What changed in this filing

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Item 1. Financial Statements

2025-08-14 compared with 2025-05-14 · 337 added, 220 removed, 682 unchanged (45% of the section changed)

2 unchanged sentences

CONSOLIDATED BALANCE SHEETS

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)

June 30, 2025 December 31, 2024

Loans held for investment at fair value (cost of $ 48,318,884 and $ 50,241,018 at June 30, 2025 and December 31, 2024, respectively, net)

$ 26,847,222 $ 30,510,804

20 unchanged sentences

Shareholders’ equity

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

Preferred stock, par value $ 0.01 per share, 10,000 shares authorized at June 30, 2025 and December 31, 2024 and 0 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

Common stock, par value $ 0.01 per share, 50,000,000 shares authorized at June 30, 2025 and December 31, 2024 and 22,595,111 and 22,332,927 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

225,951 223,329

7 unchanged sentences

Three months ended

June 30, Six months ended

2025 2024 2025 2024

Interest income $ 8,061,509 $ 17,977,945 $ 16,519,757 $ 32,312,699

6 unchanged sentences

Professional fees 361,104 367,408 733,040 814,440

BDC conversion expenses 226,780 — 226,780 —

Total expenses 2,598,494 5,754,564 5,075,326 11,259,433

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

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

(Provision for) reversal of current expected credit losses ( 15,851,566 ) 6,262,094 ( 15,152,142 ) 1,330,420

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

Change in unrealized gains (losses) on loans at fair value, net ( 1,055,970 ) ( 1,420,001 ) ( 1,741,448 ) ( 5,033,694 )

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

Income tax expense 112,406 158,360

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

Net (loss) income from continuing operations before income taxes ( 13,302,695 ) 15,492,199 ( 9,122,604 ) 14,080,216

Income tax (benefit) expense ( 138,044 ) 285,975 ( 25,638 ) 444,335

Net (loss) income from continuing operations ( 13,164,651 ) 15,206,224 ( 9,096,966 ) 13,635,881

Net income from discontinued operations, net of tax — 1,239,897 — 2,756,124

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

Net (loss) income $ ( 13,164,651 ) $ 16,446,121 $ ( 9,096,966 ) $ 16,392,005

Basic earnings per common share:

12 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Three months ended March 31, 2025

Three months ended June 30, 2025

Stock Common Stock Additional

3 unchanged sentences

Shares Amount

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

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

Stock-based compensation, net of forfeitures — ( 896 ) ( 9 ) 484,511 — 484,502

Dividends declared on common shares ($ 0.15 per share)

— — — — ( 3,389,267 ) ( 3,389,267 )

Net loss — — — — ( 13,164,651 ) ( 13,164,651 )

Balance at June 30, 2025 $ — 22,595,111 $ 225,951 $ 252,901,392 $ ( 68,396,269 ) $ 184,731,074

Three months ended June 30, 2024

Stock Common Stock Additional

Capital Accumulated

(Deficit) Total

Shareholders’

Shares Amount

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

Stock-based compensation — — — 369,343 — 369,343

1 unchanged sentence

— — — — ( 13,020,269 ) ( 13,020,269 )

Dividends declared on preferred shares ($ 60 per share)

— — — — ( 7,500 ) ( 7,500 )

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

Net income — — — — 16,446,121 16,446,121

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

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

See accompanying notes to the consolidated financial statements

ADVANCED FLOWER CAPITAL INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Six months ended June 30, 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

Stock-based compensation — 209,397 2,094 541,128 — 543,222

Stock-based compensation, net of forfeitures — 262,184 2,622 1,035,629 — 1,038,251

Dividends declared on common shares ($ 0.38 per share)

1 unchanged sentence

Net loss — — — — ( 9,096,966 ) ( 9,096,966 )

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

Balance at June 30, 2025 $ — 22,595,111 $ 225,951 $ 252,901,392 $ ( 68,396,269 ) $ 184,731,074

Six months ended June 30, 2024

Stock Common Stock Additional

Capital Accumulated

(Deficit) Total

Shareholders’

Shares Amount

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

Stock-based compensation — 209,397 2,094 910,471 — 912,565

Dividends declared on common shares ($ 1.11 per share)

— — — — ( 22,940,474 ) ( 22,940,474 )

Dividends declared on preferred shares ($ 60 per share)

— — — — ( 7,500 ) ( 7,500 )

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

Net income — — — — 16,392,005 16,392,005

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

See accompanying notes to the consolidated financial statements

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three months ended

Six months ended

Operating activities:

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

Net (loss) income $ ( 9,096,966 ) $ 16,392,005

Net (income) from discontinued operations, net of tax — ( 2,756,124 )

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

Net (loss) income from continuing operations ( 9,096,966 ) 13,635,881

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

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

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

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

Provision for (reversal of) current expected credit losses 15,152,142 ( 1,330,420 )

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

Change in unrealized losses (gains) on loans at fair value, net 1,741,448 5,033,694

Accretion of deferred loan original issue discount and other discounts ( 1,828,874 ) ( 5,278,643 )

