What changed in this filing

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Item 1. Financial Statements

2024-05-09 compared with 2023-11-08 · 239 added, 410 removed, 547 unchanged (54% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30, 2023 December 31, 2022

Loans held for investment at fair value (cost of $ 72,573,622 and $ 100,635,985 at September 30, 2023 and December 31, 2022, respectively, net)

March 31, 2024 December 31, 2023

Loans held for investment at fair value (cost of $ 68,514,273 and $ 71,644,003 at March 31, 2024 and December 31, 2023, respectively, net)

$ 54,977,282 $ 61,720,705

4 unchanged sentences

Cash and cash equivalents 82,298,440 121,626,453

Accounts receivable 5,690,097 1,837,450

Interest receivable 4,362,274 3,715,995

Due from affiliate 1,000,000 —

Prepaid expenses and other assets 532,829 688,446

Total assets $ 476,405,985 $ 466,585,055

Interest reserve $ 550,950 $ 3,200,944

Accrued interest $ 2,201,888 $ 894,000

10 unchanged sentences

Shareholders’ equity

Preferred stock, par value $ 0.01 per share, 10,000 shares authorized at September 30, 2023 and December 31, 2022 and 125 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Common stock, par value $ 0.01 per share, 50,000,000 shares authorized at September 30, 2023 and December 31, 2022 and 20,457,697 and 20,364,000 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Preferred stock, par value $ 0.01 per share, 10,000 shares authorized at March 31, 2024 and December 31, 2023 and 125 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Common stock, par value $ 0.01 per share, 50,000,000 shares authorized at March 31, 2024 and December 31, 2023 and 20,667,094 and 20,457,697 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

206,671 204,577

7 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Interest income $ 16,361,060 $ 18,500,486

13 unchanged sentences

Income tax expense 158,360 175,102

Net income $ 7,979,875 $ 11,480,519 $ 30,140,482 $ 32,994,312

Net (loss) income $ ( 54,116 ) $ 10,025,274

Earnings per common share:

Basic earnings per common share (in dollars per share) $ 0.39 $ 0.57 $ 1.47 $ 1.67

Diluted earnings per common share (in dollars per share) $ 0.39 $ 0.57 $ 1.47 $ 1.66

Basic (loss) earnings per common share (in dollars per share) $ ( 0.01 ) $ 0.49

Diluted (loss) earnings per common share (in dollars per share) $ ( 0.01 ) $ 0.49

Weighted average number of common shares outstanding:

3 unchanged sentences

AFC GAMMA, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Net income $ 7,979,875 $ 11,480,519 $ 30,140,482 $ 32,994,312

Other comprehensive income (loss):

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

Total comprehensive income $ 7,979,875 $ 11,480,519 $ 30,140,482 $ 33,163,062

See accompanying notes to the consolidated financial statements

AFC GAMMA, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three months ended September 30, 2023

Stock Common Stock Additional

Capital Accumulated Other Comprehensive Income (Loss) Accumulated

(Deficit) Total

Shareholders’

Shares Amount

Balance at June 30, 2023 $ 1 20,457,697 $ 204,577 $ 349,216,404 $ — $ ( 9,102,745 ) $ 340,318,237

Stock-based compensation — — — 294,014 — — 294,014

Dividends declared on common shares ($ 0.48 per share)

— — — — — ( 9,819,695 ) ( 9,819,695 )

Net income — — — — — 7,979,875 7,979,875

Balance at September 30, 2023 $ 1 20,457,697 $ 204,577 $ 349,510,418 $ — $ ( 10,942,565 ) $ 338,772,431

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

See accompanying notes to the consolidated financial statements

AFC GAMMA, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Nine months ended September 30, 2023

Three months ended March 31, 2024

Stock Common Stock Additional

Capital Accumulated Other Comprehensive Income (Loss) Accumulated

Capital Accumulated

(Deficit) Total

5 unchanged sentences

— — — — ( 9,920,205 ) ( 9,920,205 )

Dividends declared on preferred shares ($ 60 per share)

— — — — — ( 7,500 ) ( 7,500 )

Net income — — — — — 30,140,482 30,140,482

Balance at September 30, 2023 $ 1 20,457,697 $ 204,577 $ 349,510,418 $ — $ ( 10,942,565 ) $ 338,772,431

Nine months ended September 30, 2022

Net (loss) — — — — ( 54,116 ) ( 54,116 )

Balance at March 31, 2024 $ 1 20,667,094 $ 206,671 $ 350,347,018 $ ( 39,932,564 ) $ 310,621,126

Three months ended March 31, 2023

Stock Common Stock Additional

Capital Accumulated Other Comprehensive Income (Loss) Accumulated

Capital Accumulated

(Deficit) Total

2 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

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

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:

Net income $ 30,140,482 $ 32,994,312

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Net (loss) income $ ( 54,116 ) $ 10,025,274

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Provision for current expected credit losses 4,931,674 702,426

8 unchanged sentences

Changes in operating assets and liabilities

Accounts receivable 55 —

Interest receivable ( 640,023 ) 1,409,750

9 unchanged sentences

Proceeds from sales of loans 1,796,042 13,693,481

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

Due from affiliate ( 1,000,000 ) —

Principal repayment of loans 28,513,871 2,821,467

1 unchanged sentence

Cash flows from financing activities:

Proceeds from sale of common stock — 75,057,650

Payment of offering costs - equity offering — ( 1,711,365 )

Payment of financing costs ( 225,000 ) —

Borrowings on revolving credit facility 60,000,000 —

Repayment of revolving credit facility ( 42,000,000 ) ( 60,000,000 )

Dividends paid to common and preferred shareholders ( 9,819,695 ) ( 11,403,840 )

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

Repayment on revolving credit facility ( 81,000,000 ) ( 75,000,000 )

Net cash provided by (used in) financing activities 8,180,305 ( 79,141,340 )

5 unchanged sentences

OID withheld from funding of loans $ 1,641,888 $ —

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

Dividends declared and not yet paid $ 9,920,205 $ 11,473,971

5 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2023

As of March 31, 2024

AFC Gamma, Inc.

4 unchanged sentences

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

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

TRS1 began operating in July 2021, and the financial statements of TRS1 are consolidated within the Company’s consolidated financial statements.

The Company’s wholly-owned subsidiary, Sunrise Realty Trust, Inc.

(“SUNS”) (f/k/a CRE South LLC), was formed on August 28, 2023 and converted from a Delaware limited liability company to a Maryland corporation in February 2024.

The financial statements of SUNS are consolidated within the Company’s consolidated financial statements.

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.

10 unchanged sentences

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.

The current period’s results of operations will not necessarily be indicative of results that ultimately may be realized for the year ending December 31, 2024.

Use of Estimates in the Preparation of Financial Statements

3 unchanged sentences

Recent Accounting Pronouncements

In October 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023 - 06, Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, to clarify or improve disclosure and presentation requirements of a variety of topics, which will allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the FASB accounting standard codification with the SEC’s regulations.

The Company is currently evaluating the provisions of the amendments and the impact on the Company’s future consolidated financial statements.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023 - 07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, early adoption is permitted.

