Chicago Atlantic BDC, Inc. 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm ( BDO USA, P.C. , New York , NY, PCAOB ID # 243 ) 96 Statements of Assets and Liabilities 97 Statements of Operations 98 Statements of Changes in Net Assets 99 Statements of Cash Flows 100 Notes to Financial Statements 103 95 Table of Contents Report of Independent Registered Public Accounting Firm Shareholders and Board of Directors Silver Spike Investment Corp. New York, NY Opinion on the Financial Statements We have audited the accompanying statements of assets and liabilities of Silver Spike Investment Corp. (the “Company”), including the schedules of investments, as of December 31, 2023 and 2022, the related statements of operations, changes in net assets, and cash flows for the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022, and the year ended March 31, 2022 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations, changes in its net assets, and its cash flows for the year ended December 31, 2023 , the period from April 1, 2022 through December 31, 2022, and the year ended March 31, 2022 in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2023 and 2022 by correspondence with the custodian and the underlying investees or agents. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ BDO USA, P.C. We have served as the Company’s auditor since 2021. New York, NY March 27, 2024 96 Table of Contents Statements of Assets and Liabilities December 31, 2023 December 31, 2022* ASSETS Investments at fair value: Non-control/non-affiliate investments at fair value (amortized cost of $ 53,471,317 and $ 50,527,898 , respectively) $ 54,120,000 $ 50,254,550 Cash and cash equivalents 32,611,635 35,125,320 Interest receivable 1,755,360 1,559,081 Prepaid expenses 39,276 32,323 Other assets 50,000 - Total assets 88,576,271 86,971,274 LIABILITIES Income-based incentive fees payable 1,511,253 - Transaction fees payable related to the Loan Portfolio Acquisition 711,264 - Management fee payable 257,121 170,965 Audit fees payable 123,998 50,000 Directors fees payable 94,760 32,049 Capital gains incentive fees payable 87,583 - Administrator fees payable 86,463 57,306 Legal fees payable 84,824 42,215 Valuation fees payable 24,675 - Professional fees payable 17,233 28,744 Other payables 13,822 33,663 Excise tax payable 10,655 80,566 Distributions payable 2 - Due to affiliate - 37 Total liabilities 3,023,653 495,545 Commitments and contingencies (Note 6) NET ASSETS Common Stock, $ 0.01 par value, 100,000,000 shares authorized, 6,214,941 and 6,214,672 shares issued and outstanding, respectively 62,149 62,147 Additional paid-in-capital 85,041,203 84,917,788 Distributable earnings 449,266 1,495,794 Total net assets $ 85,552,618 $ 86,475,729 NET ASSET VALUE PER SHARE $ 13.77 $ 13.91 * On November 8, 2022, our Board of Directors approved a change in our fiscal year end from March 31 to December 31. See notes to financial statements. 97 Table of Contents Statements of Operations Year Ended December 31, 2023 For the period from April 1, 2022 through December 31, 2022* Year Ended March 31, 2022 INVESTMENT INCOME Non-control/non-affiliate investment income Interest income $ 11,736,649 $ 3,626,792 $ 10,073 Fee income 196,251 410,000 - Total investment income 11,932,900 4,036,792 10,073 EXPENSES Income-based incentive fees 1,511,253 - - Management fee 1,013,764 336,432 - Transaction expenses related to the Loan Portfolio Acquisition 711,264 - - Audit expense 499,698 210,284 40,000 Legal expenses 343,824 484,412 34,069 Administrator fees 335,253 171,494 47,151 Insurance expense 269,719 228,288 46,488 Director expenses 200,955 99,845 - Valuation fees 115,985 - - Capital gains incentive fees 87,583 - - Other expenses 85,953 122,070 6,808 Professional fees 70,150 70,264 34,920 Custodian fees 48,000 36,150 36,000 Excise tax expense 10,655 80,566 - Organizational expenses - - 328,002 Total expenses 5,304,056 1,839,805 573,438 NET INVESTMENT INCOME (LOSS) 6,628,844 2,196,987 ( 563,365 ) NET REALIZED GAIN (LOSS) FROM INVESTMENTS Non-controlled/non-affiliate investments ( 210,767 ) - - Net realized gain (loss) from investments ( 210,767 ) - - NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) FROM INVESTMENTS Non-controlled/non-affiliate investments 922,031 ( 273,348 ) - Net change in unrealized appreciation (depreciation) from investments 922,031 ( 273,348 ) - Net realized and unrealized gains (losses) 711,264 ( 273,348 ) - NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 7,340,108 $ 1,923,639 $ ( 563,365 ) NET INVESTMENT INCOME (LOSS) PER SHARE — BASIC AND DILUTED $ 1.07 $ 0.35 $ ( 0.64 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE — BASIC AND DILUTED $ 1.18 $ 0.31 $ ( 0.64 ) WEIGHTED AVERAGE SHARES OUTSTANDING — BASIC AND DILUTED 6,214,682 6,214,672 877,409 * On November 8, 2022, our Board of Directors approved a change in our fiscal year end from March 31 to December 31. See notes to financial statements. 98 Table of Contents Statements of Changes in Net Assets Common Stock Shares Par value Additional paid-in-capital Distributable Earnings/ (Accumulated Loss) Total net assets Balance, March 31, 2021 - $ - $ - $ ( 159,715 ) $ ( 159,715 ) Net increase (decrease) in net assets resulting from operations Net investment income (loss) - - - ( 563,365 ) ( 563,365 ) Net realized gain (loss) from investments - - - - - Net change in unrealized appreciation (depreciation) from investments - - - - - Total net increase (decrease) in net assets resulting from operations - - - ( 563,365 ) ( 563,365 ) Capital transactions Issuance of common stock, net of offering costs of $ 1,690,184 6,214,672 62,147 85,213,023 - 85,275,170 Total increase (decrease) in net assets 6,214,672 62,147 85,213,023 ( 563,365 ) 84,711,805 Effect of permanent adjustments - - ( 295,235 ) 295,235 - Balance, March 31, 2022 6,214,672 $ 62,147 $ 84,917,788 $ ( 427,845 ) $ 84,552,090 Common Stock Shares Par value Additional paid-in-capital Distributable Earnings/ (Accumulated Loss) Total net assets Balance, March 31, 2022 6,214,672 $ 62,147 $ 84,917,788 $ ( 427,845 ) $ 84,552,090 Net increase (decrease) in net assets resulting from operations Net investment income (loss) - - - 2,196,987 2,196,987 Net realized gain (loss) from investments - - - - - Net change in unrealized appreciation (depreciation) from investments - - - ( 273,348 ) ( 273,348 ) Total net increase (decrease) in net assets resulting from operations - - - 1,923,639 1,923,639 Capital transactions Issuance of common stock - - - - - Total increase (decrease) in net assets - - - 1,923,639 1,923,639 Effect of permanent adjustments - - - - - Balance, December 31, 2022* 6,214,672 $ 62,147 $ 84,917,788 $ 1,495,794 $ 86,475,729 Common Stock Shares Par Value Additional paid-in-capital Distributable Earnings/ (Accumulated Loss) Total net assets Balance, December 31, 2022 6,214,672 $ 62,147 $ 84,917,788 $ 1,495,794 $ 86,475,729 Net increase (decrease) in net assets resulting from operations Net investment income (loss) - - - 6,628,844 6,628,844 Net realized gain (loss) from investments - - - ( 210,767 ) ( 210,767 ) Net change in unrealized appreciation (depreciation) from investments - - - 922,031 922,031 Total net increase (decrease) in net assets resulting from operations - - - 7,340,108 7,340,108 Distributions to stockholders from: Investment income-net - - - ( 8,265,537 ) ( 8,265,537 ) Capital transactions Issuance of common stock - - - - - Reinvestment of stockholder distributions 269 2 2,316 - 2,318 Total net increase (decrease) in net assets from capital transactions 269 2 2,316 - 2,318 Total increase (decrease) in net assets 269 2 2,316 ( 925,429 ) ( 923,111 ) Effect of permanent adjustments - - 121,099 ( 121,099 ) - Balance, December 31, 2023 6,214,941 $ 62,149 $ 85,041,203 $ 449,266 $ 85,552,618 * On November 8, 2022, our Board of Directors approved a change in our fiscal year end from March 31 to December 31. See notes to financial statements. 99 Table of Contents Statements of Cash Flows Year Ended December 31, 2023 For the period from April 1, 2022 through December 31, 2022* Year Ended March 31, 2022 Cash flows from operating activities Net increase (decrease) in net assets resulting from operations $ 7,340,108 $ 1,923,639 $ ( 563,365 ) Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: Net realized (gain) loss from investments 210,767 - - Net change in unrealized (appreciation) depreciation from investments ( 922,031 ) 273,348 - Net (accretion of discounts) and amortization of premiums ( 810,554 ) ( 165,398 ) - Purchase of investments ( 8,442,000 ) ( 50,362,500 ) - PIK interest capitalized ( 115,725 ) - - Proceeds from sales of investments and principal repayments 6,214,093 - - (Increase)/Decrease in operating assets: Interest receivable ( 196,279 ) ( 1,549,867 ) ( 9,215 ) Other assets ( 50,000 ) - - Prepaid expenses ( 6,953 ) 224,189 ( 256,512 ) Deferred offering costs - - 276,256 Increase/(Decrease) in operating liabilities: Income-based incentive fees payable 1,511,253 - - Management fee payable 86,156 170,965 - Capital gains incentive fees payable 87,583 - - Legal fees payable 42,609 8,232 33,983 Transaction fees payable related to the Loan Portfolio Acquisition 711,264 - - Valuation fees payables 24,675 - - Administrator fees payable 29,157 10,155 47,151 Audit fees payable 73,998 - 40,000 Director fees payable 62,711 7,679 24,370 Professional fees payable ( 11,511 ) 28,744 - Other payables ( 19,841 ) 8,305 25,359 Due to affiliate ( 37 ) ( 48 ) 85 Excise tax payable ( 69,911 ) 80,566 - Offering cost payable - ( 264,581 ) ( 11,675 ) Organizational costs payable - ( 34,168 ) ( 115,547 ) Net cash provided by (used in) operating activities 5,749,532 ( 49,640,740 ) ( 509,110 ) Cash flows from financing activities Issuance of common stock, net of offering cost - - 85,275,170 Distributions paid ( 8,263,217 ) - - Net cash provided by (used in) financing activities ( 8,263,217 ) - 85,275,170 Net increase (decrease) in cash and cash equivalents ( 2,513,685 ) ( 49,640,740 ) 84,766,060 Cash and cash equivalents, beginning of period 35,125,320 84,766,060 - Cash and cash equivalents, end of period $ 32,611,635 $ 35,125,320 $ 84,766,060 Supplemental and non-cash financing activities Reinvestment of dividend distributions $ 2,318 $ - $ - * On November 8, 2022, our Board of Directors approved a change in our fiscal year end from March 31 to December 31. See notes to financial statements. 