What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-10 compared with 2022-11-08 · 261 added, 363 removed, 534 unchanged (54% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30, 2022 December 31, 2021

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

March 31, 2023 December 31, 2022

Loans held for investment at fair value (cost of $ 102,811,826 and $ 100,635,985 at March 31, 2023 and December 31, 2022, respectively, net)

$ 99,924,201 $ 99,226,051

Debt securities available for sale held at fair value (cost of $ 16,050,000 at December 31, 2021)

Loans held for investment at carrying value, net 275,211,195 285,177,112

Loan receivable at carrying value, net 2,220,466 2,530,588

Loan receivable held at carrying value, net 2,220,653 2,220,653

Current expected credit loss reserve ( 14,408,793 ) ( 13,538,077 )

Loans held for investment at carrying value and loan receivable at carrying value, net of current expected credit loss reserve 335,918,302 257,262,526

Loans held for investment at carrying value and loan receivable held at carrying value, net of current expected credit loss reserve 263,023,055 273,859,688

Cash and cash equivalents 80,605,744 140,372,841

11 unchanged sentences

Senior notes payable, net 87,565,548 97,131,777

Line of credit payable to affiliate, net — 74,845,355

Line of credit payable, net — 60,000,000

Total liabilities 109,954,318 180,117,530

1 unchanged sentence

Shareholders’ equity

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

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

Preferred stock, par value $ 0.01 per share, 10,000 shares authorized at March 31, 2023 and December 31, 2022 and 125 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Common stock, par value $ 0.01 per share, 50,000,000 shares authorized at March 31, 2023 and December 31, 2022 and 20,489,234 and 20,364,000 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

204,892 203,640

Additional paid-in capital 349,085,320 348,817,914

Accumulated other comprehensive income (loss) — ( 168,750 )

Accumulated (deficit) earnings ( 11,410,883 ) ( 9,962,186 )

5 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Interest income $ 18,500,486 $ 18,635,853

8 unchanged sentences

Provision for current expected credit losses ( 702,426 ) ( 905,129 )

Realized gains (losses) on sales of investments, net — 400,000 450,000 400,000

Realized (losses) gains on sales of investments, net ( 26,384 ) 450,000

Gain (loss) on extinguishment of debt 1,986,381 —

Change in unrealized (losses) gains on loans at fair value, net ( 1,477,691 ) 80,843

12 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Net income $ 10,025,274 $ 10,162,120

1 unchanged sentence

Reversal of unrealized loss to recognized loss on debt securities available for sale held at fair value

— — 168,750 —

Total other comprehensive income (loss) — 168,750

3 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three months ended September 30, 2022

Stock Common Stock Additional

Capital Accumulated Other Comprehensive Income (Loss) Accumulated

(Deficit) Total

Shareholders’

Shares Amount

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

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

Stock-based compensation — ( 338 ) 642 114,062 — — 114,704

Dividends declared on common shares ($ 0.56 per share)

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

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

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

Three months ended September 30, 2021

Stock Common Stock Additional

Capital Accumulated Other Comprehensive Income (Loss) Accumulated

(Deficit) Total

Shareholders’

Shares Amount

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

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

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

Dividends declared on common shares ($ 0.43 per share)

— — — — — ( 7,070,409 ) ( 7,070,409 )

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

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

(See accompanying notes to the consolidated financial statements)

AFC GAMMA, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Nine months ended September 30, 2022

Three months ended March 31, 2023

Stock Common Stock Additional

4 unchanged sentences

Balance at December 31, 2022 $ 1 20,364,000 $ 203,640 $ 348,817,914 $ — $ ( 9,962,186 ) $ 339,059,369

Issuance of common stock, net of offering costs — 3,913,230 39,694 73,306,511 — — 73,346,205

Stock-based compensation — 125,234 1,252 267,406 — — 268,658

1 unchanged sentence

— — — — — ( 11,473,971 ) ( 11,473,971 )

Dividends declared on preferred shares ($ 60 per share)

— — — — — ( 7,500 ) ( 7,500 )

Other comprehensive income (loss) — — — — 168,750 — 168,750

Net income — — — — — 10,025,274 10,025,274

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

Nine months ended September 30, 2021

Balance at March 31, 2023 $ 1 20,489,234 $ 204,892 $ 349,085,320 $ — $ ( 11,410,883 ) $ 337,879,330

Three months ended March 31, 2022

Stock Common Stock Additional

8 unchanged sentences

— — — — — ( 10,858,617 ) ( 10,858,617 )

Dividends declared on preferred shares ($ 60 per share)

— — — — — ( 7,500 ) ( 7,500 )

Other comprehensive income (loss) — — — — 168,750 — 168,750

Net income — — — — — 10,162,120 10,162,120

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

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

See accompanying notes to the consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

September 30,

Three months ended

Operating activities:

2 unchanged sentences

Provision for current expected credit losses 702,426 905,129

Realized (gains) losses on sale of investments, net ( 450,000 ) ( 400,000 )

Realized losses (gains) on sale of investments, net 26,384 ( 450,000 )

(Gain) loss on extinguishment of debt ( 1,986,381 ) —

Change in unrealized losses (gains) on loans at fair value, net 1,477,691 ( 80,843 )

Accretion of deferred loan original issue discount and other discounts ( 1,236,946 ) ( 3,965,878 )

Amortization of deferred financing costs 714,471 —

Amortization of deferred financing costs - revolving credit facility 39,258 50,982

Amortization of deferred financing costs - senior notes 157,652 161,979

Stock-based compensation 268,658 990,023

11 unchanged sentences

Issuance of and fundings on loans ( 1,523,332 ) ( 50,463,213 )

Proceeds from sales of Assigned Rights — 2,313,130

Proceeds from sales of loans 13,693,481 —

Sale of available-for-sale debt securities 15,900,000 —

Principal repayment of loans 2,821,467 20,415,460

3 unchanged sentences

Payment of offering costs - equity offering — ( 966,779 )

Dividends paid to common and preferred shareholders ( 30,207,932 ) ( 7,311,779 )

Repayment on the line of credit ( 75,000,000 ) —

Dividends paid to common shareholders ( 11,403,840 ) ( 8,221,406 )

Repayment of senior notes ( 7,737,500 ) —

Repayment on revolving credit facility ( 60,000,000 ) ( 75,000,000 )

Net cash provided by (used in) financing activities ( 79,141,340 ) ( 20,248,463 )

5 unchanged sentences

OID withheld from funding of loans $ — $ 1,067,675

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

Receivable in connection with sale of loan $ — $ 10,600,000

Receivable in connection with sale of securities $ — $ 15,900,000

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

6 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2022

As of March 31, 2023

AFC Gamma, Inc.

