What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-14 compared with 2024-11-13 · 176 added, 206 removed, 259 unchanged (60% of the section changed)

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

Our investment guidelines primarily relate to deploying capital in attractive lending opportunities to state law-compliant cannabis operators, typically secured by real estate, cash flows and license value.

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

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

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

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

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

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

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

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

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

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

We also intend to operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act of 1940 as amended (the “Investment Company Act”).

We also intend to operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act of 1940.

Our wholly-owned subsidiary, AFCG TRS1, LLC (“TRS1”), operates as a taxable REIT subsidiary (a “TRS”).

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The financial statements of TRS1 are consolidated within our consolidated financial statements.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

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

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

We have elected to take advantage of the extended transition period.

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

We could remain an “emerging growth company” for up to five years from our initial public offering, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.235 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three-year period.

On February 22, 2024, we announced a plan to separate into two independent, publicly traded companies - one focused on providing institutional loans to state law compliant cannabis operators in the U.S., the other an institutional commercial real estate lender focused on the Southern United States.

On February 22, 2024, we announced a plan to separate into two independent, publicly traded companies.

Prior to the Spin-Off, Sunrise Realty Trust, Inc.

(“SUNS”) held our CRE portfolio as our wholly-owned subsidiary.

(“SUNS”) held our commercial real estate (“CRE”) portfolio as our wholly-owned subsidiary.

On July 9, 2024, we completed the separation of our CRE portfolio through the spin-off of SUNS into an independent, publicly traded REIT (the “Spin-Off”) through a pro-rata distribution of all of the outstanding shares of SUNS common stock to our shareholders of record as of the close of business on July 8, 2024 (the “Record Date”).

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Unless otherwise noted, all amounts, percentages and discussion below reflect only the results of operations and financial condition from our continuing operations.

Developments During the Third Quarter September 30, 2024:

Updates to Our Loan Portfolio During the Third Quarter September 30, 2024

In July 2024, we received an approximately $10.0 million principal prepayment and a $0.2 million prepayment premium on our investment in Subsidiary of Public Company M.

Following the prepayment, the aggregate outstanding principal balance on our investments in Subsidiary of Public Company M is approximately $2.8 million as of September 30, 2024.

In August 2024, we entered into the fourth amendment to the credit agreement with Private Company J, pursuant to which, we, among other things, amended certain financial covenants and increased the total aggregate commitment by an additional $5.5 million, of which we have funded $3.0 million as of September 30, 2024.

In August 2024, we entered into the second amendment to the credit agreement with Private Company N - Real Estate, which increased the total aggregate commitment by an additional approximately $1.8 million under the terms of the existing credit agreement.

We have funded approximately $1.2 million of the increased commitment as of September 30, 2024.

In August 2024, we entered into a $11.0 million senior secured credit facility with Private Company Q.

The loan was originated at a discount of 4.0% and matures September 1, 2028.

The loan bears interest at SOFR plus an 8.75% spread, subject to a SOFR floor of 5.0%.

As of September 30, 2024, approximately $5.2 million was drawn and the remainder is available to be drawn within two years of closing.

The loan is secured by substantially all assets of Private Company Q.

The proceeds of the loan will be used to, among other things, pay for transactional costs and expenses, general working capital and other general corporate purposes and to fund capital expenditures in accordance with the budget.

In August 2024, we entered into the first amendment to the credit agreement with Private Company P, which amended the interest payable for July 2024 and August 2024 to be paid in kind and payable in cash thereafter.

In September 2024, we purchased $4.6 million of outstanding principal of a third-party syndicate partner’s minority debt as part of the credit agreement with Private Company A for approximately $1.8 million.

We now hold approximately $53.8 million of outstanding principal as of September 30, 2024.

In September 2024, we received a voluntary prepayment from Private Company L of approximately $1.5 million, recognizing $45.5 thousand in prepayment premium and $37.9 thousand in exit fees.

On July 9, 2024, we completed the Spin-Off of SUNS, which held our CRE portfolio, into an independent, publicly traded REIT.

See “—Spin-Off” above.

Developments During the First Quarter March 31, 2025:

Updates to Our Loan Portfolio During the First Quarter March 31, 2025

In January 2025, AFC Agent placed Private Company K in a consensual receivership to operate the collateral assets for the benefit of the Company, as a secured lender, and all other stakeholders.

In February 2025, we entered into a $15.0 million senior secured credit facility with Private Company U, which was fully funded at closing.

The loan was originated at a discount of 2.5% and matures March 1, 2028.

The loan bears interest at 14.0%.

In February 2025, AFC Agent, on behalf of the Company and the other lenders, initiated a mortgage foreclosure proceeding in connection with the forbearance agreement entered into by the Company and Subsidiary of Private Company G in March 2024 (the “2024 Subsidiary of Private Company G Forbearance Agreement”) over a cultivation facility owned by Subsidiary of Private Company G.

The Company also delivered a reservation of rights letter to Subsidiary of Private Company G concerning the occurrence of events of default and forbearance defaults under the credit agreement and the 2024 Subsidiary of Private Company G Forbearance Agreement, respectively, including unpermitted payments, the failure to maintain and preserve one of Subsidiary of Private Company G’s cannabis licenses and its cultivation facility and its failure to cooperate with us in the foreclosure proceeding.