100 Table of Contents December 31, 2023 Schedule of Investments (in thousands) Portfolio Company (1) Type of Investment (2) Investment Date (3) Maturity Date Interest Rate (4) Fair Value Hierarchy (5) Geographic Region (6) Non- Qualifying Asset (7) Principal Amount (8) Amortized Cost Fair Value (9) % of Net Assets Debt Securities - United States Wholesale Trade (10) Curaleaf Holdings, Inc. Senior Secured Note 10/11/2022 12/15/2026 Fixed interest rate 8.0 % 3 Northeast Yes $ 4,500 $ 3,989 $ 4,140 4.84 % Dreamfields Brands, Inc. (d/b/a Jeeter) Senior Secured First Lien Term Loan 5/3/2023 5/3/2026 Variable interest rate PRIME (11) + 8.75 % ( 7.5 % PRIME Floor) 3 West No 4,320 4,229 4,320 5.05 PharmaCann, Inc. Senior Secured Note 6/30/2022 6/30/2025 Fixed interest rate 12.0 % 3 Midwest No 4,250 4,109 3,974 4.65 STIIIZY, Inc. (f/k/a Shryne Group Inc.) Senior Secured First Lien Term Loan 5/26/2022 5/26/2026 Variable interest rate PRIME (11) + 8.5 % ( 4.0 % PRIME Floor) “ 1.0 % PIK” 3 West No 21,065 20,682 20,749 24.25 Verano Holdings Corp. Senior Secured First Lien Term Loan 10/27/2022 10/30/2026 Variable interest rate PRIME (11) + 6.5 % ( 6.25 % PRIME Floor) 3 Midwest Yes 20,937 20,462 20,937 24.47 $ 55,072 53,471 54,120 63.26 Total: Debt Securities -United States ( 63.26 %): 53,471 54,120 63.26 Total: Debt Securities ( 63.26 %): 53,471 54,120 63.26 Total Investment in Securities ( 63.26 %): $ 53,471 $ 54,120 63.26 % Cash equivalents State Street Institutional U.S. Government Money Market Fund (12) 1 $ 32,612 $ 32,612 38.12 % Cash equivalents ( 38.12 %): 32,612 32,612 38.12 Total Portfolio Investments and Cash equivalents ( 101.38 %): $ 86,083 $ 86,732 101.38 % (1) All portfolio companies are located in the United States, as determined by the location of the portfolio company’s headquarters. (2) No debt investment is non-income producing as of December 31, 2023. (3) Investment date represents the date of initial investment, at which date interest began accruing. (4) Interest rate is the fixed or variable rate of the debt investments. (5) See Note 2 – Significant Accounting Policies and Note 4 – Fair Value of Financial Instruments in the accompanying notes to the financial statements. (6) Geographic regions are determined by the respective portfolio company’s headquarters’ location. (7) Under the Investment Company Act of 1940, as amended (the “1940 Act”), a business development company (“BDC”) may not acquire any “non-qualifying asset” (i.e., an asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as “qualifying assets”), unless, at the time the acquisition is made, qualifying assets represent at least 70% of the BDC’s total assets. As of December 31, 2023 the aggregate fair value of non-qualifying assets is $ 25,077 or 29.3 % of the Company’s total assets. (8) Principal is net of repayments, if any, as per the terms of the debt instrument’s contract. (9) All investments were valued at fair value. See Note 4 — Fair Value of Financial Instruments in the accompanying notes to the financial statements. (10) The Company uses the North American Industry Classification System (“NAICS”) code for classifying the industry grouping of its portfolio companies. (11) As of December 31, 2023 PRIME is 8.50 %. (12) The annualized seven-day yield as of December 31, 2023 is 5.32 %. See notes to financial statements. 101 Table of Contents December 31, 2022 Schedule of Investments (in thousands) Portfolio Company (1) Type of Investment (2) Investment Date (3) Maturity Date Interest Rate (4) Fair Value Hierarchy (5) Geographic Region (6) Non- Qualifying Asset (7) Principal Amount (8) Amortized Cost Fair Value (9) % of Net Assets Debt Securities – United States Wholesale Trade (10) AYR Wellness, Inc. Senior Secured Note 10/11/2022 12/10/2024 Fixed interest rate 12.5 % 3 Southeast No $ 2,000 $ 1,773 $ 1,773 2.05 % Curaleaf Holdings, Inc. Senior Secured Note 10/11/2022 12/15/2026 Fixed interest rate 8.0 % 3 Northeast No 4,500 3,854 3,854 4.46 PharmaCann, Inc. Senior Secured Note 6/30/2022 6/30/2025 Fixed interest rate 12.0 % 3 Midwest No 4,250 4,029 3,967 4.59 Shryne Group, Inc. Senior Secured First Lien Term Loan 5/26/2022 5/26/2026 Variable interest rate PRIME (11) + 8.5 % ( 4.0 % PRIME Floor) 3 West No 21,000 20,480 20,269 23.44 Verano Holdings Corp. Senior Secured First Lien Term Loan 10/27/2022 10/30/2026 Variable interest rate PRIME (11) + 6.5 % ( 6.25 % PRIME Floor) 3 Midwest No 21,000 20,392 20,392 23.58 $ 52,750 50,528 50,255 58.12 Total: Debt Securities – United States ( 58.12 %): 50,528 50,255 58.12 Total: Debt Securities ( 58.12 %): 50,528 50,255 58.12 Total Investment in Securities ( 58.12 %): $ 50,528 $ 50,255 58.12 % Cash equivalents State Street Institutional U.S. Government Money Market Fund (12) 1 $ 35,125 $ 35,125 40.62 % Cash equivalents ( 40.62 %): 35,125 35,125 40.62 Total Portfolio Investments and Cash equivalents ( 98.74 %): $ 85,653 $ 85,380 98.74 % (1) All portfolio companies are located in the United States. (2) No debt investment is non-income producing as of December 31, 2022. (3) Investment date represents the date of initial investment, at which date interest began accruing. (4) Interest rate is the fixed or variable rate of the debt investments. (5) See Note 2 – Significant Accounting Policies and Note 4 — Fair Value of Financial Instruments in the accompanying notes to the financial statements. (6) Geographic regions are determined by the respective portfolio company’s headquarters’ location. (7) Under the Investment Company Act of 1940, as amended (the “1940 Act”), a business development company (“BDC”) may not acquire any “non-qualifying asset” (i.e., an asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as “qualifying assets”), unless, at the time the acquisition is made, qualifying assets represent at least 70% of the BDC’s total assets. (8) Principal is net of repayments, if any, as per the terms of the debt instrument’s contract. (9) All investments were valued at fair value. See Note 4 — Fair Value of Financial Instruments in the accompanying notes to the financial statements. (10) The Company uses the North American Industry Classification System (“NAICS”) code for classifying the industry grouping of its portfolio companies. (11) As of December 31, 2022 PRIME is 7.50 %. (12) The annualized seven-day yield as of December 31, 2022 is 4.12 %. See notes to financial statements. 102 Table of Contents NOTE 1 — ORGANIZATION Silver Spike Investment Corp. (an emerging growth company) (the “Company”, “we” or “our” ) was formed on January 25, 2021 as a Maryland corporation structured as an externally managed, closed-end, non-diversified management investment company. The Company has elected to be treated as a business development company (“BDC”), under the Investment Company Act of 1940, as amended (“1940 Act”). In addition, for U.S. federal income tax purposes the Company adopted an initial tax year end of December 31, 2021, and was taxed as a corporation for the tax period ended December 31, 2021. The Company adopted the tax year end of March 31 and elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) for the tax period January 1, 2022 through March 31, 2022, as well as maintain such election in future taxable years. However, there is no guarantee that the Company will qualify to make such an election for any taxable year. On February 4, 2022, the Company’s common stock began trading on the Nasdaq Global Market under the ticker symbol “SSIC,” and we completed our initial public offering of 6,214,286 shares of our common stock, par value $ 0.01 , inclusive of an over-allotment option that was exercised on March 1, 2022 (“IPO”), for approximately $ 87 million. The Company is managed by Silver Spike Capital, LLC (“SSC” or “Adviser”), a registered investment advisor under the Investment Advisers Act of 1940 with the Securities and Exchange Commission. SSC has engaged SS&C Technologies, Inc. and ALPS Fund Services, Inc. (“SS&C”), as sub-administrator, to perform administrative services necessary for the Company to operate. The Company’s investment objective is to maximize risk-adjusted returns on equity for its shareholders. The Company seeks to drive return on equity by generating current income from debt investments and capital appreciation from equity and equity-related investments. The Company intends to achieve its investment objective by investing