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

The Company primarily originates, structures, underwrites, and invests in senior secured loans and other types of loans and debt securities for cannabis industry operators in states that have legalized medical and/or adult-use cannabis.

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

The Company primarily originates, structures, underwrites, invests in and manages senior secured commercial real estate loans and other types of loans and debt securities, with a specialization in loans to cannabis industry operators in states that have legalized medical and/or adult-use cannabis.

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

2 unchanged sentences

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

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

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

The Company has elected to be taxed as a real estate investment trust (“REIT”) for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2020.

The Company operates in one operating segment and is primarily focused on financing senior secured loans and other types of loans primarily to (i) senior secured loans to cannabis industry operators in states where medical and/or adult-use cannabis is legal and (ii) secured loans to commercial real estate owners, operators and related businesses.

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

The Company has elected to be taxed as a real estate investment trust (“REIT”) for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”).

The Company generally will not be subject to United States federal income taxes on its REIT taxable income as long as it annually distributes all of its REIT taxable income prior to the deduction for dividends paid to shareholders and complies with various other requirements as a REIT.

4 unchanged sentences

Basis of Presentation

The accompanying unaudited interim consolidated financial statements and related notes have been prepared on the accrual basis of accounting in conformity with generally accepted accounting principles in the United States (“GAAP”) and in conformity with the rules and regulations of the SEC applicable to interim financial information.

These unaudited interim consolidated financial statements reflect all adjustments that, in the opinion of management, are considered necessary for a fair statement of the Company’s results of operations and financial condition as of and for the periods presented.

The accompanying unaudited interim consolidated financial statements and related notes have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the rules and regulations of the SEC applicable to interim financial information and include the accounts of the Company, and its wholly-owned subsidiary.

The unaudited interim consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and for the periods presented.

All intercompany balances and transactions have been eliminated in consolidation.

The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the year ending December 31, 2023.

Investment in Marketable Securities

Marketable debt securities in the Company’s portfolio are recorded at fair value and unrealized gains or losses are excluded from net income on the consolidated statement of operations and reported as a component of accumulated other comprehensive income within shareholders’ equity.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures.

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures.

Actual results could differ from those estimates.

1 unchanged sentence

Recent Accounting Pronouncements

In March 2020, the FASB issued ASU No.

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 the London Interbank Offered Rate (“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.

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 update, 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.

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

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

LOANS HELD FOR INVESTMENT AT FAIR VALUE

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

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

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

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

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

As of September 30, 2022

As of March 31, 2023 and December 31, 2022, the Company’s portfolio included three loans held at fair value.

The aggregate originated commitment under these loans was approximately $ 104.3 million and $ 104.3 million, respectively, and outstanding principal was approximately $ 104.2 million and $ 102.4 million as of March 31, 2023 and December 31, 2022, respectively.

For the three months ended March 31, 2023, the Company gross funded approximately $ 0.8 million of additional principal and had no principal repayments of loans held at fair value.

As of March 31, 2023 and December 31, 2022, none of the Company’s loans held at fair value had floating interest rates.

The following tables summarize the Company’s loans held at fair value as of March 31, 2023 and December 31, 2022:

As of March 31, 2023

Fair Value (1)

13 unchanged sentences

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

(1) Refer to Note 14 to the Company's unaudited consolidated financial statements.

(1) Refer to Note 14 to the Company's unaudited interim consolidated financial statements.

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

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

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

(3) Weighted average remaining life is calculated based on the fair value of the loans as of March 31, 2023 and December 31, 2022.

The following table presents changes in loans held at fair value as of and for the three months ended March 31, 2023:

Principal Original Issue

3 unchanged sentences

New fundings 802,884 — — 802,884

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

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

Accretion of original issue discount — 380,086 — 380,086

PIK interest 992,871 — — 992,871

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

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

Total loans held at fair value at March 31, 2023 $ 104,172,301 $ ( 1,360,475 ) $ ( 2,887,625 ) $ 99,924,201

As of March 31, 2023, the Company ha d one l oan held at fair value on non-accrual status with an outstanding principal amount of approximately $ 1.2 million with a related unrealized loss recorded of approximately $( 1.2 ) million.

A more detailed listing of the Company’s loans held at fair value portfolio based on information available as of March 31, 2023 is as follows:

Collateral Location Collateral

1 unchanged sentence

Rate Maturity Date (4)

A AZ, MI, MD, MA C, D $ 78,444,211 $ 78,055,662 $ 79,772,976 15.5 % (6)

A NV C 1,174,066 1,198,639 1,198,639 15.0 % (7)

A AZ, MI, MD, MA, NM C, D $ 83,552,001 $ 85,244,168 $ 86,421,309 16.1 % (6)

NV C — 1,213,416 1,213,416 15.0 % (7)

9/30/2023 I/O

2 unchanged sentences

(1) C = Cultivation Facilities, D = Dispensary/Retail Facilities.

(2) Refer to Note 14 to the Company’s unaudited consolidated financial statements.

(2) Refer to Note 14 to the Company’s unaudited interim consolidated financial statements.

(3) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of OID and loan origination costs.

4 unchanged sentences

P/I loans may include interest-only periods for a portion of the loan term.

(6) Base weighted interest rate of 12.8 % and payment-in-kind (“PIK”) interest rate of 2.7 %.

(6) Base weighted average interest rate of 12.6 % and payment-in-kind (“PIK”) weighted average interest rate of 3.5 %.

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

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

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

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

As amended, an additional 4.0 % PIK interest rate is applicable from January 15, 2023 to April 30, 2023.

(9) As of October 1, 2022, this loan was placed on non-accrual status.