We believe these defaults have had a material adverse impact on

Subsidiary of Private Company G’s ability to operate its business and make payments under the credit agreement.

AFC Agent is also therefore pursuing a payment guarantee from the parent company and the beneficial shareholders of Subsidiary of Private Company G that guaranteed the loan.

See below under “ Recent Developments—Subsidiary of Private Company G Updates”.

At-the-Market Offering Program

In April 2022, we filed our shelf registration statement on Form S-3 with the SEC, registering the offer and sale of up to $1.0 billion of securities (the “Shelf Registration Statement”).

The Shelf Registration Statement enables us to issue shares of common stock, preferred stock, debt securities, warrants, rights, as well as units that include one or more of such securities.

The Shelf Registration Statement also included a prospectus for the ATM Program to sell up to an aggregate of $75.0 million of shares of our common stock that may be issued and sold from time to time under the Sales Agreement, dated April 5, 2022 (the “Sales Agreement”), with Jefferies LLC and Citizens JMP Securities LLC, as Sales Agents.

In April 2022, we filed a shelf registration statement on Form S-3 with the SEC, registering the offer and sale of up to $1.0 billion of securities (the “ Prior Shelf Registration Statement”).

The Prior Shelf Registration Statement enabled us to issue shares of common stock, preferred stock, debt securities, warrants, rights, as well as units that include one or more of such securities.

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

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

The Prior Shelf Registration Statement also included a prospectus for the ATM Program to sell up to an aggregate of $75.0 million of shares of our common stock that may be issued and sold from time to time under the Sales Agreement, dated April 5, 2022 (the “Sales Agreement”), with Jefferies LLC and Citizens JMP Securities LLC, as Sales Agents.

Under the terms of the Sales Agreement, we have agreed to pay the Sales Agents a commission of up to 3.0% of the gross proceeds from each sale of common stock under the Sales Agreement.

During the three and nine months ended September 30, 2024, we sold an aggregate of 1,214,953 shares of our 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.

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 our Prior Shelf Registration Statement.

We do 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.

Dividends Declared Per Share

For the nine months ended September 30, 2024 and 2023, we declared the following cash dividends:

For the three months ended March 31, 2025, we declared the following cash dividend:

Date Declared Payable to Shareholders of Record at the Close of Business on Payment Date Amount per Share Total Amount

March 2, 2023 March 31, 2023 April 14, 2023 $ 0.56 $ 11.5 million

June 15, 2023 June 30, 2023 July 14, 2023 0.48 9.8 million

September 15, 2023 September 30, 2023 October 13, 2023 0.48 9.8 million

2023 Period Subtotal

$ 1.52 $ 31.1 million

March 4, 2024 March 31, 2024 April 15, 2024 $ 0.48 $ 9.9 million

June 13, 2024 June 24, 2024 July 15, 2024 0.48 9.9 million

June 27, 2024 July 8, 2024 July 15, 2024 0.15 3.1 million

September 13, 2024 September 30, 2024 October 15, 2024 0.33 7.2 million

March 11, 2025 March 31, 2025 April 15, 2025 $ 0.23 $ 5,197,082

2025 Period Subtotal

$ 1.44 $ 30.1 million

In connection with the Spin-Off, we declared a one-time dividend of $0.15 per share of our common stock, which was paid on July 15, 2024 to shareholders of record as of July 8, 2024.

The aggregate amount of the one-time dividend payment was approximately $3.1 million .

$ 0.23 $ 5,197,082

Recent Developments

In October 2024, we 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, we 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, we 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 we expect to settle the transaction in the near future.

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

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, we 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, we received a voluntary prepayment from Private Company L of approximately $2.0 million, which was applied to our outstanding principal balance, recognizing $48.8 thousand in exit fees.

In April 2025, we 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 our 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.

In May 2025, we were 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.

On April 10, 2025, we and AFC Agent (collectively, “AFC Parties”) commenced an action in the United States District Court for the Southern District of New York captioned Advanced Flower Capital Inc.

Kanovitz et al., Case No.

1:25 cv-02996-PKC, against two Subsidiary of Private Company G shareholders (the “Guarantors”).

The complaint asserts 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.

The Company alleges that the Guarantors, as co-owners and managers of certain Subsidiary of Private Company G entities who are borrowers of the Company, engaged

in a pattern of fraudulent conduct, including misrepresentations, improper transfers of funds, and concealment of defaults and assets, in connection with loans provided by the Company to finance the operations of non-borrower Subsidiary of Private Company G entities for their personal benefit.

On April 17, 2025, two Subsidiary of Private Company G-affiliated cannabis companies that are borrowers under a September 30, 2021 credit agreement (the “Plaintiffs”), commenced an action in the United States District Court for the District of New Jersey captioned Hayden Gateway LLC, et al.

Advanced Flower Capital Inc., et al., Case No.

3:25-cv-02789-ZNQ-JBD, against the AFC Parties.

The complaint alleges, 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.

Plaintiffs seek declaratory and injunctive relief, as well as compensatory and other damages, alleging that the Company wrongfully declared defaults, seized funds from Plaintiffs’ operating accounts, and sought to foreclose on certain collateral.

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.

The credit facility to Subsidiary of Private Company G matures on May 1, 2026.

On April 28, 2025, AFC Agent commenced an action in the Supreme Court of the State of New York, County of New York, captioned AFC Agent LLC v.

