What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-13 compared with 2024-08-07 · 355 added, 268 removed, 627 unchanged (50% of the section changed)

Financial Statements

AFC GAMMA, INC.

ADVANCED FLOWER CAPITAL INC.

CONSOLIDATED BALANCE SHEETS

June 30, 2024 December 31, 2023

Loans held for investment at fair value (cost of $ 49,618,382 and $ 71,644,003 at June 30, 2024 and December 31, 2023, respectively, net)

September 30, 2024 December 31, 2023

Loans held for investment at fair value (cost of $ 50,950,868 and $ 71,644,003 at September 30, 2024 and December 31, 2023, respectively, net)

$ 31,372,174 $ 61,720,705

7 unchanged sentences

Prepaid expenses and other assets 422,967 688,446

Assets of discontinued operations — 31,244,622

Total assets $ 366,618,408 $ 466,585,055

8 unchanged sentences

Line of credit payable, net 60,000,000 42,000,000

Liabilities of discontinued operations — 10,000

Total liabilities 160,557,096 146,532,830

1 unchanged sentence

Shareholders’ equity

Preferred stock, par value $ 0.01 per share, 10,000 shares authorized at June 30, 2024 and December 31, 2023 and 0 and 125 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Common stock, par value $ 0.01 per share, 50,000,000 shares authorized at June 30, 2024 and December 31, 2023 and 20,667,094 and 20,457,697 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

Preferred stock, par value $ 0.01 per share, 10,000 shares authorized at September 30, 2024 and December 31, 2023 and 0 and 125 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

Common stock, par value $ 0.01 per share, 50,000,000 shares authorized at September 30, 2024 and December 31, 2023 and 21,882,047 and 20,457,697 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively

218,821 204,577

4 unchanged sentences

See accompanying notes to the consolidated financial statements

AFC GAMMA, INC.

ADVANCED FLOWER CAPITAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

8 unchanged sentences

Total expenses 2,475,198 5,151,155 13,734,631 16,502,697

Decrease (increase) in provision for current expected credit losses 6,190,240 1,606,187 1,258,566 903,761

(Increase) decrease in provision for current expected credit losses ( 181,370 ) ( 1,053,398 ) 1,149,050 ( 149,637 )

Realized gains (losses) on investments, net — ( 1,213,416 ) ( 93,338 ) ( 1,239,800 )

1 unchanged sentence

Change in unrealized gains (losses) on loans at fair value, net ( 4,621,702 ) 787,799 ( 9,655,396 ) ( 1,152,810 )

Net income before income taxes 16,732,096 12,302,970 16,836,340 22,503,346

Net income from continuing operations before income taxes 1,604,046 8,635,328 15,684,262 31,138,674

Income tax expense 386,256 663,220 830,591 1,005,959

Net income from continuing operations 1,217,790 7,972,108 14,853,671 30,132,715

Net income from discontinued operations, net of tax 165,944 7,767 2,922,068 7,767

Net income $ 1,383,734 $ 7,979,875 $ 17,775,739 $ 30,140,482

Earnings per common share:

Basic earnings per common share (in dollars per share) $ 0.80 $ 0.59 $ 0.79 $ 1.08

Diluted earnings per common share (in dollars per share) $ 0.80 $ 0.59 $ 0.79 $ 1.08

Basic earnings per common share:

Continuing operations $ 0.05 $ 0.39 $ 0.71 $ 1.47

Discontinued operations $ 0.01 $ 0.00 $ 0.14 $ 0.00

Total basic earnings per common share $ 0.06 $ 0.39 $ 0.85 $ 1.47

Diluted earnings per common share:

Continuing operations $ 0.05 $ 0.39 $ 0.71 $ 1.47

Discontinued operations $ 0.01 $ 0.00 $ 0.14 $ 0.00

Total diluted earnings per common share $ 0.06 $ 0.39 $ 0.85 $ 1.47

Weighted average number of common shares outstanding:

Basic weighted average shares of common stock outstanding (in shares) 20,400,004 20,317,341 20,396,940 20,310,606

Diluted weighted average shares of common stock outstanding (in shares) 20,437,799 20,322,857 20,418,897 20,381,724

Basic weighted average shares of common stock outstanding 20,684,149 20,324,125 20,493,375 20,315,162

Diluted weighted average shares of common stock outstanding 20,785,848 20,342,880 20,543,644 20,390,385

See accompanying notes to the consolidated financial statements

AFC GAMMA, INC.

ADVANCED FLOWER CAPITAL INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three months ended June 30, 2024

Three months ended September 30, 2024

Stock Common Stock Additional

3 unchanged sentences

Shares Amount

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

Balance at June 30, 2024 $ — 20,667,094 $ 206,671 $ 350,591,362 $ ( 36,514,212 ) $ 314,283,821

Issuance of common stock, net of offering costs — 1,214,953 12,150 12,149,217 — 12,161,367

Stock-based compensation — — — 218,643 — 218,643

1 unchanged sentence

— — — — ( 7,221,076 ) ( 7,221,076 )

Dividends declared on preferred shares ($ 60 per share)

— — — — ( 7,500 ) ( 7,500 )

Redemption of preferred shares ( 1 ) — — ( 124,999 ) — ( 125,000 )

Distributions in connection with the Spin-Off — — — ( 114,765,177 ) — ( 114,765,177 )

Net income — — — — 1,383,734 1,383,734

Balance at June 30, 2024 $ — 20,667,094 $ 206,671 $ 350,591,362 $ ( 36,514,212 ) $ 314,283,821

Three months ended June 30, 2023

Balance at September 30, 2024 $ — 21,882,047 $ 218,821 $ 248,194,045 $ ( 42,351,554 ) $ 206,061,312

Three months ended September 30, 2023

Stock Common Stock Additional

3 unchanged sentences

Shares Amount

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

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

1 unchanged sentence

— — — — ( 9,819,695 ) ( 9,819,695 )

Dividends declared on preferred shares ($ 60 per share)

— — — — ( 7,500 ) ( 7,500 )

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

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

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

See accompanying notes to the consolidated financial statements

AFC GAMMA, INC.

ADVANCED FLOWER CAPITAL INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Six months ended June 30, 2024

Nine months ended September 30, 2024

Stock Common Stock Additional

4 unchanged sentences

Balance at December 31, 2023 $ 1 20,457,697 $ 204,577 $ 349,805,890 $ ( 29,958,243 ) $ 320,052,225

Issuance of common stock, net of offering costs — 1,214,953 12,150 12,149,217 — 12,161,367

Stock-based compensation — 209,397 2,094 1,129,114 — 1,131,208

4 unchanged sentences

Redemption of preferred shares ( 1 ) — — ( 124,999 ) — ( 125,000 )

Distributions in connection with the Spin-Off — — — ( 114,765,177 ) — ( 114,765,177 )

Net income — — — — 17,775,739 17,775,739

Balance at June 30, 2024 $ — 20,667,094 $ 206,671 $ 350,591,362 $ ( 36,514,212 ) $ 314,283,821

Six months ended June 30, 2023

Balance at September 30, 2024 $ — 21,882,047 $ 218,821 $ 248,194,045 $ ( 42,351,554 ) $ 206,061,312

Nine months ended September 30, 2023

Stock Common Stock Additional

10 unchanged sentences

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

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

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

See accompanying notes to the consolidated financial statements

AFC GAMMA, INC.

