What changed in this filing

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Item 1. Financial Statements

2025-05-14 compared with 2024-11-13 · 296 added, 376 removed, 606 unchanged (53% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

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)

March 31, 2025 December 31, 2024

Loans held for investment at fair value (cost of $ 48,988,077 and $ 50,241,018 at March 31, 2025 and December 31, 2024, respectively, net)

$ 28,572,385 $ 30,510,804

4 unchanged sentences

Cash and cash equivalents 3,318,303 103,610,460

Accounts receivable — 1,837,450

Interest receivable 1,816,084 1,982,897

Prepaid expenses and other assets 11,291,443 1,214,817

Assets of discontinued operations — 31,244,622

Total assets $ 321,655,289 $ 402,057,313

7 unchanged sentences

Senior notes payable, net 88,759,099 88,612,150

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

Liabilities of discontinued operations — 10,000

Line of credit payable 22,250,000 60,000,000

Line of credit payable to affiliate — 40,000,000

Total liabilities 120,854,799 200,681,175

1 unchanged sentence

Shareholders’ equity

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

Preferred stock, par value $ 0.01 per share, 10,000 shares authorized at March 31, 2025 and December 31, 2024 and 0 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

Common stock, par value $ 0.01 per share, 50,000,000 shares authorized at March 31, 2025 and December 31, 2024 and 22,596,007 and 22,332,927 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively

225,960 223,329

7 unchanged sentences

Three months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

Interest income $ 8,458,248 $ 14,334,754

7 unchanged sentences

Total expenses 2,476,832 5,504,869

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

Reversal of (provision for) current expected credit losses 699,424 ( 4,931,674 )

Realized gains (losses) on investments, net — ( 93,338 )

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

Change in unrealized gains (losses) on loans at fair value, net ( 685,478 ) ( 3,613,693 )

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

Net income (loss) from continuing operations before income taxes 4,180,091 ( 1,411,983 )

Income tax expense 112,406 158,360

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

Net income (loss) from continuing operations 4,067,685 ( 1,570,343 )

Net income from discontinued operations, net of tax — 1,516,227

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

Net income (loss) $ 4,067,685 $ ( 54,116 )

Basic earnings per common share:

12 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three months ended September 30, 2024

Stock Common Stock Additional

Capital Accumulated

(Deficit) Total

Shareholders’

Shares Amount

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

Dividends declared on common shares ($ 0.33 per share)

— — — — ( 7,221,076 ) ( 7,221,076 )

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

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

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

Capital Accumulated

(Deficit) Total

Shareholders’

Shares Amount

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

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

Dividends declared on common shares ($ 0.48 per share)

— — — — ( 9,819,695 ) ( 9,819,695 )

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

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

See accompanying notes to the consolidated financial statements

ADVANCED FLOWER CAPITAL INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Nine months ended September 30, 2024

Three months ended March 31, 2025

Stock Common Stock Additional

4 unchanged sentences

Balance at December 31, 2024 $ — 22,332,927 $ 223,329 $ 251,865,763 $ ( 50,712,954 ) $ 201,376,138

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

Stock-based compensation — 263,080 2,631 551,118 — 553,749

1 unchanged sentence

— — — — ( 5,197,082 ) ( 5,197,082 )

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 — — — — 4,067,685 4,067,685

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

Balance at March 31, 2025 $ — 22,596,007 $ 225,960 $ 252,416,881 $ ( 51,842,351 ) $ 200,800,490

Three months ended March 31, 2024

Stock Common Stock Additional

7 unchanged sentences

— — — — ( 9,920,205 ) ( 9,920,205 )

Dividends declared on preferred shares ($ 60 per share)

— — — — ( 7,500 ) ( 7,500 )

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

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

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

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

See accompanying notes to the consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended

September 30,

Three months ended

Operating activities:

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

Net income (loss) $ 4,067,685 $ ( 54,116 )

Net (income) from discontinued operations, net of tax — ( 1,516,227 )

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

Net income (loss) from continuing operations 4,067,685 ( 1,570,343 )

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

(Decrease) increase in provision for current expected credit losses ( 1,149,050 ) 149,637

(Reversal of) provision for current expected credit losses ( 699,424 ) 4,931,674

Realized (gains) losses on investments, net — 93,338

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

Change in unrealized (gains) losses on loans at fair value, net 685,478 3,613,693

5 unchanged sentences

Changes in operating assets and liabilities:

Accounts receivable — 55

Interest receivable 166,813 198,535

Prepaid expenses and other assets ( 98,710 ) 50,923

Interest reserve — ( 4,149,994 )

Accrued interest 1,405,842 1,307,888

7 unchanged sentences

Issuance of and fundings on loans ( 15,472,181 ) ( 35,331,598 )

Funding to title agent for loan closing ( 10,080,000 ) —

Proceeds from sales of loans — 1,796,042

Due from affiliate — ( 1,000,000 )

Principal repayment of loans 6,474,523 26,068,834

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 continuing operations ( 19,077,658 ) ( 7,466,722 )

Net cash (used in) provided by investing activities of discontinued operations — ( 46,414,144 )

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

Net cash (used in) provided by investing activities ( 19,077,658 ) ( 53,880,866 )

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 ( 16,007 ) —

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

Repayment of revolving credit facility ( 167,000,000 ) ( 81,000,000 )

Borrowings on revolving credit facilities 26,500,000 60,000,000

Repayments on revolving credit facilities ( 104,250,000 ) ( 42,000,000 )

Dividends paid to common and preferred shareholders ( 7,369,866 ) ( 9,819,695 )

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

Net cash (used in) provided by financing activities of continuing operations ( 85,135,873 ) 8,180,305

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 cash (used in) provided by financing activities ( 85,135,873 ) 8,180,305

Net increase (decrease) in cash and cash equivalents ( 100,292,157 ) ( 39,328,013 )

2 unchanged sentences

Supplemental disclosure of non-cash activity:

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

OID withheld from funding of loans $ 375,000 $ 1,360,000

Dividends declared and not yet paid $ 5,197,082 $ 9,920,205

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:

4 unchanged sentences

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2024

As of March 31, 2025

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” 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.