JG HoldCo LLC, Index No.

652644/2025, against JG HoldCo LLC, the parent of Subsidiary of Private Company G.

The complaint asserts a claim for breach of contract arising from JG HoldCo LLC’s failure to satisfy its obligations under a guaranty agreement related to a credit agreement between the Company and certain subsidiaries of Subsidiary of Private Company G.

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.

Key Financial Measures and Indicators

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We define Distributable Earnings as, for a specified period, the net income (loss) computed in accordance with GAAP, excluding (i) stock-based compensation expense, (ii) depreciation and amortization, (iii) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss);

provided that Distributable Earnings does not exclude, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash, (iv) (decrease) increase in provision for current expected credit losses, (v) TRS (income) loss, net of any dividends received from TRS and (vi) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of such independent directors.

provided that Distributable Earnings does not exclude, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash, (iv) provision for (reversal of) current expected credit losses, (v) TRS (income) loss, net of any dividends received from TRS and (vi) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of such independent directors.

We believe providing Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to shareholders in assessing the overall performance of our business.

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Three months ended

September 30, Nine months ended

September 30,

2024 2023 2024 2023

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

Adjustments to net income:

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

Adjustments to net income (loss):

Stock-based compensation expense 553,749 543,222

Depreciation and amortization — —

Unrealized (gains) losses or other non-cash items 4,621,702 (787,799) 9,655,396 1,152,810

Increase (decrease) in provision for current expected credit losses (1)

Unrealized losses (gains) or other non-cash items 685,478 3,613,693

(Reversal of) provision for current expected credit losses

(699,424) 4,931,674

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Distributable earnings per basic weighted average share $ 0.21 $ 0.49

(1) The provision for current expected credit losses above includes approximately zero and $71.9 thousand for the three and nine months ended September 30, 2024, respectively, and zero for the three and nine months ended September 30, 2023, respectively, which is included in the net income from discontinued operations, net of tax financial statement line on the consolidated statement of operations.

Book Value Per Share

We believe that book value per share is helpful to shareholders in evaluating our growth as we scale our equity capital base and continue to invest in our target investments.

The book value per share of our common stock as of September 30, 2024 and December 31, 2023 was approximately $9.42 and $15.64, respectively.

On July 9, 2024, we completed the Spin-Off of SUNS, which had a book value of approximately $114.8 million, or $5.55 per share, on the Distribution Date.

In connection with the Spin-Off, we recognized a reduction to additional paid-in capital of approximately $114.8 million related to the transfer of certain assets and liabilities associated with our CRE business to SUNS.

The book value per share of our common stock as of March 31, 2025 and December 31, 2024 was approximately $8.89 and $9.02, respectively.

Factors Impacting our Operating Results

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Our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by our borrowers.

Results of Operations f or the three and nine months ended September 30, 2024 and 2023

Our net income from continuing operations allocable to our common shareholders for the three and nine months ended September 30, 2024, was approximately $1.2 million and $14.9 million, or $0.05 and $0.71 per basic weighted average common share from continuing operations, respectively, compared to net income from continuing operations allocable to our common shareholders of approximately $8.0 million and $30.1 million, or $0.39 and $1.47 per basic weighted average common share from continuing operations for the three and nine months ended September 30, 2023, respectively.

Interest income decreased approximately $(6.3) million, or (37.8)%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

This decrease was driven by lower interest income of approximately ($4.8) million related to Private Company A and Private Company K on nonaccrual status for the third quarter of fiscal year 2024, lower interest income of approximately ($4.1) million related to less capital deployed, partially offset by higher interest income of approximately $1.7 million related to Subsidiary of Private Company G received in cash, higher fee income of approximately $0.4 million driven by the prepayment of our investment in Subsidiary of Public Company M and higher OID income of approximately $0.4 million due to the acceleration of unaccreted OID related to the prepayment of our in investment in Subsidiary of Public Company M during the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, respectively.

While Subsidiary of Private Company G is currently on nonaccrual and was on nonaccrual for two out of three months in the prior period, cash received exceeded prior year income for this borrower.

Interest income decreased approximately $(10.2) million, or (19.3)%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

This decrease was driven by lower interest income of approximately ($13.5) million driven by Subsidiary of Private Company G, Private Company K and Private Company A placed on nonaccrual status during fiscal year 2024, lower interest income of approximately ($4.4) million driven by less capital deployed relating to loan exits and prepayments, partially offset by higher fee income of approximately $3.7 million driven by loan exits and prepayments during the nine months ended September 30, 2024, and higher OID income of approximately $4.0 million due to the acceleration of unaccreted OID of current year loan exits and prepayments during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, respectively.

Interest expense increased approximately $39.8 thousand, or 2.6%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023 due to an increase in borrowings on the Revolving Credit Facility.

Interest expense decreased approximately $(27.7) thousand, or (0.6)%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023 driven by lower interest incurred on the 2027 Senior Notes due to a weighted average decrease in the 2027 Senior Notes principal outstanding of approximately $(2.5) million, or (2.7)%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.

This relates to the repurchase of $10.0 million of our 2027 Senior Notes during the nine months ended September 30, 2023.

No repurchases took place during the same period in 2024.

This is partially offset by an increase in interest expense relating to the Revolving Credit Facility due to an increase in borrowings period over period.