ADVANCED FLOWER CAPITAL INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended

Nine months ended

September 30,

Operating activities:

Net income $ 17,775,739 $ 30,140,482

Net income from discontinued operations, net of tax ( 2,922,068 ) ( 7,767 )

Net income from continuing operations 14,853,671 30,132,715

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

9 unchanged sentences

Changes in operating assets and liabilities:

Accounts receivable 55 —

Interest receivable 2,242,351 673,473

5 unchanged sentences

Accounts payable and other liabilities ( 42,311 ) ( 13,504 )

Net cash provided by (used in) operating activities of continuing operations 16,064,202 14,982,587

Net cash provided by (used in) operating activities of discontinued operations 3,271,445 7,767

Net cash provided by (used in) operating activities 19,335,647 14,990,354

2 unchanged sentences

Proceeds from sales of loans 96,061,029 21,312,827

Due from affiliate — ( 1,000,000 )

Principal repayment of loans 53,259,314 49,953,251

Net cash provided by (used in) investing activities of continuing operations 99,298,100 18,508,853

Net cash (used in) provided by investing activities of discontinued operations ( 47,211,339 ) —

Net cash provided by (used in) investing activities 52,086,761 18,508,853

Cash flows from financing activities:

Proceeds from sale of common stock 12,335,674 —

Payment of offering costs - equity offering ( 174,307 ) —

Payment of financing costs ( 240,612 ) ( 225,000 )

Redemption of preferred shares ( 125,000 ) —

Cash distribution in connection with the Spin-Off of SUNS ( 67,913,215 ) —

Borrowings on revolving credit facility 185,000,000 21,000,000

2 unchanged sentences

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

Net cash (used in) provided by financing activities of continuing operations ( 70,885,129 ) ( 100,667,506 )

Net cash provided by (used in) financing activities of discontinued operations — —

Net cash provided by (used in) financing activities ( 70,885,129 ) ( 100,667,506 )

Net (decrease) increase in cash and cash equivalents 48,671,597 ( 58,293,439 )

Net increase (decrease) in cash and cash equivalents 537,279 ( 67,168,299 )

Cash and cash equivalents, beginning of period 121,626,453 140,372,841

2 unchanged sentences

Interest reserve withheld from funding of loans $ — $ 1,500,000

Non-cash funding of new loan $ 14,672,640 $ —

OID withheld from funding of loans $ 5,411,310 $ 7,398,475

Payable for securities purchased $ — $ 7,995,934

Dividends declared and not yet paid $ 7,221,076 $ 9,819,695

Non-cash funding of new loan $ 14,672,640 $ —

Non-cash net assets distribution in connection with the spin-off of SUNS $ 46,851,962 $ —

Supplemental information:

2 unchanged sentences

See accompanying notes to the consolidated financial statements

AFC GAMMA, INC.

ADVANCED FLOWER CAPITAL INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of June 30, 2024

AFC Gamma, Inc.

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

As of September 30, 2024

Advanced Flower Capital Inc.

(formerly known as AFC Gamma, Inc.) (the “Company” or “AFC”) is an institutional lender that was founded in July 2020 by a veteran team of investment profe ssionals.

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

2 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 operat ing in July 2021, and the financial statements of TRS1 are consolidated within the Company’s consolidated financial statements.

Sunrise Realty Trust, Inc.

(“SUNS”) (f/k/a CRE South LLC), the Company’s wholly-owned subsidiary as of June 30, 2024 , 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 in this Quarterly Report on Form 10-Q.

On February 22, 2024, the Company announced that the Board unanimously approved a plan to spin-off (the “Spin-Off”) the Company’s wholly-owned subsidiary, SUNS, which held the Company’s commercial real estate (“CRE”) loan portfolio, into an independent, publicly traded REIT, Sunrise Realty Trust, Inc.

The Spin-Off was effected by the transfer of the Company’s CRE portfolio, from the Company to SUNS and the distribution of all of the outstanding shares of SUNS common stock to the Company’s shareholders of record as of the close of business on July 8, 2024 (the “Record Date”).

The Company’s shareholders of record as of the Record Date received one share of SUNS common stock for every three shares of the Company’s common stock held as of the Record Date.

The Spin-Off was completed July 9, 2024 (the “Distribution Date”).

On the Distribution Date, SUNS became an independent, publicly-traded company, trading on the Nasdaq Capital Market under the symbol “SUNS”.

The Company retained no ownership interest in SUNS following the Spin-Off.

Beginning in the third quarter of fiscal year 2024, the historical financial results of the SUNS business for periods prior to the Distribution Date will be reflected in the Company’s consolidated financial statements as discontinued operations.

In connection with the Spin-Off, the Company entered into several agreements with SUNS that govern the relationship between the Company and SUNS following the Spin-Off, including the Separation and Distribution Agreement and the Tax Matters Agreement.

These agreements provide for the allocation between the Company and SUNS of the assets, liabilities and obligations (including, among others, investments, property and tax-related assets and liabilities) of the Company and its subsidiaries attributable to periods prior to, at and after the Spin-Off.

Following the completion of the Spin-Off, the Company amended its investment guidelines such that the Company’s investments will primarily be in first and second lien loans, typically secured by mortgages and other security interests, to cannabis operators in states that have legalized medical and/or adult use cannabis.

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

On July 9, 2024, the Company completed the spin-off (the “Spin-Off”) of the Company’s wholly-owned subsidiary, Sunrise Realty Trust, Inc.

(“SUNS”), which held the Company’s commercial real estate (“CRE”) loan portfolio, into an independent, publicly traded REIT, SUNS.

In connection with the Spin-Off, the operating results of the SUNS business through the date of the Spin-Off are reported in net income from discontinued operations, net of tax in the consolidated statements of operations for all periods presented.

The related assets and liabilities are reported as assets and liabilities of discontinued operations on the consolidated balance sheets.

Cash flows from the Company’s discontinued operations are presented as such in the consolidated statements of cash flows for all periods presented.

Unless otherwise noted, all amounts and disclosures included in the notes to consolidated financial statements reflect only the Company’s continuing operations.

For additional information, see Note 17, “Discontinued Operations.”

The Company operates in one operating segment.

Prior to the Spin-Off, the Company was primarily focused on financing senior secured loans and other types of loans 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.

Following the Spin-Off, the Company is solely focused on senior secured loans to cannabis industry operators in states where medical and/or adult-use cannabis is legal.

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

The Company is solely focused on senior secured loans to cannabis industry operators in states where medical and/or adult-use cannabis is legal.

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

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

5 unchanged sentences

Basis of Presentation

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

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

1 unchanged sentence

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.

Discontinued Operations

A discontinued operation may include a component or a group of components of the Company’s operations.

A disposal of a component or a group of components is reported in discontinued operations if the disposal represents a strategic shift that has or will have a major effect on the Company’s operations and financial results when the following occurs:

(1) a component (or group of components) meets the criteria to be classified as held for sale;

(2) the component or group of components is disposed of by sale;

or (3) the component or group of components is disposed of other than by sale (for example, by abandonment or in a distribution to owners in a spin-off).

For any component classified as held for sale or disposed of by sale or other than by sale, qualifying for presentation as a discontinued operation, the Company reports the results of operations of the discontinued operations (including any gain or loss recognized on the disposal or loss recognized on classification as held for sale of a discontinued operation), less applicable income taxes (benefit), as a separate component in the consolidated statements of operations for current and all prior periods presented.

The Company also reports assets and liabilities associated with discontinued operations as separate line items on the consolidated balance sheets for prior periods.

The Company determined that the Spin-Off of SUNS in July 2024 met the criteria for classification as a discontinued operation in accordance with ASC Subtopic 205-20, Discontinued Operations (“ASC 205-20”).

See Note 17 for further details.

Use of Estimates in the Preparation of Financial Statements

3 unchanged sentences

Recent Accounting Pronouncements

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”).