11 unchanged sentences

The Company operates in one operating segment.

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

The Company is 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.

9 unchanged sentences

All intercompany balances and transactions have been eliminated in consolidation.

The current period’s results of operations will not necessarily be indicative of results that ultimately may be 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.

The Company’s results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may ultimately be realized for the full fiscal year ending December 31, 2025.

Use of Estimates in the Preparation of Financial Statements

1 unchanged sentence

Actual results could differ from those estimates.

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

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

Recent Accounting Pronouncements

4 unchanged sentences

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.

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

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

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

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

5 unchanged sentences

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

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

The adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025, the FASB issued ASU 2025-01—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Clarifying the Effective Date (“ASU 2025-01”), which requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement.

ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The adoption of ASU 2024-03 is not expected to have a material impact on the Company’s consolidated financial statements.

LOANS HELD FOR INVESTMENT AT FAIR VALUE

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

As of March 31, 2025 and December 31, 2024, the Company’s portfolio included one loan held at fair value.

The aggregate commitment under this loan was approximately $ 43.2 million and $ 44.4 million, respectively, and outstanding principal was approximately $ 51.9 million and $ 53.1 million as of March 31, 2025 and December 31, 2024, respectively.

For the three months ended March 31, 2025, the Company received approximately $ 1.3 million of principal repayments of loans held at fair value.

As of March 31, 2025 and December 31, 2024, the Company’s loan held at fair value did not have a floating interest rate.

The following tables summarize the Company’s loans held at fair value as of March 31, 2025 and December 31, 2024:

As of March 31, 2025

Fair Value (1)

11 unchanged sentences

Remaining Life

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

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

Senior term loan $ 30,510,804 $ 50,241,018 $ 53,108,449 0.0

Total loan held at fair value $ 30,510,804 $ 50,241,018 $ 53,108,449 0.0

(1) Refer to Note 13.

(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 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 nine months ended September 30, 2024:

(3) As of March 31, 2025 and December 31, 2024, the maturity date passed on the credit facility with Private Company A without repayment.

The following table presents changes in loans held at fair value as of and for the three months ended March 31, 2025:

Principal Original Issue

Discount Unrealized Gains (Losses) Fair Value

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

Total loan held at fair value at December 31, 2024 $ 53,108,449 $ ( 2,867,431 ) $ ( 19,730,214 ) $ 30,510,804

Change in unrealized gains (losses) on loans at fair value, net — — ( 685,478 ) ( 685,478 )

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

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

Loan repayments ( 1,252,941 ) — — ( 1,252,941 )

Sale of loans ( 19,284,846 ) — — ( 19,284,846 )

PIK interest 1,134,786 — — 1,134,786

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:

Total loan held at fair value at March 31, 2025 $ 51,855,508 $ ( 2,867,431 ) $ ( 20,415,692 ) $ 28,572,385

As of March 31, 2025 and December 31, 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.

The loan with Private Company A had an outstanding principal balance of approximately $ 51.9 million and an unrealized loss of approximately $( 20.4 ) million as of March 31, 2025 .

During the three months ended March 31, 2025, approximately $( 1.3 ) million of payments were received and applied as a reduction to the amortized cost of the Private Company A loan.

A more detailed listing of the Company’s loan held at fair value portfolio based on information available as of March 31, 2025 is as follows:

Collateral Location Collateral

1 unchanged sentence

Rate Maturity Date (4)

A AZ, GA, MA, NM C, D $ 31,372,174 $ 50,950,868 $ 53,818,300 15.5 % (6)

A AZ, MA, NM C, D $ 28,572,385 $ 48,988,077 $ 51,855,508 15.5 % (6)

Total loan held at fair value $ 28,572,385 $ 48,988,077 $ 51,855,508

11 unchanged sentences

The maturity date passed on the credit facility to Private Company A without repayment.

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

The court-appointed receiver is determining the amount of principal payments the borrower is able to repay either from operations or from sale of collateral assets on a monthly basis.

In November 2023, Private

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

The court-appointed receiver is determining the amount of principal payments the borrower is able to repay on a monthly basis either from operations or from sale of collateral assets.

LOANS HELD FOR INVESTMENT AT CARRYING VALUE

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

As of March 31, 2025 and December 31, 2024, t he Company’s portfolio included fifteen and fourteen loans held at carrying value, respectively.

A s of March 31, 2025 and December 31, 2024, t he aggregate originated commitment under these loans was approximately $ 327.8 million and $ 312.8 million, resp ectively, and outstanding principal was approximately $ 312.5 million and $ 301.8 million, respectively.

During the three months ended March 31, 2025, the Company funded approximately $ 15.8 million of new loans and additional principal and had approximately $ 5.2 million of principal repayments of loans held at carrying value.

As of March 31, 2025 and December 31, 2024, approximately 49 % and 52 %, respectively, of the Company’s loans held at carrying value had floating interest rates.

As of March 31, 2025, t hese floating benchmark rates included one-month Secured Overnight Financing Rate (“SOFR”) quoted at 4.3 % and subject to a weighted average floor of 3.8 % based on outstanding principal.