16 unchanged sentences

Issuance of and fundings on loans ( 29,183,647 ) ( 39,264,440 )

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

Proceeds from sales of loans — 96,061,029

5 unchanged sentences

Payment of financing costs ( 166,928 ) ( 225,000 )

Redemption of preferred shares — ( 125,000 )

Borrowings on revolving credit facilities 35,500,000 95,000,000

4 unchanged sentences

Net cash (used in) provided by financing activities ( 102,333,876 ) ( 27,097,400 )

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

Net (decrease) increase in cash and cash equivalents ( 100,200,395 ) 48,671,597

Cash and cash equivalents, beginning of period 103,610,460 121,626,453

3 unchanged sentences

Dividends declared and not yet paid $ 3,389,267 $ 13,020,269

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

Supplemental information:

Interest paid during the period $ 3,144,421 $ 2,675,138

Income taxes paid during the period $ 138 $ 124,733

Income taxes paid (net of refunds received) during the period $ 185,668 $ 567,070

See accompanying notes to the consolidated financial statements

1 unchanged sentence

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2025

As of June 30, 2025

Advanced Flower Capital Inc.

2 unchanged sentences

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

The Company is externally managed by AFC Management, LLC, a Delaware limited liability company (the Company’s “Manager”), pursuant to the terms of the Amended and Restated Management Agreement, dated January 14, 2021, between the parties (as amended from time to time, the “Management Agreement”).

The Company is externally managed by AFC Management, LLC, a Delaware limited liability company (the “Manager”), pursuant to the terms of the Amended and Restated Management Agreement, dated January 14, 2021, between the parties (as amended from time to time, the “Management Agreement”).

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

7 unchanged sentences

For additional information, see Note 16, “Discontinued Operations.”

The Company operates in one operating segment.

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

During the reporting period, the Company operated in one operating segment.

The Company 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.

1 unchanged sentence

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

At a meeting of the Board of Directors (the “Board”) on August 12, 2025 (the “August Meeting”), the Board approved the sixth amendment to the Company’s existing Management Agreement (the “Sixth Amendment”) to expand the Company’s investment strategy.

Accordingly, under the Sixth Amendment, the Company expanded its investment strategy and intends to additionally originate, structure, underwrite, invest in and manage senior secured mortgage loans and other types of loans and debt securities to companies ancillary to the cannabis industry as well as companies outside of the cannabis industry.

Businesses ancillary to the cannabis industry may include, but are not limited to, brand developers, business services providers, and equipment and consumables providers.

The Company believes there are also attractive lending opportunities in companies ancillary to and outside of the cannabis industry that could generate attractive risk-adjusted returns.

The investment team has over 30 years of experience in direct lending outside of the cannabis industry across $ 10 billion of transactions.

By expanding the investment mandate, the Company expects to be able to diversify its exposure across industries and credit risk profiles while maintaining deal selectivity.

The Company may make investments in accordance with this expanded investment strategy to the extent consistent with maintaining its eligibility to continue to qualify as a REIT under the Code and maintain our exemption from registration under the Investment Company Act of 1940, as amended (“1940 Act”).

At a meeting held on August 12, 2025, the Board, including a majority of the directors who are not “interested persons” of the Company (as that term is defined under the Investment Company Act of 1940), unanimously approved, subject to the approval of the Company’s shareholders, a new Investment Advisory Agreement between the Company and the Manager.

If approved by the shareholders, the new Investment Advisory Agreement would enable the Company to operate as a BDC under the 1940 Act, as discussed further below in “Note 18—Subsequent Events”.

SIGNIFICANT ACCOUNTING POLICIES

6 unchanged sentences

All intercompany balances and transactions have been eliminated in consolidation.

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.

The Company’s results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may ultimately be realized for the full fiscal year ending December 31, 2025.

BDC Conversion Expenses

Expenses associated with the Company’s election and subsequent conversion to be regulated as a business development company (“BDC”) under the 1940 Act are expensed as incurred and include legal fees related to the proxy statement and special shareholder meeting in connection the BDC election, the entry into certain agreements relating to the BDC election and adoption of certain compliance policies and procedures relating to the BDC election.

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”) reserve.

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

Recent Accounting Pronouncements

18 unchanged sentences

LOANS HELD FOR INVESTMENT AT FAIR VALUE

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

As of June 30, 2025 and December 31, 2024, the Company’s portfolio included one loan held at fair value.

The aggregate commitment under this loan was approximately $ 42.5 million and $ 44.4 million, respectively, and outstanding principal was approximately $ 51.2 million and $ 53.1 million as of June 30, 2025 and December 31, 2024, respectively.

For the six months ended June 30, 2025, the Company received approximately $ 1.9 million of principal repayments of loans held at fair value.

As of June 30, 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 June 30, 2025 and December 31, 2024:

As of June 30, 2025

Fair Value (1)

15 unchanged sentences

(2) The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted original issue discount (“OID”) and loan origination costs.