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

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

The Company has elected to take advantage of this extended transition period.

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

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.

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.

10 unchanged sentences

LOANS HELD FOR INVESTMENT AT FAIR VALUE

As of June 30, 2024 and December 31, 2023, the Company’s portfolio included one and two loans held at fair value, respectively.

The aggregate originated commitment under these loans was approximately $ 77.8 million and $ 94.2 million, respectively, and outstanding principal was approximately $ 49.7 million and $ 71.9 million as of June 30, 2024 and December 31, 2023, respectively.

For the six months ended June 30, 2024, the Company received approximately $ 4.0 million of principal repayments of loans held at fair value and sold $ 19.3 million of the Company’s investment in Private Company B.

As of June 30, 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 June 30, 2024 and December 31, 2023:

As of June 30, 2024

As of September 30, 2024 and December 31, 2023, the Company’s portfolio included one and two loans held at fair value, respectively.

The aggregate originated commitment under these loans was approximately $ 85.3 million and $ 94.2 million, respectively, and outstanding principal was approximately $ 53.8 million and $ 71.9 million as of September 30, 2024 and December 31, 2023, respectively.

For the nine months ended September 30, 2024, the Company funded approximately $ 4.6 million in new loans and additional principal and received approximately $ 4.5 million of principal repayments of loans held at fair value and sold $ 19.3 million of the Company’s investment in Private Company B.

As of September 30, 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 September 30, 2024 and December 31, 2023:

As of September 30, 2024

Fair Value (1)

15 unchanged sentences

(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) As of June 30, 2024, the maturity date passed on the credit facility with Private Company A without repayment.

(3) As of September 30, 2024, the maturity date passed on the credit facility with Private Company A without repayment.

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

As of 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 six months ended June 30, 2024:

The following table presents changes in loans held at fair value as of and for the nine months ended September 30, 2024:

Principal Original Issue

2 unchanged sentences

Change in unrealized gains (losses) on loans at fair value, net — — ( 9,655,396 ) ( 9,655,396 )

New fundings 4,594,027 ( 2,756,417 ) — 1,837,610

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

2 unchanged sentences

PIK interest 1,134,786 — — 1,134,786

Total loans held at fair value at June 30, 2024 $ 49,729,397 $ ( 111,015 ) $ ( 14,956,992 ) $ 34,661,390

As of June 30, 2024 , the Company ha d one l oan held at fair value on nonaccrual status.

Effective 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 $( 15.0 ) million as of June 30, 2024 .

A more detailed listing of the Company’s loan held at fair value portfolio based on information available as of June 30, 2024 is as follows:

Total loans held at fair value at September 30, 2024 $ 53,818,300 $ ( 2,867,432 ) $ ( 19,578,694 ) $ 31,372,174

As of September 30, 2024 , the Company ha d one l oan held at fair value on nonaccrual status.

Effective March 1, 2024, the Company placed Private Company A on nonaccrual status with an outstanding principal amount of approximately $ 53.8 million and an unrealized loss of approximately $( 19.6 ) million as of September 30, 2024 .

A more detailed listing of the Company’s loan held at fair value portfolio based on information available as of September 30, 2024 is as follows:

Collateral Location Collateral

18 unchanged sentences

LOANS HELD FOR INVESTMENT AT CARRYING VALUE

As of June 30, 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 $ 311.1 million and $ 333.1 million, resp ectively, and outstanding principal was approximately $ 283.7 million and $ 314.4 million, respectively, as of June 30, 2024 and December 31, 2023.

During the six months ended June 30, 2024, the Company funded approximately $ 107.2 million of new loans and additional principal, had approximately $ 49.1 million of principal repayments of loans held at carrying value and sold $ 90.0 million in the aggregate of the Company’s investments in Subsidiary of Public Company H and Subsidiary of Public Company M.

As of June 30, 2024 and December 31, 2023, approximately 44 % and 84 %, respectively, of the Company’s loans held at carrying value had floating interest rates.

As of June 30, 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 %.

The following tables summarize the Company’s loans held at carrying value as of June 30, 2024 and December 31, 2023:

As of June 30, 2024

As of September 30, 2024 and December 31, 2023, t he Company’s portfolio included eleven and nine loans held at carrying value, respectively.

A s of September 30, 2024 and December 31, 2023, t he aggregate originated commitment under these loans was approximately $ 260.2 million and $ 333.1 million, resp ectively, and outstanding principal was approximately $ 242.8 million and $ 314.4 million, respectively.

During the nine months ended September 30, 2024, the Company funded approximately $ 65.5 million of new loans and additional principal, had approximately $ 48.8 million of principal repayments of loans held at carrying value and sold $ 90.0 million in the aggregate of the Company’s investments in Subsidiary of Public Company H and Subsidiary of Public Company M.

As of September 30, 2024 and December 31, 2023, approximately 47 % and 84 %, respectively, of the Company’s loans held at carrying value had floating interest rates.

As of September 30, 2024, t hese floating benchmark rates included one-month Secured Overnight Financing Rate (“SOFR”) subject to a weighted average floor of 3.6 % and quoted at 4.8 %.

The following tables summarize the Company’s loans held at carrying value as of September 30, 2024 and December 31, 2023:

As of September 30, 2024

Principal (1)

2 unchanged sentences

Senior term loans $ 242,802,878 $ ( 8,545,836 ) $ 234,257,042 2.0

$ 262,048,014 $ ( 9,851,079 ) $ 252,196,935 2.1

Subordinate debt 21,630,051 ( 246,652 ) 21,383,399 2.9

Total loans held at carrying value $ 242,802,878 $ ( 8,545,836 ) $ 234,257,042 2.0

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 each respective group of loans as of June 30, 2024 and December 31, 2023.

(3) Senior term loans include senior loans that also have a contiguous subordinate loan because as a whole, the expected credit quality of the subordinate loan is more similar to that of a senior loan.

The following table presents changes in loans held at carrying value as of and for the six months ended June 30, 2024:

(2) Weighted average remaining life is calculated based on the carrying value of the loans as of September 30, 2024 and December 31, 2023.

The following table presents changes in loans held at carrying value as of and for the nine months ended September 30, 2024:

Principal Original Issue

7 unchanged sentences

Loan amortization payments ( 3,512,621 ) — ( 3,512,621 )

Total loans held at carrying value at June 30, 2024 $ 283,678,065 $ ( 10,097,731 ) $ 273,580,334

As of June 30, 2024 , the Company had two loans held at carrying value on nonaccrual status.

Total loans held at carrying value at September 30, 2024 $ 242,802,878 $ ( 8,545,836 ) $ 234,257,042

As of September 30, 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.

1 unchanged sentence

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

During the six months ended June 30, 2024, the Company recognized interest income of approximately $ 2.8 million related to this loan which was received in cash.

During the nine months ended September 30, 2024, the Company recognized interest income of approximately $ 5.2 million related to this loan, which was received in cash.

The Company placed Private Company K on nonaccrual status effective December 1, 2023, with an outstanding principal amount of approximately $ 12.2 million and an amortized cost of approximately $ 11.5 million.

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

During the six months ended June 30, 2024, the Company received a $ 1.3 million payment applied to the outstanding principal balance and recognized interest income of approximately $ 0.5 million related to this loan received in cash.

A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of June 30, 2024 is as follows:

During the nine months ended September 30, 2024, the Company received a $ 1.3 million payment applied to the outstanding principal balance and recognized interest income of approximately $ 0.5 million related to this loan received in cash.

A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of September 30, 2024 is as follows:

Collateral Location Collateral

16 unchanged sentences

P MI C, D 15,383,749 ( 414,896 ) 14,968,853 13.0 % (14)

CRE Private Co.