The amendments should be applied retrospectively to all prior period s presented in the financial statements.

Upon transition, the segment expense categories and amounts disclosed in the prior periods should be based on the significant segment expense categories identified and disclosed in the period of adoption.

The Company is currently evaluating the impact of the update on the Company’s future consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 improves the transparency of income tax disclosures related to rate reconciliation and income taxes.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024.

For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

The amendments should be applied prospectively, however retrospective application is permitted.

The Company is currently evaluating the impact of the update on the Company’s future consolidated financial statements.

LOANS HELD FOR INVESTMENT AT FAIR VALUE

As of September 30, 2023 and December 31, 2022, the Company’s portfolio included two and three loans held at fair value, respectively.

The aggregate originated commitment under these loans was approximately $ 94.2 million and $ 104.3 million, respectively, and outstanding principal was approximately $ 73.0 million and $ 102.4 million as of September 30, 2023 and December 31, 2022, respectively.

For the nine months ended September 30, 2023, the Company funded approximately $ 1.9 million of additional principal and had approximately $ 33.0 million of principal repayments of loans held at fair value.

As of September 30, 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 September 30, 2023 and December 31, 2022:

As of September 30, 2023

As of March 31, 2024 and December 31, 2023, the Company’s portfolio included two loans held at fair value.

The aggregate originated commitment under these loans was approximately $ 94.2 million and $ 94.2 million, respectively, and outstanding principal was approximately $ 68.6 million and $ 71.9 million as of March 31, 2024 and December 31, 2023, respectively.

For the three months ended March 31, 2024, the Company received approximately $ 4.0 million of principal repayments of loans held at fair value.

As of March 31, 2024 and December 31, 2023, 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, 2024 and December 31, 2023:

As of March 31, 2024

Fair Value (1)

12 unchanged sentences

Remaining Life

(Years) (3)(4)

Senior term loans $ 61,720,705 $ 71,644,003 $ 71,883,402 0.4

Total loans held at fair value $ 61,720,705 $ 71,644,003 $ 71,883,402 0.4

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

(1) Refer to Note 14.

(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, 2023 and December 31, 2022.

(4) As of September 30, 2023, the weighted average remaining life only reflects the remaining life of the Private Company A Credit Facility.

The following table presents changes in loans held at fair value as of and for the nine months ended September 30, 2023:

(3) Weighted average remaining life is calculated based on the fair value of the loans as of March 31, 2024 and December 31, 2023.

(4) As of March 31, 2024 and December 31, 2023, the weighted average remaining life only reflects the remaining life of the Private Company A Credit Facility.

The following table presents changes in loans held at fair value as of and for the three months ended March 31, 2024:

Principal Original Issue

1 unchanged sentence

Total loans held at fair value at December 31, 2023 $ 71,883,402 $ ( 239,399 ) $ ( 9,923,298 ) $ 61,720,705

Realized gains (losses) on loans at fair value, net ( 1,213,416 ) — — ( 1,213,416 )

Change in unrealized gains (losses) on loans at fair value, net — — ( 3,613,693 ) ( 3,613,693 )

New fundings 1,881,840 — — 1,881,840

Accretion of original issue discount — 128,384 — 128,384

1 unchanged sentence

PIK interest 745,831 — — 745,831

Total loans held at fair value at September 30, 2023 $ 73,005,930 $ ( 432,308 ) $ ( 2,562,744 ) $ 70,010,878

In September 2023, the credit facility with Public Company A matured without repayment.

The agent on the credit facility has placed the borrower in default, and the Company has recorded a realized loss 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 September 30, 2023 is as follows:

Total loans held at fair value at March 31, 2024 $ 68,625,288 $ ( 111,015 ) $ ( 13,536,991 ) $ 54,977,282

As of March 31, 2024 , the Company ha d one l oan held at fair value on nonaccrual status.

As of March 1, 2024, the Company placed Private Company A on nonaccrual status with an outstanding principal amount of approximately $ 49.7 million and an unrealized loss of approximately $( 10.2 ) million.

A more detailed listing of the Company’s loans held at fair value portfolio based on information available as of March 31, 2024 is as follows:

Collateral Location Collateral

1 unchanged sentence

Rate Maturity Date (4)

A AZ, MI, MA, NM C, D $ 52,722,454 $ 54,249,907 $ 54,682,215 15.7 % (6)

A AZ, GA, MA, NM C, D $ 39,435,412 $ 49,618,381 $ 49,729,397 15.7 % (6)

B MI C, D 15,541,870 18,895,892 18,895,891 18.7 % (7)

1 unchanged sentence

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

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

(2) Refer to Note 14.

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

5 unchanged sentences

(6) Base weighted average interest rate of 13.0 % and payment-in-kind (“PIK”) weighted average interest rate of 2.7 %.

In October 2023, AFC Agent delivered a notice of default to Private Company A based on certain financial and other covenant defaults and began charging additional default interest of 5.0 %, beginning as of July 1, 2023, in accordance with the terms of the Private Company A Credit Facility.

In October 2023, AFC Agent LLC (“AFC Agent”) delivered a notice of default to Private Company A based on certain financial and other covenant defaults and began charging additional default interest of 5.0 %, beginning as of July 1, 2023, in accordance with the terms of the Private Company A Credit Facility.

Effective March 1, 2024, the Company placed the borrower on nonaccrual status.

(7) The maturity date passed on the credit facility to Private Company B without repayment.

3 unchanged sentences

As amended by the forbearance and modification agreement entered into with Private Company B in February 2023, the 4.0 % default interest rate is applicable from January 15, 2023 and is paid in kind.

Outstanding principal balance also includes a protective advance of approximately $ 0.2 million made in September 2023 to cover certain expenses and was repaid in November 2023.

Interest on the protective advance is calculated at the same rate as standard monthly cash interest and PIK interest, plus default interest.

LOANS HELD FOR INVESTMENT AT CARRYING VALUE

As of September 30, 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 $ 335.1 million and $ 338.9 million, respectively, and outstanding principal was approximately $ 322.7 million and $ 296.6 million, respectively, as of September 30, 2023 and December 31, 2022.

During the nine months ended September 30, 2023, the Company funded approximately $ 59.1 million of new loans and additional principal, had approximately $ 16.7 million of principal repayments of loans held at carrying value and sold $ 22.6 million in the aggregate of the Company’s investment in Subsidiary of Public Company M and Private Company I.

As of September 30, 2023 and December 31, 2022, approximately 84 % and 73 %, respectively, of the Company’s loans held at carrying value had floating interest rates.

As of September 30, 2023, t hese floating benchmark rates included one-month Secured Overnight Financing Rate (“SOFR”) subject to a weighted average floor of 3.3 % and quoted at 5.3 % and U.S.

As of March 31, 2024 and December 31, 2023, t he Company’s portfolio included twelve and nine loans held at carrying value, respectively.

The aggregate originated commitment under these loans was approximately $ 402.6 million and $ 333.1 million, resp ectively, and outstanding principal was approximately $ 370.6 million and $ 314.4 million, respectively, as of March 31, 2024 and December 31, 2023.

