December 31,

In December 2021, we entered into a credit agreement with Sub.

of Public Company H (the ‘‘Sub.

Of Public Company H Credit Agreement’’)

to provide it with a $100.0 million senior secured credit facility, of which, we committed $60.0 million, ABDCW committed $10.0 million, and third-party lenders committed $30.0 million of the aggregate principal amount.

The loan has a maturity

date of January 1, 2026 and an interest rate of 9.75%.

Upon closing, the lenders funded $75.0 million in aggregate principal amount, of which we funded approximately $42.5 million.

The remaining $25.0 million principal amount may be funded by the

lenders pro rata in accordance with their commitment at any time on or prior to December 16, 2022 upon request by the Sub.

of Public Company H and subject to the terms and conditions specified under the Sub.

of Public Company H Credit Agreement.

The credit facility with Sub.

of Public Company H (the ‘‘Sub.

of Public Company H Credit Facility’’) also includes an option for the borrower, upon its request and subject to its achievement of predetermined milestones and the terms and conditions

of Public Company H Credit Agreement, to increase the amount of the Sub.

Of Public Company H Credit Facility by up to $50.0 million on or around December 16, 2022, to be funded by one or more of the lenders.

of Public Company H

Credit Facility is guaranteed by Public Company H, as parent of the borrower, as well as certain of its subsidiaries and affiliated entities.

The lenders’ commitment under the Sub.

of Public Company H Credit Facility is secured by liens on

substantially all assets of the borrower and certain of its subsidiaries and affiliated entities, including, in particular, owned real estate in several states.

AFC Agent, LLC (‘‘AFC Agent’’), an entity wholly - owned by Mr.

Tannenbaum, our Chief Executive Officer and Chairman of our Board, and Mrs.

Tannenbaum, our Managing Director, Head of Origination and Investor Relations, serves as administrative

agent to the lenders under the Sub.

of Public Company H Credit Facility.

For the year ended December 31, 2022, our gross funding was approximately $200.3 million and our net funding, taking into account loan repayments and amortization, was approximately $26.8 million.

In total, we closed on total new debt commitments of approximately $224.8 million during the year ended December 31, 2022.

Tot al loan commitments and contingencies as of December 31, 2022 is approximately $447.1 million, of which approximately $45.6 million is unfunded.

In January 2022, Public Company A and the lender under the real estate loan entered into a modification agreement, pursuant to which, among other things, the lender agreed to (i) extend an additional subordinated loan to Public Company A in the amount of $10.1 million, (ii) modify the payment of interest, such that 10.0% per annum would be paid in cash and 4.0% per annum would be paid in kind, (iii) capitalize the outstanding balance of certain accrued but unpaid interest as of January 1, 2022 and (iv) forbear from exercising its rights and remedies with respect to existing events of default until the earlier of January 26, 2023 and the existence of any new event of default under the real estate loan documents.

The forbearance period was extended in May 2022 with respect to existing and new events of default under the Public Company A loans to the earlier of June 15, 2022 and the existence of any new event of default.

In May 2022, the lender under the real estate loan also extended an additional subordinated loan to Public Company A in the amount of $5.0 million.

In June 2022, Public Company A and the lender under the real estate loan entered into a modification agreement (the “June 2022 RE Modification Agreement”) to, among other things, (i) recapitalize certain accrued but unpaid interest payable in 2022 and the 4.0% interest that was deferred for payment until the maturity date in January 2022, (ii) split the outstanding principal balance into four separate loans with varying interest rates and maturity dates (provided, that, the loans in which we have a participation accrue interest at a rate per annum equal to 15.0%, with 7.5% payable in cash and 7.5% payable in kind, and have a maturity date of September 30, 2023 and varying payment priorities, and (iii) extend the forbearance period with respect to existing events of default until the earlier of January 31, 2026 and any new event of default.

In connection with the June 2022 RE Modification Agreement, two-thirds of our participation in the Public Company A real estate loan was repaid and we agreed to payment subordination of our remaining participation.

In June 2022, Public Company A and the lender under the equipment loan entered into a modification agreement (the “June 2022 Equipment Modification Agreement”), pursuant to which, among other things, the lender agreed to (i) continue to forbear from exercising its rights and remedies until the earlier of March 31, 2025 and any new event of default, (ii) extend the term of the master lease to March 31, 2025 and (iii) amend the monthly rent payment schedule.

Public Company A also paid a modification fee of $0.2 million in connection with the June 2022 Equipment Modification Agreement, of which we hold 20.0% of the aggregate loan commitment.

In October 2022, the parent company of Public Company A, which is also a guarantor of the Public Company A loans, along with its Canadian subsidiaries (“Public Company A Affiliates”), filed for bankruptcy protection under the Companies’ Creditors Arrangement Act in Canada.