Management fees decreased approximately $(0.2) million, or (22.7)%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023 driven by lower outside fees earned and lower equity attributable to the Spin-Off of SUNS completed on July 9, 2024.

In connection with the Spin-Off, we recognized a reduction to additional paid-in capital of approximately $114.8 million.

Incentive fees decreased approximately $(2.4) million, or (90.4)%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, driven by lower Core Earnings (as defined in the Management Agreement).

Management fees increased approximately $0.1 million, or 3.5%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023 driven by lower outside fees earned and offset by lower equity attributable to the Spin-Off of SUNS completed on July 9, 2024.

Results of Operations f or the three months ended March 31, 2025 and 2024

Our net income from continuing operations allocable to our common shareholders for the three months ended March 31, 2025, was approximately $4.1 million, or $0.18 per basic weighted average common share from continuing operations, compared to net loss from continuing operations allocable to our common shareholders of approximately $(1.6) million, or $(0.08) per basic weighted average common share from continuing operations for the three months ended March 31, 2024, respectively.

Interest income decreased approximately $(5.9) million, or (41.0)%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

This decrease was driven by lower interest income of approximately $(1.8) million due to loans with Private Company A, Subsidiary of Private Company G, and Private Company K on nonaccrual status, a decrease in loan exits and prepayments compared to capital deployed period over period of approximately $(2.4) million, and a reduction in commitments with Private Company L resulting in lower interest income of $(1.2) million period over period, respectively.

Interest expense increased approximately $0.2 million, or 13.2%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, driven by an increase in borrowings on our Revolving Credit Facility resulting in additional interest expense of $0.1 million and an increase in unused fees of $0.1 million, respectively.

Management fees decreased approximately $(0.2) million, or (16.0)%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, driven by lower outside fees earned and offset by lower equity attributable to the Spin-Off of SUNS completed on July 9, 2024.

In connection with the Spin-Off, we recognized a reduction to additional paid-in capital of approximately $115 million.

Incentive fees decreased approximately $(2.3) million, or (28.7)%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, driven by lower Core Earnings (as defined in the Management Agreement).

General and administrative expenses decreased approximately $(0.1) million, or (13.1)%, for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.

General and administrative expenses decreased approximately $(1.1) million, or (27.7)%, for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.

This decrease was primarily due to severance expense incurred during the nine months ended September 30, 2023 attributable to the departure of our former Chief Financial Officer of approximately $0.7 million.

No severance expense was incurred during the nine months ended September 30, 2024.

Stock-based compensation decreased approximately $(0.1) million, or (25.6)%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

This was driven by accelerated vesting of restricted stock awards in the prior period.

Stock-based compensation increased approximately $0.4 million, or 60.4%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

This was driven by additional equity awards granted in January 2024.

Professional fees increased approximately $0.1 million, or 41.3%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023.

Prior to the third quarter of 2024, Spin-Off costs were previously 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.

Professional fees increased approximately $0.1 million, or 8.4%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

The net change in realized gains (losses) on investments was approximately $1.2 million for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, driven by the change in realized loss relating to the maturity of our loan to Public Company A without repayment in the prior period.

The net change in realized gains (losses) on investments was approximately $1.1 million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, driven by the change in realized losses relating to separate sales of our investment in Subsidiary of Public Company M and realized loss relating to our loan to Public Company A during such periods.

Incentive fees decreased approximately $(2.5) million, or (100.0)%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, driven by lower Core Earnings (as defined in the Management Agreement).

General and administrative expenses decreased approximately $(0.3) million, or (30.1)%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.

This decrease was primarily due to less expenses reimbursable to our Manager of approximately $(0.2) million.

Stock-based compensation remained relatively flat, increasing approximately $10.5 thousand, or 1.9%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Professional fees decreased approximately $(0.1) million, or (16.8)%, for the year ended March 31, 2025 as compared to the three months ended March 31, 2024.

We did not recognize a realized loss for the three months ended March 31, 2025, compared to $(0.1) million for the three months ended March 31, 2024, driven by the net change in realized losses relating to separate sales of our investment in Subsidiary of Public Company M in the prior period.

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

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

The net change in unrealized gain (loss) of approximately $(4.6) million and $0.8 million for the three months ended September 30, 2024 and 2023, respectively, and $(9.7) million and $(1.2) million for the nine months ended September 30, 2024 and 2023, respectively, was mainly driven by the sale of our loan with Private Company B with an unrealized loss that was recovered, maturity of our loan with Public Company A with an unrealized loss that was realized, as well as the net change in the valuation of the loans, which was impacted by changes in market yields, revenue multiples, and recovery rates.

The gain (loss) on extinguishment of debt was zero for both the three months ended September 30, 2024 and the three months ended September 30, 2023.

Gain (loss) on extinguishment of debt decreased approximately $(2.0) million for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023.

This decrease was driven by the repurchase of $10.0 million of our 2027 Senior Notes during the nine months ended September 30, 2023.

No repurchases took place during the same period in 2024.

The net change in unrealized gain (loss) of approximately $(0.7) million and $(3.6) million for the three months ended March 31, 2025 and 2024, respectively, was driven by the net change in the valuation of our loans, which was impacted by changes in market yields, revenue multiples, and recovery rates.

Provision for Current Expected Credit Losses

The provision for current expected credit losses decreased approximately $(0.9) million, or (82.8)%, for the three months ended September 30, 2024 as compared to the three months ended September 30, 2023 .