LOANS HELD FOR INVESTMENT AT CARRYING VALUE

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

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

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

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

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

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

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

As of September 30, 2022

As of March 31, 2023 and December 31, 2022, the Company’s portfolio included nine loans held at carrying value.

The aggregate originated commitment under these loans was approximately $ 313.1 million and $ 338.9 million, respectively, and outstanding principal was approximately $ 284.5 million and $ 296.6 million, respectively, as of March 31, 2023 and December 31, 2022.

During the three months ended March 31, 2023, the Company funded approximately $ 2.2 million of additional principal and sold $ 15.0 million of the Company’s investment in Subsidiary of Public Company M.

As of March 31, 2023 and December 31, 2022, approximately 77 % and 73 %, respectively, of the Company’s loans held at carrying value had floating interest rates.

As of March 31, 2023, t hese floating benchmark rates included one-month LIBOR subject to a weighted average floor of 1.0 % and quoted at 4.9%, one-month Secured Overnight Financing Rate (“SOFR”) subject to a weighted average floor of 1.0 % and quoted at 4.8% and U.S.

prime rate subject to a weighted average floor of 4.9 % and quoted at 8.0%.

The following tables summarize the Company’s loans held at carrying value as of March 31, 2023 and December 31, 2022:

As of March 31, 2023

Principal (1)

10 unchanged sentences

(1) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted OID and loan origination costs.

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

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

(2) Weighted average remaining life is calculated based on the carrying value of the loans as of March 31, 2023 and December 31, 2022.

The following table presents changes in loans held at carrying value as of and for the three months ended March 31, 2023:

Principal Original Issue

7 unchanged sentences

Loan amortization payments ( 1,823,325 ) — ( 1,823,325 )

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

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

Total loans held at carrying value at March 31, 2023 $ 284,494,385 $ ( 9,283,190 ) $ 275,211,195

A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of March 31, 2023 is as follows:

Collateral Location Collateral

7 unchanged sentences

05/01/2026 P/I

F AR, AZ, IL, FL, NV, OH, MA, MI, MD, NV C, D 86,600,000 ( 854,133 ) 85,745,867 8.6 % (7)

05/30/2023 I/O

of Private Co.

10 unchanged sentences

01/01/2026 I/O

L MO, NJ, OH C, D 50,000,000 ( 2,303,571 ) 47,696,429 12.0 % (13)

L MO, OH C, D 50,945,492 ( 1,982,143 ) 48,963,349 12.0 % (12)

05/01/2026 P/I

10 unchanged sentences

P/I loans may include interest-only periods for a portion of the loan term.

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

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

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

(5) Base interest rate of 9.0 % plus U.S.

prime rate (U.S.

prime rate floor of 4.0 %) and PIK interest rate of 2.0 %.

(6) Base interest rate of 10.25 % plus U.S.

prime rate (U.S.

prime rate floor of 4.5 %).

As amended, 75.0 % of the monthly cash interest is paid in kind from December 1, 2022 to May 1, 2023.

(7) Base interest rate of 15.0 %.

(9) Base interest rate of 12.0 % plus SOFR (SOFR floor of 1.0 %)

(8) Base interest rate of 12.0 % plus SOFR (SOFR floor of 1.0 %) and PIK interest rate of 2.0 %.

(9) Base interest rate of 12.0 % plus LIBOR (LIBOR floor of 1.0 %) and PIK interest rate of 4.5 %.

As amended, between 50.0 % and 60.0 % of the monthly cash interest is paid in kind from October 1, 2022 to April 1, 2023.

(10) Base interest rate of 12.0 % plus LIBOR (LIBOR floor of 1.0 %) and PIK interest rate of 4.0 %.

(12) Base interest rate of 9.8 %.

Effective April 1, 2023, Private Company J transitioned from LIBOR to SOFR.

(11) Base interest rate of 5.8 % plus U.S.

prime rate (U.S.

prime rate floor of 5.5 %).

(12) Base interest rate of 12.0 %.

(13) Base interest rate of 9.5 %.

LOAN RECEIVABLE AT CARRYING VALUE

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

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

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

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

LOAN RECEIVABLE HELD AT CARRYING VALUE

As of March 31, 2023 and December 31, 2022, the Company’s 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 $ 2.2 million as of March 31, 2023 and December 31, 2022, respectively.

During the three months ended March 31, 2023, the Company had no principal repayments.

The following table presents changes in loans receivable as of and for the three months ended March 31, 2023:

Principal Original Issue

Discount Carrying

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

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

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

Accretion of original issue discount — — —

PIK interest 26,187 — 26,187

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

Total loan receivable held at carrying value at March 31, 2023 $ 2,222,339 $ ( 1,686 ) $ 2,220,653

As of March 31, 2023 , the Company had one loan receivable held at carrying value on non-accrual status with an outstanding principal amount of approximately $ 2.2 million with a related current expected credit loss reserve recorded of approximately $ 1.1 million .

CURRENT EXPECTED CREDIT LOSSES

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

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

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

4 unchanged sentences

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

As of September 30, 2022 and December 31, 2021, the Company’s CECL Reserve for its loans held at carrying value and loan receivable at carrying value is approximately $ 6.2 million and $ 3.1 million, respectively, or 1.80 % and 1.20 %, respectively, of the Company’s total loans held at carrying value and loans receivable at carrying value of approximately $ 341.4 million and $ 259.7 million, respectively, and is bifurcated between the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loans receivable at carrying value of approximately $ 5.5 million and $ 2.4 million, respectively, and a liability for unfunded commitments of approximately $ 0.7 million and $ 0.7 million, respectively.

As of March 31, 2023 and December 31, 2022, the Company’s CECL Reserve for its loans held at carrying value and loan receivable held at carrying value is approximately $ 15.0 million and $ 14.3 million, respectively, or 5.40 % and 4.97 %, respectively, of the Company’s total loans held at carrying value and loan receivable held at carrying value of approximately $ 277.4 million and $ 287.4 million, respectively, and is bifurcated between the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loan receivable held at carrying value of approximately $ 14.4 million and $ 13.5 million, respectively, and a liability for unfunded commitments of approximately $ 0.6 million and $ 0.8 million, respectively.