The following tables summarize the Company’s loans held at carrying value as of March 31, 2025 and December 31, 2024:

As of March 31, 2025

Principal (1)

10 unchanged sentences

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

(2) Weighted average remaining life is calculated based on the carrying value of the loans as of September 30, 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:

(2) Weighted average remaining life is calculated based on the carrying value of the loans as of March 31, 2025 and December 31, 2024 .

The following table presents changes in loans held at carrying value as of and for the three months ended March 31, 2025:

Principal Original Issue

3 unchanged sentences

Accretion of original issue discount — 873,806 873,806

Loan repayments ( 45,237,624 ) — ( 45,237,624 )

Sale of loans ( 90,000,000 ) 251,662 ( 89,748,338 )

PIK interest 118,869 — 118,869

Loan amortization payments ( 5,221,582 ) — ( 5,221,582 )

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.

Total loans held at carrying value at March 31, 2025 $ 312,500,259 $ ( 7,994,611 ) $ 304,505,648

In April 2025, the Company entered into a $ 14.0 million senior secured credit facility with Subsidiaries of Private Company V.

The loan was originated at a discount of 3.0 % and matures April 1, 2029.

The loan bears cash interest at 12.5 % and 1.5 % interest paid-in kind.

As of the date of this Quarterly Report on Form 10-Q, approximately $ 10.5 million was drawn and the remainder is available to be drawn within one year of closing.

Due to the timing of closing, the cash funding of approximately $ 10.1 million, net of OID, for the Company’s loan with Subsidiaries of Private Company V was held by the title agent and not yet complete as of March 31, 2025 and was recorded within prepaid expenses and other assets on these consolidated financial statements.

The loan with Subsidiaries of Private Company V closed subsequent to the first quarter 2025.

As of March 31, 2025 and December 31, 2024 , the Company had two loans held at carrying value on nonaccrual status, respectively.

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

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

During the 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 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:

During the three months ended March 31, 2025, the Company recognized interest income of approximately $ 0.7 million related to this loan, which was received in cash.

During the three months ended March 31, 2025, the Company recognized no interest income related to this loan.

A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of March 31, 2025 is as follows:

Collateral Location Collateral

17 unchanged sentences

Q GA C, D 5,984,450 ( 375,833 ) 5,608,617 13.8 % (15)

R MD C, D 37,990,362 ( 687,027 ) 37,303,335 12.0 % (16)

11/1/2027 P/I

of Public Co.

S FL, IL, MA, NY, OH, PA C, D 10,000,000 — 10,000,000 9.5 % (17)

8/12/2026 I/O

T UT C, D 7,965,277 — 7,965,277 11.3 % (18)

7/26/2027 P/I

U GA, OH C, D 15,000,000 ( 354,730 ) 14,645,270 14.0 % (19)

Total loans held at carrying value $ 312,500,259 $ ( 7,994,611 ) $ 304,505,648

2 unchanged sentences

(3) Certain loans are subject to contractual extension options and may be subject to performance based or other conditions as stipulated in the loan agreement.

Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty.

Actual maturities may differ from contractual maturities stated herein as certain borrowers

may have the right to prepay with or without paying a prepayment penalty.

The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications.

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(5) Base interest rate of 12.5 %.

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

prime rate to a fixed interest rate.

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

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

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

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

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(10) Base interest rate of 9.0 %.

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

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

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(14) 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 %).

(16) Base interest rate of 7.5 % plus SOFR (SOFR floor of 4.5 %).

(17) Base interest rate of 9.5 %.

(18) Base interest rate of 11.25 %.

(19) Base interest rate of 14.0 %.

LOAN RECEIVABLE HELD AT CARRYING VALUE

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:

As of March 31, 2025 and December 31, 2024, 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 $ 1.9 million and $ 1.9 million as of March 31, 2025 and December 31, 2024, respectively.

The following table presents changes in loans receivable as of and for the three months ended March 31, 2025:

Principal Original Issue

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Loan repayments — — —

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.

Total loan receivable held at carrying value at March 31, 2025 $ 1,897,324 $ ( 1,686 ) $ 1,895,638

As of March 31, 2025 and December 31, 2024 , the Company had one loan receivable held at carrying value on nonaccrual status.

The equipment loan with Public Company A had an outstanding principal balance of approximately $ 1.9 million and amortized cost of approximately $ 1.9 million.

During the three months ended March 31, 2025, no interest income was recognized relating to this loan.

Future payments will be accounted for under the cost recovery method and applied as a reduction to the amortized cost of the Public Company A equipment loan.

CURRENT EXPECTED CREDIT LOSSES

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.

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

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

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

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.

As of March 31, 2025 and December 31, 2024, the Company’s CECL Reserve for its loans held at carrying value and loan receivable held at carrying value is approximately $ 29.9 million and $ 30.6 million, respectively, or 9.75 % and 10.36 %, respectively, of the Company’s total loans held at carrying value and loan receivable held at carrying value of approximately $ 306.4 million and $ 295.2 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 $ 29.7 million and $ 30.4 million, respectively, and a liability for unfunded commitments of approximately $ 0.1 million and $ 0.2 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 nine months ended September 30, 2024 was as follows:

Outstanding (1)

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

Outstanding (1)

Balance at December 31, 2024 $ 30,419,677 $ 166,702 $ 30,586,379

(Decrease) increase in provision for current expected credit losses ( 1,198,241 ) 49,191 ( 1,149,050 )

(Reversal of) provision for current expected credit losses ( 675,465 ) ( 23,959 ) ( 699,424 )

Write-offs — — —

Recoveries — — —

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.