(3) As of 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:

(3) As of June 30, 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 six months ended June 30, 2025:

Principal Original Issue

3 unchanged sentences

Loan repayments ( 1,922,134 ) — — ( 1,922,134 )

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.

Total loan held at fair value at June 30, 2025 $ 51,186,315 $ ( 2,867,431 ) $ ( 21,471,662 ) $ 26,847,222

As of June 30, 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:

As of June 30, 2025 , the loan with Private Company A had an outstanding principal balance of approximately $ 51.2 million and an unrealized loss of approximately $( 21.5 ) million.

During the three and six months ended June 30, 2025, approximately $ 0.7 million and $ 1.9 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 June 30, 2025 is as follows:

Collateral Location Collateral

15 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.

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 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

As of June 30, 2025 and December 31, 2024, t he Company’s portfolio included 14 and 14 loans held at carrying value, respectively.

A s of June 30, 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 $ 308.4 million and $ 301.8 million, respectively.

During the six months ended June 30, 2025, the Company funded approximately $ 30.0 million of new loans and additional principal and had approximately $ 23.6 million of principal repayments of loans held at carrying value.

As of June 30, 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 June 30, 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 June 30, 2025 and December 31, 2024:

As of June 30, 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 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:

(2) Weighted average remaining life is calculated based on the carrying value of the loans as of June 30, 2025 and December 31, 2024 .

The following table presents changes in loans held at carrying value as of and for the six months ended June 30, 2025:

Principal Original Issue

3 unchanged sentences

Accretion of original issue discount — 1,828,874 1,828,874

Loan repayments ( 13,608,683 ) — ( 13,608,683 )

PIK interest 266,550 — 266,550

Loan amortization payments ( 9,986,554 ) — ( 9,986,554 )

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.

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 as of March 31, 2025 .

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

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.

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 as of March 31, 2025 .

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:

Total loans held at carrying value at June 30, 2025 $ 308,405,751 $ ( 7,459,543 ) $ 300,946,208

As of June 30, 2025 and December 31, 2024 , the Company had three and two loans held at carrying value on nonaccrual status, respectively, with a total amortized cost of approximately $ 104.2 million and $ 89.3 million, respectively.

During the three and six months ended June 30, 2025, the Company recognized interest income of zero and $ 0.7 million on loans on nonaccrual status.

Subsequent to June 30, 2025, AFC Agent delivered a notice of default and acceleration to Private Company P based on certain payment defaults, including the failure to make its interest payment when due for July 1, 2025, and began charging additional default interest of 5.0 %, in accordance with the terms of the credit facility with Private Company P.

The Company placed the loan with Private Company P on nonaccrual status effective June 1, 2025.

As of June 30, 2025, the loan with Private Company P had an outstanding principal amount of approximately $ 15.6 million and amortized cost of $ 15.3 million.

AFC Agent, on behalf of the Company and its affiliates, is actively pursuing judicial and non-judicial remedies against Private Company P.

The Company placed Subsidiary of Private Company G on nonaccrual status effective December 1, 2023.

As of June 30, 2025, the loan with Subsidiary of Private Company G had an outstanding principal amount of approximately $ 78.9 million

and an amortized cost of approximately $ 77.4 million, respectively.

During the three and six months ended June 30, 2025, the Company recognized interest income of zero an d approximately $ 0.7 million related to this loan, which was received in cash.

As full recovery of principal and accrued interest is doubtful, future cash receipts received in accordance with terms of the forbearance agreement are accounted for under the cost recovery method.

During the three and six months ended June 30, 2025, approximately $ 0.3 million and $ 0.3 million of contractual interest payments were received and applied as a reduction to this loan’s amortized cost, respectively.

During the three and six months ended June 30, 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 June 30, 2025 is as follows:

Collateral Location Collateral

7 unchanged sentences

L OH C, D 30,443,356 ( 343,736 ) 30,099,620 13.0 % (8)

of Public Co.

M IL, MA, MD, MI, NJ, OH, PA C, D 2,797,527 ( 86,288 ) 2,711,239 9.5 % (9)

8/27/2025 I/O

M AZ D 26,599,497 ( 1,729,171 ) 24,870,326 9.0 % (9)

10 unchanged sentences

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 ( 324,324 ) 14,675,676 14.0 % (17)

Sub of Private Co.

V MO, OH, UT C, D 12,276,704 ( 393,750 ) 11,882,954 14.0 % (18)

Total loans held at carrying value $ 308,405,751 $ ( 7,459,543 ) $ 300,946,208

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.

8 unchanged sentences

(9) Base interest rate of 9.0 %.

(10) Base interest rate of 9.0 %.

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

2 unchanged sentences

(13) Base interest rate of 13.0 %.

Effective June 1, 2025, the Company placed the borrower on nonaccrual status.

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

2 unchanged sentences

(17) Base interest rate of 14.0 %.

(19) Base interest rate of 14.0 %.

(18) Base interest rate of 12.5 % and PIK interest rate of 1.5 %.

LOAN RECEIVABLE HELD AT CARRYING VALUE

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:

As of June 30, 2025 and December 31, 2024, the Company’s portfolio included zero and one loan receivable held at carrying value.