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

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

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

Outstanding (1)

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

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

Write-offs — — —

Recoveries — — —

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

Activity related to the CECL Reserve for outstanding balances and unfunded commitments on the Company’s loans held at carrying value and loan receivable held at carrying value as of and for the three months ended March 31, 2023 was as follows:

Outstanding (1)

3 unchanged sentences

Recoveries — — —

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

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

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

Balance at March 31, 2023 $ 14,408,793 $ 585,838 $ 14,994,631

(1) As of March 31, 2023 and December 31, 2022, the CECL Reserve related to outstanding balances on loans held at carrying value and loan receivable held at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets.

(2) As of March 31, 2023 and December 31, 2022, the CECL Reserve related to unfunded commitments on loans held at carrying value is recorded within current expected credit loss reserve as a liability in the Company’s consolidated balance sheets.

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

13 unchanged sentences

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

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

As of March 31, 2023, the carrying value, excluding the CECL Reserve, of the Company’s loans held at carrying value and loan receivable held at carrying value within each risk rating by year of origination is as follows:

2022 2021 2020 Total

5 unchanged sentences

INTEREST RECEIVABLE

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

September 30, 2022 As of

The following table summarizes the interest receivable by the Company as of March 31, 2023 and December 31, 2022:

March 31, 2023 As of

December 31, 2022

4 unchanged sentences

INTEREST RESERVE

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

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

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

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

At March 31, 2023 and December 31, 2022, the Company had one and three loans, respectively, that included a loan-funded interest reserve.

For the three months ended March 31, 2023 and 2022, approximately $ 3.2 million and $ 4.2 million, respectively, of aggregate interest income was earned and disbursed from the interest reserves.

The following table presents changes in interest reserve as of and for the three months ended March 31, 2023 and 2022:

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Beginning reserves $ 3,200,944 $ 4,782,271

5 unchanged sentences

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

The Revolving Credit Facility contains aggregate commitments of $ 60.0 million from two FDIC-insured banking institutions (which may be increased to up to $ 100.0 million in aggregate, subject to available borrowing base and additional commitments) which may be borrowed, repaid and redrawn, subject to a borrowing base based on eligible loan

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

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

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

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

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

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

During the year ended December 31, 2022, t he Company incurred a one-time commitment fee expense of approximately $ 0.5 million, which is included in prepaid expenses and other assets on the Company’s unaudited interim consolidated balance sheets and 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 the Company’s unaudited interim consolidated statements of operations.

As of March 31, 2023 and December 31, 2022, the outstanding loan balance under the Revolving Credit Facility was $ 0.0 million and $ 60.0 million, respectively.

All borrowings that were previously outstanding as of December 31, 2022 were repaid in full on January 3, 2023.

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

10 unchanged sentences

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

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

Pursuant to the Second Amendment, the Company incurred a one-time commitment fee expense of approximately $ 0.2 million in November 2021, payable in three quarterly installments that began in the first quarter of 2022, which was amortized over the life of the loan.

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

1 unchanged sentence

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

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

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

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

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

2027 Senior Notes

1 unchanged sentence

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

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

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

The Company intends to use the proceeds from the issuance of the 2027 Senior Notes (i) to fund loans related to unfunded commitments to existing borrowers, (ii) to originate and participate in commercial loans to companies operating in the cannabis industry that are consistent with the Company’s investment strategy and (iii) for working capital and other general corporate purposes.

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

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

The Company used the proceeds from the issuance of the 2027 Senior Notes (i) to fund loans related to unfunded commitments to existing borrowers, (ii) to originate and participate in commercial loans to companies operating in the cannabis industry that are consistent with the Company’s investment strategy and (iii) for working capital and other general corporate purposes.

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

1 unchanged sentence

Subsequent to the Company’s investment in the senior secured loan to Private Company I being transferred to TRS1 on April 1, 2022, TRS1 was added as a subsidiary guarantor under the Indenture.

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

As of March 31, 2023, the 2027 Senior Notes are guaranteed by TRS1.

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

5 unchanged sentences

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

During the three months ended March 2023, the Company repurchased $ 10.0 million in principal amount of the Company’s 2027 Senior Notes at 77.4 % of par value, plus accrued interest.

This resulted in a gain on extinguishment of debt of approximately $ 2.0 million, recorded within the unaudited interim consolidated statements of operations.

Following this transaction, as of March 31, 2023, the Company had $ 90.0 million in principal amount of the 2027 Senior Notes outstanding.

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

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

Scheduled principal payments on the 2027 Senior Notes as of March 31, 2023 are as follows:

2027 Senior Notes

2023 (remaining) $ —

Thereafter 100,000,000

2027 90,000,000

Total principal $ 90,000,000

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

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

The following table reflects a summary of interest expense incurred during the three months ended March 31, 2023 and 2022.

Three months ended

September 30, 2022

March 31, 2023

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

3 unchanged sentences

Total interest expense $ 1,566,402 $ 101,758 $ — $ 1,668,160

Nine months ended

September 30, 2022

Three months ended

March 31, 2022

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

4 unchanged sentences

COMMITMENTS AND CONTINGENCIES

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

September 30, 2022 As of

As of March 31, 2023 and December 31, 2022, the Company had the following commitments to fund various investments:

March 31, 2023 As of

December 31, 2022

3 unchanged sentences

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

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

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

As of March 31, 2023, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

On March 17, 2023, the Company appointed Brandon Hetzel to serve as its Chief Financial Officer and Treasurer in place of Brett Kaufman, effective as of such date, with Mr.

Kaufman’s employment with AFC Management, LLC, the Company’s external manager (the “Manager”), terminated, effective as of April 17, 2023 (the “Separation Date”).

In connection with his termination, Mr.

Kaufman will receive (i) twelve (12) months’ worth of his current base salary, (ii) his annual target bonus, (iii) continued payment by our Manager of 100 % of the COBRA premiums for him and his dependents for a period of twelve (12) months following his Separation Date, (iv) accelerated vesting of one ( 1 ) additional tranche of each of Mr.

Kaufman’s outstanding equity awards, and (v) extension of the exercise period for Mr.

Kaufman’s outstanding options until one (1) year following the Separation Date, contingent on Mr.