During the three months ended March 31, 2024, the Company funded approximately $ 85.8 million of new loans and additional principal, had approximately $ 24.5 million of principal repayments of loans held at carrying value and sold $ 6.0 million of the Company’s investment in Subsidiary of Public Company M.

As of March 31, 2024 and December 31, 2023, approximately 61 % and 84 %, respectively, of the Company’s loans held at carrying value had floating interest rates.

As of March 31, 2024, t hese floating benchmark rates included one-month Secured Overnight Financing Rate (“SOFR”) subject to a weighted average floor of 3.7 % and quoted at 5.3 % and U.S.

prime rate subject to a weighted average floor of 5.4 % and quoted at 8.5 %.

The following tables summarize the Company’s loans held at carrying value as of September 30, 2023 and December 31, 2022:

As of September 30, 2023

The following tables summarize the Company’s loans held at carrying value as of March 31, 2024 and December 31, 2023:

As of March 31, 2024

Principal (1)

2 unchanged sentences

Senior term loans $ 323,858,794 $ ( 12,434,565 ) $ 311,424,229 2.2

Subordinate debt 46,696,032 ( 267,794 ) 46,428,238 1.5

Total loans held at carrying value $ 370,554,826 $ ( 12,702,359 ) $ 357,852,467 2.1

6 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, 2023 and December 31, 2022.

The following table presents changes in loans held at carrying value as of and for the nine months ended September 30, 2023:

(2) Weighted average remaining life is calculated based on the carrying value of the loans as of March 31, 2024 and December 31, 2023.

The following table presents changes in loans held at carrying value as of and for the three months ended March 31, 2024:

Principal Original Issue

7 unchanged sentences

Loan amortization payments ( 1,218,953 ) — ( 1,218,953 )

Total loans held at carrying value at September 30, 2023 $ 322,737,668 $ ( 14,726,592 ) $ 308,011,076

As of September 30, 2023 , the Company had one loan held at carrying value on non-accrual status.

As of May 1, 2023, Private Company I was placed on non-accrual status with an outstanding principal amount of approximately $ 3.8 million.

Subsidiary of Private Company G was placed on non-accrual status from June 1, 2023 to August 31, 2023.

In September 2023, a forbearance agreement was entered into with Subsidiary of Private Company G.

In exchange for such forbearance, Subsidiary of Private Company G agreed to, among other things, sell certain assets, including certain collateral, the proceeds of which will be applied to the outstanding obligations under the credit agreement with Private Company G, to provide certain additional collateral, and to contribute additional cash equity to be held in escrow by AFC Agent.

As amended by the forbearance agreement entered into with Subsidiary of Private Company G, the borrower was required to pay interest of $ 0.8 million pro rata to the lender group for the month of September and must pay $ 1.0 million pro rata to the lender group for each of the months of October, November, and December.

Subsidiary of Private Company G paid September and October interest in accordance with the terms of the forbearance agreement, which was due October 1, 2023 and November 1, 2023, respectively, and the credit facility was restored to accrual status.

A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of September 30, 2023 is as follows:

Total loans held at carrying value at March 31, 2024 $ 370,554,826 $ ( 12,702,359 ) $ 357,852,467

As of March 31, 2024 , the Company had two loans held at carrying value on nonaccrual status.

The Company placed Subsidiary of Private Company G on nonaccrual status effective December 1, 2023, with an outstanding principal amount of approximately $ 79.2 million and an amortized cost of approximately $ 77.8 million.

Subsidiary of Private Company G was previously placed on nonaccrual status during various periods in 2023.

The Company will recognize income related to loan activity only upon receipt of cash.

During the three months ended March 31, 2024, the Company recognized approximately $ 0.7 million of interest income related to this loan.

The Company placed Private Company K on nonaccrual status effective December 1, 2023, with an outstanding principal amount of approximately $ 13.4 million and an amortized cost of approximately $ 12.8 million.

The Company will recognize income related to loan activity only upon receipt of cash.

During the three months ended March 31, 2024, the Company recognized approximately $ 0.1 million of interest income related to this loan.

In March 2024, the Company was repaid on all remaining principal under the loan to Private Company I, which was previously placed on nonaccrual status, effective May 1, 2023.

In addition to the repayment of the outstanding principal amount of approximately $ 3.8 million, the Company also received and recognized past due cash interest of approximately $ 0.7 million during the three months ended March 31, 2024 .

A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of March 31, 2024 is as follows:

Collateral Location Collateral

5 unchanged sentences

of Private Co.

G MO, NJ, PA C, D 80,625,124 ( 1,544,492 ) 79,080,632 18.8 % (6)

G NJ, PA C, D 79,215,888 ( 1,444,847 ) 77,771,041 12.5 % (6)

K MA C, D 13,445,762 ( 682,619 ) 12,763,143 19.3 % (7)

I MD C, D 3,767,454 ( 50,036 ) 3,717,418 21.8 % (8)

J MO C, D 21,228,511 ( 278,793 ) 20,949,718 19.3 % (8)

of Public Co.

H CT, IA, IL, ME, MI, NJ, PA C, D 84,000,000 ( 2,747,942 ) 81,252,058 14.3 % (10)

H CT, IA, IL, ME, MI, NJ, NY, OH, PA C, D 84,000,000 ( 2,137,289 ) 81,862,711 14.3 % (9)

L MO, OH C, D 44,332,375 ( 1,233,008 ) 43,099,367 13.7 % (10)

of Public Co.

M IL, MI, MA, NJ, OH, PA C, D 20,822,000 ( 2,513,150 ) 18,308,850 9.5 % (12)

M IL, MA, MD, MI, NJ, OH, PA C, D 12,822,000 ( 1,521,459 ) 11,300,541 9.5 % (11)

8/27/2025 I/O

1 unchanged sentence

7/31/2026 P/I

N - Real Estate FL C, D 16,800,000 ( 672,000 ) 16,128,000 13.3 % (13)

N - Non-Real Estate FL C, D 17,200,000 ( 688,000 ) 16,512,000 13.3 % (14)

CRE Private Co.

A TX Mixed-use 25,779,522 — 25,779,522 20.6 % (15)

5/31/2024 I/O

CRE Private Co.

B FL Multifamily 20,916,510 ( 267,794 ) 20,648,716 13.0 % (16)

5/12/2027 I/O

Total loans held at carrying value $ 370,554,826 $ ( 12,702,359 ) $ 357,852,467

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

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

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

7 unchanged sentences

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 was paid in kind from December 1, 2022 to May 1, 2023.

Subsidiary of Private Company G was placed on non-accrual status from June 1, 2023 to August 31, 2023.

In September 2023, a forbearance agreement was entered into with Subsidiary of Private Company G.

Outstanding principal balance also includes a protective advance of approximately $ 1.6 million made in September 2023 to cover certain construction expenses and was repaid in October 2023.

Interest on the protective advance is calculated at the same rate as standard monthly cash interest, plus an additional 5.0 % default interest rate.

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

(6) Base interest rate of 12.5 % .

Effective March 2024, pursuant to the forbearance agreement with Subsidiary of Private Company G, Subsidiary of Private Company G transitioned from a floating interest rate tied to U.S.

prime rate to a fixed interest rate.