Balance at March 31, 2025 $ 29,744,212 $ 142,743 $ 29,886,955

(1) As of March 31, 2025 and December 31, 2024, the CECL Reserve related to outstanding balances on loans held at carrying value and loan receivable held at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets.

(2) As of March 31, 2025 and December 31, 2024, 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 by the Company.

Risk factors may 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 by the Company.

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:

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

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:

As of March 31, 2025, 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:

2025 2024 2023 2022 2021 2020 Total

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INTEREST RECEIVABLE

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

September 30, 2024 As of

The following table summarizes the interest receivable by the Company as of March 31, 2025 and December 31, 2024:

March 31, 2025 As of

December 31, 2024

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Total interest receivable $ 1,816,084 $ 1,982,897

INTEREST RESERVE

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

September 30, Nine months ended

September 30,

2024 2023 2024 2023

Beginning reserves $ — $ 1,130,541 $ — $ 3,200,944

New reserves — — — 1,526,065

Reserves disbursed — ( 579,591 ) — ( 4,176,059 )

Ending reserves $ — $ 550,950 $ — $ 550,950

Revolving Credit Facility

On April 29, 2022, the Company entered into the Loan and Security Agreement (the “Revolving Credit Agreement”) by and among the Company, the other loan parties from time to time party thereto, the lenders party thereto, and the lead arranger, bookrunner and administrative agent party thereto, pursuant to which, the Company obtained a $ 60.0 million senior secured revolving credit facility (as amended from time to time, the “Revolving Credit Facility”).

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

The Revolving Credit Facility contains aggregate commitments of $ 60.0 million from two FDIC-insured banking institutions (which may be increased to up to $ 100.0 million in aggregate, subject to available borrowing base and additional commitments) which may be borrowed, repaid and redrawn, subject to a borrowing base based on eligible loan obligations held by the Company and subject to the satisfaction of other conditions provided under the Revolving Credit Facility.

The Revolving Credit Facility matured April 29, 2025.

The Revolving Credit Facility contains aggregate commitments of $ 60.0 million from two FDIC-insured banking institutions (which may be increased up to $ 100.0 million in aggregate, subject to available borrowing base and additional commitments) which may be borrowed, repaid and redrawn, subject to a borrowing base based on eligible loan obligations held by the Company and subject to the satisfaction of other conditions provided under the Revolving Credit Facility.

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

Upon entering into the Revolving Credit Agreement, the Company incurred a one-time commitment fee expense of approximately $ 0.5 million, which was included in prepaid expenses and other assets on the Company’s consolidated balance sheets and amortized over the life of the facility.

In connection with the Revolving Credit Agreement, the Company incurred a one-time commitment fee expense of approximately $ 0.5 million, which was included in prepaid expenses and other assets on the Company’s consolidated balance sheets and amortized over the life of the facility.

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

Based on the terms of the Revolving Credit Agreement, the Company’s estimated average cash balance will exceed the minimum balance required to waive the unused line fee and as such, the Company did not incur an unused line fee for the three and nine months ended September 30, 2024.

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.

During the three months ended March 31, 2025, the Company incurred an unused line fee of approximately $ 56.3 thousand.

As of March 31, 2025 and December 31, 2024, outstanding borrowings under the Revolving Credit Facility were $ 22.3 million and $ 60.0 million, respectively, and $ 37.8 million and zero was available for borrowing as of March 31, 2025 and December 31, 2024, respectively.

As of March 31, 2025 and December 31, 2024, the interest rate on the Company’s borrowings under the Revolving Credit Facility was 8.00 %.

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.

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

To the best of our knowledge, as of March 31, 2025, we were in compliance in all material respects with all covenants contained in our Revolving Credit Agreement.

In January 2025, the Company entered into Amendment Number Three to Loan and Security Agreement, by and among the Company, as borrower, the lenders party thereto, and the lead arranger, bookrunner and administrative agent party thereto, pursuant to which, among other things, the parties agreed to reduce the procedural requirements for obligor loan receivables to become eligible under the borrowing base.

In April 2025, the Company entered into Amendment Number Four to Loan and Security Agreement (“Amendment Number Four”), by and among the Company, as borrower, the lenders party thereto, and the lead arranger, bookrunner and administrative agent party thereto.

The Amendment, among other things, (i) extends the maturity date of the Agreement to April 29, 2028, (ii) increases the interest rate floor from 4.00 % to 7.00 %, (iii) permits certain restricted payments to be made upon the Company meeting certain terms and conditions, and (iv) expands the collateral secured under the Agreement from assets comprising of or relating to loan obligations designed for inclusion in the borrower base to substantially all of the Company’s and its subsidiaries’ assets.

In connection with the amendment, the Revolving Credit

Facility has a lead commitment of $ 30.0 million from a FDIC-insured banking institution (which may be increased up to $ 100.0 million in aggregate, subject to available borrowing base and additional commitments) which may be borrowed, repaid and redrawn, subject to a borrowing base based on eligible loan obligations held by the Company and subject to the satisfaction of other conditions provided under the Revolving Credit Facility.

Interest is payable on the Revolving Credit Facility at the greater of (1) the applicable base rate plus 0.50 % and (2) 7.00 %, as provided in the Revolving Credit Agreement, payable in cash in arrears.

In connection with the Revolving Credit Agreement and related amendments, the Company incurred a one-time commitment fee of approximately $ 0.1 million, which will be included in prepaid expenses and other assets on the Company’s consolidated balance sheets and amortized over the life of the facility.