The originated commitment under this loan was $ 4.0 million and outstanding principal was zero and $ 1.9 million as of June 30, 2025 and December 31, 2024, respectively.

During the six months ended June 30, 2025, the Company received $ 0.1 million of principal repayments of loan receivable held at carrying value.

The following table presents changes in loans receivable as of and for the six months ended June 30, 2025:

Principal Original Issue

2 unchanged sentences

Loan repayments ( 118,392 ) — ( 118,392 )

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.

Loan write-off ( 1,778,932 ) 1,686 ( 1,777,246 )

Total loan receivable held at carrying value at June 30, 2025 $ — $ — $ —

Effective October 1, 2022, the Company placed Public Company A equipment loan receivable on nonaccrual status.

During the three and six months ended June 30, 2025, the Company recognized no interest income related to this loan.

Payments received were accounted for under the cost recovery method and applied as a reduction to the amortized cost of the Public Company A equipment loan.

Prior to the write-off, in June 2025, the equipment loan with Public Company A had an outstanding principal balance of approximately $ 1.8 million and amortized cost of approximately $ 1.8 million.

Based on discussions with the collateral agent, the Company does not expect future proceeds and deemed the remaining balance on the loan with Public Company A to be uncollectible.

Prior to the write-off, the loan receivable had a CECL Reserve that was fully reserved for.

In the second quarter of 2025, the Company wrote off $ 1.8 million, which was equal to the carrying value of the loan receivable, excluding the CECL Reserve at the time the loan was written off.

CURRENT EXPECTED CREDIT LOSSES

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.

As of June 30, 2025 and December 31, 2024, the Company’s CECL Reserve for its loans held at carrying value and loan receivable held at carrying value was approximately $ 44.0 million and $ 30.6 million, respectively, or 14.61 % and 10.36 %, respectively, of the Company’s total loans held at carrying value and loan receivable held at carrying value of approximately $ 300.9 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 $ 43.8 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 months ended March 31, 2025 was as follows:

Management considered the likelihood that funding will occur and, if funded, the expected credit loss on the funded portion when determining the amount to allocate to its CECL Reserve.

Outstanding (1)

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

Provision for (reversal of) current expected credit losses 15,867,183 ( 15,617 ) 15,851,566

Write-offs ( 1,777,246 ) — ( 1,777,246 )

Recoveries — — —

Balance at June 30, 2025 $ 43,834,149 $ 127,126 $ 43,961,275

Outstanding (1)

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

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

Provision for (reversal of) current expected credit losses 15,191,718 ( 39,576 ) 15,152,142

Write-offs ( 1,777,246 ) — ( 1,777,246 )

Recoveries — — —

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.

Balance at June 30, 2025 $ 43,834,149 $ 127,126 $ 43,961,275

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

Such 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 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:

As of June 30, 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

5 unchanged sentences

Total $ 26,558,630 $ 107,142,736 $ 24,870,326 $ 41,612,763 $ 100,761,753 $ — $ 300,946,208

Gross write-offs $ — $ — $ — $ — $ — $ ( 1,777,246 ) $ ( 1,777,246 )

During the three months ended June 30, 2025, the Company deemed its equipment loan receivable with Public Company A uncollectible and wrote off the remaining balance.

At the time of write-off, the equipment loan with Public Company A had an outstanding principal balance of approximately $ 1.8 million and amortized cost of approximately $ 1.8 million.

Prior to the write-off, the loan receivable had a risk rating of “5” and was fully reserved for.

In the second quarter of 2025, the Company wrote off $ 1.8 million, which was equal to the carrying value of the loan receivable, excluding the CECL Reserve at the time the loan was written off.

Refer to Note 5 for more information.

INTEREST RECEIVABLE

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

March 31, 2025 As of

The following table summarizes the interest receivable by the Company as of June 30, 2025 and December 31, 2024:

June 30, 2025 As of

December 31, 2024

5 unchanged sentences

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 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.

The Revolving Credit Facility’s initial maturity date of April 29, 2025 was extended to April 29, 2028 under Amendment Number Four to the Revolving Credit Agreement, as described further below.

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.

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.

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 %.

In connection with entering 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.

The Company is required to pay certain fees to the agent and the lenders under the Revolving Credit Agreement, including a $ 75.0 thousand agent fee payable to the agent and a 0.25 % per annum loan fee payable ratably to the lenders, in each case, payable on the closing date and on the annual anniversary thereafter.

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 unused line fee is waived if our average revolver usage exceeds the minimum amount required per the Revolving Credit Agreement.

During the three and six months ended June 30, 2025, the Company incurred an unused line fee of approximately $ 18.3 thousand and $ 74.5 thousand, respectively.

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

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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.

To the best of our knowledge, as of June 30, 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.

1 unchanged sentence

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.

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.

In June 2025, the Company entered into Amendment Number Five to the Loan and Security Agreement, by and among the Company, as borrower, the lenders party thereto, and the lead arranger, bookrunner and administrative party thereto.