Kaufman executing and not revoking a release of claims in favor of the Company.

During the three months ended March 31, 2023, the Company recorded approximately $ 0.7 million in severance expense, recorded within general and administrative expenses within the unaudited interim consolidated statements of operations.

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

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

4 unchanged sentences

Series A Preferred Stock

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

As of March 31, 2023 and December 31, 2022, the Company has authorized 10,000 preferred shares and issued 125 of the preferred shares designated as 12.0 % Series A Cumulative Non-Voting Preferred Stock, par value $ 0.01 per share (the “Series A Preferred Stock”).

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

5 unchanged sentences

Shares of the Series A Preferred Stock that are redeemed shall no longer be deemed outstanding shares of the Company and all rights of the holders of such shares will terminate.

The Board of Directors of the Company (the “Board”) approved a seven -for-one stock split of the Company’s common stock effective on January 25, 2021.

All common shares, stock options, and per share information presented in the consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis for all periods presented, including reclassifying an amount equal to the increase in par value of common stock from additional paid-in capital.

There was no change in the par value of the Company’s common stock.

Upon consummation of the Company’s IPO, any shareholder that held fractional shares received cash in lieu of such fractional shares based on the public offering price of the shares of the Company’s common stock at IPO.

This resulted in the reduction of 15 shares issued and outstanding.

On March 23, 2021, the Company completed its IPO of 6,250,000 shares of its common stock at a price of $ 19.00 per share, raising approximately $ 118.8 million in gross proceeds.

The underwriters also exercised their over-allotment option to purchase up to an additional 937,500 shares of the Company’s common stock at a price of $ 19.00 per share, which was completed on March 26, 2021, raising approximately $ 17.8 million in additional gross proceeds.

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

The Company 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 the Company totaled approximately $ 123.9 million.

On June 28, 2021, the Company completed an offering of 2,750,000 shares of its 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 shareholders’ equity.

The Company 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 the Company totaled approximately $ 52.6 million.

On July 6, 2021, the underwriters partially exercised their over-allotment option to purchase 269,650 shares of the Company’s 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 shareholders’ equity.

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

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

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

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

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

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 are reflected as a reduction of additional paid-in capital in the first quarter of fiscal year 2022.

The underwriting commissions of approximately $ 3.5 million were reflected as a reduction of additional paid-in capital in the first quarter of fiscal year 2022.

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

10 unchanged sentences

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

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

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

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

Equity Incentive Plan

The Company has established an equity incentive compensation plan (the “2020 Plan”).

During the three months ended March 31, 2023, the Company did not sell any shares of the Company’s common stock under the Sales Agreement.

As of March 31, 2023 , the shares of common stock sold under the ATM Program are the only offerings that have been initiated under the Shelf Registration Statement.

Stock Incentive Plan

The Company has established a stock incentive compensation plan (the “2020 Plan”).

The 2020 Plan authorizes stock options, stock appreciation rights, restricted stock, stock bonuses, stock units and other forms of awards granted or denominated in the Company’s common stock or units of common stock.

7 unchanged sentences

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

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

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

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

During the first quarter of 2023, the Company’s Board of Directors approved grants of restricted stock to the Company’s directors and officers, as well as certain employees of the Manager.

In January 2023, the Company granted an aggregate of 125,234 shares of restricted stock to certain of our officers and other eligible persons.

The restricted stock granted in January 2023 under the 2020 Plan contain vesting periods that vary from immediately vested to vesting over a three-year period, with approximately 33 % vesting on each of the first, second and third anniversaries of the vesting commencement date.

As of March 31, 2023, there were 2,469,849 shares of common stock granted under the 2020 Plan, underlying 2,281,272 options and 188,577 shares of restricted stock.

As of March 31, 2023, the maximum number of shares of the Company’s common stock that may be delivered pursuant to awards under the 2020 Plan (the “Share Limit”) equals 2,793,288 shares, which is consistent with the Share Limit at December 31, 2022.

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

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

September 30, 2022 As of

The following table summarizes the (i) non-vested options granted, (ii) vested options granted, (iii) exercised and (iv) forfeited options granted for the Company’s directors and officers and employees of the Manager as of March 31, 2023 and December 31, 2022:

March 31, 2023 As of

December 31, 2022

1 unchanged sentence

Vested 2,142,143 2,081,212

Exercised ( 5,511 ) ( 5,511 )

Forfeited ( 88,749 ) ( 88,749 )

1 unchanged sentence

The Company uses the Black-Scholes option pricing model to value stock options in determining the stock-based compensation expense.

Forfeitures are recognized as they occur.

The Company has elected to recognize forfeitures as they occur.

Previously recognized compensation expense related to forfeitures are reversed in the period awards are forfeited.

The risk-free interest rate is based on the U.S.

Treasury yield curve in effect at the date of grant.

The expected dividend yield was based on the Company’s expected dividend yield at grant date.

The expected dividend yield was based on the Company’s expected dividend yield at the grant date.

Expected volatility is based on the estimated average volatility of similar companies due to the lack of historical volatilities of the Company’s common stock.

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

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

The stock-based compensation expense for the Company was approximately $ 0.3 million and $ 1.0 million for the three months ended March 31, 2023 and 2022, respectively.

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

4 unchanged sentences

Expected forfeiture rate 0 %

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

Three months ended

September 30, 2022 Weighted-average

grant date fair

value per option

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

Exercised ( 5,511 ) 0.90

Forfeited ( 24,023 ) 1.20

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

The following tables summarize stock option activity during the three months ended March 31, 2023 and 2022:

Three months ended

September 30, 2021 Weighted-average

grant date fair

value per option

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

Exercised — —

Forfeited ( 8,862 ) 0.90

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

Nine months ended

September 30, 2022 Weighted-average

March 31, 2023 Weighted-average

grant date fair

1 unchanged sentence

Balance as of December 31, 2022 2,280,372 $ 1.21

Granted 742,000 1.46

Exercised — —

Forfeited — —

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

Nine months ended

September 30, 2021 Weighted-average

Balance as of March 31, 2023 2,280,372 $ 1.21

Three months ended

March 31, 2022 Weighted-average

grant date fair

4 unchanged sentences

Forfeited ( 25,130 ) 0.98

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

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

September 30, 2022 As of

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

March 31, 2023 As of

December 31, 2022

Non-vested 189,815 64,581

Vested ( 3,211 ) —

Forfeited ( 1,238 ) ( 1,238 )