Effective December 1, 2023, the Company placed the borrower on nonaccrual status.

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

As amended, between 50.0 % and 60.0 % of the monthly cash interest was paid in kind from October 1, 2022 to April 1, 2023 and an additional 5.0 % default rate has been applied since May 8, 2023 and the agent on this credit facility has since initiated a foreclosure proceeding.

As of May 1, 2023, this loan was placed on non-accrual status.

Effective July 2023, the floating interest rate under the credit agreement for Private Company I transitioned from LIBOR to SOFR.

As amended by the forbearance agreement entered into in March 2024, between 20.0 % and 80.0 % of the monthly cash interest will be paid in kind from December 1, 2023 to June 1, 2024.

As of December 1, 2023, the Company placed the borrower on nonaccrual status.

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

3 unchanged sentences

(10) Base interest rate of 8.4 % plus SOFR (SOFR floor of 5.0 %).

Effective September 2023, Private Company L transitioned from a fixed interest rate to a floating interest rate tied to SOFR.

(11) Base interest rate of 9.5 %.

1 unchanged sentence

Quarterly cash interest is paid in kind from closing to February 1, 2024 and then payable in cash thereafter.

(13) Base interest rate of 8.0 % plus SOFR (SOFR floor of 4.5 % ).

(14) Base interest rate of 8.0 % plus SOFR (SOFR floor of 4.5 % ).

(15) Base interest rate of 15.31 % plus SOFR (SOFR floor of 4.0 % ).

(16) Base interest rate of 13.0 %.

LOAN RECEIVABLE HELD AT CARRYING VALUE

As of September 30, 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 $ 2.0 million and $ 2.2 million as of September 30, 2023 and December 31, 2022, respectively.

During the nine months ended September 30, 2023, the Company had approximately $ 0.2 million of principal repayments of loan receivable held at carrying value.

The following table presents changes in loans receivable as of and for the nine months ended September 30, 2023:

As of March 31, 2024 and December 31, 2023, 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 $ 2.0 million as of March 31, 2024 and December 31, 2023, respectively.

The following table presents changes in loans receivable as of and for the three months ended March 31, 2024:

Principal Original Issue

2 unchanged sentences

Loan repayments — — —

Total loan receivable held at carrying value at September 30, 2023 $ 2,041,744 $ ( 1,686 ) $ 2,040,058

As of September 30, 2023 , the Company had one loan receivable held at carrying value on non-accrual status with an outstanding principal amount of approximately $ 2.0 million.

Total loan receivable held at carrying value at March 31, 2024 $ 2,041,744 $ ( 1,686 ) $ 2,040,058

As of March 31, 2024 , the Company had one loan receivable held at carrying value on nonaccrual status with an outstanding principal amount of approximately $ 2.0 million and amortized cost of approximately $ 2.0 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 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 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.

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

Estimating the CECL Reserve also requires significant judgment with respect to various factors, including but not limited to the expected timing of loan repayments and the Company’s current and future view of the macroeconomic environment.

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

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

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

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

As of September 30, 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 $ 14.4 million and $ 14.3 million, respectively, or 4.66 % and 4.97 %, respectively, of the Company’s total loans held at carrying value and loan receivable held at carrying value of approximately $ 310.1 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 $ 14.3 million and $ 13.5 million, respectively, and a liability for unfunded commitments of approximately $ 0.2 million and $ 0.8 million, respectively.

As of March 31, 2024 and December 31, 2023, the Company’s CECL Reserve for its loans held at carrying value and loan receivable held at carrying value is approximately $ 31.4 million and $ 26.4 million, respectively, or 8.71 % and 8.71 %, respectively, of the Company’s total loans held at carrying value and loan receivable held at carrying value of approximately $ 359.9 million and $ 303.3 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 $ 31.3 million and $ 26.3 million, respectively, and a liability for unfunded commitments of approximately $ 9.1 thousand and $ 115.5 thousand, 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 loan receivable held at carrying value as of and for the three and nine months ended September 30, 2023 was as follows:

Outstanding (1)

Balance at June 30, 2023 $ 13,129,270 $ 259,174 $ 13,388,444

Provision for current expected credit losses 1,145,727 ( 92,329 ) 1,053,398

Write-offs — — —

Recoveries — — —

Balance at September 30, 2023 $ 14,274,997 $ 166,845 $ 14,441,842

Outstanding (1)

3 unchanged sentences

Recoveries — — —

Balance at September 30, 2023 $ 14,274,997 $ 166,845 $ 14,441,842

(1) As of September 30, 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 September 30, 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.

Balance at March 31, 2024 $ 31,347,462 $ 9,135 $ 31,356,597

(1) As of March 31, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, 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, 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:

As of March 31, 2024, 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:

2024 2023 2022 2021 2020 Total

3 unchanged sentences

4 — — — — — —

5 — — 12,763,143 77,771,041 2,040,058 92,574,242

Total $ 79,068,238 $ 27,433,654 $ 67,163,051 $ 180,583,470 $ 5,644,112 $ 359,892,525

INTEREST RECEIVABLE

The following table summarizes the interest receivable by the Company as of September 30, 2023 and December 31, 2022:

September 30, 2023 As of

The following table summarizes the interest receivable by the Company as of March 31, 2024 and December 31, 2023:

March 31, 2024 As of

December 31, 2023

4 unchanged sentences

INTEREST RESERVE

At September 30, 2023 and December 31, 2022, the Company had one and three loans, respectively, that included a loan-funded interest reserve.

For the three and nine months ended September 30, 2023, approximately $ 0.6 million and $ 4.2 million, respectively, of aggregate interest income was earned and disbursed from the interest reserves.

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.

The following table presents changes in interest reserve as of and for the three and nine months ended September 30, 2023 and 2022:

At March 31, 2024 and December 31, 2023, the Company had zero loans that included a loan-funded interest reserve.

For the three months ended March 31, 2024 and 2023, approximately zero and $ 3.2 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, 2024 and 2023:

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Beginning reserves $ — $ 3,200,944

7 unchanged sentences

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.

During the year ended December 31, 2022, t he Company incurred a one-time commitment fee expense of approximately $ 0.5 million, which was included in prepaid expenses and other assets on the Company’s consolidated balance sheets and amortized over the life of the facility.

Upon entering into the Revolving Credit Agreement, the Company incurred a one-time commitment fee expense of approximately $ 0.5 million, which was included in prepaid expenses and other assets on the Company’s 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, payable semi-annually in arrears, which is included within interest expense in the Company’s unaudited interim consolidated statements of operations.

Based on the terms of the Revolving Credit Agreement, the Company’s estimated average cash balance will exceed the minimum balance required to waive the unused line fee and as such, the Company did not incur an unused line fee for the three months ended September 30, 2023.

As of September 30, 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.

During the third quarter of 2023, the Company drew $ 21.0 million under the Revolving Credit Facility, which was repaid prior to the end of the third quarter of 2023.

As of March 31, 2024 and December 31, 2023, outstanding borrowings under the Revolving Credit Facility was $ 60.0 million and $ 42.0 million, respectively, and zero and $ 18.0 million was available for borrowing as of March 31, 2024 and December 31, 2023, respectively.