primarily in secured debt, unsecured debt, equity warrants and direct equity investments in private leveraged middle-market cannabis companies and other companies in the health and wellness sector. The debt investments are often secured by either a first or second priority lien on the assets of the portfolio company, can include either fixed or floating rate terms and will generally have a term of between two and six years from the original investment date. On November 8, 2022, the Board of Directors (“Board”) of the Company approved a change in its fiscal year end from March 31 to December 31. As a result, the Company’s results of operations, cash flows, and all transactions impacting shareholders equity presented in this annual report on Form 10-K are for the year ended December 31, 2023 and the nine months ended December 31, 2022. See Note 12 for additional information. NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), including the requirements under ASC 946, Financial Services—Investment Companies and Articles 6 and 12 of Regulation S-X. Use of Estimates The preparation of the financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions affecting reported amounts of assets and liabilities at the date of the financial statements (i.e., fair value of investments) and the reported amounts of income, expenses, and gains and losses during the reported period . These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions and conditions. Investment Valuation The Company’s investments are recorded at their estimated fair value on the Statement of Assets and Liabilities. Investments for which market quotations are readily available will typically be valued at the bid price of those market quotations. To validate market quotations, we utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by the Adviser, as the Company’s valuation designee (the “Valuation Designee”), based on inputs that may include valuations, or ranges of valuations, provided by independent third-party valuation firm(s) engaged by the Adviser. Generally, the valuation approach used for debt investments is the income approach. The approach derives a value based on either determining the present value of a projected level of cash flow, including a terminal value, or by the capitalization of a normalized measure of future cash flow. The discounted cash flow (“DCF”) method, one of the methodologies under the income approach, involves estimating future cash flows under various scenarios and discounting them to the measurement date. The discount rate represents a return required by a market participant in order to make an investment in the subject company. 103 Table of Contents Alternatively, the market approach or asset approach may be used. The market approach is a way of determining a value indication by using one or more methods that compare the portfolio company to similar businesses. Value indicators are applied to relevant financial information of the entity being valued to estimate its fair value. There are two methodologies to consider under the market approach: the guideline company method (“GCM”) and the controlling transaction method (“CTM”). The GCM is based on the premise that the pricing multiples of comparable publicly traded companies can be used as a tool to value privately held companies. The publicly traded companies’ ratios and business enterprise value provide guidance in the valuation process. Considerations of factors such as size, growth, profitability and return on investment are also analyzed and compared to the subject business. The CTM is based on the same premise as the GCM. Guideline transactions include change-of-control transactions involving public or private businesses for companies engaged in similar lines of business or with similar economic characteristics. The valuation considers the price at which the merger or acquisition took place to other factors in order to create a pricing multiple that can be used to determine an estimate of value for the subject company. The asset approach provides an indication of the portfolio company’s value by developing a valuation-based balance sheet. This approach requires adjusting the historical assets and liabilities listed on the U.S. GAAP-based balance sheet to estimated fair values. The excess of assets over liabilities represents the tangible value of the business enterprise. The asset approach does not consider the relevant earnings capacity of a going concern business. Effective September 8, 2022, pursuant to Rule 2a-5 under the 1940 Act, the Board designated the Adviser as the Valuation Designee to perform the fair value determinations for the Company, subject to the oversight of the Board and certain Board reporting and other requirements. As part of the valuation process, the Adviser takes into account relevant factors in determining the fair value of our investments, including: the estimated enterprise value of a portfolio company (i.e., the total fair value of the portfolio company’s debt and equity), the nature and realizable value of any collateral, the portfolio company’s ability to make payments based on its earnings and cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company’s securities to any similar publicly traded securities, and overall changes in the interest rate environment and the credit markets. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Adviser considers whether the pricing indicated by the external event corroborates its valuation. The Adviser undertakes a multi-step valuation process, which includes, among other procedures, the following: • With respect to investments for which market quotations are readily available, those investments will typically be valued at the bid price of those market quotations; • With respect to investments for which market quotations are not readily available, the valuation process begins with the Adviser’s valuation committee establishing a preliminary valuation of each investment, which may be based on valuations, or ranges of valuations, provided by independent valuation firm(s); • Preliminary valuations are documented and discussed by the Adviser’s valuation committee and, where appropriate, the independent valuation firm(s); and • The Adviser determines the fair value of each investment. We conduct this valuation process on a quarterly basis. We apply Financial Accounting Standards Board Accounting Standards Codification 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value in accordance with U.S. GAAP and required disclosures of fair value measurements. ASC 820 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, we consider the principal market to be the market that has the greatest volume and level of activity. ASC 820 specifies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in determination of fair value. In accordance with ASC 820, these levels are summarized below: • Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date; • Level 2 – Valuations based on quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or for which all significant inputs are observable, either directly or indirectly; and • Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement. 104 Table of Contents Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If we were required to liquidate a portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected previously. Cash and Cash Equivalents Cash and cash equivalents consists of funds deposited with financial institutions and short-term (maturity of 90 days or less) liquid investments and money market funds. Funds held in money market funds are considered Level 1 in the fair value hierarchy in accordance with ASC 820. Cash held in demand deposit accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit. The Company has not incurred any losses on these accounts, and the credit risk exposure is mitigated by the financial strength of the banking institution where the accounts are held. As of December 31, 2023 and December 31, 2022, cash and cash equivalents consisted of $ 32.61 million and $ 35.13 million, respectively, of which $ 32.61 million and $ 35.13 million, respectively, was held in the State Street Institutional U.S. Government Money Market Fund. Earnings per share Basic earnings per share is computed by dividing net increase (decrease) in net assets resulting from operations by the weighted-average number of common shares outstanding for the period. Other potentially dilutive common shares, and the related impact to earnings are considered when calculating earnings per share on a diluted basis. Investment Transactions Investment transactions are recorded on trade date. Realized gains or losses are recognized as the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments written off during the period, net of recoveries. Current-period changes in fair value of investments are reflected as a component of the net change in unrealized appreciation (depreciation) on investments on the Statements of Operations. The net change in unrealized appreciation (depreciation) primarily reflects the change in investment fair values as of the last business day of the reporting period, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period. Investments traded but not yet settled, if any, are reported in payable for investments purchased and receivable for investments sold on the Statement of Assets and Liabilities. Interest