The Amendment among other things increased the commitment from the lenders by $ 20.0 million to a total aggregate commitment of $ 50.0 million.

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.

In connection with the Revolving Credit Agreement and related amendments, the Company incurred certain closing costs of approximately $ 35.9 thousand, which were included in prepaid expenses and other assets on the Company’s consolidated balance sheets and amortized over the life of the Revolving Credit Facility.

As of June 30, 2025 and December 31, 2024, outstanding borrowings under the Revolving Credit Facility were $ 10.4 million and $ 60.0 million, respectively, and $ 39.6 million and zero were available for borrowing as of June 30, 2025 and December 31, 2024, respectively.

As of June 30, 2025 and December 31, 2024, the interest rate on the Company’s borrowings under the Revolving Credit Facility was 8.00 %, respectively.

AFCF Credit Facility

5 unchanged sentences

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.

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.

As December 31, 2024, outstanding borrowings under the AFCF Credit Facility were $ 40.0 million and no amounts available for borrowing.

As of June 30, 2025, the AFCF Credit Facility had been terminated and no amounts were outstanding or available for borrowing thereunder.

2027 Senior Notes

10 unchanged sentences

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.

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

1 unchanged sentence

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

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

As of June 30, 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 March 31, 2025 are as follows:

Scheduled principal payments on the 2027 Senior Notes as of June 30, 2025 are as follows:

2027 Senior Notes

2 unchanged sentences

Total principal 90,000,000

Deferred financing costs included in senior notes ( 1,240,901 )

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

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

Deferred financing costs included in senior notes payable ( 1,092,320 )

Senior notes payable, net $ 88,907,680

The following tables reflect a summary of interest expense incurred during the three and six months ended June 30, 2025 and 2024:

Three months ended

March 31, 2025

June 30, 2025

2027 Senior Notes Revolving Credit Facility AFCF Credit Facility Total

4 unchanged sentences

Three months ended

March 31, 2024

June 30, 2024

2027 Senior Notes Revolving Credit Facility AFCF Credit Facility Total

3 unchanged sentences

Total interest expense $ 1,451,082 $ 122,193 $ — $ 1,573,275

Six months ended

June 30, 2025

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

Interest expense $ 2,587,500 $ 520,122 $ 8,889 $ 3,116,511

Unused fee expense — 74,511 — 74,511

Amortization of deferred financing costs 313,030 169,393 — 482,423

Total interest expense $ 2,900,530 $ 764,026 $ 8,889 $ 3,673,445

Six months ended

June 30, 2024

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

Interest expense $ 2,587,500 $ 82,387 $ — $ 2,669,887

Unused fee expense — — — —

Amortization of deferred financing costs 314,664 191,887 — 506,551

Total interest expense $ 2,902,164 $ 274,274 $ — $ 3,176,438

COMMITMENTS AND CONTINGENCIES

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

March 31, 2025 As of

As of June 30, 2025 and December 31, 2024, the Company had the following commitments to fund various investments:

June 30, 2025 As of

December 31, 2024

2 unchanged sentences

Total undrawn commitments $ 10,136,715 $ 10,334,599

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

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 from time to time may be a party to litigation or other legal proceedings relating to claims arising from the ordinary course of business.

As of June 30, 2025, the Company was not subject to any material pending legal proceedings to which the Company is a party or any of the Company’s assets are subject 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.

5 unchanged sentences

Series A Preferred Stock

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.

As of June 30, 2025 and December 31, 2024, the Company 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 June 30, 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.

The Company generally may not declare or pay, or set apart for payment, any dividend or other distribution on any shares of the Company’s stock ranking junior to the Series A Preferred Stock as to dividends, including the Company’s common stock, or redeem, repurchase or otherwise make payments on any such shares, unless full, cumulative dividends on all outstanding shares of Series A Preferred Stock have been declared and paid or set apart for payment for all past dividend periods.

shares of Series A Preferred Stock have been declared and paid or set apart for payment for all past dividend periods.

The holders of the Series A Preferred Stock generally have no voting rights except in limited circumstances, including certain amendments to the Company’s charter and the authorization or issuance of equity securities senior to or on parity with the Series A Preferred Stock.

6 unchanged sentences

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.

As of June 30, 2025 and December 31, 2024, the Company authorized 50,000,000 shares of common stock at $ 0.01 par value per share, pursuant to the Articles of Amendment, dated March 10, 2022 (“Common Stock”).

As of June 30, 2025 and December 31, 2024, 22,595,111 and 22,332,927 shares of Common Stock were issued and outstanding, respectively.

During the three and six months ended June 30, 2025 and the year ended December 31, 2024 , 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 2020 Plan.

Shelf Registration Statement

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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 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.

During the three and six months ended June 30, 2025, the Company did not sell any shares of the Company’s common stock under the Sales Agreement.

At the time of termination, the Company’s remaining authorization under the Sales Agreement was approximately $ 47.4 million.

As of June 30, 2025, the ATM Program was no longer in effect.

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

7 unchanged sentences

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

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.