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

1 unchanged sentence

(1) liquidity of at least $ 5.0 million, (2) annual debt service coverage of at least 1.5 to 1.0 and (3) secured debt not to exceed 25 % of total consolidated assets of the Company and its subsidiaries.

Termination of AFC Finance Revolving Credit Facility

In July 2020, the Company obtained a secured revolving credit line (the “AFCF Revolving Credit Facility”) from AFC Finance, LLC and Gamma Lending HoldCo LLC, each affiliates of the Company’s management, secured by the assets of the Company.

The AFCF Revolving Credit Facility originally had a loan commitment of $ 40.0 million at an interest rate of 8 % per annum, payable in cash in arrears.

The maturity date of the AFCF Revolving Credit Facility was the earlier of (i) July 31, 2021 and (ii) the date of the closing of any credit facility where the proceeds are incurred to refund, refinance or replace the AFCF Revolving Credit Agreement, in accordance with terms of the credit agreement governing the AFCF Revolving Credit Facility (the “AFCF Revolving Credit Agreement”).

On May 7, 2021, the Company amended the AFCF Revolving Credit Agreement (the “First Amendment”).

The First Amendment (i) increased the loan commitment from $ 40.0 million to $ 50.0 million, (ii) decreased the interest rate from 8 % per annum to 6 % per annum, (iii) removed Gamma Lending HoldCo LLC as a lender and (iv) extended the maturity date from July 31, 2021 to the earlier of (A) December 31, 2021 or (B) the date of the closing of any refinancing credit facility.

On November 3, 2021, the Company entered into the Second Amendment to the AFCF Revolving Credit Agreement (the “Second Amendment”).

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

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

In connection with the termination, the Company paid the remaining amount of the commitment fee outstanding of approximately $ 0.1 million and accelerated the remaining deferred financing costs of approximately $ 0.1 million in the second quarter of 2022.

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

2027 Senior Notes

6 unchanged sentences

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

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, 2023, the 2027 Senior Notes are guaranteed by TRS1.

TRS1 and SUNS are currently subsidiary guarantors under the Indenture.

Following the completion of the Spin-Off, SUNS will no longer be a guarantor under the Indenture.

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 nine months ended September 30, 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.

During the three months ended March 31, 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.

As of September 30, 2023 , the Company had $ 90.0 million in principal amount of the 2027 Senior Notes outstanding.

No repurchases took place during the three months ended March 31, 2024.

As of March 31, 2024 , 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, 2023 are as follows:

Scheduled principal payments on the 2027 Senior Notes as of March 31, 2024 are as follows:

2027 Senior Notes

2 unchanged sentences

Total principal 90,000,000

The following tables reflect a summary of interest expense incurred during the three and nine months ended September 30, 2023 and 2022:

Deferred financing costs included in senior notes ( 1,836,860 )

Total due senior notes, net $ 88,163,140

The following tables reflect a summary of interest expense incurred during the three months ended March 31, 2024 and 2023:

Three months ended

September 30, 2023

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

March 31, 2024

2027 Senior Notes Revolving Credit Facility Total Borrowings

Interest expense $ 1,293,750 $ 56,137 $ 1,349,887

3 unchanged sentences

Three months ended

September 30, 2022

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

Interest expense $ 1,437,500 $ — $ — $ 1,437,500

Unused fee expense — — — —

Amortization of deferred financing costs 166,458 40,130 — 206,588

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

Nine months ended

September 30, 2023

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

Interest expense $ 3,996,250 $ 37,167 $ — $ 4,033,417

Unused fee expense — 47,915 — 47,915

Amortization of deferred financing costs 482,698 212,833 — 695,531

Total interest expense $ 4,478,948 $ 297,915 $ — $ 4,776,863

Nine months ended

September 30, 2022

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

March 31, 2023

2027 Senior Notes Revolving Credit Facility Total Borrowings

Interest expense $ 1,408,750 $ 26,667 $ 1,435,417

3 unchanged sentences

COMMITMENTS AND CONTINGENCIES

As of September 30, 2023 and December 31, 2022, the Company had the following commitments to fund various investments:

September 30, 2023 As of

As of March 31, 2024 and December 31, 2023, the Company had the following commitments to fund various investments:

March 31, 2024 As of

December 31, 2023

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

As of March 31, 2024, 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.

1 unchanged sentence

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 received (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.

1 unchanged sentence

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

During the nine months ended September 30, 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.

During the three months ended March 31, 2024 and 2023 , the Company recorded approximately zero and $ 0.7 million in severance expense within general and administrative expenses within the unaudited interim consolidated statements of operations, respectively.

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.

5 unchanged sentences

Series A Preferred Stock

As of September 30, 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”).

As of March 31, 2024 and December 31, 2023, 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.

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.

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 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.

After giving effect to the partial exercise of the over-allotment option, the total number of shares sold by the Company in the public offering was 3,291,832 shares and total gross proceeds, before deducting underwriting discounts and commissions, a structuring fee and other offering expenses payable by the Company, were approximately $ 67.5 million.

The net proceeds to the Company totaled approximately $ 63.0 million.

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

During the three months ended March 31, 2024 and year ended December 31, 2023 , the Company did not issue any shares of its common stock, other than awards granted under the Stock Incentive Plan.

Shelf Registration Statement

6 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, 2023, the Company did not sell any shares of the Company’s common stock under the Sales Agreement.

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

As of September 30, 2023 , the shares of common stock sold under the ATM Program are the only offerings that have been initiated under the Shelf Registration Statement.

During the three months ended March 31, 2024 and year ended December 31, 2023 , the Company did not sell any shares of the Company’s common stock under the Sales Agreement.

As of March 31, 2024 , the shares of common stock sold under the ATM Program are the only offerings that have been initiated under the Shelf Registration Statement.

Share Repurchase Program

4 unchanged sentences

The Repurchase Program may be discontinued, modified or suspended at any time.

During the three and nine months ended September 30, 2023, the Company did no t repurchase any shares of its common stock pursuant to the Repurchase Program.

During the three months ended March 31, 2024 and year ended December 31, 2023 , the Company did no t repurchase any shares of its common stock pursuant to the Repurchase Program.

Stock Incentive Plan

5 unchanged sentences

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

During the first quarter of 2022, the Company’s Board of Directors approved grants of restricted stock and stock options to the Company’s directors and officers, as well as employees of the Manager.

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

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

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

During the first quarter of 2024, the Company’s Board of Directors approved grants of restricted stock to the Company’s directors and officers, as well as employees of the Manager.

In January 2024, the Company granted an aggregate of 209,397 shares of restricted stock to certain of our directors, officers and other eligible persons.

The restricted stock granted in January 2024 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, 2024, there were 2,536,289 shares of common stock granted under the 2020 Plan, underlying 2,169,852 options and 366,437 shares of restricted stock.

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.

1 unchanged sentence

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.

On June 20, 2023, the Company granted 1,159 shares of restricted stock to James C.

Fagan in connection with his recent appointment to the Company’s Board of Directors, which will vest upon the one-year anniversary of the grant date.