and Dividend Income Interest income is recorded on the accrual basis and includes accretion and amortization of discounts or premiums, respectively. Discounts and premiums to par value on securities purchased are accreted and amortized, respectively, into interest income over the contractual life of the respective security using the effective yield method. The amortized cost of investments includes the original cost adjusted for the accretion and amortization of discounts and premiums, respectively. Upon prepayment of a loan or debt security, any prepayment premiums and unamortized discounts or premiums are recorded as interest income in the current period. When a debt security becomes 90 days or more past due, or if management otherwise does not expect that principal, interest, and other obligations due will be collected in full, the Company will generally place the debt security on non-accrual status and cease recognizing interest income on that debt security until all principal and interest due has been paid or the Company believes the borrower has demonstrated the ability to repay its current and future contractual obligations. Any uncollected interest is reversed from income in the period that collection of the interest receivable is determined to be doubtful. However, the Company may make exceptions to this policy if the investment has sufficient collateral value and is in the process of collection. As of December 31, 2023 and December 31, 2022, there were no loan investments in the portfolio placed on non-accrual status. We typically receive debt investment origination or closing fees in connection with investments. Such debt investment origination and closing fees are capitalized as unearned income and offset against investment cost basis on our Statements of Assets and Liabilities and accreted into interest income using the effective yield method over the term of the investment. Upon the prepayment of a debt investment, any unaccreted debt investment origination and closing fees are accelerated into interest income. Interest income earned, excluding accretion of discounts and amortization of premiums, was $ 10,926,095 , $ 3,461,394 and $ 10,073 for the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022. As of December 31, 2023 and December 31, 2022, $ 1,755,360 and $ 1,559,081 , respectively, were recorded as interest receivable. Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies. 105 Table of Contents Certain investments may have contractual PIK interest or dividends. PIK interest or dividends represents accrued interest or dividends that is added to the principal amount of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity. If PIK interest or dividends are not expected to be realized by the Company, the investment generating PIK interest or dividends will be placed on non-accrual status. When an investment with PIK is placed on non-accrual status, the accrued, uncapitalized interest or dividends are generally reversed through interest or dividend income, respectively. Fee Income All transaction fees earned in connection with our investments are recognized as fee income and are generally non-recurring. Such fees typically include fees for services, including administrative, structuring and advisory services, provided to portfolio companies. We recognize income from fees for providing such structuring and advisory services when the services are rendered or the transactions are completed. For the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022, the Company earned $ 196,251 , $ 410,000 and $ 0 , respectively, in fee income. Income Taxes The Company adopted an initial tax year end of December 31, 2021 and was taxed as a corporation for U.S. federal income tax purposes for the tax period ended December 31, 2021. The Company adopted the tax year end of March 31, 2022 and elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code for the tax period January 1, 2022 through March 31, 2022, and intends to maintain such election in the current and future taxable years. To maintain its tax treatment as a RIC, the Company must meet specified source-of-income and asset diversification requirements and timely distribute to its stockholders for each taxable year at least 90 % of its investment company taxable income. In order for the Company not to be subject to U.S. federal excise taxes, it must distribute annually an amount at least equal to the sum of (i) 98 % of its net ordinary income for the calendar year, (ii) 98.2 % of its capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. The Company, at its discretion (subject to the requirement to distribute 90 % of its investment company taxable income as described above), may carry forward taxable income in excess of calendar year dividends and pay a 4 % nondeductible U.S. federal excise tax on this income. If the Company chooses to do so, this generally would increase expenses and reduce the amount available to be distributed to stockholders. For the year ended December 31, 2023 and the nine months ended December 31, 2022, the Company accrued excise taxes of $ 10,655 and $ 80,566 , respectively. As of December 31, 2023 and December 31, 2022, $ 10,655 and $ 80,566 , respectively, of accrued excise taxes remained payable. The Company evaluates tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority in accordance with ASC Topic 740, Income Taxes (“ASC 740”). Tax benefits of positions not deemed to meet the more-likely-than-not threshold, or uncertain tax positions, would be recorded as tax expense in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense. Based on the analysis of the Company’s tax position, the Company has no uncertain tax positions that met the recognition or measurement criteria as of December 31, 2023 and December 31, 2022. The Company does not anticipate any significant increase or decrease in unrecognized tax benefits for the next twelve months. All of the Company’s tax returns remain subject to examination by U.S. federal and state tax authorities. Distributions Distributions to common stockholders are recorded on the record date. The amount of taxable income to be paid out as a distribution is determined by our Board each quarter and is generally based upon the future taxable income estimated by management. Capital gains, if any, are distributed at least annually, although the Company may decide to retain all or some of those capital gains for investment and pay U.S. federal income tax at corporate rates on those retained amounts. If the Company chooses to do so, this generally will increase expenses and reduce the amount available to be distributed to stockholders. Our distributions may exceed our earnings, and therefore, portions of the distributions that we make may be a return of the money originally invested and represent a return of capital distribution to shareholders for tax purposes. Organization Expenses and Offering Costs Organizational expenses Costs associated with the organization of the Company are expensed as incurred. These expenses consist primarily of legal fees and other costs of organizing the Company. For the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022, the Company incurred organizational expenses of $ 0 , $ 0 and $ 328,002 , respectively. As of December 31, 2023 and December 31, 2022, there were no unpaid organizational expenses . Offering costs These costs consist primarily of legal fees and other costs incurred in connection with the Company’s share offerings, the preparation of the Company’s registration statement, and registration fees. Costs associated with the offering of common shares of the Company are capitalized as deferred offering and are included in deferred offering costs on the Statements of Assets and Liabilities. Costs of approximately $ 1,690,184 were charged to capital upon the completion of the Company’s public offering for the year ended March 31, 2022. For the year ended December 31, 2023 and the period from April 1, 2022 through December 31, 2022, no offering costs were charged to capital. As of December 31, 2023 and December 31, 2022, there were no unpaid offering costs. Transaction expenses related to the Loan Portfolio Acquisition Transaction expenses related to the Loan Portfolio Acquisition at December 31, 2023 were $ 711,264 and consisted exclusively of legal fees incurred related to the Loan Portfolio Acquisition. See “Note 13 – Subsequent Events” for further information regarding the Loan Portfolio Acquisition Agreement and the Loan Portfolio Acquisition. For the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022, the Company incurred transaction expenses related to the Loan Portfolio Acquisition of $ 711,264 , $ 0 and $ 0 , respectively. As of December 31, 2023 and December 31, 2022, there were $ 711,264 and $ 0 of transaction expenses related to the Loan Portfolio Acquisition payable by the Company. 