A TX Mixed-use 16,209,825 — 16,209,825 20.0 % (15)

11/30/2024 I/O

CRE Private Co.

B FL Residential 21,630,051 ( 246,652 ) 21,383,399 13.0 % (16)

5/12/2027 I/O

Q GA C, D 5,208,468 ( 430,833 ) 4,777,635 13.8 % (15)

Total loans held at carrying value $ 242,802,878 $ ( 8,545,836 ) $ 234,257,042

22 unchanged sentences

(14) Base interest rate of 13.0 %.

(15) Base weighted average interest rate of 14.7 % plus SOFR (SOFR floor of 4.0 %).

Cash interest rate for CRE Private Company A represents a blended rate of differing cash interest rates applicable to each of the senior and subordinate loans to which the Company is a lender under the credit agreements.

The subordinate loan component bears interest at a base interest rate of 15.31 % plus SOFR (SOFR floor of 4.0 %) and the senior loan component bears interest at a base interest rate of 3.48 % plus SOFR (SOFR floor of 4.0 %).

(16) Base interest rate of 13.0 %.

Pursuant to the first amendment to the credit agreement entered into in August 2024, interest was paid in kind from July 1, 2024 to August 31, 2024 and then payable in cash thereafter.

(15) Base interest rate of 8.75 % plus SOFR (SOFR floor of 5.0 %).

LOAN RECEIVABLE HELD AT CARRYING VALUE

As of June 30, 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 June 30, 2024 and December 31, 2023, respectively.

The following table presents changes in loans receivable as of and for the six months ended June 30, 2024:

As of September 30, 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 September 30, 2024 and December 31, 2023, respectively.

The following table presents changes in loans receivable as of and for the nine months ended September 30, 2024:

Principal Original Issue

2 unchanged sentences

Loan repayments — — —

Total loan receivable held at carrying value at June 30, 2024 $ 2,041,744 $ ( 1,686 ) $ 2,040,058

As of June 30, 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.

Total loan receivable held at carrying value at September 30, 2024 $ 2,041,744 $ ( 1,686 ) $ 2,040,058

As of September 30, 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 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 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 the fixed charge coverage ratio, loan-to-value ratio, property type and geographic location.

2 unchanged sentences

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.

As of June 30, 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 $ 25.2 million and $ 26.4 million, respectively, or 9.13 % and 8.71 %, respectively, of the Company’s total loans held at carrying value and loan receivable held at carrying value of approximately $ 275.6 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 $ 25.0 million and $ 26.3 million, respectively, and a liability for unfunded commitments of approximately $ 0.2 million and $ 0.1 million, respectively.

As of September 30, 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 $ 25.3 million and $ 26.4 million, respectively, or 10.70 % and 8.71 %, respectively, of the Company’s total loans held at carrying value and loan receivable held at carrying value of approximately $ 236.3 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 $ 25.1 million and $ 26.3 million, respectively, and a liability for unfunded commitments of approximately $ 0.2 million and $ 0.1 million, respectively.

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

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

Activity related to the CECL Reserve for outstanding balances and unfunded commitments on the Company’s loans held at carrying value and loan receivable held at carrying value as of and for the three and six months ended June 30, 2024 was as follows:

Outstanding (1)

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

(Decrease) increase in provision for current expected credit losses ( 6,338,438 ) 148,198 ( 6,190,240 )

Balance at June 30, 2024 $ 24,971,603 $ 122,900 $ 25,094,503

Increase (decrease) in provision for current expected credit losses 139,606 41,764 181,370

Write-offs — — —

Recoveries — — —

Balance at June 30, 2024 $ 25,009,024 $ 157,333 $ 25,166,357

Balance at September 30, 2024 $ 25,111,209 $ 164,664 $ 25,275,873

Outstanding (1)

3 unchanged sentences

Recoveries — — —

Balance at June 30, 2024 $ 25,009,024 $ 157,333 $ 25,166,357

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

Balance at September 30, 2024 $ 25,111,209 $ 164,664 $ 25,275,873

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

Risk factors include property type, geographic and local market dynamics, physical condition, projected cash flow, loan structure and exit plan, loan-to-value ratio, fixed charge coverage ratio, project sponsorship, and other factors deemed necessary.

Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows:

11 unchanged sentences

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

As of June 30, 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:

As of September 30, 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

6 unchanged sentences

INTEREST RECEIVABLE

The following table summarizes the interest receivable by the Company as of June 30, 2024 and December 31, 2023:

June 30, 2024 As of

The following table summarizes the interest receivable by the Company as of September 30, 2024 and December 31, 2023:

September 30, 2024 As of

December 31, 2023

4 unchanged sentences

INTEREST RESERVE

At June 30, 2024 and December 31, 2023, the Company had no loans that included a loan-funded interest reserve.

For the three and six months ended June 30, 2024, zero of aggregate interest income was earned and disbursed from the interest reserves.

For the three and six months ended June 30, 2023, approximately $ 0.6 million and $ 3.6 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 six months ended June 30, 2024 and 2023:

At September 30, 2024 and December 31, 2023, the Company had no loans that included a loan-funded interest reserve.

For the three and nine months ended September 30, 2024, zero of aggregate interest income was earned and disbursed from the interest reserves.

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.

The following table presents changes in interest reserve as of and for the three and nine months ended September 30, 2024 and 2023:

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

10 unchanged sentences

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 and six months ended June 30, 2024.

As of June 30, 2024 and December 31, 2023, outstanding borrowings under the Revolving Credit Facility were $ 35.0 million and $ 42.0 million, respectively, and $ 25.0 million and $ 18.0 million was available for borrowing as of June 30, 2024 and December 31, 2023, respectively.

As of September 30, 2024 and December 31, 2023, outstanding borrowings under the Revolving Credit Facility were $ 60.0 million and $ 42.0 million, respectively, and zero and $ 18.0 million was available for borrowing as of September 30, 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.

9 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.

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.

TRS1 is currently a subsidiary 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 six months ended June 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 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.

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

No repurchases took place during the six months ended June 30, 2024.

As of June 30, 2024 , the Company had $ 90.0 million in principal amount of the 2027 Senior Notes outstanding.

No repurchases took place during the nine months ended September 30, 2024.

As of September 30, 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 June 30, 2024 are as follows:

Scheduled principal payments on the 2027 Senior Notes as of September 30, 2024 are as follows:

2027 Senior Notes

4 unchanged sentences

Total due senior notes, net $ 88,461,936

The following tables reflect a summary of interest expense incurred during the three and six months ended June 30, 2024 and 2023:

The following tables reflect a summary of interest expense incurred during the three and nine months ended September 30, 2024 and 2023:

Three months ended

June 30, 2024

September 30, 2024

2027 Senior Notes Revolving Credit Facility Total Borrowings

Interest expense $ 1,293,750 $ 21,667 $ 1,315,417

Unused fee expense — — —

Amortization of deferred financing costs 158,964 98,324 257,288

1 unchanged sentence

Three months ended

June 30, 2023

September 30, 2023

2027 Senior Notes Revolving Credit Facility Total Borrowings

3 unchanged sentences

Total interest expense $ 1,452,714 $ 80,214 $ 1,532,928

Six months ended

June 30, 2024

Nine months ended

September 30, 2024

2027 Senior Notes Revolving Credit Facility Total Borrowings

Interest expense $ 3,881,250 $ 104,054 $ 3,985,304

Unused fee expense — — —

Amortization of deferred financing costs 473,628 290,211 763,839

Total interest expense $ 4,354,878 $ 394,265 $ 4,749,143

Six months ended

June 30, 2023

Nine months ended

September 30, 2023

2027 Senior Notes Revolving Credit Facility Total Borrowings

4 unchanged sentences

COMMITMENTS AND CONTINGENCIES

As of June 30, 2024 and December 31, 2023, the Company had the following commitments to fund various investments:

June 30, 2024 As of

As of September 30, 2024 and December 31, 2023, the Company had the following commitments to fund various investments:

September 30, 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 June 30, 2024, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

As of September 30, 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.