As of September 30, 2023, there were 2,326,892 shares of common stock granted under the 2020 Plan, underlying 2,169,852 options and 157,040 shares of restricted stock.

As of September 30, 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 as of June 30, 2023.

As of March 31, 2024, 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 3,202,442 shares, which is an increase of 409,154 shares compared to December 31, 2023.

The Share Limit increased pursuant to the Minimum Annual Increase provision in the 2020 Plan.

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, (iii) exercised and (iv) forfeited options granted for the Company’s directors and officers and employees of the Manager as of September 30, 2023 and December 31, 2022:

September 30, 2023 As of

March 31, 2024 As of

December 31, 2023

6 unchanged sentences

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.

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

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

3 unchanged sentences

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

The stock-based compensation expense for the Company was approximately $ 0.3 million and $ 0.7 million for the three and nine months ended September 30, 2023, respectively, and approximately $ 0.1 million and $ 1.2 million for the three and nine months ended September 30, 2022, respectively.

The stock-based compensation expense for the Company was approximately $ 0.5 million and $ 0.3 million for the three months ended March 31, 2024 and 2023 , 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, 2023 and 2022:

Three months ended

September 30, 2023 Weighted-average

grant date fair

value per option

Balance as of June 30, 2023 2,273,272 $ 1.21

Exercised — —

Forfeited ( 104,320 ) 1.23

Balance as of September 30, 2023 2,168,952 $ 1.20

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

Nine months ended

September 30, 2023 Weighted-average

grant date fair

value per option

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

Exercised — —

Forfeited ( 111,420 ) 1.23

Balance as of September 30, 2023 2,168,952 $ 1.20

Nine months ended

September 30, 2022 Weighted-average

grant date fair

value per option

Balance as of December 31, 2021 1,604,236 $ 1.08

Granted 742,000 1.46

The following tables summarize stock option activity as of and during the three months ended March 31, 2024:

Number of options Weighted-average

exercise price Weighted-average remaining contractual term Aggregate intrinsic value

Outstanding as of December 31, 2023 2,168,952 $ 17.74

Exercised — —

Forfeited — —

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

The following table summarizes the restricted stock (i) granted, (ii) vested and (iii) forfeited for the Company’s directors and officers and employees of the Manager as of September 30, 2023 and December 31, 2022:

September 30, 2023 As of

Outstanding as of March 31, 2024 2,168,952 $ 17.74 4.02 years $ —

Exercisable as of March 31, 2024 2,123,596 $ 17.72 4.01 years $ —

T he Company did not grant any options d uring the three months ended March 31, 2024 and 2023 .

No options were exercised during the three months ended March 31, 2024 and 2023 .

The following table summarizes the non-vested restricted stock (i) granted, (ii) vested and (iii) forfeited for the Company’s directors and officers and employees of the Manager as of March 31, 2024 and December 31, 2023:

March 31, 2024 As of

December 31, 2023

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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, 2023 and 2022:

Three months ended

September 30, 2023 Weighted-average value at award date

Balance as of June 30, 2023 137,482 $ 16.06

Vested ( 18,470 ) 16.24

Forfeited — —

Balance as of September 30, 2023 119,012 $ 16.03

Three months ended

September 30, 2022 Weighted-average value at award date

Balance as of June 30, 2022 64,581 $ 20.40

Forfeited ( 1,238 ) 20.18

Balance as of September 30, 2022 63,343 $ 20.40

Nine months ended

September 30, 2023 Weighted-average value at award date

The following tables summarize the restricted stock activity as of and during the three months ended March 31, 2024:

Number of shares of restricted stock Weighted-average

grant date fair value

Balance as of December 31, 2023 119,012 $ 16.06

2 unchanged sentences

Forfeited — —

Balance as of September 30, 2023 119,012 $ 16.03

Nine months ended

September 30, 2022 Weighted-average value at award date

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

Granted 8,296 20.18

Forfeited ( 1,238 ) 20.18

Balance as of September 30, 2022 63,343 $ 20.40

Balance as of March 31, 2024 267,230 $ 13.00

The total fair value of shares vested during the three months ended March 31, 2024 was approximately $ 0.7 million.

During the three months ended March 31, 2023, 3,211 shares of restricted stock vested with a weighted-average grant date fair value of $ 15.57 .

The total fair value of shares vested during the three months ended March 31, 2023 was approximately $ 50.0 thousand.

As of March 31, 2024 , there was approximately $ 3.1 million of total unrecognized compensation cost related to non-vested restricted stock and stock option awards.

That cost is expected to be recognized over a weighted-average period of 2.36 years.

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, 2023 and 2022:

The following information sets forth the computations of basic and diluted weighted average (loss) earnings per common share for the three months ended March 31, 2024 and 2023:

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Net income attributable to common shareholders $ 7,979,875 $ 11,480,519 $ 30,140,482 $ 32,994,312

Dividends paid on preferred shares — — ( 7,500 ) ( 7,500 )

Net (loss) income attributable to common shareholders $ ( 54,116 ) $ 10,025,274

Dividends paid on unvested restricted stock ( 57,126 ) ( 35,472 )

Net income attributable to common shareholders 7,913,884 11,444,354 29,927,714 32,886,985

Net (loss) income attributable to common shareholders

( 111,242 ) 9,989,802

Basic weighted average shares of common stock outstanding 20,393,875 20,303,797

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Diluted weighted average shares of common stock outstanding 20,405,187 20,489,163

Basic weighted average earnings per common share $ 0.39 $ 0.57 $ 1.47 $ 1.67

Diluted weighted average earnings per common share $ 0.39 $ 0.57 $ 1.47 $ 1.66

Basic weighted average (loss) earnings per common share $ ( 0.01 ) $ 0.49

Diluted weighted average (loss) earnings per common share $ ( 0.01 ) $ 0.49

Diluted EPS was computed using the treasury stock method for stock options and restricted stock.

Diluted weighted average earnings per common share excluded 2,288,419 and 2,247,328 weighted average unvested restricted stock and stock options due to anti-dilutive effect for the three and nine months ended September 30, 2023, respectively, and 1,406,700 and 1,406,700 for the three and nine months ended September 30, 2022, respectively .

Diluted weighted average (loss) earnings per common share excluded 2,240,089 and 2,280,372 weighted average unvested restricted stock and stock options due to anti-dilutive effect for the three months ended March 31, 2024 and 2023, 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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In addition, as a REIT, the Company also may be subject to a 100% excise tax on certain transactions between it and its TRS that are not conducted on an arm’s-length basis.

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

The income tax provision for the Company was approximately $ 0.7 million and $ 1.0 million for the three and nine months ended September 30, 2023, respectively.

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, 2023 and 2022 primarily relates to activities of the Company’s taxable REIT subsidiary.

For the three and nine months ended September 30, 2023 and 2022, the Company incurred no expense for United States federal excise tax.

The income tax provision is included in the line item income tax expense, including excise tax.

The income tax provision for the Company was approximately $ 0.2 million and $ 0.2 million for the three months ended March 31, 2024 and 2023, respectively.