106 Table of Contents New Accounting Standards In November 2023, the FASB issued Accounting Standard Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. We do not believe that the Company will be materially impacted by the adoption of ASU 2023-07. NOTE 3 — INVESTMENTS The Company seeks to invest in portfolio companies primarily in the form of loans (secured and unsecured), but may include equity warrants and direct equity investments. The loans typically pay interest with some amortization of principal. As of December 31, 2023, 84.9 % of the portfolio (based on amortized cost) pays interest on a floating rate basis with a PRIME floor, and 15.1 % of the portfolio (based on amortized cost) pays fixed interest. As of December 31, 2022, 80.9 % of th e portfolio (based on amortized cost) pays interest on a floating rate basis with a PRIME floor, and 19.1 % of the portfolio (based on amortized cost) pays fixed interest. We will generally seek to obtain security interests in the assets of our portfolio companies that serve as collateral in support of the repayment of these loans. This collateral may take the form of first or second priority liens on the assets of a portfolio company. In some of our portfolio investments, we expect to receive nominally priced equity warrants and/or make direct equity investments in connection with a debt investment. In addition, a portion of our portfolio may be comprised of derivatives, including total return swaps. No such equity or derivative instruments were held as of December 31, 2023 or December 31, 2022. We expect that our loans will typically have final maturities of three to six years . However, we expect that our portfolio companies often may repay these loans early, generally within three years from the date of initial investment. Portfolio Composition The Company’s portfolio investments are in companies conducting business in or supporting the cannabis industries. The following tables summarize the composition of the Company’s portfolio investments by industry at amortized cost and fair value and as a percentage of the total portfolio as of December 31, 2023 and December 31, 2022. December 31, 2023 Amortized Cost Fair Value Industry Amount % Amount % Wholesale Trade $ 53,471,317 100.0 % $ 54,120,000 100.0 % Total $ 53,471,317 100.0 % $ 54,120,000 100.0 % December 31, 2022 Amortized Cost Fair Value Industry Amount % Amount % Wholesale Trade $ 50,527,898 100.0 % $ 50,254,550 100.0 % Total $ 50,527,898 100.0 % $ 50,254,550 100.0 % The geographic composition is determined by the location of headquarters of the portfolio company. The following tables summarize the composition of the Company’s portfolio investments by geographic region of the United States at amortized cost and fair value and as a percentage of the total portfolio as of December 31, 2023 and December 31, 2022. Geographic regions are defined as: West, for the states of WA, OR, ID, MT, WY, CO, AK, HI, UT, NV and CA; Midwest, for the states ND, SD, NE, KS, MO, IA, MN, WI, MI, IL, IN and OH; Northeast, for the states PA, NJ, NY, CT, RI, MA, VT, NH and ME; Southeast, for the states of AR, LA, MS, TN, KY, AL, FL, GA, SC, NC, VA, DE, WV and MD; and Southwest, for the states of AZ, NM, TX and OK. December 31, 2023 Amortized Cost Fair Value Geographic Location Amount % Amount % West $ 24,910,798 46.5 % $ 25,069,000 46.4 % Midwest 24,571,197 46.0 24,911,000 46.0 Northeast 3,989,322 7.5 4,140,000 7.6 Total $ 53,471,317 100.0 % $ 54,120,000 100.0 % December 31, 2022 Amortized Cost Fair Value Geographic Location Amount % Amount % Midwest $ 24,420,752 48.4 % $ 24,358,686 48.5 % West 20,479,987 40.5 20,268,705 40.3 Northeast 3,854,475 7.6 3,854,475 7.7 Southeast 1,772,684 3.5 1,772,684 3.5 Total $ 50,527,898 100.0 % $ 50,254,550 100.0 % 107 Table of Contents The following tables summarize the composition of the Company’s portfolio investments by investment type at amortized cost and fair value and as a percentage of the total portfolio as of December 31, 2023 and December 31, 2022. December 31, 2023 Amortized Cost Fair Value Investment Amount % Amount % Senior Secured First Lien Term Loans $ 45,372,626 84.9 % $ 46,006,000 85.0 % Senior Secured Notes 8,098,691 15.1 8,114,000 15.0 Total $ 53,471,317 100.0 % $ 54,120,000 100.0 % December 31, 2022 Amortized Cost Fair Value Investment Amount % Amount % Senior Secured First Lien Term Loans $ 40,871,914 80.9 % $ 40,660,633 80.9 % Senior Secured Notes 9,655,984 19.1 9,593,917 19.1 Total $ 50,527,898 100.0 % $ 50,254,550 100.0 % Certain Risk Factors In the ordinary course of business, the Company manages a variety of risks including market risk, credit risk, liquidity risk, interest rate risk, prepayment risk, risks associated with financial, economic and other global market developments and disruptions, including those arising from war, terrorism, market manipulation, government interventions, defaults and shutdowns, political changes or diplomatic developments, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics) and natural/environmental disasters, which can all negatively impact the securities markets generally. These events can also impair the technology and other operational systems upon which the Company’s service providers rely and could otherwise disrupt the Company’s service providers’ ability to fulfill their obligations to the Company. The Company identifies, measures and monitors risk through various control mechanisms, including trading limits and diversifying exposures and activities across a variety of instruments, markets and counterparties. Market risk is the risk of potential adverse changes to the value of financial instruments because of changes in market conditions, including as a result of changes in the credit quality of a particular issuer, credit spreads, interest rates, and other movements and volatility in security prices or commodities. In particular, the Company may invest in issuers that are experiencing or have experienced financial or business difficulties (including difficulties resulting from the initiation or prospect of significant litigation or bankruptcy proceedings), which involves significant risks. The Company manages its exposure to market risk through the use of risk management strategies and various analytical monitoring techniques. Concentration risk is the risk that the Company’s focus on investments in cannabis companies may subject the Company to greater price volatility and risk of loss as a result of adverse economic, business or other developments affecting cannabis companies than funds investing in a broader range of industries or sectors. At times, the performance of investments in cannabis companies will lag the performance of other industries or sectors or the broader market as a whole. Credit risk is the risk that a decline in the credit quality of an investment could cause the Company to lose money. The Company could lose money if the issuer or guarantor of a portfolio security fails to make timely payment or otherwise honor its obligations. Fixed income securities rated below investment grade (high-yield bonds) involve greater risks of default or downgrade and are generally more volatile than investment grade securities. Below investment grade securities involve greater risk of price declines than investment grade securities due to actual or perceived changes in an issuer’s creditworthiness. In addition, issuers of below investment grade securities may be more susceptible than other issuers to economic downturns. Such securities are subject to the risk that the issuer may not be able to pay interest or dividends and ultimately to repay principal upon maturity. Discontinuation of these payments could substantially adversely affect the market value of the security. The Company’s investments may, at any time, include securities and other financial instruments or obligations that are illiquid or thinly traded, making purchase or sale of such securities and financial instruments at desired prices or in desired quantities difficult. Furthermore, the sale of any such investments may be possible only at substantial discounts, and it may be extremely difficult to value any such investments accurately. 108 Table of Contents Interest rate risk refers to the change in earnings that may result from changes in the level of interest rates. To the extent that the Company borrows money to make investments, including under any credit facility, net investment income (loss) will be affected by the difference between the rate at which the Company borrows funds and the rate at which the Company invests these funds. In periods of rising interest rates, the Company’s cost of borrowing funds would increase, which may reduce net investment income (loss). As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on net investment income (loss). Prepayment risk is the risk that a loan in the Company’s portfolio will prepay due to the existence of favorable financing market conditions that allow the portfolio company the ability to replace existing financing with less expensive capital. As market conditions change, prepayment may be possible for each portfolio company. In some cases, the prepayment of a loan may reduce the Company’s achievable yield if the capital returned cannot be invested in transactions with equal or greater expected yields, which could have a material adverse effect on our business, financial condition and results of operations. NOTE 4 — FAIR VALUE OF FINANCIAL INSTRUMENTS ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. The Company accounts for its investments at fair value. As of December 31, 2023 and December 31, 2022, the Company’s portfolio investments consisted of investments in secured loans and secured notes. The fair value amounts have been measured as of the reporting date and have not been reevaluated or updated for purposes of these financial statements subsequent