The provision for current expected credit losses decreased approximately $(1.3) million, or (867.9)%, for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 .

The balance as of September 30, 2024 was approximatel y $25.3 million , or 10.70%, of our total loans held at carrying value and loan receivable held at carrying value balance of approximately $236.3 million and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loan receivable held at carrying value of approximately $25.1 million and (ii) a liability for unfunded commitments of approximately $0.2 million .

The balance as of September 30, 2023 was approximately $14.4 million, or 4.66%, of our total loans held at carrying value and loan receivable held at carrying value balance of approximately $310.1 million and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loan receivable held at carrying value of approximately $14.3 million and (ii) a liability for unfunded commitments of approximately $0.2 million.

The provision for current expected credit losses decreased approximately $(5.6) million, or (114.2)%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 .

The balance as of March 31, 2025 was approximatel y $29.9 million , or 9.75%, of our total loans held at carrying value and loan receivable held at carrying value balance of approximately $306.4 million and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loan receivable held at carrying value of approximately $29.7 million and (ii) a liability for unfunded commitments of approximately $0.1 million .

The balance as of March 31, 2024 was approximately $31.4 million, or 8.71%, of our total loans held at carrying value and loan receivable held at carrying value balance of approximately $359.9 million and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loan receivable held at carrying value of approximately $31.3 million and (ii) a liability for unfunded commitments of approximately $9.1 thousand.

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

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We continuously evaluate the credit quality of each loan by assessing the risk factors of each loan.

The change in the provision for current expected credit losses for the three and nine months ended September 30, 2024 compared to the three and nine months ended September 30, 2023 was due to changes in macroeconomic factors, changes to the loan portfolio including new commitments and repayments, borrower payment status, and changes in other data points we use in estimating the reserve.

The change in the provision for current expected credit losses for the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was due to changes in macroeconomic factors, changes to the loan portfolio including new commitments and repayments, borrower payment status, and changes in other data points we use in estimating the reserve.

Loan Portfolio

The table below summarizes our total loan portfolio as of September 30, 2024, unless otherwise specified.

As of March 31, 2025 , our portfolio was comprised of 17 loans (such portfolio, our “Existing Portfolio”).

The aggregate originated commitment under these loans was approximately $375.0 million and outstanding principal was approximately $366.3 million as of March 31, 2025.

As of March 31, 2025, our portfolio had a weighted-average estimated YTM of approximately 18% and was secured by various types of assets of our borrowers, including real property and personal property, such as cash flows and the value associ ated with licenses (where applicable), equipment, and other assets to the extent permitted by applicable laws and the regulations governing our borrowers.

The table below summarizes our total loan portfolio as of March 31, 2025, unless otherwise specified.

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

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Q 8/16/2024 9/1/2028 11,000,000 2.9% 5,984,450 13.8% N/A Floating Yes 17%

Subtotal (10)

R 10/4/2024 11/1/2027 41,000,000 10.9% 37,990,362 12.0% N/A Floating Yes 15%

of Public Co.

S 11/19/2024 8/12/2026 10,000,000 2.7% 10,000,000 9.5% N/A Fixed No 10%

T 12/18/2024 7/26/2027 8,945,972 2.4% 7,965,277 11.3% N/A Fixed Yes 12%

U 2/14/2025 3/1/2028 15,000,000 4.0% 15,000,000 14.0% N/A Fixed Yes 16%

$ 375,025,490 100.0% $ 366,253,091 12.7% 0.6% 18%

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

Estimated YTM is calculated using the interest rate as of September 30, 2024 applied through maturity.

Estimated YTM is calculated using the interest rate as of March 31, 2025 applied through maturity.

Actual results could differ from those estimates and assumptions.

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

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

terms of the Private Company A Credit Facility.

Effective March 1, 2024, Private Company A was placed on nonaccrual status.

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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.

(6) 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.

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

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

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

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

(9) 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.

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

Loans Held for Investment at Fair Value

As of September 30, 2024 and December 31, 2023, our 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, we 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 our loans held at fair value had floating interest rates.

The following tables summarize our 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, our 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, we received approximately $1.3 million of principal repayments of loans held at fair value.

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

The following tables summarize our loan held at fair value as of March 31, 2025 and December 31, 2024 :

As of March 31, 2025

Fair Value (1)

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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

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

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 to our consolidated financial statements titled “Fair Value” .

(2) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted 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

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

Loans Held for Investment at Carrying Value

As of September 30, 2024 and December 31, 2023, our portfolio included eleven and nine loans held at carrying value, respectively.

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

During the nine months ended September 30, 2024, we 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 our 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 our loans held at carrying value had floating interest rates.

As of September 30, 2024, these 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 our 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, our 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, we 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 our 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 our loans held at carrying value as of March 31, 2025 and December 31, 2024 :

As of March 31, 2025

Principal (1)

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(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

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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

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

Loan Receivable Held at Carrying Value

As of September 30, 2024 and December 31, 2023, our portfolio included one loan receivable held at carrying value.

The originated commitment under this loan was $4.0 million and outstanding principal was approximately $2.0 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, our portfolio included one loan receivable held at carrying value.