The income tax expense for the three months ended March 31, 2024 and 2023 primarily related to activities of the Company’s taxable REIT subsidiary.

The income tax provision for the Company and TRS1 consisted of the following for the three months ended March 31, 2024 and 2023:

Three months ended

$ 158,360 $ 174,832

Excise tax — 270

Total income tax expense, including excise tax $ 158,360 $ 175,102

(1) During the three months ended March 31, 2024, the Company incurred federal taxes of approximately $ 105.3 thousand and state and local taxes of approximately $ 53.1 thousand.

During the three months ended March 31, 2023, the Company incurred federal taxes of approximately $ 131.5 thousand and state and local taxes of approximately $ 43.3 thousand.

For the three months ended March 31, 2024 and 2023, 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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The Company’s loans are typically valued using a yield analysis, which is typically performed for non-credit impaired loans to borrowers where the Company does not own a controlling equity position.

Alternative valuation methodologies may be used as appropriate, and can include a market analysis, income analysis, or recovery analysis.

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

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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, 2023 and December 31, 2022:

Fair Value Measurement as of September 30, 2023

The following tables present fair value measurements of loans held at fair value as of March 31, 2024 and December 31, 2023:

Fair Value Measurement as of March 31, 2024

Total Level 1 Level 2 Level 3

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Total $ 61,720,705 $ — $ — $ 61,720,705

The following table presents changes in loans that use Level 3 inputs as of and for the nine months ended September 30, 2023:

Nine months ended

September 30, 2023

The following table presents changes in loans that use Level 3 inputs as of and for the three months ended March 31, 2024:

Three months ended

March 31, 2024

Total loans using Level 3 inputs at December 31, 2023 $ 61,720,705

Realized gains (losses) on loans at fair value, net ( 1,213,416 )

Change in unrealized gains (losses) on loans at fair value, net ( 3,613,693 )

Additional fundings 1,881,840

Loan repayments ( 4,003,945 )

1 unchanged sentence

PIK interest 745,831

Total loans using Level 3 inputs at September 30, 2023 $ 70,010,878

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 September 30, 2023 is $( 1,152,810 ).

The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of September 30, 2023 and December 31, 2022.

Total loans using Level 3 inputs at March 31, 2024 $ 54,977,282

The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of March 31, 2024 and December 31, 2023.

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, 2023

As of March 31, 2024

Unobservable Input

Fair Value Primary Valuation Techniques Input Estimated Range Weighted Average

Senior term loans $ 52,722,454 Yield analysis Market yield 32.61 % - 39.06 %

Senior term loans $ 39,435,412 Recovery analysis Recovery rate 75.50 % - 83.10 %

Senior term loans 15,541,870 Market approach Revenue multiple 0.75 x - 1.00 x

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Fair Value Primary Valuation Techniques Input Estimated Range Weighted Average

Senior term loans $ 99,226,051 Yield analysis Market yield 19.99 % - 31.72 %

Senior term loans $ 47,627,845 Recovery analysis Recovery rate 86.10 % - 92.40 %

Senior term loans 14,092,860 Market approach Revenue multiple 0.50 x - 0.70 x

Total investments $ 61,720,705

Changes in market yields and revenue multiples may change the fair value of certain of the Company’s loans.

Generally, an increase in market yields may result in a decrease in the fair value of certain of the Company’s loans, while a decrease in revenue multiples may result in a decrease in the fair value of certain of the Company’s loans.

Changes in market yields, revenue multiples, and recovery rates may change the fair value of certain of the Company’s loans.

Generally, an increase in market yields may result in a decrease in the fair value of certain of the Company’s loans, while a decrease in revenue multiples and recovery rates may result in a decrease in the fair value of certain of the Company’s loans.

Due to the inherent uncertainty of determining the fair value of loans that do not have a readily available market value, the fair value of the Company’s loans may fluctuate from period to period.

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In addition, changes in the market environment and other events that may occur over the life of the loans may cause the gains or losses ultimately realized on these loans to be different than the unrealized gains or losses reflected in the valuations currently assigned.

Investment in Marketable Securities

As of September 30, 2023 and December 31, 2022 , the Company’s portfolio did not include any debt securities.

For the three and nine months ended September 30, 2023, the Company had no sales of debt securities.

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

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 unaudited interim consolidated balance sheet as of September 30, 2023 :

As of September 30, 2023

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

As of March 31, 2024

Carrying Value Fair Value

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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, 2023 was approximately $ 2.6 million and $ 7.9 million, respectively.

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

The Incentive Compensation for the three months ended March 31, 2024 and 2023 , was approximately $ 2.5 million and $ 2.8 million, respectively.

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

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

The following table summarizes the related party costs incurred by the Company for the three and nine months ended September 30, 2023 and 2022:

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 in an amount equal to the proportional amount of time employees of the Manager spent providing services to the Company, as reasonably stipulated by time sheets.

The following table summarizes the related party costs incurred by the Company for the three months ended March 31, 2024 and 2023 :

Three months ended

September 30, Nine months ended

September 30,

2023 2022 2023 2022

Affiliate Costs

5 unchanged sentences

Total $ 4,245,081 $ 4,790,246

Amounts payable to the Company’s Manager as of September 30, 2023 and December 31, 2022 were approximately $ 4.9 million and $ 5.7 million, respectively.

Due to/from Affiliate

Amounts due to an affiliate of the Company as of September 30, 2023 and December 31, 2022 were approximately $ 19.7 thousand and $ 18.1 thousand, respectively.

Amounts due from an affiliate of the Company as of September 30, 2023 and December 31, 2022 were $ 1.0 million and zero , respectively.

The amount due from the affiliate, AFC Agent LLC (“AFC Agent”), was contributed to AFC Agent in anticipation of a funding and was subsequently repaid to the Company in October 2023.

Amounts payable to the Manager as of March 31, 2024 and December 31, 2023 were approximately $ 4.4 million and $ 5.0 million, respectively.

The Manager is a wholly-owned subsidiary of Castleground Holdings LLC (f/k/a Advanced Flower Capital Management, LLC) (the “Parent Manager”).

Leonard Tannenbaum, Executive Chairman of the Board and Chief Investment Officer, owns 75.0 % of the outstanding equity of the Parent Manager.

Similarly, Robyn Tannenbaum, President, Bernard Berman, a member of the Company’s Investment Committee, and Daniel Neville, Chief Executive Officer, currently own 10.0 % , 3.0 % and 1.6 % , respectively, of the Parent Manager.

Due to Affiliate

Amounts due to an affiliate of the Company as of March 31, 2024 and December 31, 2023 were approximately $ 19.8 thousand and $ 16.4 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, including the Manager, 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 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, 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) former Head of Real Estate and a former Director, while each such owner also maintained a beneficial ownership of the Company’s Manager at the time of the investment.

AFCIF holds approximately one-third of the loan’s aggregate principal amount as of September 30, 2023.

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

In May 2023, Private Company I failed to pay its full principal and interest payments due May 1, 2023.

The agent on the credit facility, AFC Agent, promptly delivered a notice of an event of default based on this payment default and certain other defaults under the credit agreement , accelerated all obligations due thereunder and subsequently initiated a foreclosing procedure in the State of Maryland.