The Public Company A Affiliates are in the process of restructuring their operations.

Given the subsequent failures of Public Company A to repay the principal and interest in accordance with the real estate and equipment loan documents, resulting in the need for forbearance and additional modifications, as of October 1, 2022 the Company placed its loan participations involving Public Company A on nonaccrual status.

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 a pproximately $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 an additional $1.0 million of the expansion was syndicated to a third-party lender.

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 to 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 the Company;

(ii) $15.0 million of the new loan commitments allocated to FLH;

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.

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

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

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 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 facility with Private Company K was terminated and repaid in full in connection with the Company’s refinancing and restructuring of 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 an effective floor of 13%, and matures in May 2027.

In May 2022, the Credit Agreement with Private Company I was amended to, among other things, increase the aggregate loan commitment by approximately $0.1 million, such that the loan commitment of TRS1 is approximately $10.4 million.

In connection with this amendment, TRS1 also agreed to waive certain financial covenants for one fiscal quarter and amend the minimum net income financial covenant for certain fiscal quarters, subject to certain terms and conditions, including payment of an amendment fee.

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

In August 2022, we purchased $10.0 million in outstanding principal amount, of a loan to Subsidiary of Public Company M, an operator publicly listed in the United States, at an 8.8% discount from a third party lender.

The third party lender assigned all rights, title and interest in such loan to the Company.

The term loans under the Subsidiary of Public Company M Credit Facility accrue interest at a fixed rate per annum of 9.5%.

In August 2022, we committed an additional $8.1 million under the credit agreement with Subsidiary of Private Company G.

Following the expansion, we now hold $73.5 million in commitments, of which we have funded approximately $71.1 million in total principal amount.

As part of the expansion, the interest rate increased from a blended weighted-average rate across three tranches of 13.7% to U.S.

prime rate plus 10.3%, subject to a U.S.

prime rate floor of 4.5%, per annum and the PIK interest decreased from a blended weighted-average rate across three tranches of 1.8% to 0.0% per annum.

In October 2022, TRS1 entered into an amendment with Private Company I to, among other things, and subject to certain terms and conditions, (i) increase the aggregate loan commitment by approximately $0.1 million, such that the loan commitment of TRS1 is approximately $10.5 million, (ii) waive certain financial covenants for one fiscal quarter, (iii) defer certain principal payments, (iv) permit 50% of cash interest to instead be paid in kind for four months and (v) increase the interest rate for interest paid in kind.

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.

We 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 our loans have repaid prior to maturity since the Company’s IPO in March 2021.

In October 2022, the credit agreement with 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.

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

prime rate plus 5.8%, subject to a U.S.

prime rate floor of 5.5%.

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.

In November 2022, we entered into a fourth amendment to the Private Company A Credit Facility to, among other things, increase the total loan commitments by $10.0 million in an additional tranche, with approximately $7.1 million allocated to the Company, $1.4 million allocated to FLH and the remaining $1.5 million allocated to third party lenders.

Following the expansions, we now hold approximately $84.9 million in commitments.

In December 2022, the credit agreement with Subsidiary of Private Company G was amended to, among other things and subject to certain terms and conditions, (i) require the borrowers to make certain cash equity capital contributions, (ii) permit 75% of accrued cash interest to instead be paid in kind for four months and (iii) include an excess cash flow sweep.

In December 2022, TRS1 invested in three separate investments of Subsidiary of Public Company M.

In the aggregate, we purchased approximately $13.8 million in outstanding principal amount, issued at a blended weighted-average discount of 9.1%, from a third party lender and the third party lender assigned all rights, title and interest to the Company.

The term loans under the Subsidiary of Public Company M Credit Facility accrue interest at a fixed rate per annum of 9.5%.

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, Adjusted

Distributable Earnings, book value per share and dividends declared per share.

Distributable Earnings and Adjusted Distributable Earnings

In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use Distributable Earnings and Adjusted

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.

Each of Distributable Earnings and Adjusted

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.

Distributable Earnings

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

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.

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) non-cash equity 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);

received in cash, (iv) provision for current expected credit losses and (v) 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 define Adjusted Distributable Earnings, for a specified period, as Distributable Earnings excluding certain non-recurring organizational expenses (such as one-time expenses related to our formation and

We believe providing Distributable Earnings and Adjusted 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.