to that date. As such, the fair values of these financial instruments subsequent to the reporting date may be different than amounts reported. The fair value determination of each portfolio investment categorized as Level 3 required one or more unobservable inputs. The use of significant unobservable inputs creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement of the Company’s investments may vary and may include debt investments’ yield (i.e. discount rate) and volatility assumptions. The Company’s investments measured at fair value by investment type on a recurring basis as of December 31, 2023 and December 31, 2022 were as follows: Fair Value Measurements at December 31, 2023 Using Assets Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Senior Secured First Lien Term Loans $ - $ - $ 46,006,000 $ 46,006,000 Senior Secured Notes - - 8,114,000 8,114,000 Total $ - $ - $ 54,120,000 $ 54,120,000 Fair Value Measurements at December 31, 2022 Using Assets Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Senior Secured First Lien Term Loans $ - $ - $ 40,660,633 $ 40,660,633 Senior Secured Notes - - 9,593,917 9,593,917 Total $ - $ - $ 50,254,550 $ 50,254,550 109 Table of Contents The following tables provide a summary of the significant unobservable inputs used to fair value the Level 3 portfolio investments as of December 31, 2023 and December 31, 2022. The methodology for the determination of the fair value of the Company’s investments is discussed in “Note 2 – Significant Accounting Policies”. Discount rate ranges are shown as spread over PRIME and Treasuries, respectively, for Senior Secured First Lien Term Loans, as of December 31, 2023 and December 31, 2022. Investment Type Fair Value as of December 31, 2023 Valuation Techniques/ Methodologies Unobservable Input Range Weighted Average (1) Senior Secured First Lien Term Loans $ 46,006,000 Discounted Cash Flow Discount Rate 10.4 % - 14.0 % 12.2 % Senior Secured Notes 8,114,000 Discounted Cash Flow Discount Rate 7.4 % - 13.7 % 10.5 % Total $ 54,120,000 Investment Type Fair Value as of December 31, 2022 Valuation Techniques/ Methodologies Unobservable Input Range Weighted Average (1) Senior Secured First Lien Term Loans $ 40,660,633 Discounted Cash Flow Discount Rate Volatility 7.2 % - 9.6 20.0 % - 20.0 % % 8.4 20.0 % % Senior Secured Notes 9,593,917 Discounted Cash Flow Discount Rate Volatility 11.6 % - 18.7 7.0 % - 20.0 % % 14.3 12.4 % % Total $ 50,254,550 (1) The weighted average is calculated based on the fair value of each investment. Significant increases (decreases) in discount rate in isolation would result in a significantly lower (higher) fair value assessment. Significant increases (decreases) in volatility in isolation would result in a significantly lower (higher) fair value assessment. The following tables provide a summary of changes in the fair value of the Company’s Level 3 portfolio investments for the year ended December 31, 2023 and the period from April 1, 2022 through December 31, 2022: Senior Secured First Lien Term Loans Senior Secured Notes Total Investments Fair Value as of December 31, 2022 $ 40,660,633 $ 9,593,917 $ 50,254,550 Purchases 8,442,000 - 8,442,000 Accretion of discount and fees (amortization of premium), net 557,079 253,475 810,554 PIK interest 115,725 - 115,725 Proceeds from sales of investments and principal repayments ( 4,614,093 ) ( 1,600,000 ) ( 6,214,093 ) Net realized gain (loss) on investments - ( 210,767 ) ( 210,767 ) Net change in unrealized appreciation (depreciation) from investments 844,656 77,375 922,031 Balance as of December 31, 2023 $ 46,006,000 $ 8,114,000 $ 54,120,000 Net change in unrealized appreciation/depreciation on Level 3 investments still held as of December 31, 2023 $ 844,656 $ 77,375 $ 922,031 Senior Secured First Lien Term Loans Senior Secured Notes Total Investments Fair Value as of March 31, 2022 $ - $ - $ - Purchases 40,792,500 9,570,000 50,362,500 Accretion of discount and fees (amortization of premium), net 79,414 85,984 165,398 PIK interest - - - Proceeds from sales of investments and principal repayments - - - Net realized gain (loss) on investments - - - Net change in unrealized appreciation (depreciation) from investments ( 211,281 ) ( 62,067 ) ( 273,348 ) Balance as of December 31, 2022 $ 40,660,633 $ 9,593,917 $ 50,254,550 Net change in unrealized appreciation/depreciation on Level 3 investments still held as of December 31, 2022 $ ( 211,281 ) $ ( 62,067 ) $ ( 273,348 ) 110 Table of Contents NOTE 5 — RELATED PARTY TRANSACTIONS Pursuant to the investment advisory agreement between the Company and SSC (the “Investment Advisory Agreement”), fees payable to SSC are equal to (a) a base management fee of 1.75 % of the average value of the Company’s gross assets at the end of the two most recent quarters (i.e., total assets held before deduction of any liabilities), which includes investments acquired with the use of leverage and excludes cash and cash equivalents and (b) an incentive fee based on the Company’s performance. The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears and equals 20 % of the Company’s “Pre-Incentive Fee Net Investment Income” for the quarter, subject to a preferred return, or “hurdle,” of 1.75 % per quarter ( 7 % annualized), and a “catch-up” feature. The second part is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Investment Advisory Agreement) and equals 20 % of the Company’s realized capital gains on a cumulative basis from inception through the end of the fiscal year, if any, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fee (the “Incentive Fee on Capital Gains”). While the Investment Advisory Agreement neither includes nor contemplates the inclusion of unrealized gains in the calculation of the Incentive Fee on Capital Gains, as required by U.S. GAAP, we accrue the Incentive Fee on Capital Gains on unrealized capital appreciation exceeding unrealized depreciation. This accrual reflects the Incentive Fee on Capital Gains that would be payable to SSC if the Company’s entire investment portfolio was liquidated at its fair value as of the balance sheet date even though SSC is not entitled to an Incentive Fee on Capital Gains with respect to unrealized capital appreciation unless and until such gains are actually realized. The management fee is payable quarterly in arrears. For the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022, the Company incurred management fee expenses of $ 1,013,764 , $ 336,432 and $ 0 , respectively. As of December 31, 2023 and December 31, 2022 , $ 257,121 and $ 170,965 , respectively, remained payable. For the year ended December 31, 2023, the Company incurred income-based incentive fee expenses of $ 1,511,253 . For the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022, the Company did no t incur any income-based incentive fee expenses. As of December 31, 2023 and December 31, 2022, $ 1,511,253 and $ 0 , respectively, remained payable. For the year ended December 31, 2023, the Company incurred capital gains incentive fee expenses of $ 87,583 . For the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022, the Company did no t incur any capital gains incentive fee expenses. As of December 31, 2023 and December 31, 2022, $ 87,583 and $ 0 , respectively, remained payable. Pursuant to the administration agreement between the Company and SSC (the “Administration Agreement”), the Company is to reimburse SSC for the costs and expenses incurred by SSC in performing its obligations, including but not limited to maintaining and keeping all books and records and providing personnel and facilities. This includes costs and expenses incurred by SSC in connection with the delegation of its obligations to SS&C, the sub-administrator. The Company is generally not responsible for the compensation of SSC’s employees or any overhead expenses. However, we may reimburse SSC for an allocable portion of the compensation paid by SSC to our CCO and CFO and their respective staffs (based on a percentage of time such individuals devote, on an estimated basis, to our business affairs). For the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022, the Adviser has waived any expense reimbursement, other than those associated with the delegation of its obligations to the sub-administrator. For the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022, the Company reimbursed SSC $ 6,192 , $ 12,145 and $ 387,373 , respectively, for expenses paid on the Company’s behalf. Due to affiliate in the accompanying Statements of Assets and Liabilities in the amount of $ 0 and $ 37 as of December 31, 2023 and December 31, 2022, respectively, is due to SSC for expenses paid on the Company’s behalf. For the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022, the Company paid $ 0 , $ 2,086 and $ 0 , respectively, for expenses on SSC’s behalf. Subsequently, SSC reimbursed the Company for the expenses incurred during the period from April 1, 2022 through December 31, 2022. 