In June 2023, the Company sold two-thirds of the Private Company I credit facility at par plus accrued interest to a multi-state cannabis operator and has a put right on the remaining one-third immediately prior to the transfer of one of the borrower’s cannabis licenses.

Following the sale, the Company’s outstanding principal balance under the credit facility with Private Company I was approximately $ 3.8 million , which is fully funded.

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 (“FLH”), an entity wholly-owned by the Company’s Chief Executive Officer and Chairman of the Board and President, 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.

In March 2023, the Company entered into a fifth amendment to the Private Company A Credit Facility 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.

During the nine months ended September 30, 2023 , AFC Agent received approximately $ 48.2 million in total loan principal prepayments and $ 1.4 million in related exit fees from the borrower’s sale of its collateral assets, of which approximately $ 34.7 million in principal prepayments and $ 1.1 million in related exit fees were allocated to the Company relating to its pro rata portion of the Private Company A Credit Facility and was applied to the outstanding principal balance.

Following the prepayment, the Company’s outstanding principal balance under the Private Company A Credit Facility was approximately $ 54.7 million, which is fully funded.

Refer to Note 17 to the Company’s unaudited interim consolidated financial statements for more information on Private Company A prepayments that occurred subsequent to September 30, 2023.

In November 2023, Private Company A was placed into receivership to maintain the borrower’s operations and maximize value for the benefit of its creditors.

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.

The Company’s outstanding principal balance under the credit facility with Subsidiary of Private Company G was approximately $ 80.6 million, which is fully funded.

Subsidiary of Private Company G failed to make its cash interest payment due July 1, 2023 in arrears for the month of June, and the Company placed the borrower on non-accrual as of June 1, 2023.

In connection therewith, the Company has initiated a consensual foreclosure proceeding with respect to certain of the borrower’s assets in Pennsylvania, with the expectation that the net cash proceeds of the public auction will be used to prepay a portion of the principal outstanding under the credit facility.

The Company entered into a forbearance agreement with Subsidiary of Private Company G in September 2023, which carves out the consensual foreclosure proceeding described above, pursuant to which the Company agreed to forbear from exercising certain remedies as a result of certain defaults under the credit agreement.

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.

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, (ii) strengthen the real estate coverage covenants and (iii) require certain conditions precedent be met prior to disbursing funds to construction projects.

Following the amendment, the Company now holds $ 84.0 million in commitments.

The Company’s outstanding principal balance under the credit facility with Subsidiary of Public Company H was $ 84.0 million, which is fully funded.

In September 2023, Mr.

Bernard Berman, a member of the Company’s investment committee, purchased a 3.0 % membership interest in certain income of the Manager.

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 interim consolidated financial statements for more information.

Additionally, our Manager or its affiliates, including AFC Agent LLC (“AFC Agent”), may from time to time serve as administrative agent to the lenders under our co-investments.

As of March 31, 2024, there were five co-invested loans held by the Company and affiliates of the Company.

DIVIDENDS AND DISTRIBUTIONS

The following table summarizes the Company’s dividends declared during the nine months ended September 30, 2023 and 2022:

The following table summarizes the Company’s dividends declared during the three months ended March 31, 2024 and 2023:

Record Date Payment

2 unchanged sentences

Regular cash dividend 3/31/2023 4/14/2023 $ 0.56 $ 11,473,971

Regular cash dividend 6/30/2022 7/15/2022 0.56 11,120,408

Regular cash dividend 9/30/2022 10/14/2022 0.56 11,403,840

2023 Period Subtotal

Regular cash dividend 3/31/2023 4/14/2023 $ 0.56 $ 11,473,971

Regular cash dividend 6/30/2023 7/14/2023 0.48 9,819,695

$ 0.56 $ 11,473,971

Regular cash dividend 3/31/2024 4/15/2024 $ 0.48 $ 9,920,205

2024 Period Subtotal

$ 0.48 $ 9,920,205

SUBSEQUENT EVENTS

1 unchanged sentence

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

In October 2023, AFC Agent received approximately $ 2.3 million in total loan principal prepayments and $ 0.1 million in related exit fees from Private Company A’s sale of its collateral assets, of which approximately $ 1.7 million in principal prepayments and $ 0.1 million in related exit fees were allocated to the Company relating to the Company’s pro rata portion of the Private Company A Credit Facility and was applied to the outstanding principal balance.

Following the prepayment, the Company’s outstanding principal balance under the Private Company A Credit Facility was approximately $ 53.2 million.

In October 2023, AFC Agent delivered a notice of default to Private Company A based on certain financial and other covenant defaults and began charging additional default interest 5.0 %, beginning as of July 1, 2023, in accordance with the terms of the Private Company A Credit Facility.

In November 2023, Private Company A was placed into receivership to maintain the borrower’s operations and maximize value for the benefit of its creditors.

In October 2023, Private Company B was placed into receivership following the maturity date of the credit facility, which has not been repaid.

The Company has been in discussions with the borrower regarding refinancing the credit facility and with the receiver regarding a potential sale of the business in order to repay the loan.

In April 2024, the Company received approximately $ 8.1 million prepayment from Private Company L’s sale of certain collateral assets and $ 0.2 million prepayment premium.

In April 2024, the co-agents under the credit facility with Subsidiary of Public Company H delivered a reservation of rights letter to the borrower citing certain defaults, including a breach of the minimum cash covenants as of March 31, 2024.

The borrower has since failed to make the interest payment for the month ending April 30, 2024 that was due May 1, 2024, and which was subject to a five business day grace period.

The lenders are evaluating the best course of action to protect their interests and pursue their rights and remedies under the credit facility.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, filed by AFC Gamma, Inc.

This Quarterly Report on Form 10-Q (this “Quarterly Report”), filed by AFC Gamma, Inc.

(the “Company,” “we,” “us,” and “our”), and the information incorporated by reference in it, or made in other reports, filings with the SEC, press releases contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we intend such statements to be covered by the safe harbor provisions contained therein.

Some of the statements contained in this Quarterly Report, other than statements of current or historical facts, are forward-looking statements and are based on our current intent, belief, expectations and views of future events.

The forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results or performance, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “could,” “would,” “will,” “can,” “continuing,” “may,” “aim,” “intend,” “ongoing,” “plan,” “predict,” “potential,” “should,” “seeks,” “likely to” or words or phrases of similar meaning.

Specifically, this Quarterly Report includes forward-looking statements regarding (i) the conditions in the adult-use and medicinal cannabis markets and their impact on our business;

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• 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;

• our expectations for origination targets and repayments;

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

22 unchanged sentences

• 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 maintain our exemption from registration under the Investment Company Act (as defined below);

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

3 unchanged sentences

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

• our ability to complete the Spin-Off (as defined below) in a timely manner or at all;

• we may not achieve some or all of the expected benefits of the Spin-Off (as defined below).

Please see the section entitled “ Risk Factors ” located in our Annual Report on Form 10-K, filed with the SEC on March 7, 2024, for a further discussion of these and other risks and uncertainties which could affect our future results.

1 unchanged sentence

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