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 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 and Adjusted Distributable Earnings are non-GAAP financial measures and should not be considered as substitutes for GAAP net income.

caution readers that our methodology for calculating Distributable Earnings and Adjusted 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 and Adjusted 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 and Adjusted Distributable Earnings:

December 31, 2021

July 31,2020 to

December 31, 2020

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:

Net income $ 35,932,397 $ 21,000,497

Adjustments to net income:

Non-cash equity compensation expense

Stock-based compensation expense 1,338,469 1,745,872

Depreciation and amortization — —

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

Unrealized losses, (gains) or other non-cash items 3,593,095 (619,821)

Provision for current expected credit losses 11,177,470 2,649,338

2 unchanged sentences

Distributable Earnings $ 49,871,083 $ 24,681,917

Adjustments to Distributable Earnings

Organizational expense

Adjusted Distributable Earnings

Basic weighted average shares of common stock outstanding (in shares) 19,842,222 13,373,778

Adjusted Distributable Earnings per Basic Weighted Average Share

Distributable earnings per basic weighted average share $ 2.51 $ 1.85

Book Value Per Share

We believe that book value per share is helpful to stockholders 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 December 31, 2021 and December 31, 2020 was approximately $16.

$14.83, respectively, on a post-split basis.

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 December 31, 2022 and 2021 was approximately $16.65 and $16.61, respectively.

Dividends Declared Per Share

For the period from July 31, 2020 (date of commencement of operations) through December 31, 2020, we declared (i) a regular cash dividend of $0.35 per share of

our common stock, relating to the period since our inception through the fourth quarter of 2020, to be paid on December 30, 2020 to stockholders of record as of December 23, 2020, and (ii) a special cash dividend of approximately $0.26 per share of

our common stock to be paid on December 30, 2020 to stockholders of record as of December 23, 2020.

The total amount of the regular cash dividend payment and the special cash dividend payment was approximately $2.2 million and $1.6 million,

respectively.

In December 2020, we declared a seven-for-one stock split in the form of a stock dividend, pursuant to which six additional shares of our common stock were

issued for each outstanding share of our common stock on January 25, 2021, to each stockholder of record as of the close of business on January 21, 2021 out of our authorized but unissued shares of common stock.

In March 2021, we declared a regular cash dividend of $0.36 per share of our common stock, relating to the first quarter of 2021, which was paid on March 31,

2021 to stockholders of record as of March 15, 2021.

The aggregate amount of the regular cash dividend payment was approximately $2.2 million.

In May 2021, we declared a regular cash dividend of $0.38 per share of our common stock, relating to the second quarter of 2021, which was paid on June 30,

2021 to stockholders of record as of June 15, 2021.

The aggregate amount of the regular cash dividend payment was approximately $5.1 million.

In September 2021, we declared a regular cash dividend of $0.43 per share of our common stock, relating to the third quarter of 2021, which was paid on October

15, 2021 to stockholders of record as of September 30, 2021.

The aggregate amount of the regular cash dividend payment was approximately $7.1 million.

In December 2021, we declared a regular cash dividend of $0.50 per share of our common stock, relating to the fourth quarter of 2021, which was paid on January

14, 2022 to stockholders of record as of December 31, 2021.

The aggregate amount of the regular cash dividend payment was approximately $8.2 million.

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

will be paid on April 15, 2022 to stockholders of record as of March 31, 2022.

The estimated aggregate amount of the regular cash dividend payment is approximately $10.9 million.

For the years ended December 31, 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

September 15, 2021 September 30, 2021 October 15, 2021 0.43 7.1 million

December 15, 2021 December 31, 2021 January 14, 2022 0.50 8.2 million

2021 Period Subtotal $1.67 $22.6 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

September 15, 2022 September 30, 2022 October 14, 2022 0.56 11.4 million

December 15, 2022 December 31, 2022 January 13, 2023 0.56 11.4 million

2022 Period Subtotal $2.23 $44.8 million

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

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.

We expect that our primary sources of financing will be, to the extent available to us, through (a) credit facilities and (b)

public and private offerings of our equity and debt securities.

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 December 31, 2021 and 2020, all of our cash was unrestricted and totaled approximately $109.2 million and $9.6 million, respectively.

As of December 31, 2021, we believe that our cash on hand, capacity available under our lines of credit and cash flows from operations for the next twelve

months 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 year ended December 31, 2022 of approximately $31.3 million was less than our dividend payments of $41.6 million made during the same period due to earned OID of $11.8 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 December 31, 2022 , we sold an aggregate of 621,398 shares of the Company’s common stock under the Sales Agreement at an average price of $18.30 per share.

The sales generated net proceeds of approximately $10.4 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 for cannabis operators to increase.

We also expect that our expanded investment focus to require additional capital.

As a result, we expect we will need to raise additional equity and/or debt funds to increase our liquidity in the near future.

As of December 31, 2022 and 2021, all of our cash was unrestricted and totaled approximately $140.4 million and $109.2 million, respectively.