During the six months ended June 30, 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 six months ended June 30, 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 June 30, 2025, there were 2,860,379 shares of common stock granted under the 2020 Plan, underlying 2,148,885 options and 711,494 shares of restricted stock.

As of June 30, 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 749,343 shares remained available for future issuance under the 2020 Plan.

The Share Limit is consistent with the Share Limit as of March 31, 2025.

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.

19 unchanged sentences

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 months ended March 31, 2025 and 2024:

The following table presents the assumptions used in the Black-Scholes pricing model of options granted under the 2020 Plan during the three and six months ended June 30, 2025 and 2024:

Expected term

18 unchanged sentences

Restricted Stock

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

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

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

1 unchanged sentence

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:

The following table summarize s the stock-based compensation expense incurred by the Company for the three and six months ended June 30, 2025 and 2024:

Three months ended

June 30, Six months ended

2025 2024 2025 2024

Stock-based compensation $ 484,502 $ 369,343 $ 1,038,251 $ 912,565

Stock Options

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

March 31, 2025 As of

June 30, 2025 As of

December 31, 2024

4 unchanged sentences

Balance 2,147,985 2,168,452

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

The following tables summarize stock option activity as of and during the six months ended June 30, 2025:

Number of options Weighted-average

3 unchanged sentences

Forfeited ( 20,467 ) 11.65

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.

Outstanding as of June 30, 2025 2,147,985 $ 11.46 2.77 years $ —

Exercisable as of June 30, 2025 2,137,314 $ 11.45 2.76 years $ —

Unvested as of June 30, 2025 10,671 $ 12.99 3.53 years $ —

T he Company did not grant any options d uring the six months ended June 30, 2025 and 2024 .

No options were exercised during the six months ended June 30, 2025 and 2024 .

As of June 30, 2025 , there was approximately $ 6.2 thousand of total unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 0.53 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

June 30, 2025 As of

December 31, 2024

4 unchanged sentences

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:

The following table summarizes the restricted stock activity as of and during the six months ended June 30, 2025:

Number of shares of restricted stock Weighted-average

4 unchanged sentences

Forfeited ( 9,313 ) 8.80

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.

Balance as of June 30, 2025 480,770 $ 8.53

There were no shares of restricted stock granted during the three months ended June 30, 2025 and 2024.

The total fair value of shares vested during the three months ended June 30, 2025 and 2024, was zero and $ 14.5 thousand, respectively.

During the three months ended June 30, 2024, 1,159 shares of restricted stock vested with a weighted-average grant date fair value of $ 12.94 per share.

During the six months ended June 30, 2024, 209,397 shares of restricted stock were granted with a weighted-average grant date fair value of $ 11.70 per share.

During the six months ended June 30, 2024, 62,338 shares of restricted stock vested with a weighted-average grant date fair value of $ 14.50 per share.

The total fair value of shares vested during the six months ended June 30, 2025 and 2024, was approximately $ 1.1 million and $ 0.7 million, respectively.

As of June 30, 2025 , there was approximately $ 3.3 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 2.16 years.

EARNINGS PER SHARE

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:

The following information sets forth the computations of basic and diluted weighted average earnings per common share for the three and six months ended June 30, 2025 and 2024:

Three months ended

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

June 30, Six months ended

2025 2024 2025 2024

Net (loss) income from continuing operations $ ( 13,164,651 ) $ 15,206,224 $ ( 9,096,966 ) $ 13,635,881

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

Dividends paid on unvested restricted stock ( 110,783 ) ( 128,270 ) ( 225,138 ) ( 185,396 )

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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.

Diluted weighted average earnings per common share excluded 2,571,834 and 2,480,235 weighted average shares of unvested restricted stock and stock options due to anti-dilutive effect for the three and six months ended June 30, 2025, respectively, and 2,206,907 and 2,206,907 for the three and six months ended June 30, 2024, respectively .

For the three and six months ended June 30, 2025 , 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 $ 0.1 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:

The income tax (benefit) provision for the Company was approximately $( 0.1 ) million and $( 25.6 ) thousand for the three and six months ended June 30, 2025, respectively, and $ 0.3 million and $ 0.4 million for the three and six months ended

June 30, 2024 , respectively.

The income tax expense for the three and six months ended June 30, 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 and six months ended June 30, 2025 and 2024:

Three months ended

June 30, Six months ended

2025 2024 2025 2024

Federal $ ( 27,302 ) $ 183,000 $ 72,698 $ 288,300

State ( 42,950 ) 102,975 22,031 156,035

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

Federal ( 52,575 ) —

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

Total current income tax (benefit) expense ( 70,252 ) 285,975 94,729 444,335

Total deferred income tax expense (benefit) 43,873 — ( 8,702 ) —

Excise tax ( 111,665 ) — ( 111,665 ) —

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.

Total income tax (benefit) expense, including excise tax $ ( 138,044 ) $ 285,975 $ ( 25,638 ) $ 444,335

For the three and six months ended June 30, 2025 and 2024, the Company did not incur United States federal excise tax expense, respectively.