1 unchanged sentence

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

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

Three months ended

September 30, 2022

Balance as of June 30, 2022 64,581

Forfeited ( 1,238 )

Balance as of September 30, 2022 63,343

The following tables summarize the restricted stock activity during the three months ended March 31, 2023 and 2022:

Three months ended

September 30, 2021

Balance as of June 30, 2021 —

Granted 56,285

Balance as of September 30, 2021 56,285

Nine months ended

September 30, 2022

March 31, 2023 Weighted-average value at award date

Balance as of December 31, 2022 63,343 $ 20.40

Granted 125,234 15.57

Vested ( 3,211 ) 15.57

Forfeited — —

Balance as of September 30, 2022 63,343

Nine months ended

September 30, 2021

Balance as of March 31, 2023 185,366 $ 17.19

Three months ended

March 31, 2022 Weighted-average value at award date

Balance as of December 31, 2021 56,285 $ 20.43

Granted 8,296 20.18

Balance as of September 30, 2021 56,285

Forfeited — —

Balance as of March 31, 2022 64,581 $ 20.40

EARNINGS PER SHARE

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

The following information sets forth the computations of basic and diluted weighted average earnings per common share for the three months ended March 31, 2023 and 2022:

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

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

Net income attributable to common shareholders $ 10,025,274 $ 10,162,120

Dividends paid on unvested restricted stock ( 35,472 ) ( 28,143 )

Net income attributable to common shareholders 9,989,802 10,133,977

Basic weighted average shares of common stock outstanding 20,303,797 19,319,993

Weighted average unvested restricted stock and stock options 185,366 271,479

Diluted weighted average shares of common stock outstanding 20,489,163 19,591,472

1 unchanged sentence

Diluted weighted average earnings per common share $ 0.49 $ 0.52

Diluted weighted average earnings per common share excludes 2,280,372 and 742,000 stock options due to anti-dilutive effect for the three months ended March 31, 2023 and 2022, respectively .

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.

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

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

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

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

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

The income tax provision for the Company was approximately $ 175.1 thousand and $ 18.3 thousand for the three months ended March 31, 2023 and 2022, respectively.

The income tax expense for the three months ended March 31, 2023 and 2022 primarily relates to activities of the Company’s taxable REIT subsidiary.

For the three months ended March 31, 2023 and 2022, the Company incurred no expense for United States federal excise tax.

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

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

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

Fair Value Measurement as of September 30, 2022

The following tables present fair value measurements of loans held at fair value as of March 31, 2023 and December 31, 2022:

Fair Value Measurement as of March 31, 2023

Total Level 1 Level 2 Level 3

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Total $ 99,226,051 $ — $ — $ 99,226,051

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

Nine months ended

September 30, 2022

The following table presents changes in loans that use Level 3 inputs as of and for the three months ended March 31, 2023:

Three months ended

March 31, 2023

Total loans using Level 3 inputs at December 31, 2022 $ 99,226,051

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Additional fundings 802,884

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

Loan repayments ( 1,960,000 )

Loan amortization payments ( 1,089,776 )

Accretion of original issue discount 380,086

PIK interest 992,871

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

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

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

Total loans using Level 3 inputs at March 31, 2023 $ 99,924,201

The change in unrealized losses included in the unaudited interim consolidated statements of operations attributable to loans held at fair value, categorized as Level 3, held as of March 31, 2023 is $( 1,477,691 ).

The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of March 31, 2023 and December 31, 2022.

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

As of September 30, 2022

As of March 31, 2023

Unobservable Input

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Investment in Marketable Securities

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

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

As of March 31, 2023 and December 31, 2022 , the Company’s portfolio did not include any debt securities.

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

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

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

Principal Original Issue Discount Unrealized Gains (Losses) Fair Value

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 — — 168,750 168,750

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

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

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

Fair Value Measurement as of September 30, 2022

Total Level 1 Level 2 Level 3

Debt securities held at fair value $ — $ — $ — $ —

Total $ — $ — $ — $ —

Fair Value Measurement as of December 31, 2021

Total Level 1 Level 2 Level 3

Debt securities held at fair value $ 15,881,250 $ — $ 15,881,250 $ —

Total $ 15,881,250 $ — $ 15,881,250 $ —

For the three months ended March 31, 2022, the realized loss on the sale of debt securities was approximately $ 0.2 million.

Fair Value of Financial Instruments

GAAP requires disclosure of fair value information about financial instruments, whether or not recognized at fair value in the balance sheet, for which it is practicable to estimate that value.

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

As of September 30, 2022

The following table details the book value and fair value of the Company’s financial instruments not recognized at fair value in the unaudited interim consolidated balance sheet as of March 31, 2023 :

As of March 31, 2023

Carrying Value Fair Value

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Loans held for investment at carrying value $ 275,211,195 $ 268,178,899

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

Loan receivable held at carrying value $ 2,220,653 $ 1,200,063

Financial liabilities:

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

Senior notes payable, net $ 87,565,548 $ 69,466,810

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

The Company’s loans held for investment are measured using unobservable inputs, or Level 3 inputs.

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

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

The fair value of the Company’s 2027 Senior Notes is estimated by discounting expected cash flows using readily available quoted prices for similar debt, or Level 2 inputs.

RELATED PARTY TRANSACTIONS

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Pursuant to the Management Agreement, the Manager manages the loans and day-to-day operations of the Company, subject at all times to the further terms and conditions set forth in the Management Agreement and such further limitations or parameters as may be imposed from time to time by the Company’s Board.

The Manager receives base management fees (the “Base Management Fee”) that are calculated and payable quarterly in arrears, in an amount equal to 0.375 % of the Company’s Equity (as defined below), subject to certain adjustments, less 50 % of the aggregate amount of any other fees (“Outside Fees”), including any agency fees relating to our loans, but excluding the Incentive Compensation (as defined below) and any diligence fees paid to and earned by the Manager and paid by third parties in connection with the Manager’s due diligence of potential loans.