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

Revolving Credit Facility

Pursuant to the terms of the Revolving Credit Agreement, as amended, our Revolving Credit Facility provides 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 foundations.

As of December 31, 2021 and 2020, we had $75.0 million and $0.0 million of borrowings outstanding under our Revolving Credit Agreement, respectively.

December 30, 2021, we drew $75.0 million on our Revolving Credit Facility.

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.

As of December 31, 2022, we had $60.0 million of borrowings outstanding under our Revolving Credit Agreement.

On December 28, 2022, we drew $60.0 million on our Revolving Credit Facility.

All outstanding borrowings were subsequently repaid in full on January 3, 2023.

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, 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.

of our knowledge, as of December 31, 2021, 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.

We 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 is included within interest expense in our consolidated statements of operations.

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.

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.

To the best of our knowledge, as of December 31, 2022, we were in compliance in all material respects with all covenants contained in our Revolving Credit Agreement.

Termination of AFC Finance Credit Facility

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 in the second quarter of 2022.

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.

The 2027 Senior Notes accrue interest at a rate of 5.750%

The 2027 Senior Notes accrue interest at a rate of 5.750% 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 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.

The 2027 Senior Notes are currently not guaranteed by any of our subsidiaries.

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 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);

and (4) merge, consolidate or sell

substantially all of our assets.

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.

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 December 31, 2022, the 2027 Senior Notes were 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 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), and (4) merge, consolidate or sell substantially all of our assets.

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

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

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

Interest Rate

2027 Senior Notes

November 3, 2021

$100.0 million

May 1 and November 1

February 1, 2027

Senior Notes Issue Date Amount

Outstanding Interest Rate

Coupon Maturity

Date Interest

Due Dates Optional

Redemption Date

2027 Senior Notes November 3, 2021 $100.0 million 5.750% 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.

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.

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 December 31, 2021, we believe that our cash on hand, capacity available under our Revolving Credit Facility, and cash flows from operations for the next

twelve months 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 and cash

equivalents for the year ended December 31, 2021 and the period ended December 31, 2020:

December 31, 2021

December 31, 2020

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

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 December 31, 2022, we believe that our cash on hand, capacity available under our Revolving Credit Facility, and cash flows from operations for the next twelve months 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 years ended December 31, 2022 and 2021:

Net income $ 35,932,397 $ 21,000,497

Adjustments to reconcile net income to net cash (used in) provided by operating activities and changes in operating assets and liabilities (4,610,424) (11,461,935)

Net cash provided by (used in) operating activities 31,321,973 9,538,562

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities (16,343,685) (248,458,088)

Net cash provided by (used in) financing activities 16,148,505 338,541,754

Change in cash and cash

Change in cash and cash equivalents $ 31,126,793 $ 99,622,228

Net Cash Provided by (Used in) Operating Activities

For the year ended December 31, 2021, net cash provided by operating activities totaled approximately $9.5 million.

For the year ended

December 31, 2021, adjustments to net income related to operating activities primarily included net change in unrealized gain on loans at fair value of approximately $0.6 million, realized gains on loans at fair value of approximately $0.5

million, stock-based compensation expense of approximately $1.7 million, PIK interest of approximately $4.5 million, accretion of deferred loan original issue discount and other discounts of approximately $5.6 million, provision for current

expected credit losses of approximately $2.6 million, amortization of deferred financing costs relating to the revolving credit facility of approximately $0.03 million, amortization of offering costs relating to the senior notes of approximately

$0.1 million, and change in other assets and liabilities of approximately $4.8 million.

For the period ended December 31, 2020, net cash provided by operating activities totaled approximately $1.5 million.

For the period ended December 31, 2020,

adjustments to net income related to operating activities primarily included net change in unrealized gain on loans at fair value of approximately $1.6 million, realized gains on loans at fair value of approximately $0.4 million, accretion of

deferred loan original issue discount and other discounts of approximately $0.8 million and change in other assets and liabilities of approximately $0.1 million.

Net Cash Provided by (Used in) Investing Activities

For the year ended December 31, 2021, net cash used in investing activities totaled approximately $248.5 million.

The net cash used in investing activities was

primarily a result of the cash used for the origination and funding of loans held for investment of approximately $272.6 million exceeding the cash received from principal repayment of loans held for investment of approximately $22.4 million, cash

received from the sale of loans of $15.5 million, purchase of debt securities of $16.1 million, and cash received from the sale of Assigned Rights of approximately $2.3 million for the year ended December 31, 2021.

For the period ended December 31, 2020, net cash used in investing activities totaled approximately $32.4 million.

The net cash used in investing activities

was primarily a result of the cash used for the origination and funding of loans held for investment of approximately $46.8 million exceeding the cash received from principal repayment of loans held for investment of approximately $5.3 million, cash

received from the sale of Assigned Rights of approximately $1.6 million, and cash from the sale of loans held for sale of approximately $7.3 million for the period ended December 31, 2020.