During the six months ended June 30, 2025, the Company received a partial refund of previously paid excise tax relating to the 2023 tax year, which was received in the second quarter of 2025.

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.

As of June 30, 2025, tax years since 2021 remain subject to examination by taxing authorities.

The federal statutory rate was 21% for the three and six months ended June 30, 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.

As of June 30, 2025 and December 31, 2024, the Company’s deferred tax assets were $ 0.7 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.

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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.

There were no valuation allowances for deferred tax assets during the three and six months ended June 30, 2025 and 2024.

Loans Held for Investment

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A key determinant of risk, among other things, is the leverage through the loan relative to the enterprise value of the borrower.

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 March 31, 2025 and December 31, 2024:

Fair Value Measurement as of March 31, 2025

As loans held by the Company are substantially illiquid with no active loan market, the Company depends on

primary market data, including newly funded loans, as well as secondary market data with respect to high-yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.

The following tables present fair value measurements of loans held at fair value as of June 30, 2025 and December 31, 2024:

Fair Value Measurement as of June 30, 2025

Total Level 1 Level 2 Level 3

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

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

The following table presents changes in loans that use Level 3 inputs as of and for the six months ended June 30, 2025:

Six months ended

June 30, 2025

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

1 unchanged sentence

Loan repayments ( 1,922,134 )

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

The change in unrealized losses included in the unaudited interim consolidated statements of operations attributable to loans held at fair value, categorized as Level 3, held as of March 31, 2025 is $( 685,478 ).

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.

Total loans using Level 3 inputs at June 30, 2025 $ 26,847,222

The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of June 30, 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 March 31, 2025

As of June 30, 2025

Unobservable Input

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

Additionally, the fair value of the Company’s loans may differ significantly from the values that would have been used had a ready market existed for such loans and may differ materially from the values that the Company may ultimately realize.

Additionally, the fair value of the Company’s loans may differ significantly from the values that would have been used had a ready market existed for such loans and may

differ materially from the values that the Company may ultimately realize.

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.

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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 March 31, 2025 :

As of March 31, 2025

As of June 30, 2025

Carrying Value Fair Value

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Loans held for investment at carrying value $ 300,946,208 $ 256,542,083

Loan receivable held at carrying value $ 1,895,638 $ —

Financial liabilities:

Senior notes payable, net $ 88,907,680 $ 86,040,000

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

Cash and cash equivalents have a carrying value which approximates their fair value due to the short-term nature of these instruments.

The Company categorizes the fair value measurement of these assets as Level 1.

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

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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 months ended March 31, 2025 and 2024 , was zero and approximately $ 2.5 million, respectively.

The Incentive Compensation for the three and six months ended June 30, 2025 was zero and zero , respectively.

The Incentive Compensation for the three and six months ended June 30, 2024 was approximately $ 2.9 million and $ 5.3 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 months ended March 31, 2025 and 2024 :

The following table summarizes the related party costs incurred by the Company for the three and six months ended June 30, 2025 and 2024 :

Three months ended

June 30, Six months ended

2025 2024 2025 2024

Affiliate Costs

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General and administrative expenses reimbursable to Manager 565,349 740,619 1,127,845 1,515,983

Professional fees reimbursable to Manager 12,094 9,325 18,132 16,280

Total $ 1,257,801 $ 4,734,972 $ 2,642,525 $ 8,980,053

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.

Amounts payable to the Manager as of June 30, 2025 and December 31, 2024 were approximately $ 1.4 million and $ 3.1 million, respectively.

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

The outstanding equity of the Parent Manager is beneficially owned by certain officers as of the date of this Quarterly Report on Form 10-Q:

72.4 % by Leonard Tannenbaum, Chairman of the Board, 9.7 % by Robyn Tannenbaum, President and Chief Investment Officer, 9.7 % by other Tannenbaum family members and trusts, 2.9 % by Bernard Berman, a member of the Company’s Investment Committee, 2.5 % by Daniel Neville, Chief Executive Officer, 1.5 % by Brandon Hetzel, Chief Financial Officer and Treasurer, and 1.0 % by Gabriel Katz, Chief Legal Officer and Secretary, respectively.

At the August Meeting, the Board, including a majority of the directors who are not “interested persons” (“Independent Directors”) of the Company (as that term is defined under the 1940 Act)), unanimously approved, subject to the approval of the Company’s shareholders, a new Investment Advisory Agreement between the Company and the Manager.

Investments in Loans

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

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

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

As of June 30, 2025, there were two co-invested loans held by the Company and affiliates of the Company.

Unsecured Revolving Credit Facility with Affiliate

3 unchanged sentences

DIVIDENDS AND DISTRIBUTIONS

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

The following table summarizes the Company’s dividends declared during the six months ended June 30, 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 6/13/2024 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

2024 Period Subtotal

2 unchanged sentences

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

Regular cash dividend

6/13/2025 6/30/2025 7/15/2025 0.15 3,389,267

2025 Period Subtotal

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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 months ended March 31, 2025 and 2024:

The following table summarizes the financial statement lines included in net income from discontinued operations, net of tax for the three and six months ended June 30, 2025 and 2024:

Three months ended

June 30, Six months ended

2025 2024 2025 2024

Interest income $ — $ 1,979,576 $ — $ 4,005,882

3 unchanged sentences

Net income from discontinued operations, net of tax $ — $ 1,239,897 $ — $ 2,756,124

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.