Prior to the IPO, the quarterly base management fee was equal to 0.4375 % of the Company’s Equity, subject to certain adjustments, less 100 % of the aggregate amount of any Outside Fees, including any agency fees relating to the Company’s loans, but excluding the Incentive Compensation and any diligence fees paid to and earned by the Manager and paid by third parties in connection with the Manager’s due diligence of potential loans.

The Manager receives base management fees (the “Base Management Fee”) that are calculated and payable quarterly in arrears, in an amount equal to 0.375 % of the Company’s Equity (as defined in the Management Agreement), subject to certain adjustments, less 50 % of the aggregate amount of any other fees (“Outside Fees”), including any agency fees relating to our loans, but excluding the Incentive Compensation (as defined below) and any diligence fees paid to and earned by the Manager and paid by third parties in connection with the Manager’s due diligence of potential loans.

In addition to the Base Management Fee, the Manager is entitled to receive incentive compensation (the “Incentive Compensation” or “Incentive Fees”) under the Management Agreement.

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

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

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

The Incentive Compensation for the three months ended March 31, 2023 and 2022 was approximately $ 2.8 million and $ 3.0 million, respectively.

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

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

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

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

The following table summarizes the related party costs incurred by the Company for the three months ended March 31, 2023 and 2022:

Three months ended

September 30, Nine months ended

September 30,

2022 2021 2022 2021

Affiliate Costs

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Total $ 4,790,246 $ 4,753,930

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

Amounts payable to the Company’s Manager as of March 31, 2023 and December 31, 2022 were approximately $ 4.8 million and $ 5.7 million, respectively.

Due to Affiliate

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

Amounts due to an affiliate of the Company as of March 31, 2023 and December 31, 2022 were approximately $ 20.0 thousand and $ 18.1 thousand, respectively.

Investments in Loans

From time to time, the Company may co-invest with other investment vehicles managed by the Company’s Manager or its affiliates and their portfolio companies, including by means of splitting loans, participating in loans or other means of syndicating loans.

From time to time, the Company may co-invest with other investment vehicles managed by the Company’s Manager or its affiliates, including the Manager, and their portfolio companies, including by means of splitting loans, participating in loans or other means of syndicating loans.

The Company is not obligated to provide, nor has it provided, any financial support to the other managed investment vehicles.

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

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

In March 2022, the Company entered into the fourth amendment of the Amended and Restated Credit Agreement with Public Company F to, among other things, increase the total loan commitments by $ 100.0 million, with approximately (i) $ 26.6 million of the new loan commitments allocated to us;

(ii) $ 15.0 million of the new loan commitments allocated to Flower Loan Holdco LLC, an affiliated entity in which Leonard Tannenbaum, our Chief Executive Officer and Chairman, is the majority ultimate beneficial owner;

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

In connection with investments in loans, the Company may receive the option to assign the right (the “Assigned Right”) to acquire warrants and/or equity of the borrower.

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

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

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

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

As of March 31, 2023, there were four co-invested loans held by the Company and affiliates of the Company.

In July 2021, the senior secured loan facility with Private Company I, consisting of an aggregate of $ 15.5 million in loan commitments, was syndicated by the Company’s Manager between the Company and A BDC Warehouse, LLC (“ABW”), an entity wholly-owned by the Company’s Chief Executive Officer and Chairman of the Board and President.

ABW’s commitment in the loan facility was ultimately transferred to AFC Institutional Fund LLC (“AFCIF”), an entity beneficially owned in part, by the Company’s (i) Chief Executive Officer and Chairman of the Board, (ii) President and (iii) Head of Real Estate and a Director, while each such owner also maintains a beneficial ownership of the Company’s Manager.

AFCIF holds approximately one-third of the loan’s aggregate principal amount as of March 31, 2023.

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

In September 2021, the Company entered into 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 , which was funded in September 2021.

The loans were purchased at accreted cost plus accrued PIK interest.

We did not pay any fees or premium to our Manager for the Company’s acquisition of the Company’s Manager’s loan commitments under the Credit Agreement with Private Company A pursuant to the September Commitment Assignment.

In December 2021, the Company entered into the second amendment to the Private Company A Credit Facility to, among other things, increase the total loan commitments by $ 20.0 million in an additional tranche, with $ 2.5 million allocated to Flower Loan Holdco, LLC, an entity wholly-owned by the Company’s Chief Executive Officer and Chairman of the Board and President (“FLH”), and the remaining new commitment allocated to third-party lenders.

In February 2022, the Company entered into the third amendment to the Private Company A Credit Facility to, among other things, increase the total loan commitments by $ 16.3 million in an additional tranche, with approximately $ 15.3 million allocated to the Company and approximately $ 1.0 million allocated to a third-party lender.

In November 2022, the Company 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, the Company now holds approximately $ 84.9 million in commitments.

In March 2023, the credit facility with Private Company A was amended to, among other things and subject to certain terms and conditions, (i) increase the interest rate of certain tranches such that the facility has a uniform interest rate of 13.0 % across certain tranches;

(ii) reprioritize the allocation of principal and interest payments to first be applied to a specific tranche under the facility;

and (iii) establish the requirement for a blocked account to hold the cash proceeds from the sale of certain assets and distribute such proceeds to the lenders.

In September 2021, the Company entered into the second amended and restated credit agreement with Subsidiary of Private Company G to, among other things, increase the total loan commitments by $ 53.4 million in three tranches, with approximately $ 10.0 million allocated to ABW and the remaining $ 43.4 million allocated to the Company.

ABW’s commitment was ultimately transferred to AFCIF.

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

Following the expansion, the Company now holds $ 73.5 million in commitments, of which the Company has funded approximately $ 71.1 million in total principal amount.

In December 2021, the Company entered into a credit agreement with Subsidiary of Public Company H, which provides Subsidiary of Public Company H with a $ 100.0 million senior secured credit facility, of which, we committed $ 60.0 million, a predecessor-in-interest to AFCIF committed $ 10.0 million, and third-party lenders committed $ 30.0 million of the aggregate principal amount.

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 pro rata to the Company, $ 5.0 million was allocated to AFCIF and the remaining $ 15.0 million was allocated to a third-party lender.