Net cash provided by operating activities during the year ended December 31, 2022 was approximately $31.3 million, compared to approximately $9.5 million for the year ended December 31, 2021.

The increase from December 31, 2021 to December 31, 2022 was due to an increase in net income of approximately $14.9 million, offset by an increase in accretion of OID of approximately $(6.2) million, an increase in PIK interest of approximately $(3.8) million, an increase in provision for current expected credit losses of approximately $8.5 million, an increase in unrealized losses (gains) on loans held at fair value of approximately $4.2 million and an increase in interest reserve of approximately $4.0 million.

Net Cash (Used in) Provided by Investing Activities

Net cash used in investing activities during the year ended December 31, 2022 was approximately $16.3 million, compared to approximately $248.5 million for the year ended December 31, 2021.

The change was caused by a decrease in loan issuance and fundings of approximately $109.7 million, an increase in repayments of loans of approximately $97.6 million, and an increase in proceeds received from the sale of loans and marketable securities of approximately $11.1 million compared to the purchase of marketable securities in the prior year of approximately $16.1 million.

Net Cash Provided by (Used in) Financing Activities

For the year ended December 31, 2021, net cash provided by financing activities totaled approximately $338.5 million and related to proceeds from the issuance

of our common stock in our IPO and June 2021 follow-on public offering of approximately $185.5 million, less offering costs relating to the equity offering of approximately $4.0 million, issuance of senior notes of approximately $100.0 million and

related financing costs of approximately $3.5 million, borrowings on revolving credit facility of approximately $75.0 million, and less approximately $14.4 million in dividends paid to common and preferred stockholders.

For the period ended December 31, 2020, net cash provided by financing activities totaled approximately $40.5 million and related to proceeds from the issuance

of our common stock of approximately $44.2 million, less approximately $3.8 million in dividends paid.

Net cash provided by financing activities during the year ended December 31, 2022 was approximately $16.1 million , compared to net cash provided by financing activities of approximately $338.5 million for the year ended December 31, 2021.

The change was caused by a decrease in proceeds from the sale of common stock of approximately $(110.4) million , the issuance of the 2027 Senior Notes during the year ended December 31, 2021 of $100.0 million (there were no issuances in 2022), repayment on the AFCF Revolving Credit Facility of $75.0 million during the year ended December 31, 2022 and an increase in dividends paid of approximately $(27.2) million .

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

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

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

5 years Total

Unfunded commitments $ 33,570,938 $ 12,054,508 $ — $ — $ 45,625,446

As of December 31, 2021, all unfunded commitments relate to our total loan commitments and were due in less than one year.

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

Total $ 33,570,938 $ 12,054,508 $ — $ — $ 45,625,446

As of December 31, 2022, all unfunded commitments relate to our total loan commitments and were available for funding in less than two years.

We also had the following contractual obligations as of December 31, 2022 relating to the 2027 Senior Notes:

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

5 years Total

Contractual obligations (1)

$ 6,708,333 $ 11,500,000 $ 107,666,667 $ — $ 125,875,000

Total $ 6,708,333 $ 11,500,000 $ 107,666,667 $ — $ 125,875,000

(1) Amounts include projected interest payments during the period based on interest rates in effect as of December 31, 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 Annual Report, 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

Other than as set forth in this Annual Report, 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.

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 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.

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

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 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 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

Our consolidated financial statements are prepared in accordance with GAAP which requires the use of estimates and assumptions that involve the exercise of

judgment as to future uncertainties.

Our consolidated financial statements are prepared in accordance with GAAP which requires the use of estimates and assumptions that involve the exercise of judgment as to future uncertainties.

In accordance with SEC guidance, the following discussion addresses the accounting policies that we believe apply to us based on the nature of our initial operations.

Our most critical accounting policies involve

decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses.

We believe that all of the decisions and assessments used to prepare our consolidated financial statements are based upon

reasonable assumptions given the information available to us at that time.

Those accounting policies and estimates that we believe are most critical to an investor’s understanding of our financial results and condition and require complex management

judgment are discussed below.

Our most critical accounting policies involve decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses.

We believe that all of the decisions and assessments used to prepare our consolidated financial statements are based upon reasonable assumptions given the information available to us at that time.

Those accounting policies and estimates that we believe are most critical to an investor’s understanding of our financial results and condition and require complex management judgment are discussed below.

Loans Held at Fair Value

We originate commercial real estate debt and related instruments generally to be held for investment.

Although we generally hold our target investments as

long-term loans, we may occasionally classify some of our loans as held for sale.