5 unchanged sentences

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

During the six months ended June 30, 2024 and 2023 , the Company recorded zero and approximately $ 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.

During the nine months ended September 30, 2024 and 2023 , the Company recorded zero and approximately $ 0.7 million in severance expense within general and administrative expenses within the unaudited interim consolidated statements of operations, respectively.

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

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

4 unchanged sentences

Series A Preferred Stock

As of June 30, 2024 and December 31, 2023, the Company has authorized 10,000 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 June 30, 2024 and December 31, 2023, there were zero and 125 shares of Series A Preferred Stock issued and outstanding, respectively.

As of September 30, 2024 and December 31, 2023, the Company has authorized 10,000 preferred shares designated as 12.0 % Series A Cumulative Non-Voting Preferred Stock, par value $ 0.01 per share (the “Series A Preferred Stock”).

As of September 30, 2024 and December 31, 2023, there were zero and 125 shares of Series A Preferred Stock issued and outstanding, respectively.

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.

3 unchanged sentences

The Series A Preferred Stock is senior to all other classes and series of shares of the Company’s stock as to dividend and redemption rights and rights upon the Company’s liquidation, dissolution and winding up.

Upon written notice to each record holder of the Series A Preferred Stock as to the effective date of redemption, the Company may redeem the shares of the outstanding Series A Preferred Stock at the Company’s option, in whole or in part, at any time for cash at a redemption price equal to $ 1,000 per share, for a total of $ 125,000 for the 125 shares outstanding, plus all accrued and unpaid dividends thereon up to and including the date fixed for redemption.

Upon written notice to each record holder of the Series A Preferred Stock as to the effective date of redemption, the Company may redeem the shares of the outstanding Series A Preferred Stock at the Company’s option, in whole or in part, at any time for cash at a redemption price equal to $ 1,000 per share, plus all accrued and unpaid dividends thereon up to and including the date fixed for redemption.

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.

2 unchanged sentences

As the shares were redeemed on June 30, 2024, there were no accrued and unpaid dividends.

During the three and six months ended June 30, 2024 and year ended December 31, 2023 , the Company did not issue any shares of its common stock, other than restricted stock awards granted under the Stock Incentive Plan.

During the three and nine months ended September 30, 2024 and year ended December 31, 2023 , the Company did not issue any shares of its common stock, other than shares of common stock sold under the ATM Program (hereinafter defined) and restricted stock 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 six months ended June 30, 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 June 30, 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

On June 13, 2023, the Company's Board of Directors authorized a share repurchase program providing for the repurchase of up to $ 20.0 million of the Company's outstanding common stock (the “Repurchase Program”).

The timing, price, and volume of repurchases will be based on the Company’s stock price, general market conditions, applicable legal requirements and other factors.

The repurchase of the Company’s common stock may be made from time to time in the open market, in privately negotiated transactions or otherwise in compliance with Rule 10b-18 and Rule 10b5-1 under the Securities Exchange Act of 1934.

The Company expects to finance any share repurchases under the Repurchase Program using cash on hand, capacity available under our line of credit and cash flows from operations.

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

During the three and six months ended June 30, 2024 and year ended December 31, 2023 , the Company did no t repurchase any shares of its common stock pursuant to the Repurchase Program.

During the three and nine months ended September 30, 2024, the Company sold an aggregate of 1,214,953 shares of the Company’s common stock under the Sales Agreement at a weighted average price of $ 10.39 per share, generating net proceeds of approximately $ 12.2 million.

As of September 30, 2024, the Company’s remaining authorization under the Sales Agreement was approximately $ 51.0 million.

As of September 30, 2024 , the shares of common stock sold under the ATM Program are the only offerings that have been initiated under the Shelf Registration Statement.

Stock Incentive Plan

3 unchanged sentences

Any award may be structured to be paid or settled in cash.

The Company has, and currently intends to continue to grant stock options to participants in the 2020 Plan, but it may also grant any other type of award available under the 2020 Plan in the future.

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.

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

The Company has granted, and currently intends to continue to continue to grant, stock options and restricted stock awards to participants in the 2020 Plan, but it may also grant any other type of award available under the 2020 Plan in the future.

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, consultants and other service providers to the Company or any of its subsidiaries.

In January 2024, the Company’s Board of Directors approved grants of restricted stock to the Company’s directors and certain officers, as well as certain employees of the Manager, with an aggregate of 209,397 shares of restricted stock granted to such 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 June 30, 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.

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

As of September 30, 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.

In January 2023, the Company’s Board of Directors approved grants of restricted stock to the Company’s directors and certain officers, as well as certain employees of the Manager, with an aggregate of 125,234 shares of restricted stock granted to such eligible persons.

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

1 unchanged sentence

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

As of June 30, 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 consistent with the Share Limit as of March 31, 2024.

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.

In connection with the Spin-Off, certain of the outstanding stock options of the Company, as well as the strike price for the stock options, will be adjusted.

All adjustments are made with the intent to preserve the intrinsic value of each award immediately before and after the Spin-Off.

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 June 30, 2024 and December 31, 2023:

June 30, 2024 As of

December 31, 2023

Non-vested 161,879 206,304

Vested 2,212,753 2,168,328

Exercised ( 5,511 ) ( 5,511 )

Forfeited ( 200,169 ) ( 200,169 )

Balance 2,168,952 2,168,952

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

As of September 30, 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 3,323,937 shares, which is an increase of 121,495 shares compared to June 30, 2024.

The Share Limit increased during the third quarter of 2024 under the evergreen provision in the 2020 Plan in connection with the shares issued under the ATM Program during such time.

Shares that are subject to or underlie awards that expire or, for any reason, are cancelled, terminated, forfeited, fail to vest or 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.

Modification of Stock Options and Restricted Stock Outstanding at Spin-Off

Stock Options

On July 9, 2024, the Company completed the separation of its CRE portfolio through the Spin-Off of SUNS.

As a result, the strike price for the outstanding stock options of the Company were adjusted to give effect to the Spin-Off.

All adjustments were made with the intent to preserve the intrinsic value of each award immediately before and after the Spin-Off.

The Company accounted for the modification as Type I modification (probable to probable).

The number of awards remained constant, while the strike prices were modified to preserve the intrinsic value of each award.

The modified stock option awards otherwise retained substantially the same terms and conditions, including term and vesting provisions.

The fair value of such unvested stock option awards remained constant pre- and post-Spin-Off, resulting in no incremental compensation cost.

The Company will recognize the remaining unrecognized compensation cost of the original stock option awards over the remaining vesting period.

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

The Company has elected to recognize forfeitures as they occur.

4 unchanged sentences

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

The expected term for each award is based on the contractual term for all awards granted thus far under the 2020 Plan.

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 $ 0.4 million and $ 0.9 million for the three and six months ended June 30, 2024, respectively, and approximately $ 0.1 million and $ 0.4 million for the three and six months ended June 30, 2023, respectively.

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

Assumptions Range

The weighted-average exercise price of stock options have been retroactively adjusted to give effect to the Spin-Off for all periods presented.