The originated commitment under this loan was $4.0 million and outstanding principal was approximately $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

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

Collateral Overview

Our loans are typically secured by various types of assets of our borrowers, including real property and certain personal property, such as cashflows and the value associated with licenses (where applicable), equipment, and other assets to the extent permitted by applicable laws and the regulations governing our borrowers.

Our loans are typically secured by various types of assets of our borrowers, including real property and certain personal property, such as cash flows and the value associated with licenses (where applicable), equipment, and other assets to the extent permitted by applicable laws and the regulations governing our borrowers.

With respect to our loans to cannabis operators, we do not have liens on cannabis inventory and are generally restricted from taking ownership of state licenses by current statutory prohibitions and exchange listing standards.

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Becoming the holder of a license through foreclosure or otherwise, the sale of a license or other realization of the value of licenses requires the approval of regulatory authorities.

As of September 30, 2024, our portfolio of assets held outside of TRS1 had a weighted average real estate collateral coverage of approximately 1.0 times our aggregate committed principal amount of such loans, with the real estate collateral coverage for each of our loans measured as of the time of closing for such loan and based on various sources of data available at such time.

As of March 31, 2025, our portfolio of assets held outside of TRS1 had a weighted average real estate collateral coverage of approximately 1.0 times our aggregate committed principal amount of such loans, with the real estate collateral coverage for each of our loans measured as of the time of closing for such loan and based on various sources of data available at such time.

We calculate our weighted average real estate collateral coverage by estimating the underlying value of our real estate collateral based on various objective and subjective factors, including, without limitation, third-party appraisals, total cost basis of the subject property and/or our own internal estimates.

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However, we can provide no assurances that a third party would buy such loans or that the sales price of such loans would be sufficient to recover the outstanding principal balance, accrued interest, and fees.

We will not own real estate as long as it is used in the commercial sale of cannabis due to current statutory prohibitions and exchange listing standards, which may delay or limit our remedies in the event that any of our borrowers default under the terms of their loans with us.

We will not own real estate as long as it is used in the commercial sale of cannabis due to current statutory prohibitions and exchange listing

standards, which may delay or limit our remedies in the event that any of our borrowers default under the terms of their loans with us.

Liquidity and Capital Resources

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The sources of financing for our target investments are described below.

Our primary sources of cash generally consist of unused borrowing capacity under our Revolving Credit Facility, the net proceeds of future debt or equity offerings, including in connection with the ATM Program, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating results.

Our net cash provided by operating activities for the nine months ended September 30, 2024 of approximately $19.3 million was less than our dividend payments of $32.8 million made during the same period due to earned OID of $7.1 million and PIK repayments of $5.5 million related to the exits from Private Company I, Private Company C and Private Company B during such period.

Our primary sources of cash generally consist of unused borrowing capacity under the Revolving Credit Facility, the net proceeds of future debt or equity offerings, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating results.

Our net cash provided by operating activities for the three months ended March 31, 2025 of approximately $3.9 million was less than our dividends declared of $5.2 million made during the same period due to earned OID of $0.9 million.

OID relates to cash withheld by the Company upon funding of its investments and is included under the ‘Supplemental disclosure of non-cash activity’ on the Consolidated Statements of Cash Flows.

As of September 30, 2024 and December 31, 2023, all of our cash was unrestricted and totaled approximately $122.2 million and $90.4 million, respectively.

As of September 30, 2024, we believe that our cash on hand, capacity available under our line of credit and cash flows from operations will be sufficient to satisfy the operating requirements of our business through at least the next twelve months.

As of March 31, 2025 and December 31, 2024, all of our cash was unrestricted and totaled approximately $3.3 million and $103.6 million, respectively.

As of March 31, 2025, we believe that our cash on hand, capacity available under the Revolving Credit Facility and cash flows from operations will be sufficient to satisfy the operating requirements of our business through at least the next twelve months.

Capital Markets

Our Shelf Registration Statement became effective on April 18, 2022, allowing us to sell, from time to time in one or more offerings, up to $1.0 billion of our securities, including common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of our common stock or preferred stock.

Our current Shelf Registration Statement became effective on April 25, 2025, allowing us to sell, from time to time in one or more offerings, up to $1.0 billion of our securities, including common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of our common stock or preferred stock.

The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.

We may also access liquidity through our ATM Program, which was established in April 2022, pursuant to which we may sell, from time to time, up to $75.0 million of our common stock.

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

Subsequent to September 30, 2024, we sold an aggregate of 70,630 shares of our common stock under the Sales Agreement at a weighted average price of $9.99 per share, generating net proceeds of approximately $0.7 million.

As of November 13, 2024, our remaining authorization under the Sales Agreement was approximately $50.3 million.

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

As of March 31, 2025, our 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 our Prior Shelf Registration Statement.

We do 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.

We may seek to raise further equity capital and issue debt securities in order to fund our future investments in loans.

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Revolving Credit Facility

On April 29, 2022, we entered into the Revolving Credit Facility.

As of September 30, 2024, we had $60.0 million of borrowings outstanding and zero availability under our Revolving Credit Agreement, which may be borrowed, repaid and redrawn, subject to a borrowing base based on eligible loan obligations held by us and subject to the satisfaction of other conditions provided under the Revolving Credit Facility.

The Revolving Credit Facility contains aggregate commitments of $60.0 million from two FDIC-insured banking institutions, which may be increased to up to $100.0 million in aggregate (subject to available borrowing base and additional commitments), and contains a maturity date of April 29, 2025.