Although we generally hold our target investments as long-term loans, we may occasionally classify some of our loans as held for sale.

We may carry our loans at fair value or amortized cost in our consolidated balance sheet.

As of December 31, 2021, three loans held for investment were carried at fair

value within loans held at fair value in our consolidated balance sheets, with changes in fair value recorded through earnings.

As of December 31, 2022 and 2021, three loans held for investment were carried at fair value within loans held at fair value in our consolidated balance sheets, with changes in fair value recorded through earnings.

Refer to Note 14 to our annual consolidated financial statements for more information on the valuations of the loans.

Loans are generally collateralized by real estate, equipment, value associated with licenses and/or other assets of borrowers to the extent permitted by

applicable laws and the regulations governing such borrowers.

The extent of any credit deterioration associated with the performance and/or value of the underlying collateral property and the financial and operating capability of the borrower could

impact the expected amounts received.

Loans are generally collateralized by real estate, equipment, value associated with licenses (where applicable) and/or other assets of borrowers to the extent permitted by applicable laws and the regulations governing such borrowers.

The extent of any credit deterioration associated with the performance and/or value of the underlying collateral property and the financial and operating capability of the borrower could impact the expected amounts received.

We monitor performance of our loans held for investment portfolio under the following methodology:

(i) borrower review, which analyzes the borrower’s ability to execute on its original business plan, reviews its

financial condition, assesses pending litigation and considers its general level of responsiveness and cooperation;

(ii) economic review, which considers underlying collateral (i.e.

leasing performance, unit sales and cash flow of the collateral and

its ability to cover debt service, as well as the residual loan balance at maturity);

(iii) property review, which considers current environmental risks, changes in insurance costs or coverage, current site visibility, capital expenditures and market

(i) borrower review, which analyzes the borrower’s ability to execute on its original business plan, reviews its financial condition, assesses pending litigation and considers its general level of responsiveness and cooperation;

(ii) economic review, which considers underlying collateral (i.e., leasing performance, unit sales and cash flow of the collateral and its ability to cover debt service, as well as the residual loan balance at maturity);

(iii) property review, which considers current environmental risks, changes in insurance costs or coverage, current site visibility, capital expenditures and market perception;

and (iv) market review, which analyzes the collateral from a supply and demand perspective of similar property types, as well as from a capital markets perspective.

We accrete or amortize any discounts or premiums on loans held for investment over the life of the related loan held for investment utilizing the effective

interest method.

We follow Accounting Standards Codification (“ASC”) 825-10, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASC 825-10”), which

provides companies the option to report selected financial assets and liabilities at fair value.

ASC 825-10 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different

measurement attributes for similar types of assets and liabilities and to more easily understand the effect of the company’s choice to use fair value on its earnings.

ASC 825-10 also requires entities to display the fair value of the selected assets

and liabilities on the face of the balance sheet.

We accrete or amortize any discounts or premiums on loans held for investment over the life of the related loan held for investment utilizing the effective interest method.

We follow Accounting Standards Codification (“ASC”) 825-10, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASC 825-10”), which provides companies the option to report selected financial assets and liabilities at fair value.

ASC 825-10 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect of the company’s choice to use fair value on its earnings.

ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the balance sheet.

We have elected the ASC 825-10 option to report selected financial assets and liabilities at fair value.

With the exception of the line items entitled “prepaid expenses and other assets,” “loans

receivable” and “interest reserve,” which are reported at amortized cost, all assets and liabilities approximate fair value on the balance sheet.

The carrying value of the lines titled “interest receivable,” “accrued management fees,” “accrued direct

administrative expenses” and “accounts payable and other liabilities” approximate fair value due to their short maturity.

We also follow ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”), which expands the application of fair value accounting.

ASC 820-10 defines

fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements.

ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which

assumes an orderly transaction between market participants on the measurement date.

ASC 820-10 requires us to assume that the loan is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous

market, which may be a hypothetical market.

ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements.

ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date.

ASC 820-10 requires us to assume that the loan is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market.

Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact.

In accordance with ASC 820-10, we

have considered its principal market as the market in which we exit our investments with the greatest volume and level of activity.

ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are

observable or unobservable.

In accordance with ASC 820-10, we have considered its principal market as the market in which we exit our investments with the greatest volume and level of activity.

ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.

In accordance with ASC 820-10, these inputs are summarized in the three broad levels listed below:

2 unchanged sentences

• Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

If inputs used to measure fair value fall into different levels of the fair value hierarchy, a loan’s level is based on the lowest level of input that is

significant to the fair value measurement.

If inputs used to measure fair value fall into different levels of the fair value hierarchy, a loan’s level is based on the lowest level of input that is significant to the fair value measurement.

Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the loan.