AFCF Credit Facility

In December 2024, the Company entered into an unsecured revolving credit agreement (the “AFCF Credit Agreement”), by and among the Company, as borrower, the lenders party thereto from time to time, and AFC Finance, LLC, as agent and lender.

AFC Finance, LLC is wholly owned by Leonard M.

Tannenbaum, Chairman of the Company’s Board of Directors.

The AFCF Credit Agreement provides for an unsecured revolving credit facility (the “AFCF Credit Facility”) with a $ 40.0 million commitment, which may be borrowed, repaid and redrawn, subject to a draw fee and the other conditions provided in the AFCF Credit Agreement.

Interest is payable on the AFCF Credit Facility at a rate per annum equal to 8.00 %.

The AFCF Credit Facility matures on the earlier of (i) December 31, 2025 and (ii) the date of the closing of any unsecured debt with principal of at least $ 40.0 million used to refinance the AFCF Credit Agreement.

As of March 31, 2025 and December 31, 2024, outstanding borrowings under the AFCF Credit Facility were zero and $ 40.0 million, respectively, and $ 40.0 million and zero were available for borrowing as of March 31, 2025 and December 31, 2024, respectively.

In April 2025, in conjunction with the entry by the Company into Amendment Number Four to the Revolving Credit Facility, the Company terminated that certain AFCF Credit Agreement, by and among the Company, as borrower, the lenders party thereto from time to time, and AFC Finance, LLC, as agent and lender.

There were no outstanding borrowings under the AFCF Credit Agreement at the time of its termination.

2027 Senior Notes

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

The Indenture contains customary terms and restrictions, subject to a number of exceptions and qualifications, including restrictions on the Company’s ability to (1) incur additional indebtedness unless the Annual Debt Service Charge (as defined in the Indenture) is no less than 1.5 to 1.0, (2) incur or maintain total debt in an aggregate principal amount greater than 60 % of the Company’s consolidated Total Assets (as defined in the Indenture), (3) incur or maintain secured debt in an aggregate principal amount greater than 25 % of the Company’s consolidated Total Assets (as defined in the Indenture), and (4) merge, consolidate or sell substantially all of the Company’s assets.

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

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

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

During the nine months ended September 30, 2023 , the Company repurchased $ 10.0 million in principal amount of the Company’s 2027 Senior Notes at 77.4 % of par value, plus accrued interest.

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 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.

As of March 31, 2025 and December 31, 2024, the Company had $ 90.0 million in principal amount of the 2027 Senior Notes outstanding.

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

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

Scheduled principal payments on the 2027 Senior Notes as of March 31, 2025 are as follows:

2027 Senior Notes

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Total due senior notes, net $ 88,759,099

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

September 30, 2024

2027 Senior Notes Revolving Credit Facility Total Borrowings

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

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

Total interest expense $ 1,452,714 $ 119,991 $ 1,572,705

The following tables reflect a summary of interest expense incurred during the three months ended March 31, 2025 and 2024:

Three months ended

September 30, 2023

2027 Senior Notes Revolving Credit Facility Total Borrowings

March 31, 2025

2027 Senior Notes Revolving Credit Facility AFCF Credit Facility Total

Interest expense $ 1,293,750 $ 191,333 $ 8,889 $ 1,493,972

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Total interest expense $ 1,449,449 $ 356,933 $ 8,889 $ 1,815,271

Nine months ended

September 30, 2024

2027 Senior Notes Revolving Credit Facility Total Borrowings

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

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

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

Nine months ended

September 30, 2023

2027 Senior Notes Revolving Credit Facility Total Borrowings

Three months ended

March 31, 2024

2027 Senior Notes Revolving Credit Facility AFCF Credit Facility Total

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

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COMMITMENTS AND CONTINGENCIES

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

September 30, 2024 As of

As of March 31, 2025 and December 31, 2024, the Company had the following commitments to fund various investments:

March 31, 2025 As of

December 31, 2024

Total original loan commitments $ 349,532,028 $ 431,239,913

Total loan commitments $ 375,025,490 $ 361,278,431

drawn commitments ( 365,538,073 ) ( 350,943,832 )

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

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.

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

In connection with his termination, Mr.

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

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

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

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

During the 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.

As of March 31, 2025, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

The Company provides loans to companies operating in the cannabis industry which involves significant risks, including the risk of strict enforcement against the Company’s borrowers 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.

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Series A Preferred Stock

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.

As of March 31, 2025 and December 31, 2024, the Company has authorized 10,000 preferred shares and previously issued 125 of the preferred shares designated as 12.0 % Series A Cumulative Non-Voting Preferred Stock, par value $ 0.01 per share (the “Series A Preferred Stock”).

As of March 31, 2025 and December 31, 2024, there were zero 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.

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

On June 30, 2024, the Company redeemed all 125 outstanding shares of its Series A Preferred Stock.

In June 2024, the Company redeemed all 125 outstanding shares of its Series A Preferred Stock.

The Series A Preferred Stock was redeemed at a price of $ 1,000 per share, plus all accrued and unpaid dividends thereon to and including the date fixed for redemption.

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

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.

There were no accrued and unpaid dividends at the time of redemption.

During the three months ended March 31, 2025 and year ended December 31, 2024 , the Company did not issue any shares of its common stock, other than restricted stock awards granted under the 2020 Plan.

Shelf Registration Statement

On April 5, 2022, the Company filed a shelf registration statement on Form S-3 (File No.

333-264144) (the “Prior Shelf Registration Statement”), which was declared effective on April 18, 2022.

Under the Prior Shelf Registration Statement, the Company was able, from time to time, issue and sell up to $ 1.0 billion of the Company’s common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of the Company’s common stock or preferred stock.