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

Upon entering into the Revolving Credit Agreement, w e incurred a one-time commitment fee expense of approximately $0.5 million, which is amortized over the life of the facility.

In connection with the Revolving Credit Agreement, w e incurred a one-time commitment fee expense of approximately $0.5 million, which was 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 our unaudited interim consolidated statements of operations.

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

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

In April 2025, we entered into Amendment Number Four 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.

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, we incurred a one-time commitment fee of approximately $0.1 million, which will be included in prepaid expenses and other assets on our consolidated balance sheets and amortized over the life of the facility.

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

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(1) liquidity of at least $5.0 million, (2) annual debt service coverage of at least 1.50 to 1.0 and (3) secured debt not to exceed 25% of total consolidated assets of us and our subsidiaries.

To the best of our knowledge, as of September 30, 2024, we were in compliance in all material respects with all covenants contained in our Revolving Credit Agreement.

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.

AFCF Credit Facility

In December 2024, we entered into the AFCF Credit Facility, which provides for an unsecured revolving 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 .

As of March 31, 2025, we had no borrowings outstanding and $40.0 million availability under our AFCF Credit Agreement.

In April 2025, in conjunction with the entry by the Company into Amendment Number Four to the Revolving Credit Facility, we terminated that certain AFCF Credit Agreement, dated December 17, 2024.

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 governing the 2027 Senior Notes contains customary terms and restrictions, subject to a number of exceptions and qualifications, including restrictions on our ability to (1) incur additional indebtedness unless the Annual Debt Service Charge (as defined in the Indenture) is no less than 1.5 to 1.0, (2) incur or maintain total debt in an aggregate principal amount greater than 60% of our consolidated Total Assets (as defined in the Indenture), (3) incur or maintain secured debt in an aggregate principal amount greater than 25% of our consolidated Total Assets (as defined in the Indenture);

and (4) merge, consolidate or sell substantially all of our assets.

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We expect that these facilities will typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates.

As of September 30, 2024 , we believe that our cash on hand, capacity available under our Revolving Credit Facility, and cash flows from operations will be sufficient to service our outstanding debt during the next twelve months.

Cash provided by (used in) operating, investing and financing activities of continuing operations for the nine months ended September 30, 2024 and 2023 is as follows:

September 30,

As of March 31, 2025 , we believe that our cash on hand, capacity available under our Revolving Credit Facility and cash flows from operations will be sufficient to service our outstanding debt during the next twelve months.

Cash provided by (used in) operating, investing and financing activities of continuing operations for the three months ended March 31, 2025 and 2024 is as follows:

Three months ended

Net cash provided by (used in) operating activities of continuing operations $ 3,921,374 $ 5,500,858

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 financing activities of continuing operations $ (85,135,873) $ 8,180,305

Net Cash Provided by (Used in) Operating Activities of Continuing Operations

Net cash provided by operating activities of continuing operations during the nine months ended September 30, 2024 was approximately $16.1 million, compared to approximately $15.0 million for the same period in 2023.

The increase of approximately $1.1 million during the nine months ended September 30, 2023 to September 30, 2024 was primarily due to an increase in the change in unrealized (gains) losses on loans held at fair value of approximately $8.5 million, decrease in PIK interest of approximately $6.6 million, decrease in gain (loss) on extinguishment of debt of approximately $2.0 million, increase in interest reserve of approximately $4.1 million, increase in interest receivable of approximately $1.6 million, partially offset by a decrease in net income from continuing operations of approximately $(15.3) million, decrease in accrued management and incentive fees of approximately $(2.2) million, increase in provision for current expected credit losses of approximately $(1.3) million and increase in OID accretion of approximately $(2.7) million, respectively.

Net Cash Provided by (Used in) Investing Activities of Continuing Operations

Net cash provided by investing activities of continuing operations during the nine months ended September 30, 2024 was approximately $99.3 million, compared to approximately $18.5 million for the same period in 2023.

The increase in net cash provided by investing activities of approximately $80.8 million during the nine months ended September 30, 2023 to September 30, 2024 was primarily due to an decrease in issuance and fundings on loans of approximately $1.7 million, an increase in proceeds from the sale of loans of approximately $74.7 million and an increase in principal repayments of loans of approximately $3.3 million, respectively.

Net Cash Provided by (Used in) Financing Activities of Continuing Operations

Net cash used in financing activities of continuing operations during the nine months ended September 30, 2024 was approximately $(70.9) million, compared to approximately $(100.7) million for the same period in 2023.

The decrease of approximately $29.8 million during the nine months ended September 30, 2023 to September 30, 2024 was primarily due to an increase in borrowings on the Revolving Credit Facility of $164.0 million, offset by an increase in repayments on the Revolving Credit Facility of $(86.0) million, an increase in proceeds from the ATM program of $12.3 million, a decrease in repayments of the 2027 Senior Notes of approximately $7.7 million, and an increase in cash distributions in connection with the Spin-Off of SUNS of approximately $(67.9) million, respectively.

Cash provided by (used in) operating, investing and financing activities of discontinued operations for the nine months ended September 30, 2024 and 2023 is as follows:

September 30,

Net cash provided by operating activities of continuing operations during the three months ended March 31, 2025 was approximately $3.9 million, compared to approximately $5.5 million for the same period in 2024.