111 Table of Contents SSC was the seed investor of the Company and provided initial funding to the Company by purchasing approximately $ 63 million of the Company’s common stock in the Company’s initial public offering. SSC provided this “seed capital” to the Company for the purpose of facilitating the launch and initial operation of the Company, as opposed to for long term investment purposes. SSC does not expect to hold the Company’s common stock indefinitely, and may sell the Company’s common stock at a future point in time. In order for SSC’s sales of the shares of the Company not to be deemed to have been made “on the basis of” material nonpublic information, such sales may be made pursuant to a pre-approved trading plan that complies with Rule 10b5-1 under the Exchange Act and that may obligate SSC to make recurring sales of the Company’s common stock on a periodic basis. Sales of substantial amounts of the Company’s common stock, including by SSC or other large stockholders, or the availability of such common stock for sale, could adversely affect the prevailing market prices for the Company’s common stock. If this occurs and continues for a sustained period of time, it could impair the Company’s ability to raise additional capital through the sale of securities, should the Company desire to do so. SSC holds approximately 72 % of the Company’s voting stock and has the ability to exercise substantial control over all corporate actions requiring stockholder approval, including the election and removal of directors, certain amendments of the Company’s charter, the Company’s ability to issue its common stock at a price below NAV per share, and the approval of any merger or other extraordinary corporate action. SSC absorbed $ 1.23 million, representing the cost of the sales load (i.e., underwriting discounts and commissions) incurred by the Company in connection with the initial public offering of its common stock. The Company will not incur any additional expenses with this transaction. During the year ended December 31, 2023, SSC and certain related parties received quarterly and special dividend distributions from the Company relating to their shares held. Refer to “Note 7 – Common Stock” for further details on the Company’s dividend reinvestment plan and the distributions declared. The Company did no t make any distributions during the period from April 1, 2022 through December 31, 2022 or the year ended March 31, 2022. NOTE 6 — COMMITMENTS AND CONTINGENCIES Commitments and contingencies have been reviewed and the Company has identified no commitments or contingencies as of December 31, 2023 and December 31, 2022. NOTE 7 — COMMON STOCK In connection with its formation, the Company authorized 100,000,000 shares of its common stock with a par value of $ 0.01 per share. On June 15, 2021, the Company was initially capitalized by the issuance of 386 shares of its common stock for an aggregate purchase price of $ 5,400 to SSC. Initial Public Offering On February 4, 2022, the Company completed its initial public offering of 6,214,286 shares of common stock at a price of $ 14.00 per share, inclusive of the underwriters’ option to purchase additional shares, which was exercised on March 1, 2022, and raised capital of approximately $ 85 million (net of approximately $ 2 million of offering costs). Distributions The following table summarizes distributions declared and/or paid by the Company during the year ended December 31, 2023: Declaration Date Type Record Date Payment Date Per Share Amount Dividends Paid August 10, 2023 Quarterly September 15, 2023 September 29, 2023 $ 0.23 $ 1,429,375 August 10, 2023 Special September 15, 2023 September 29, 2023 $ 0.40 $ 2,485,869 November 9, 2023 Quarterly December 20, 2023 December 29, 2023 $ 0.25 $ 1,553,676 November 9, 2023 Special December 20, 2023 December 29, 2023 $ 0.45 $ 2,796,617 The Company did no t make any distributions during the period from April 1, 2022 through December 31, 2022 or the year ended March 31, 2022. Dividend Reinvestment Plan The Company’s dividend reinvestment plan (“DRIP”) provides for the reinvestment of distributions in the form of common stock on behalf of its stockholders, unless a stockholder has elected to receive distributions in cash. As a result, if the Company declares a cash distribution, its stockholders who have not “opted out” of the DRIP by the opt out date will have their cash distribution automatically reinvested into additional shares of the Company’s common stock. The share requirements of the DRIP may be satisfied through the issuance of common shares or through open market purchases of common shares by the DRIP plan administrator. 112 Table of Contents The Company’s DRIP is administered by its transfer agent on behalf of the Company’s record holders and participating brokerage firms. Brokerage firms and other financial intermediaries may decide not to participate in the Company’s DRIP but may provide a similar dividend reinvestment plan for their clients. During the year ended December 31, 2023, the Company issued the following shares of common stock under the DRIP: Declaration Date Type Record Date Payment Date Shares August 10, 2023 Quarterly September 15, 2023 September 29, 2023 12 August 10, 2023 Special September 15, 2023 September 29, 2023 21 November 9, 2023 Quarterly December 20, 2023 December 29, 2023 84 November 9, 2023 Special December 20, 2023 December 29, 2023 152 During the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022, the Company issued no new shares of common stock under the DRIP. NOTE 8 — INDEMNIFICATION Under the Company’s organizational documents, the Company’s officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Company. In addition, in the normal course of business the Company enters into contracts that contain a variety of representations which provide general indemnifications. The Company’s maximum exposure under these agreements cannot be known; however, the Company expects any risk of loss to be remote. NOTE 9 — EARNINGS PER SHARE The following table sets forth the computation of the weighted average basic and diluted net increase (decrease) in net assets per share from operations for the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022 and the year ended March 31, 2022: Year Ended December 31, 2023 For the period from April 1, 2022 through December 31, 2022* Year Ended March 31, 2022 Net increase (decrease) in net assets resulting from operations $ 7,340,108 $ 1,923,639 $ ( 563,365 ) Weighted Average Shares Outstanding - basic and diluted 6,214,682 6,214,672 877,409 Net increase (decrease) in net assets resulting from operations per share - basic and diluted $ 1.18 $ 0.31 $ ( 0.64 ) * On November 8, 2022, our Board of Directors approved a change in our fiscal year end from March 31 to December 31. NOTE 10 — INCOME TAXES The Company adopted a tax year end of March 31 and elected to be treated as a regulated investment company (“RIC”) for U.S. federal income tax purposes under Subchapter M of the Code. However, there is no guarantee that the Company will qualify to make such an election for any taxable year. As a RIC, the Company generally will not pay corporate-level income tax if it distributes to stockholders at least 90% of its investment company taxable income (“ICTI”) (which is generally its net ordinary taxable income and realized net short-term capital gains in excess of realized net long-term capital losses) and 90% of its tax-exempt income to maintain its RIC status. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of the current year distribution into the next tax year. Any such carryover ICTI must be distributed before the end of that next tax year through a dividend declared prior to filing the final tax return related to the year which generated such ICTI. The amount to be paid out as a distribution is determined by the Board each quarter and is based upon the annual earnings estimated by the management of the Company. To the extent the Company’s earnings fall below the amount of dividend distributions declared, however, a portion of the total amount of the Company’s distributions for the tax year may be deemed a return of capital for tax purposes to the Company’s stockholders. The Company’s taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each tax year. Therefore, the final taxable income earned in each tax year and carried forward for distribution in the following tax year may be different than this estimate. 