The Prior Shelf Registration Statement expired on April 18, 2025.

On April 17, 2025, the Company filed a shelf registration statement on Form S-3 (File No.

333-286604) (the “Shelf Registration Statement”), which was declared effective on April 25, 2025.

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

During the three and nine months ended September 30, 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.

During the three months ended March 31, 2025, the Company did not sell any shares of the Company’s common stock under the Sales Agreement.

As of March 31, 2025, the Company’s remaining authorization under the Sales Agreement was approximately $ 47.4 million.

The ATM Program and related Sales Agreement expired in April 2025, in connection with the expiration of the Company’s Prior Shelf Registration Statement.

The Company does not currently have an ATM program, but may enter into a new ATM program and related sales agreement in the future pursuant to which sales may be made under the Shelf Registration Statement.

Stock Incentive Plan

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

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.

The Company has granted, and currently intends 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 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.

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

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 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.

During the three months ended March 31, 2025, the Company’s Board of Directors approved grants of an aggregate of 271,497 shares of restricted stock to the Company’s directors and certain officers, as well as certain employees of the Manager and its affiliates.

The restricted stock awards granted during the three months ended March 31, 2025 under the 2020 Plan are subject to vesting periods that vary from immediately vested, one-year vesting and to vesting over a three-year period, with approximately 33 % vesting on each of the first, second and third anniversaries of the vesting commencement date.

As of March 31, 2025, there were 2,880,075 shares of common stock granted under the 2020 Plan, underlying 2,167,685 options and 712,390 shares of restricted stock.

As of March 31, 2025, 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”) equaled 3,609,722 shares, of which 729,647 shares remained available for future issuance under the 2020 Plan.

The Share Limit is consistent with the Share Limit as of December 31, 2024.

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.

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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:

The following table presents the assumptions used in the Black-Scholes pricing model of options granted under the 2020 Plan during the three months ended March 31, 2025 and 2024:

Expected term

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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.

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

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

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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:

Stock Compensation

The following table summarize s the stock-based compensation expense incurred by the Company for the three months ended March 31, 2025 and 2024:

Three months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

Stock-based compensation $ 553,749 $ 543,222

The following table summarizes the (i) non-vested options granted, (ii) vested options granted, (iii) exercised and (iv) forfeited options granted for the Company’s directors and officers and employees of the Manager as of September 30, 2024 and December 31, 2023:

September 30, 2024 As of

Stock Options

March 31, 2025 As of

December 31, 2024

4 unchanged sentences

Balance 2,166,785 2,168,452

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

The following tables summarize stock option activity as of and during the three months ended March 31, 2025:

Number of options Weighted-average

3 unchanged sentences

Forfeited ( 1,667 ) 12.99

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

Outstanding as of March 31, 2025 2,166,785 $ 11.46 3.02 years $ —

Exercisable as of March 31, 2025 2,155,447 $ 11.45 3.02 years $ —

Unvested as of March 31, 2025 11,338 $ 12.99 3.78 years $ —

T he Company did not grant any options d uring the three months ended March 31, 2025 and 2024 .

No options were exercised during the three months ended March 31, 2025 and 2024 .

As of March 31, 2025 , there was approximately $ 9.7 thousand of total unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 0.78 years.

Restricted Stock

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 and its affiliates as of March 31, 2025 and December 31, 2024:

March 31, 2025 As of

December 31, 2024

3 unchanged sentences

Balance 481,666 346,530

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

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 table summarizes the restricted stock activity as of and during the three months ended March 31, 2025:

Number of shares of restricted stock Weighted-average

4 unchanged sentences

Forfeited ( 8,417 ) 8.84

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.

Balance as of March 31, 2025 481,666 $ 8.53

The total fair value of shares vested during the three months ended March 31, 2025 and 2024, was approximately $ 1.1 million and $ 0.7 million, respectively.

During the three months ended March 31, 2024, 209,397 shares of restricted stock were granted with a weighted-average grant date fair value of $ 11.70 .

During the three months ended March 31, 2024, 61,179 shares of restricted stock vested with a weighted-average grant date fair value of $ 14.53 .

As of March 31, 2025 , there was approximately $ 3.7 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 2.36 years.

EARNINGS PER SHARE

The following information sets forth the computations of basic and diluted weighted average earnings per common share for the three and nine months ended September 30, 2024 and 2023:

The following information sets forth the computations of basic and diluted weighted average earnings per common share for the three months ended March 31, 2025 and 2024:

Three months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

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 )

Net income (loss) from continuing operations $ 4,067,685 $ ( 1,570,343 )

Dividends paid on unvested restricted stock ( 114,355 ) ( 57,126 )

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Total diluted weighted average earnings per common share $ 0.18 $ ( 0.01 )

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 .

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

Diluted weighted average earnings per common share excluded 2,320,290 and 2,240,089 weighted average shares of unvested restricted stock and stock options due to anti-dilutive effect for the three months ended March 31, 2025 and 2024, respectively.

For the three months ended March 31, 2024, the potential dilutive shares due to unvested restricted stock and stock options were not included in the computation of diluted loss per share since to do so would decrease the loss per share from continuing operations.

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

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

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:

The income tax provision for the Company was approximately $ 0.1 million and $ 0.2 million for the three months ended March 31, 2025 and 2024, respectively.

The income tax expense for the three months ended March 31, 2025 and 2024 primarily related to activities of the Company’s taxable REIT subsidiary.