The decrease of approximately $(1.6) million period over period was primarily due to a decrease in the non-cash change in unrealized (gains) losses on loans held at fair value of approximately $(2.9) million, decrease in non-cash provision for current expected credit losses of approximately $(5.6) million, decrease in accrued management and incentive fees of approximately $(1.1) million, partially offset by an increase in net income from continuing operations of approximately $5.6 million, decrease in non-cash PIK interest of approximately $1.5 million and decrease in non-cash OID accretion of approximately $1.0 million, respectively.

Net Cash (Used in) Provided by Investing Activities of Continuing Operations

Net cash used in investing activities of continuing operations during the three months ended March 31, 2025 was approximately $(19.1) million, compared to approximately $(7.5) million for the same period in 2024.

The decrease in net cash used in investing activities of approximately $(11.6) million during the three months ended March 31, 2024 to March 31, 2025 was primarily due to a decrease on loan repayments of approximately $(19.6) million and an increase in cash fundings to title agent due to the timing of loan closings of $(10.1) million, offset by a decrease in issuance and fundings on loans of approximately $19.9 million.

Net Cash (Used in) Provided by Financing Activities of Continuing Operations

Net cash used in financing activities of continuing operations during the three months ended March 31, 2025 was approximately $(85.1) million, compared to approximately $8.2 million for the same period in 2024.

The decrease of approximately $(93.3) million during the three months ended March 31, 2024 to March 31, 2025 was primarily due to a decrease in borrowings on the Revolving Credit Facility and the AFCF Credit Facility of $(33.5) million in the aggregate, offset by an increase in repayments on the Revolving Credit Facility and the AFCF Credit Facility of $(62.3) million in the aggregate.

Cash provided by (used in) operating, investing and financing activities of discontinued operations for the three months ended March 31, 2025 and 2024 is as follows:

Three months ended

Net cash provided by (used in) operating activities of discontinued operations $ — $ 871,690

2 unchanged sentences

Net Cash Provided by (Used in) Operating Activities of Discontinued Operations

Net cash provided by operating activities of discontinued operations during the nine months ended September 30, 2024 was approximately $3.3 million, compared to approximately $7.8 thousand for the same period in 2023.

The increase of approximately $3.3 million during the nine months ended September 30, 2023 to September 30, 2024 was primarily due to an increase in net income from discontinued operations of $2.9 million and changes in working capital of $0.3 million, respectively.

Net cash provided by operating activities of discontinued operations during the three months ended March 31, 2025 was zero, compared to approximately $0.9 million for the same period in 2024.

The decrease of approximately $(0.9) million during the three months ended March 31, 2024 to March 31, 2025 was primarily due to a decrease in net income from discontinued operations of $(1.5) million and changes in working capital of $0.6 million, respectively.

Net Cash Provided by (Used in) Investing Activities of Discontinued Operations

Net cash used in investing activities of discontinued operations during the nine months ended September 30, 2024 was approximately $(47.2) million, compared to net cash provided by investing activities of zero for the same period in 2023.

The decrease of net cash used in investing activities of discontinued operations was primarily due to the issuance and fundings on loans of approximately $67.3 million, offset by principal repayments of loans of $15.1 million, respectively.

Net cash used in investing activities of discontinued operations during the three months ended March 31, 2025 was zero, compared to net cash provided by investing activities of $(46.4) million for the same period in 2024.

The increase of net cash used in investing activities of discontinued operations was primarily due to the issuance and fundings on loans of approximately $(48.9) million, offset by principal repayments of loans of $2.5 million, respectively.

Net Cash Provided by (Used in) Financing Activities of Discontinued Operations

There were no cash flows related to financing activities of discontinued operations during the nine months ended September 30, 2024 and 2023.

There were no cash flows related to financing activities of discontinued operations during the three months ended March 31, 2025 and 2024.

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

Our contractual obligations as of September 30, 2024 are as follows:

As of September 30, 2024

Our contractual obligations as of March 31, 2025 are as follows:

As of March 31, 2025

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

2 unchanged sentences

Total $ 4,471,867 $ 5,015,550 $ — $ — $ 9,487,417

As of September 30, 2024 , all unfunded commitments were related to our total loan commitments and were available for funding in less than four years.

We also had the following contractual obligations as of September 30, 2024 relating to the 2027 Senior Notes:

As of September 30, 2024

As of March 31, 2025 , all unfunded commitments were related to our total loan commitments and were available for funding in less than two years.

We also had the following contractual obligations as of March 31, 2025 relating to the 2027 Senior Notes:

As of March 31, 2025

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

3 unchanged sentences

Total $ 5,175,000 $ 97,762,500 $ — $ — $ 102,937,500

(1) Amounts include projected interest payments during the period based on interest rates in effect as of September 30, 2024 .

(1) Amounts include projected interest payments during the period based on interest rates in effect as of March 31, 2025 .

We may enter into certain contracts that may contain a variety of indemnification obligations.

19 unchanged sentences

Critical Accounting Policies and Estimates

As of September 30, 2024 , there were no significant changes in or changes in the application of our critical accounting policies or estimates from those presented in our Annual Report on Form 10-K.

As of March 31, 2025 , there were no significant changes in or changes in the application of our critical accounting policies or estimates from those presented in our Annual Report on Form 10-K.

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 2. Management’s Discussion and Analysis