The following table presents the assumptions used in the Black-Scholes pricing model of options granted under the 2020 Plan during the three and nine months ended September 30, 2024 and 2023:

Expected term

Expected volatility 40 % - 50 %

2 unchanged sentences

Expected forfeiture rate 0 %

The following tables summarize stock option activity as of and during the six months ended June 30, 2024:

The modification date fair value of the stock options was determined using the Binomial-Lattice Model with the following assumptions on July 9, 2024:

Expected term

3.1 - 4.5 years

Expected volatility 31.24 % - 32.41 %

Expected dividend yield 15.65 %

Risk-free interest rate 4.16 % - 4.25 %

Expected forfeiture rate 0 %

As additional Company history and information is available, the Company determined the use of the Binomial-Lattice Model to be appropriate compared to the closed-form Black-Scholes model.

The risk-free interest rate is based on the continuously compounded rates from the U.S.

Treasury yield curve in effect at the date of Spin-Off.

The expected term is based on the remaining contractual term of each option’s life as of the date of Spin-Off.

The expected dividend yield was based on the Company’s most recent quarterly dividend divided by the three-month average stock price as of the Spin-Off date, annualized.

Expected volatility is based on the remaining contractual term-matched historical volatility.

In cases where the look back period exceeds the trading history of the Company’s Common Stock, the Company’s entire trading history was used.

Restricted Stock

Restricted stock awards originally granted under the 2020 Plan include awards granted to employees of the Company’s manager that perform shared fun ctions pre- and post-Spin-Off.

In co nnection with the Spin-Off transaction and as a result of the related modification, approximately 33 % of the remaining unrecognized compensation cost of unvested restricted stock awards will be recognized over the remaining vesting period of the Company’s former wholly-owned subsidiary, SUNS.

The Company will recognize the remaining 67 % of unrecognized compensation cost of unvested restricted stock awards over the remaining vesting period.

The following table summarize s the stock-based compensation expense incurred by the Company for the three and nine months ended September 30, 2024 and 2023:

Three months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

Stock-based compensation $ 218,643 $ 294,014 $ 1,131,208 $ 705,361

September 30, 2024 As of

December 31, 2023

Non-vested 156,367 206,304

Vested 2,218,265 2,168,328

Exercised ( 5,511 ) ( 5,511 )

Forfeited ( 200,169 ) ( 200,169 )

Balance 2,168,952 2,168,952

The following tables summarize stock option activity as of and during the nine months ended September 30, 2024:

Number of options Weighted-average

3 unchanged sentences

Forfeited — —

Outstanding as of June 30, 2024 2,168,952 $ 17.74 3.77 years $ —

Exercisable as of June 30, 2024 2,123,596 $ 17.72 3.76 years $ —

T he Company did not grant any options d uring the six months ended June 30, 2024 and 2023 .

No options were exercised during the six months ended June 30, 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 June 30, 2024 and December 31, 2023:

June 30, 2024 As of

Outstanding as of September 30, 2024 2,168,952 $ 11.46 3.52 years $ 529,236

Exercisable as of September 30, 2024 2,129,108 $ 11.44 3.51 years $ 526,559

T he Company did not grant any options d uring the nine months ended September 30, 2024 and 2023 .

No options were exercised during the nine months ended September 30, 2024 and 2023 .

As of September 30, 2024 , there was approximately $ 22.2 thousand of total unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 1.14 years.

The following table summarizes 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, 2024 and December 31, 2023:

September 30, 2024 As of

December 31, 2023

3 unchanged sentences

Balance 263,657 119,012

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 as of and during the six months ended June 30, 2024:

The following tables summarize the restricted stock activity as of and during the nine months ended September 30, 2024:

Number of shares of restricted stock Weighted-average

4 unchanged sentences

Forfeited — —

Balance as of June 30, 2024 266,071 $ 13.00

The total fair value of shares vested during the three months ended June 30, 2024 was approximately $ 14.5 thousand.

There were no shares of restricted stock granted during the three months ended June 30, 2024 .

During the three months ended June 30, 2023, 1,159 shares of restricted stock were granted with a weighted-average grant date fair value of $ 12.94 .

During the three months ended June 30, 2023, 16,347 shares of restricted stock vested with a weighted-average grant date fair value of $ 20.39 .

The total fair value of shares vested during the three months ended June 30, 2023 was approximately $ 194.9 thousand.

The total fair value of shares vested during the six months ended June 30, 2024 was approximately $ 738.6 thousand.

During the six months ended June 30, 2023, 126,393 shares of restricted stock were granted with a weighted-average grant date fair value of $ 15.55 .

During the six months ended June 30, 2023, 19,558 shares of restricted stock vested with a weighted-average grant date fair value of $ 19.60 .

The total fair value of shares vested during the six months ended June 30, 2023 was approximately $ 244.9 thousand.

As of June 30, 2024 , there was approximately $ 2.8 million of total unrecognized compensation cost related to non-vested restricted stock and stock option awards.

Balance as of September 30, 2024 263,657 $ 8.61

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

The weighted-average grant date fair value of the remaining unvested restricted stock awards as of September 30, 2024 has been adjusted to give effect to the Spin-Off transaction, which was completed July 9, 2024.

The total fair value of shares vested during the three months ended September 30, 2024 was approximately $ 25.0 thousand.

There were no shares of restricted stock granted during the three months ended September 30, 2024 and 2023.

During the three months ended September 30, 2023, 18,470 shares of restricted stock vested with a weighted-average grant date fair value of $ 16.24 .

The total fair value of shares vested during the three months ended September 30, 2023 was approximately $ 244.8 thousand.

The total fair value of shares vested during the nine months ended September 30, 2024 was approximately $ 763.6 thousand.

During the nine months ended September 30, 2023, 126,393 shares of restricted stock were granted with a weighted-average grant date fair value of $ 15.55 .

During the nine months ended September 30, 2023, 38,028 shares of restricted stock vested with a weighted-average grant date fair value of $ 17.97 .

The total fair value of shares vested during the nine months ended September 30, 2023 was approximately $ 489.6 thousand.

As of September 30, 2024 , there was approximately $ 1.6 million of total unrecognized compensation cost related to non-vested restricted stock.

That cost is expected to be recognized over a weighted-average period of 1.91 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 six months ended June 30, 2024 and 2023:

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, 2024 and 2023:

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

Net income attributable to common shareholders $ 16,446,121 $ 12,135,333 $ 16,392,005 $ 22,160,607

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

Net income from continuing operations $ 1,217,790 $ 7,972,108 $ 14,853,671 $ 30,132,715

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

Dividends paid on unvested restricted stock ( 167,625 ) ( 65,991 ) ( 353,021 ) ( 205,268 )

Net income from continuing operations attributable to common shareholders 1,050,165 7,906,117 14,493,150 29,919,947

Net income from discontinued operations 165,944 7,767 2,922,068 7,767

Net income attributable to common shareholders 1,216,109 7,913,884 17,415,218 29,927,714

16,310,351 12,024,028 16,199,109 22,013,830

Basic weighted average shares of common stock outstanding 20,684,149 20,324,125 20,493,375 20,315,162

1 unchanged sentence

Diluted weighted average shares of common stock outstanding 20,785,848 20,342,880 20,543,644 20,390,385

Basic weighted average earnings per common share $ 0.80 $ 0.59 $ 0.79 $ 1.08

Diluted weighted average earnings per common share $ 0.80 $ 0.59 $ 0.79 $ 1.08

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

Diluted weighted average earnings per common share excluded 2,206,907 and 2,206,907 weighted average unvested restricted stock and stock options due to anti-dilutive effect for the three and six months ended June 30, 2024, respectively, and 2,417,817 and 2,369,907 for the three and six months ended June 30, 2023, respectively .