The income tax provision for the Company and TRS1 consisted of the following for the three months ended March 31, 2025 and 2024:

Three months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

$ 394,210 $ 663,220 $ 838,545 $ 1,005,689

Deferred — — — —

Federal $ 100,000 $ 105,300

State 64,981 53,060

Total current income tax expense (benefit) 164,981 158,360

Federal ( 52,575 ) —

Total deferred income tax (benefit) expense ( 52,575 ) —

Excise tax — —

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

(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.

Total income tax expense (benefit), including excise tax $ 112,406 $ 158,360

For the three months ended March 31, 2025 and 2024, the Company did not incur United States federal excise tax expense, respectively.

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

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The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months.

As of March 31, 2025, tax years since 2021 remain subject to examination by taxing authorities.

The federal statutory rate was 21% for the three months ended March 31, 2025 and 2024.

The primary difference between the Company’s statutory rate and effective tax rate is largely determined by the amount of income subject to tax by the Company’s taxable REIT subsidiary .

The Company expects that its future effective tax rate will be determined in a similar manner.

As of March 31, 2025 and December 31, 2024, the Company’s deferred tax assets were $ 0.8 million and $ 0.7 million, respectively, and are included in prepaid expenses and other assets in the Company’s consolidated balance sheets.

The Company believes it is more likely than not that the deferred tax assets will be realized in the future.

Realization of the deferred tax assets is dependent upon the Company’s generation of sufficient taxable income in future years in appropriate tax jurisdictions to benefit from the reversal of temporary differences.

The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income change.

The Company recorded deferred tax assets related to temporary differences on the fair value adjustments of the unrealized losses of loans held in the TRS and CECL allowance on loans held in the TRS.

There were no valuation allowances for deferred tax assets during the three months ended March 31, 2025 and 2024.

Loans Held for Investment

5 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 September 30, 2024 and December 31, 2023:

Fair Value Measurement as of September 30, 2024

The following tables present fair value measurements of loans held at fair value as of March 31, 2025 and December 31, 2024:

Fair Value Measurement as of March 31, 2025

Total Level 1 Level 2 Level 3

5 unchanged sentences

Total $ 30,510,804 $ — $ — $ 30,510,804

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

The following table presents changes in loans that use Level 3 inputs as of and for the three months ended March 31, 2025:

Three months ended

March 31, 2025

Total loans using Level 3 inputs at December 31, 2024 $ 30,510,804

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 )

Change in unrealized (losses) gains on loans at fair value, net ( 685,478 )

Loan repayments ( 1,252,941 )

Sale of loans ( 19,284,846 )

Accretion of original issue discount 128,384

PIK interest 1,134,786

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

The change in unrealized losses included in the unaudited interim consolidated statements of operations attributable to loans held at fair value, categorized as Level 3, held as of September 30, 2024 is $( 14,081,406 ).

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.

Total loans using Level 3 inputs at March 31, 2025 $ 28,572,385

The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of March 31, 2025 and December 31, 2024.

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

As of September 30, 2024

As of March 31, 2025

Unobservable Input

5 unchanged sentences

Fair Value Primary Valuation Techniques Input Estimated Range Weighted Average

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

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

Total investments $ 61,720,705

Senior term loan $ 30,510,804 Recovery analysis Recovery rate 54.90 % - 60.00 %

Total investment $ 30,510,804

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

3 unchanged sentences

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

If the Company was required to liquidate a loan in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it.

If the Company was required to

liquidate a loan in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it.

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

1 unchanged sentence

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 September 30, 2024 :

As of September 30, 2024

As of March 31, 2025

Carrying Value Fair Value

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“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 Incentive Compensation for the three months ended March 31, 2025 and 2024 , was zero and approximately $ 2.5 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 nine months ended September 30, 2024 and 2023:

The following table summarizes the related party costs incurred by the Company for the three months ended March 31, 2025 and 2024 :

Three months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

Affiliate Costs

5 unchanged sentences

Total $ 1,384,724 $ 4,245,081

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”).

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 September 30, 2024 and December 31, 2023 were approximately $ 20.6 thousand and $ 16.4 thousand, respectively.

Amounts payable to the Company’s Manager as of March 31, 2025 and December 31, 2024 were approximately $ 1.4 million and $ 3.1 million, respectively.

The Company’s Manager is a wholly-owned subsidiary of Castleground Holdings LLC (the “Parent Manager”).

Certain officers have ownership in the outstanding equity of the Parent Manager as of the date of this Quarterly Report on Form 10-Q:

74.25 %, 9.90 %, 2.92 % and 2.54 % beneficially owned by 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, respectively.

Investments in Loans

3 unchanged sentences

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.

As of March 31, 2025, there were two co-invested loans held by the Company and affiliates of the Company.

Unsecured Revolving Credit Facility with Affiliate

In December 2024, the Company entered the AFCF Credit Facility with AFC Finance LLC, an affiliate of the Company and Mr.

The AFCF Credit Facility was terminated in April 2025.

Refer to Note 8 for more information.

DIVIDENDS AND DISTRIBUTIONS

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

The following table summarizes the Company’s dividends declared during the three months ended March 31, 2025 and 2024:

Declaration Date Record Date Payment

2 unchanged sentences

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

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

2024 Period Subtotal

1 unchanged sentence

Regular cash dividend

Regular cash dividend 6/13/2024 6/24/2024 7/15/2024 0.48 9,920,205

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

3/11/2025 3/31/2025 4/15/2025 $ 0.23 $ 5,197,082

2025 Period Subtotal

7 unchanged sentences

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

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.

3 unchanged sentences

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:

The following table summarizes the financial statement lines included in net income from discontinued operations, net of tax for the three months ended March 31, 2025 and 2024:

Three months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

Interest income $ — $ 2,026,306

1 unchanged sentence

Professional fees — ( 509,536 )

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

(Provision for) reversal of current expected credit losses — —

Net income from discontinued operations, net of tax $ — $ 1,516,227

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

During the three months ended March 31, 2025 and 2024, Spin-Off costs incurred were zero and approximately $ 0.5 million.