During the three and six months ended June 30, 2025 and 2024, Spin-Off costs incurred were zero and zero , respectively, and approximately $ 0.6 million and $ 1.1 million, respectively.

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 June 30, 2025 or December 31, 2024.

REPORTABLE SEGMENTS

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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.

During the three and six months ended June 30, 2025, interest income earned on the Company’s portfolio was concentrated with five and five borrowers, respectively, each comprising more than 10% of consolidated interest income for an aggregate amount of $ 5.8 million, or 72 %, and $ 11.7 million, or 71 %, of consolidated interest income, respectively.

During the three and six months ended June 30, 2024, interest income earned on the Company’s portfolio was concentrated with five and two borrowers, respectively, each comprising more than 10% of consolidated interest income for an aggregate amount of $ 12.9 million, or 72 %, and $ 13.0 million, or 40 %, 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 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.

In July 2025, AFC Agent delivered a notice of default and acceleration to Private Company P based on certain payment defaults, including the failure to make its interest payment when due for July 1, 2025, and began charging additional default interest of 5.0 %, in accordance with the terms of the credit facility with Private Company P.

The Company placed the loan with Private Company P on nonaccrual status effective June 1, 2025.

AFC Agent, on behalf of the Company and its affiliates, is actively pursuing judicial and non-judicial remedies against Private Company P.

In August 2025, 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 a 4.0 % discount.

The term loan under the Subsidiary of Public Company S Credit Facility accrues interest at a fixed rate per annum of 12.5 % and matures in August 2030.

Concurrently, the Company’s existing $ 10.0 million investment with Subsidiary of Public Company S was repaid at par plus accrued interest and the Company recognized an exit fee of approximately $ 0.2 million.

At the August Meeting, the Board, including a majority of the Independent Directors, unanimously approved, subject to the approval of the Company’s shareholders, a new Investment Advisory Agreement between the Company and the Manager.

If approved by the shareholders, the new Investment Advisory Agreement would enable the Company to operate as a BDC under the 1940 Act.

The Company believes that converting from a mortgage REIT to a BDC (the “Conversion”) would enable the Company to pursue a broader array of investment opportunities, as further discussed below.

The Company expects, in the coming days, to file a preliminary proxy statement with the U.S.

Securities and Exchange Commission (“SEC”) and, subsequently, to mail definitive proxy statements to its shareholders seeking their approval of (1) the new Investment Advisory Agreement and (2) in connection with its anticipated operation as a BDC, a reduction in the asset coverage ratio applicable to the Company (enabling the Company to utilize a greater degree of leverage than would otherwise be permitted), all of which will be more fully described in the proxy statement.

In addition, in the coming months, the Board will consider other matters necessary to effect the Company’s conversion to a BDC.

There can be no assurance that the Board or the Company’s shareholders will approve the matters necessary for the Company to convert to a BDC.

BDC conversion expenses incurred were approximately $ 0.2 million and $ 0.2 million for the three and six months ended June 30, 2025, respectively.

The Company currently operates as a mortgage REIT and has historically focused on lending to cannabis operators.

In order to qualify as a mortgage REIT for income tax purposes and avoid being subject to registration under the 1940 Act, the Company currently must focus its investments in certain types of real estate-related assets, including loans collateralized by real property, which limits the universe of qualifying assets.

The Company is pursuing the Conversion, which, subject to shareholder approval, will result in the Company ceasing to operate as a mortgage REIT and electing to be regulated as a BDC under the 1940 Act, to enable it to invest in a much broader universe of assets, including both real estate- and non-real estate-related assets.

Following the Conversion, the Company expects that it would seek to qualify to be treated as a regulated investment company for federal income tax purposes.

The Company has historically targeted lending to vertically integrated cannabis companies with significant real estate holdings.

Given the capital-intensive nature of the cannabis industry, combined with the high cost of capital, many operators do not own real estate, which significantly limits the universe of cannabis operators to which the Company can lend as a mortgage REIT.

The Conversion would allow the Company to invest in non-real estate covered vertically integrated operators.

In addition, following the Conversion, the Company intends to continue investing in businesses ancillary to the cannabis industry, as contemplated under the Sixth Amendment.

Ancillary cannabis businesses can have high growth potential, but often do not own real property and have limited access to debt capital.

If completed, the transition to a BDC will enable the Company to significantly expand its investment universe by increasing its ability to lend to ancillary cannabis businesses as well as non-real estate covered vertically integrated operators.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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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.

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 subsequently filed Quarterly Reports on Form 10-Q, for a further discussion of these and other risks and uncertainties which could affect our future results.

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

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

What changed 10-Q

Item 1. Financial Statements