This includes loans that are valued using

“bid” and “ask” prices obtained from independent third-party pricing services or directly from brokers.

Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment

inherent in measuring fair value.

This includes loans that are valued using “bid” and “ask” prices obtained from independent third-party pricing services or directly from brokers.

Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value.

As such, we obtain and analyze readily available market quotations provided by pricing vendors and brokers for all of our loans for which quotations are available.

In determining the fair value of a particular loan,

pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.

GAAP requires disclosure of fair value information about financial and nonfinancial assets and liabilities, whether or not recognized in the consolidated

financial statements, for which it is practical to estimate the value.

In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows using market yields, or other

valuation methodologies.

In determining the fair value of a particular loan, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.

GAAP requires disclosure of fair value information about financial and nonfinancial assets and liabilities, whether or not recognized in the consolidated financial statements, for which it is practical to estimate the value.

In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows using market yields, or other valuation methodologies.

Any changes to the valuation methodology will be reviewed by our management to ensure the changes are appropriate.

The methods used may produce a fair value calculation that is not indicative of net realizable value or

reflective of future fair values.

financial and nonfinancial assets and liabilities could result in a different estimate of fair value at the reporting date.

We use inputs that are current as of the measurement date, which may fall within periods of market dislocation, during which

price transparency may be reduced.

The methods used may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values.

Furthermore, while we anticipate that the valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial and nonfinancial assets and liabilities could result in a different estimate of fair value at the reporting date.

We use inputs that are current as of the measurement date, which may fall within periods of market dislocation, during which price transparency may be reduced.

Current Expected Credit Loss Reserve (“CECL”)

We estimate our 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 our loan portfolio and (iv) our current and

future view of the macroeconomic environment.

requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and (iii) the liquidation value of collateral.

For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we may

elect to apply a practical expedient in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a CECL Allowance for the specific loan.

In order to estimate the future expected loan losses

relevant to our portfolio, we 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 which we believe is a

reasonably comparable and available data set to our type of loans.

We utilized macroeconomic data that reflects a current recession;

however, the short and long-term economic implications of the COVID-19 pandemic and its financial impact on us are

highly uncertain.

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

Equity-Based Compensation

The Company accounts for equity-based compensation issued to employees and the Board of Directors pursuant to the Amended and Restated Stock Incentive Plan

(the “Stock Incentive Plan”) under the fair value method.

We estimate our 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 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 (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 our loan portfolio and (iv) our current and future view of the macroeconomic environment.

We may consider loan-specific qualitative factors on certain loans to estimate our 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.

For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we may elect to apply a practical expedient in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a CECL Allowance for the specific loan.

In order to estimate the future expected loan losses relevant to our portfolio, we 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 which we believe is a reasonably comparable and available data set to our type of loans.

Stock-Based Compensation

The Company accounts for stock-based compensation issued to employees and the Board of Directors pursuant to the Stock Incentive Plan under the fair value method.

This method measures compensation cost at the date of grant based on the value of the award and recognizes the cost over the service period, which is usually the vesting period.

The fair value

of equity-based compensation awards is based on the estimated fair value of the Company’s common stock, as determined by management using a valuation model and approved by the Board of Directors.

Fair values of award grants also recognize any ongoing

restrictions on the sale of securities.

The fair value of equity-based compensation awards is based on the estimated fair value of the Company’s common stock, as determined by management using a valuation model and approved by the Board of Directors.

Fair values of award grants also recognize any ongoing restrictions on the sale of securities.

Revenue Recognition

Interest income from loans is accrued based on the outstanding principal amount and the contractual terms of each loan.

Revenue from OID is also recognized in

interest income from loans over the initial loan term as a yield adjustment using the effective interest method.

Delayed draw loans earn interest or unused fees on the undrawn portion of the loan, which is recognized as interest income in the period

Revenue from OID is also recognized in interest income from loans over the initial loan term as a yield adjustment using the effective interest method.

Management places loans on non-accrual status when principal or interest payments are past due 30 days or more or when full recovery of interest and principal is doubtful.

Accrued and unpaid interest is generally reversed against interest income in the period the loan is placed on non-accrual status.

Interest payments received on non-accrual loans are generally recognized on a cash basis and may be recognized as income or applied to principal depending upon management’s judgment regarding the borrower’s ability to make pending principal and interest payments.

Non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current.

The Company may make exceptions to placing a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

Delayed draw loans earn interest or unused fees on the undrawn portion of the loan, which is recognized as interest income in the period earned.

Other fees, including prepayment fees and exit fees, are also recognized as interest income when received.

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We have loans in our portfolio that contain PIK provisions.

The PIK interest computed at the contractual rate specified in each applicable agreement, is

accrued and added to the principal balance of the loan and recorded as interest income.