Prior to the completion of the Spin-Off in 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 March 31, 2025 or December 31, 2024.

REPORTABLE SEGMENTS

ASC 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments.

The Company generates revenue from loans to state law compliant cannabis operators in the United States.

These investments typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates.

The accounting policies of the institutional lending segment are the same as those described in the summary of significant accounting policies.

The presentation of financial results as one reportable segment is consistent with the way the Company operates its business and is consistent with the manner in which the Company’s Chief Operating Decision Maker (“CODM”), the Company’s Chief Executive Officer, evaluates performance and makes resource and operating decisions for the business.

The Company has no operations outside of the United States.

The Company’s portfolio exhibits similar economic characteristics, similar yields and is operated using consistent business strategies.

The Company operates as one operating segment and has one reportable operating segment for activities related to institutional lending.

The CODM assesses performance and evaluates the allocation of resources of the Company on a consolidated basis, based on the Company’s net income from continuing operations, which is reported on the Company’s consolidated statements of operations.

The CODM is regularly provided with only the consolidated expenses, as noted on the consolidated statements of operations.

Significant segment expenses are listed on the accompanying consolidated statements of operations.

The measure of segment assets is reported on the consolidated balance sheets as total assets.

The CODM uses net income to evaluate income generated from segment assets and in deciding the amount of dividends to be distributed, as well as using net income as a basis for evaluating lender terms for loans with state law compliant operators.

During the three months ended March 31, 2025 and 2024, interest income earned on the Company’s portfolio was concentrated with five and three borrowers, respectively, each comprising more than 10% of consolidated interest income for an aggregate amount of $ 5.9 million, or 70 %, and $ 7.6 million, or 53 %, of consolidated interest income, respectively.

SUBSEQUENT EVENTS

1 unchanged sentence

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

In October 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.

In April 2025, the Company received a voluntary prepayment from Private Company L of approximately $ 2.0 million, which was applied to the Company’s outstanding principal balance, recognizing $ 48.8 thousand in exit fees.

In April 2025, the Company entered into a $ 14.0 million senior secured credit facility with Subsidiaries of Private Company V.

The loan was originated at a discount of 3.0 % and matures April 1, 2029.

The loan bears cash interest at 12.5 % and 1.5 % interest paid-in kind.

As of the date of this Quarterly Report on Form 10-Q, approximately $ 10.5 million was drawn and the remainder is available to be drawn within one year of closing.

The loan with Subsidiaries of Private Company V closed subsequent to the first quarter 2025.

In April 2025, the Company and AFC Agent (the “AFC Parties”) commenced separate legal actions against (i) two shareholders of the parent of Subsidiary of Private Company G in federal court asserting claims for violations of the Racketeer Influenced and Corrupt Organizations Act, breach of a shareholder guaranty, tortious interference with contract, fraud, aiding and abetting fraud, and conversion and (ii) the parent of Subsidiary of Private Company G in state court asserting a claim for breach of contract arising from its failure to satisfy its obligations under a guaranty agreement related to the Company’s credit facility with Subsidiary of Private Company G.

In April 2025, two Subsidiary of Private Company G-affiliated cannabis companies (the “Plaintiffs”) that are borrowers under the Company’s credit facility with Subsidiary of Private Company G filed a complaint against the AFC Parties alleging, among other things, breach of contract, breach of

the implied covenant of good faith and fair dealing, and violations of the New York Uniform Commercial Code in connection with the Company’s termination of a forbearance agreement between the parties.

On May 9, 2025, this court granted Plaintiffs’ request for a preliminary injunction, enjoining the Company from seizing any of Plaintiffs’ assets or cash or seeking any remedy for Subsidiary of Private Company G’s failure to (a) cooperate in the foreclosure proceeding on the Pennsylvania property;

(b) provide annual audited financial statements for fiscal years 2023 and 2024;

The Court did not consider Subsidiary of Private Company G’s failure to maintain and preserve one of its subsidiary cannabis licenses or its unpermitted payments.

Because each of these actions are in their early stages, no reasonable estimate of possible outcomes resulting from these legal actions, if any, can be made at this time.

In May 2025, the Company was fully repaid on our loan with Private Company T at par plus accrued interest.

The outstanding principal of the senior secured term loan on the date of repayment was approximately $ 7.7 million.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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.

(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.

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• our expectations for origination targets and repayments;

• our ability to obtain our target mix of loan and collateral types with our expected ranges of yields;

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

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• the state of the U.S.

economy generally or in specific geographic regions;

economy generally or in the specific geographic regions in which we operate, including as a result of the impact of natural disasters;

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

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

• our ability to obtain and maintain financing arrangements;

• our expected leverage;

• our ability to obtain and maintain competitive financing arrangements;

• our ability to achieve expected leverage;

• changes in the value of our loans;

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

• our expected investment and underwriting process;

• our investment and underwriting process;

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

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

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

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

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

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

• our ability to maintain our exemption from registration under the Investment Company Act of 1940 (the “Investment Company Act”);

• our ability to qualify and maintain our qualification as a real estate investment trust (a “REIT”) for U.S.

federal income tax purposes;

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

The above list of factors is not exhaustive or necessarily in order of importance.

Please see the section entitled “ Risk Factors ” located in our Annual Report on Form 10-K, filed with the SEC on March 13, 2025 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.

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

What changed 10-Q

Item 1. Financial Statements