Basic earnings per share

Continuing operations $ 0.05 $ 0.39 $ 0.71 $ 1.47

Discontinued operations $ 0.01 $ 0.00 $ 0.14 $ 0.00

Total basic weighted average earnings per common share $ 0.06 $ 0.39 $ 0.85 $ 1.47

Diluted earnings per share

Continuing operations $ 0.05 $ 0.39 $ 0.71 $ 1.47

Discontinued operations $ 0.01 $ 0.00 $ 0.14 $ 0.00

Total diluted weighted average earnings per common share $ 0.06 $ 0.39 $ 0.85 $ 1.47

Diluted earnings per share was computed using the treasury stock method for stock options and restricted stock.

Diluted weighted average earnings per common share excluded 1,499,235 and 1,499,235 weighted average unvested restricted stock and stock options due to anti-dilutive effect for the three and nine months ended September 30, 2024, respectively, and 2,288,419 and 2,247,328 for the three and nine months ended September 30, 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.

3 unchanged sentences

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 $ 0.3 million and $ 0.4 million for the three and six months ended June 30, 2024, respectively.

The income tax provision for the Company was approximately $ 0.2 million and $ 0.3 million for the three and six months ended June 30, 2023, respectively.

The income tax expense for the three and six months ended June 30, 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 and six months ended June 30, 2024 and 2023:

The income tax provision for the Company was approximately $ 0.4 million and $ 0.8 million for the three and nine months ended September 30, 2024, respectively.

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 expense for the three and nine months ended September 30, 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 and nine months ended September 30, 2024 and 2023:

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

3 unchanged sentences

Total income tax expense, including excise tax $ 386,256 $ 663,220 $ 830,591 $ 1,005,959

(1) During the three and six months ended June 30, 2024, the Company incurred federal taxes of approximately $ 183.0 thousand and $ 288.3 thousand and state and local taxes of approximately $ 103.0 thousand and $ 156.0 thousand, respectively.

During the three and six months ended June 30, 2023, the Company incurred federal taxes of approximately $ 131.5 thousand and $ 263.0 thousand and state and local taxes of approximately $ 36.1 thousand and $ 79.5 thousand, respectively.

For the three and six months ended June 30, 2024 and 2023, the Company incurred no expense for United States federal excise tax.

(1) During the three and nine months ended September 30, 2024, the Company incurred federal taxes of approximately $ 0.3 million and $ 0.6 million and state and local taxes of approximately $ 0.1 million and $ 0.2 million, respectively.

During the three and nine months ended September 30, 2023, the Company incurred federal taxes of approximately $ 0.5 million and $ 0.7 million and state and local taxes of approximately $ 0.2 million and $ 0.3 million, respectively.

For the three and nine months ended September 30, 2024, the Company incurred a benefit of approximately $( 8.0 ) thousand and $( 8.0 ) thousand , respectively, for United States federal excise tax.

For the three and nine months ended September 30, 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.

9 unchanged sentences

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

The following tables present fair value measurements of loans held at fair value as of June 30, 2024 and December 31, 2023:

Fair Value Measurement as of June 30, 2024

The following tables present fair value measurements of loans held at fair value as of September 30, 2024 and December 31, 2023:

Fair Value Measurement as of September 30, 2024

Total Level 1 Level 2 Level 3

5 unchanged sentences

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

The following table presents changes in loans that use Level 3 inputs as of and for the six months ended June 30, 2024:

Six months ended

June 30, 2024

The following table presents changes in loans that use Level 3 inputs as of and for the nine months ended September 30, 2024:

Nine months ended

September 30, 2024

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

Change in unrealized gains (losses) on loans at fair value, net ( 9,655,396 )

Additional fundings 4,594,027

Original issue discount and other discounts, net of costs ( 2,756,417 )

Loan repayments ( 4,509,069 )

2 unchanged sentences

PIK interest 1,134,786

Total loans using Level 3 inputs at June 30, 2024 $ 34,661,390

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 June 30, 2024 is $( 9,459,704 ).

The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of June 30, 2024 and December 31, 2023.

Total loans using Level 3 inputs at September 30, 2024 $ 31,372,174

The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of September 30, 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 June 30, 2024

As of September 30, 2024

Unobservable Input

17 unchanged sentences

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.

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 sheets as of June 30, 2024 :

As of June 30, 2024

As of September 30, 2024

Carrying Value Fair Value

14 unchanged sentences

Under the Management Agreement, the Company pays Incentive Fees to the Manager based upon the Company’s achievement of targeted levels of Core Earnings.

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

The Incentive Compensation for the three and six months ended June 30, 2024 was approximately $ 2.9 million and $ 5.3 million, respectively.

The Incentive Compensation for the three and six months ended June 30, 2023 was approximately $ 2.4 million and $ 5.2 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.

“Core Earnings” is defined in the Management Agreement as, for a given period, 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, 2024 was approximately $ 0.3 million and $ 5.6 million, respectively.

The Incentive Compensation for the three and nine months ended September 30, 2023 was approximately $ 2.6 million and $ 7.9 million, respectively.

The Company is required to pay all of its costs and expenses and 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 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 and six months ended June 30, 2024 and 2023:

The following table summarizes the related party costs incurred by the Company for the three and nine months ended September 30, 2024 and 2023:

Three months ended

June 30, Six months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

6 unchanged sentences

Total $ 1,584,711 $ 4,392,852 $ 10,564,764 $ 13,393,793

Amounts payable to the Company’s Manager as of June 30, 2024 and December 31, 2023 were approximately $ 4.9 million and $ 5.0 million, respectively.

Amounts payable to the Company’s Manager as of September 30, 2024 and December 31, 2023 were approximately $ 1.9 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 approximately 10.0 % , 3.0 % and 1.6 % , respectively, of the Parent Manager.

Certain officers have ownership in the outstanding equity of the Parent Manager, including Leonard Tannenbaum, Chairman of the Board, Robyn Tannenbaum, President and Chief Investment Officer, Bernard Berman, a member of the Company’s Investment Committee, and Daniel Neville, Chief Executive Officer.

Due to Affiliate

Amounts due to an affiliate of the Company as of June 30, 2024 and December 31, 2023 were approximately $ 24.5 thousand and $ 16.4 thousand, respectively.

Amounts due to an affiliate of the Company as of September 30, 2024 and December 31, 2023 were approximately $ 20.6 thousand and $ 16.4 thousand, respectively.

Investments in Loans

2 unchanged sentences

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

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 June 30, 2024, there were four co-invested loans held by the Company and affiliates of the Company.

Additionally, the Company’s Manager or its affiliates, including AFC Agent LLC (“AFC Agent”), may from time to time serve as administrative and collateral agent to the lenders under the Company’s loans.

As of September 30, 2024, there were two 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 six months ended June 30, 2024 and 2023:

Record Date Payment

Date Common Share

Amount Aggregate Amount Paid

The following table summarizes the Company’s dividends declared during the nine months ended September 30, 2024 and 2023:

Declaration Date Record Date Payment

Date Per Common Share

Amount Total Distribution Amount

Regular cash dividend 3/2/2023 3/31/2023 4/14/2023 $ 0.56 $ 11,473,971

Regular cash dividend 6/15/2023 6/30/2023 7/14/2023 0.48 9,819,695

Regular cash dividend 9/15/2023 9/30/2023 10/13/2023 0.48 9,819,695

2023 Period Subtotal

3 unchanged sentences

Special cash dividend 6/27/2024 7/8/2024 7/15/2024 0.15 3,100,064

Regular cash dividend 9/13/2024 9/30/2024 10/15/2024 0.33 7,221,076

2024 Period Subtotal

$ 1.44 $ 30,161,550

SUBSEQUENT EVENTS

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

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

In July 2024, the Company received a prepayment on its investment in Subsidiary of Public Company M.