Secured Revolving Credit Facility From Affiliate

In April 2022, the Company terminated the AFCF Revolving Credit Facility.

Refer to Note 9 to the Company’s unaudited consolidated financial statements for more information.

Refer to Note 9 to the Company’s unaudited interim consolidated financial statements for more information.

DIVIDENDS AND DISTRIBUTIONS

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

The following table summarizes the Company’s dividends declared during the three months ended March 31, 2023 and 2022:

Record Date Payment

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Regular cash dividend 3/31/2023 4/14/2023 $ 0.56 $ 0.56 $ — $ 0.56

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

2021 Period Subtotal $ 1.17 $ 1.17 $ — $ 1.17

Regular cash dividend 3/31/2022 4/15/2022 $ 0.55 $ 0.55 $ — $ 0.55

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

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

2022 Period Subtotal $ 1.67 $ 1.67 $ — $ 1.67

SUBSEQUENT EVENTS

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

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

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

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

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

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

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

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

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

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

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

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

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

In April 2023, the credit facility with Subsidiary of Private Company G was amended to, among other things and subject to certain other terms and conditions, (i) amend certain cash equity capital contribution requirements, (ii) add additional real property to the collateral, (iii) extend the draw period, (iv) permit 75 % of accrued cash interest due and owing to instead be paid in kind until and including the payment due May 1, 2023, subject to a monthly fee, and (v) modify the excess cash flow sweep.

Due to challenges raising equity capital in this current market environment, Subsidiary of Private Company G intends to sell certain collateral assets to pay down outstanding principal and non-core, non-collateral assets to generate additional capital for its operations.

If the borrower is unable to return to full cash payment of interest in connection with the payment due June 1, 2023, it would have an adverse impact on the Company’s Distributable Earnings for the near-term future and reduce the Company’s ability to pay dividends during such period.

In April 2023, the credit agreement with Subsidiary of Public Company H was amended to, among other things, (i) reduce the total loan commitment by $ 10.0 million ratably amongst the lenders, including the Company, of which $ 6.0 million of the reduced commitment was allocated to the Company and $ 9.0 million of additional principal was funded by the Company and (ii) strengthen the real estate coverage covenants.

Following the amendment, the Company now holds $ 84.0 million in commitments, which is fully funded.

Private Company I failed to pay its full principal and interest payments due May 1, 2023, and AFC Agent LLC (“AFC Agent”) has delivered a notice of an event of default based on this payment default and certain other defaults under the credit agreement.

The lenders have not opted to accelerate the obligations under the credit agreement at this time, however they have required that the borrower commence a process to sell certain assets to repay its obligations under the credit facility.

In May 2023, AFC Agent received $ 5.1 million in total loan principal repayments from Private Company A, relating to the sale of certain non-core assets, of which approximately $ 3.6 million was allocated to the Company.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

• our business and investment strategy;

• the ability of our Manager to locate suitable loan opportunities for us and to monitor and actively manage our portfolio and implement our investment strategy;

• our expected ranges of originations and repayments;

• the allocation of loan opportunities to us by our Manager;

• our projected operating results;

• actions and initiatives of the U.S.

or state governments and changes to government policies and the execution and impact of these actions, initiatives and policies, including the fact that cannabis remains illegal under federal law and certain state laws;

• the estimated growth in and evolving market dynamics of the cannabis market;

• changes in general economic conditions, in our industry and in the commercial finance and real estate markets;

• the demand for cannabis cultivation and processing facilities;

• shifts in public opinion and state regulation regarding cannabis;

• the state of the U.S.

economy generally or in specific geographic regions;

• the impact of a protracted decline in the liquidity of credit markets on our business;

• increased competition;

• fluctuations in interest rates negatively affecting our business and our portfolio companies;

• ability to maintain and enforce our contractual arrangements and relationships with third parties;

• lack of liquidity of investments in our portfolio, particularly those having no liquid trading market;

• actual and potential conflicts of interest with the Manager, and/or their respective affiliates;

• potential inability of our portfolio companies to achieve their objectives;

• the amount, collectability and timing of our cash flows, if any, from our loans;

• our ability to obtain and maintain financing arrangements;

• our ability to maintain our exemption from registration under the Investment Company Act;

• our ability to qualify for treatment as a REIT for U.S.

federal income tax purposes and to comply with and conduct our business in accordance with such rules;

• actions and initiatives of the U.S.

or state governments and changes to government policies and the execution and impact of these actions, initiatives and policies, including the fact that cannabis remains illegal under federal law;

• the ability of our Manager to attract and/or retain highly talented professionals;

• increase in the rates of default or decreased recovery rates on debt investments in our portfolio;

• our expected leverage;

• changes in the value of our loans;

• losses that may arise due to the concentration of our portfolio in a limited number of loans and borrowers;

• our expected investment and underwriting process;

• the rates of default or recovery rates on our loans;

• the degree to which our hedging strategies may or may not protect us from interest rate volatility;

• the availability of investment opportunities in mortgage-related and real estate-related instruments and other securities;

• changes in interest rates and impacts of such changes on our results of operations, cash flows and the market value of our loans;

• interest rate mismatches between our debt investments and any leverage used to fund such investments.

• interest rate mismatches between our loans and our borrowings used to fund such loans;

• the departure of any of the executive officers or key personnel supporting and assisting us from our Manager or its affiliates;

• impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters;

• our ability to maintain our exemption from registration under the Investment Company Act;

• our ability to qualify and maintain our qualification as a REIT for U.S.

federal income tax purposes;

• estimates relating to our ability to make distributions to our shareholders in the future;

• our understanding of our competition;

• market trends in our industry, interest rates, real estate values, the securities markets or the general economy.

Please see the section entitled “ Risk Factors ” located in our Annual Report on Form 10-K, filed with the SEC on March 7, 2023, for a further discussion of these and other risks and uncertainties which could affect our future results.

of anticipated or unanticipated events, except to the extent we are legally required to disclose certain matters in SEC filings or otherwise .

These forward-looking statements apply only as of the date of this report and we undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except to the extent we are legally required to disclose certain matters in SEC filings or otherwise .

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

What changed 10-Q

Item 1. Financial Statements