The PIK interest computed at the contractual rate specified in each applicable agreement is accrued and added to the principal balance of the loan and recorded as interest income.

The PIK interest added to the principal balance is typically amortized and paid in accordance with the loan agreements.

In cases where the loans do not amortize, the PIK interest is collected upon repayment of the outstanding principal.

To maintain our status as a REIT, this

non-cash source of income must be paid out to stockholders in the form of dividends for the year earned, even though we have not yet collected the cash.

To maintain our status as a REIT, this non-cash source of income is included in taxable income and will increase the dividend paid to shareholders for the year earned, even though the Company has not yet collected the cash.

We are a Maryland corporation and have elected to be taxed as a REIT under the Code, commencing with our taxable year ended December 31, 2020.

We believe we

have qualified, and our method of operation will enable us to continue to qualify, as a REIT.

However, no assurances can be given that our beliefs or expectations will be fulfilled, since qualification as a REIT depends on us satisfying numerous

asset, income and distribution tests which depends, in part, on our operating results.

To continue to qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute annually to

our stockholders at least 90% of our REIT taxable income prior to the deduction for dividends paid and excluding our net capital gain.

To the extent that 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 1) 85% of our ordinary income for

the calendar year, 2) 95% of our capital gain net income for the calendar year, and 3) any Required Distributions 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 a 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 believe we have qualified, and our method of operation will enable us to continue to qualify, as a REIT.

To continue to qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute annually to our shareholders at least 90% of our REIT taxable income prior to the deduction for dividends paid and excluding our net capital gain.

To the extent that 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 1) 85% of our ordinary income for the calendar year, 2) 95% of our capital gain net income for the calendar year, and 3) any Required Distributions 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 a 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 will be 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 will be 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 it is determined 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 accrue excise tax on a portion of the estimated excess taxable income as such taxable income is earned.

The annual expense is

calculated in accordance with applicable tax regulations.

The annual expense is calculated in accordance with applicable tax regulations.

Excise tax expense is included in the line item income tax expense.

FASB ASC Topic 740, Income Taxes (“ASC 740”), prescribes a recognition threshold and measurement attribute for the financial statement recognition and

measurement of a tax position taken or expected to be taken in a tax return.

Our wholly-owned subsidiary, TRS1, operates as a TRS and began operating in July 2021.

A TRS generally may engage in any business, including investing in assets and engaging in activities that could not be held or conducted directly by us without jeopardizing its qualification as a REIT.

A TRS is subject to applicable United States federal, state and local income tax on its taxable income.

In addition, as a REIT, we may also be subject to a 100% excise tax on certain transactions between us and our TRS that are not conducted on an arm’s-length basis.

The income tax provision is included in the line item income tax expense, including excise tax in the consolidated statements of operations included in this Annual Report on Form 10-K.

FASB ASC Topic 740, Income Taxes (“ASC 740”), prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

We have analyzed our

various federal and state filing positions and believe that our income tax filing positions and deductions are well documented and supported as of December 31, 2021.

We have analyzed our various federal and state filing positions and believe that our income tax filing positions and deductions are well documented and supported as of December 31, 2022.

Based on our evaluation, there is no reserve for any uncertain income tax positions.

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JOBS Act Accounting Election

As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we can take advantage of an extended transition period

for complying with new or revised accounting standards.

As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards.

This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have elected to avail ourselves

of this exemption from new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We intend to rely on other exemptions

provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.

As a result, our consolidated financial statements may not be comparable to companies

that comply with new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our

IPO, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the fiscal year in which we are deemed to be 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 held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0

billion in non-convertible debt securities during the prior three-year period.

We have elected to avail ourselves of this exemption from new or revised accounting standards and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.

As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of our IPO, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be 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 held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Recent Accounting Pronouncements

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2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform

on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to

contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

2020-04 is effective for all entities as of March 12, 2020 through

December 31, 2022.

We do not believe the adoption of this ASU will have a material impact on our financial statements .

In January 2021, the FASB issued ASU No.

2021-01, Reference Rate Reform (Topic 848):Scope, which clarifies that certain optional

expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition.

2021-01 is effective immediately for all entities.

An entity may elect to apply the

amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or

is subsequent to the date of the issuance of a final ASU, up to the date that financial statements are available to be issued.

If an entity elects to apply any of the amendments for an eligible hedging relationship, any adjustments as a result of

those elections must be reflected as of the date the entity applies the election.

The amendments 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).

We are currently evaluating the impact, if any, of this ASU on our consolidated financial statements .

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

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

Adoption of this ASU did not have a material impact on our consolidated financial statements.

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-K

Item 7. Management’s Discussion and Analysis