The Company received approximately $ 10.0 million in principal prepayments and $ 0.2 million prepayment premium.

Following the prepayment, the outstanding principal balance on the Company’s investment in Subsidiary of Public Company M is approximately $ 2.8 million.

In July 2024, pre-Spin-Off, SUNS and an affiliate of SUNS entered into a senior secured credit facility with CRE Private Company C for a total aggregate commitment amount of approximately $ 35.2 million for the refinance of an active adult multi-family rental development in southwest Austin, Texas.

SUNS committed a total of approximately $ 14.1 million, and an affiliate of SUNS committed the remaining approximately $ 21.1 million.

The senior loan commitments were issued by SUNS and an affiliate at a discount of 1.0 %.

At closing, the Company funded approximately $ 11.4 million and an affiliate of SUNS funded approximately $ 17.0 million.

The loan bears interest at a rate of SOFR plus 4.25 %, with a rate index floor of 4.75 %.

The loan with CRE Private Company C has a maturity date of three years , which may be extended, at the borrower’s option, by two separate twelve-month extensions subject to the satisfaction of certain conditions on each extension in exchange for an extension fee of 0.50 % of the total loan amount.

The loan with CRE Private Company C is secured by a deed of trust on the property and any deposit and reserve accounts established by the terms of the credit facility.

The proceeds of the loans will be used to, among other things, fund the completion of construction and other reserves, refinance existing debt and pay transaction costs.

Following completion of the Spin-Off, the loan with CRE Private Company C is part of the Spin-Off CRE portfolio held by SUNS.

On July 9, 2024, SUNS became an independent, publicly-traded company, trading on the Nasdaq Capital Market under the symbol “SUNS”.

The Spin-Off was effected by the distribution of all of the outstanding shares of SUNS common stock to the Company’s shareholders of record as of the close of business on the Record Date.

DISCONTINUED OPERATIONS

On July 9, 2024, the Company announced the completion of the previously announced separation and Spin-Off of the Company’s CRE portfolio into an independent, publicly-traded REIT, SUNS.

The Spin-Off was effected by the distribution of all of the outstanding shares of SUNS common stock to the Company’s shareholders of record as of the close of business on July 8, 2024 (the “Record Date”).

The Company’s shareholders of record as of the Record Date received one share of SUNS common stock for every three shares of the Company’s common stock held as of the Record Date.

The Spin-Off was completed July 9, 2024 (the “Distribution Date”).

On the Distribution Date, SUNS became an independent, publicly-traded company, trading on the Nasdaq Capital Market under the symbol “SUNS”.

The Company retained no ownership interest in SUNS following the Spin-Off.

Prior to the Spin-Off, SUNS held approximately $ 115 million comprised of the SUNS’ CRE loan portfolio and cash.

On the Distribution Date, the Company recognized a reduction to additional paid-in capital of approximately $ 114.8 million in connection with the Spin-Off related to the transfer of certain assets and liabilities associated with its CRE business to SUNS.

In connection with the Spin-Off, the Company entered into several agreements with SUNS that govern the relationship between the Company and SUNS following the spin-off, including the Separation and Distribution Agreement and the Tax Matters Agreement.

The operating results of the SUNS business through the date of the Spin-Off are reported in net income from discontinued operations, net of tax in the consolidated statements of operations for all periods presented.

The related assets and liabilities are reported as assets and liabilities of discontinued operations on the consolidated balance sheets.

Cash flows from the Company’s discontinued operations are presented as such in the consolidated statements of cash flows for all periods presented.

The following table summarizes the financial statement lines included in net income from discontinued operations, net of tax for the three and nine months ended September 30, 2024 and 2023:

Three months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

Interest income $ 150,453 $ 7,767 $ 4,156,335 $ 7,767

General and administrative expenses ( 83 ) — ( 21,651 ) —

Professional fees 15,574 — ( 1,140,762 ) —

(Increase) decrease in provision for current expected credit losses — — ( 71,854 ) —

Net income from discontinued operations, net of tax $ 165,944 $ 7,767 $ 2,922,068 $ 7,767

During the three and nine months ended September 30, 2024, Spin-Off costs incurred were approximately $( 15.6 ) thousand and $ 1.1 million, respectively.

During the three months ended September 30, 2024, previous estimates for Spin-Off work performed were less than actuals, resulting in a credit to expense.

Prior to the third quarter of 2024, Spin-Off costs were historically presented within professional fees in the consolidated statements of operations and are now included in the measurement and presentation of discontinued operations for all periods presented.

There were no assets or liabilities classified as discontinued operations as of September 30, 2024.

The following table summarizes the financial statement lines of assets and liabilities classified as discontinued operations as of December 31, 2023:

December 31, 2023

Cash and cash equivalents $ 31,244,622

Total assets of discontinued operations $ 31,244,622

Accounts payable and other liabilities $ 10,000

Total liabilities of discontinued operations $ 10,000

SUBSEQUENT EVENTS

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

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

In October 2024, the Company entered into a $ 41.0 million senior secured credit facility with Private Company R, which was fully funded at closing.

The loan was originated at a discount of 2.0 % and matures November 1, 2027.

The loan bears interest at SOFR plus a 7.5 % spread, subject to a SOFR floor of 4.5 %.

The loan is secured by substantially all assets of the borrowers, including a first-lien mortgage on the owned real property and a senior lien against the borrower’s assets, operations and the value of its cannabis licenses.

The loan is also guaranteed by certain direct or indirect shareholders of the borrowers.

The proceeds of the loan will be used to, among other things, refinance existing debt and provide working capital.

In October 2024, the Company received a prepayment of approximately $ 0.9 million from Private Company L’s sale of certain collateral assets and a $ 17.8 thousand prepayment premium.

In November 2024, the Company entered into an agreement to purchase $ 10.0 million in outstanding principal amount of a senior secured term loan to Subsidiary of Public Company S, a publicly traded operator, at par from a third party lender and the Company expects to settle the transaction in the near future.

The third party lender assigned all of its rights and obligations under such loan to the Company.

The term loan under the Subsidiary of Public Company S Credit Facility accrues interest at a fixed rate per annum of 9.5 % and matures in August 2026.

In November 2024, in connection with its credit facility with Private Company P, the Company entered into a limited waiver and amendment to such facility to waive certain failures by Private Company P to pay monthly cash interest payments when due.

In connection with the waiver and amendment, Private Company P will make a cash payment constituting the majority of such missed interest payments of approximately $ 0.3 million, with the remaining amount due capitalized into the loan balance.

Cash interest payments on the facility will restart January 1, 2025.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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.

This Quarterly Report on Form 10-Q (this “Quarterly Report”), filed by Advanced Flower Capital Inc.

(f/k/a 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.

8 unchanged sentences

(viii) our expected ranges of originations and repayments;

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

and (x) our expanded investment strategy.

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

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

23 unchanged sentences

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

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

• the availability of investment opportunities for us within our investment guidelines;

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

8 unchanged sentences

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

• we may not achieve some or all of the expected benefits of the Spin-Off.

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.

• uncertainties as to the impact of the Spin-Off on our business.

Please see the section entitled “ Risk Factors ” located in our Annual Report on Form 10-K, filed with the SEC on March 7, 2024 and the risk factor described under Part II, Item 1A of this Quarterly Report on Form 10-Q, for a further discussion of these and other risks and uncertainties which could affect our future results.

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

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

What changed 10-Q

Item 1. Financial Statements