113 Table of Contents Because federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income (loss) and realized gains recognized for financial reporting purposes. During the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022, and the period ended March 31, 2022, the Company reclassified for book purposes amounts arising from permanent book to tax differences primarily related to net operating loss forfeiture for income tax purposes. December 31, 2023 December 31, 2022 March 31, 2022 Increase (decrease) in additional paid in capital $ 121,099 $ - $ ( 295,235 ) Increase (decrease) in distributed earnings (accumulated loss) ( 121,099 ) - 295,235 As of March 31, 2023, the Company has no capital loss carryforwards for federal income tax purposes, which can be used to offset future capital gains. Any such losses are permitted to be carried forward indefinitely. For income tax purposes, distributions paid to shareholders are reported as ordinary income, return of capital, long-term capital gains, or a combination thereof. For the tax period from April 1, 2023 through December 31, 2023, the tax year from April 1, 2022 to March 31, 2023, and the tax period from January 1, 2022 through March 31, 2022, the Company paid the following distributions. For the period from April 1, 2023 through December 31, 2023 For the period from April 1, 2022 through March 31, 2023 For the period from January 1, 2022 through March 31, 2022 Ordinary Income $ 8,265,537 $ - $ - Total Distributions $ 8,265,537 $ - $ - As of March 31, 2023, the compon ents of distributable earnings on a tax ba sis detailed below differ from the amounts reflected in the Company’s Statements of Assets and Liabilities by temporary book or tax differences primarily arising from the tax treatment of organizational costs. March 31, 2023 March 31, 2022 Undistributed ordinary income $ 3,418,714 $ - N et unrealized appreciation (depreciation) on investments 713,009 - Other temporary differences ( 399,948 ) ( 427,845 ) Total $ 3,731,775 $ ( 427,845 ) The following table sets forth the tax cost basis and the estimated aggregate gross unrealized appreciation and depreciation from investments and cash equivalents for federal income tax purposes for the fiscal years ended December 31, 2023 and December 31, 2022 and the fiscal period ended March 31, 2022. December 31, 2023 December 31, 2022 March 31, 2022 Tax cost of investments and cash equivalents $ 86,082,952 $ 85,653,218 $ 84,766,060 Unrealized appreciation $ 784,052 $ - $ - Unrealized depreciation ( 135,369 ) ( 273,348 ) - Net unrealized appreciation (depreciation) from investments and cash equivalents $ 648,683 $ ( 273,348 ) $ - There were no differences between book-basis and tax-basis unrealized appreciation (depreciation) from investments. 114 Table of Contents NOTE 11 — FINANCIAL HIGHLIGHTS The Company was formed on January 25, 2021 and the effective date of our registration statement was February 3, 2022. Prior to February 3, 2022, the Company had no operations, except for matters relating to our formation and organization as a BDC. The following presents financial highlights for the year ended December 31, 2023, the period from April 1, 2022 through December 31, 2022 and the period from February 3, 2022 to March 31, 2022 : For the Year Ended December 31, 2023 For the period from April 1, 2022 through December 31, 2022* For the period from February 3, 2022 to March 31, 2022 Per share data: (1) Net asset value at beginning of period $ 13.91 $ 13.61 $ 14.00 Net investment income (loss) 1.07 0.35 ( 0.07 ) Net realized and unrealized gains/(losses) on investments 0.11 ( 0.05 ) - Net increase/(decrease) in net assets resulting from operations 1.18 0.30 ( 0.07 ) Offering costs (2) - - ( 0.27 ) Permanent tax adjustments - - ( 0.05 ) Less distributions from net investment income (loss) ( 1.32 ) (3) - - Net asset value at end of period $ 13.77 $ 13.91 $ 13.61 Net assets at end of period $ 85,552,618 $ 86,475,729 $ 84,552,090 Shares outstanding at end of period 6,214,941 6,214,672 6,214,672 Weighted average net assets $ 88,187,537 $ 84,885,270 $ 83,301,328 Per share market value at end of period $ 8.44 $ 9.80 $ 13.30 Total return based on market value (4) ( 13.88 )% ( 26.32 )% ( 5.00 )% Total return based on net asset value (4) 13.65 % 2.20 % ( 2.79 )% Ratio/Supplemental data: Ratio of expenses to average net assets (5) 6.01 % 2.17 % 0.22 % Ratio of net investment income (loss) to average net assets (5) 7.52 % 2.59 % ( 0.20 )% Portfolio turnover (5) 11 % N/A N/A * On November 8, 2022, our Board approved a change in our fiscal year end from March 31 to December 31. (1) The per share data was derived by using the weighted average shares outstanding during the periods presented. (2) SSC has absorbed the cost of the sales load (i.e, underwriting discounts and commissions) incurred by the Company in connection with the initial public offering of its common stock. (3) The amount shown may not correspond for the period as it includes the effect of the timing of the distribution and the issuance of common stock. (4) Total return based on market value is based on the change in market price per share between the beginning and ending market prices per share in each period and assumes that common stock dividends are reinvested in accordance with our common stock dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per share between the beginning and ending net asset values per share in each period and assumes that dividends are reinvested in accordance with our common stock dividend reinvestment plan. For periods less than a year, total return is not annualized. (5) Ratio is not annualized. 115 Table of Contents NOTE 12 — TRANSITION PERIOD COMPARATIVE DATA Nine Months Ended December 31, 2022 Nine Months Ended December 31, 2021 (unaudited) INVESTMENT INCOME Non-control/non-affiliate investment income Interest income $ 3,626,792 $ - Fee income 410,000 - Total investment income 4,036,792 - EXPENSES Legal expenses 484,412 - Management fee 336,432 - Audit expense 210,284 30,000 Insurance expense 228,288 - Administrator fees 171,494 - Director expenses 99,845 - Excise tax expense 80,566 - Professional fees 70,264 - Custodian fees 36,150 24,000 Organizational expenses - 293,834 Other expenses 122,070 - Total expenses 1,839,805 347,834 NET INVESTMENT INCOME (LOSS) 2,196,987 ( 347,834 ) NET REALIZED GAIN (LOSS) FROM INVESTMENTS - - NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) FROM INVESTMENTS Non-controlled/non-affiliate investments ( 273,348 ) - Net change in unrealized appreciation (depreciation) from investments ( 273,348 ) - NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 1,923,639 $ ( 347,834 ) NET INVESTMENT INCOME (LOSS) PER SHARE — BASIC AND DILUTED $ 0.35 $ ( 1,246.72 ) NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE — BASIC AND DILUTED $ 0.31 $ ( 1,246.72 ) WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED (1) 6,214,672 279 (1) 386 shares were issued on June 16, 2021. There were no shares prior to June 16, 2021. 116 Table of Contents Nine Months Ended December 31, 2022 Nine Months Ended December 31, 2021 (unaudited) Cash flows from operating activities Net increase (decrease) in net assets resulting from operations $ 1,923,639 $ ( 347,834 ) Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: Net change in unrealized (appreciation) depreciation from investments 273,348 - Net (accretion of discounts) and amortization of premiums ( 165,398 ) - Purchase of investments ( 50,362,500 ) - (Increase)/Decrease in operating assets: Prepaid expenses 224,189 - Interest receivable ( 1,549,867 ) - Deferred offering costs - ( 1,118,803 ) Increase/(Decrease) in operating liabilities: Legal fees payable 8,232 - Management fee payable 170,965 - Other payables 8,305 24,000 Professional fees payable 28,744 - Excise tax payable 80,566 - Director fees payable 7,679 - Due to affiliate ( 48 ) 384,076 Offering cost payable ( 264,581 ) 748,000 Audit fees payable - 30,000 Administrator fees payable 10,155 - Organizational costs payable ( 34,168 ) 280,561 Net cash provided by (used in) operating activities ( 49,640,740 ) - Cash flows from financing activities Issuance of common stock, net of offering cost - - Net cash provided by (used in) financing activities - - Net increase (decrease) in cash and cash equivalents ( 49,640,740 ) - Cash and cash equivalents, beginning of period 84,766,060 - Cash and cash equivalents, end of period $ 35,125,320 $ - NOTE 13 — SUBSEQUENT EVENTS The Company’s management evaluated subsequent events through the date on which the financial statements were issued. Other than the item listed below, there have been no subsequent events that occurred during such period that have required adjustment or disclosure in the financial statements. Loan Portfolio Acquisition Agreement Overview On February 18, 2024, the Company entered into a Purchase Agreement (the “Loan Portfolio Acquisition Agreement”) with Chicago Atlantic Loan Portfolio, LLC, a Delaware limited liability company (“CALP”). The Loan Portfolio Acquisition Agreement provides that, subject to the conditions set forth in the Loan Portfolio Acquisition Agreement, at the closing of the transactions contemplated by the Loan Portfolio Acquisition Agreement (the “Closing”, and the date on which the Closing occurs, the “Closing Date”), the Company will issue to CALP shares of the Company’s common stock (the “Stock Issuance”) in consideration for acquiring a portfolio of loans (the “Loan Portfolio” and together with the Stock Issuance, the “Loan Portfolio Acquisition") from CALP (the “Loan Purchase” and together with the Stock Issuance, the “Transactions”). The Board, on the recommendation of a special committee (the “Special Committee”) comprised solely of all of the independent directors of the Company, has approved the Loan Portfolio Acquisition Agreement and the Transactions contemplated thereby. As of January 1, 2024, the Loan Portfolio comprised 24 loans with an aggregate value of approximately $ 130 million. CALP has agreed to use reasonable best efforts to add 4 loans with an aggregate value of approximately $ 43 million to the Loan Portfolio prior to the Closing. The Company and CALP may also agree to the addition of other loans to the Loan Portfolio prior to the Closing. The inclusion and/or addition of certain loans to the Loan Portfolio requires third-party consents, and/or such loans may need to be acquired by CALP, and there can be no assurance that any additional loans will be added to the Loan Portfolio prior to the Closing. Certain loans may also be removed from the Loan Portfolio upon the agreement of the Company and CALP, if required third-party consents are not obtained, or upon the repayment of the loans. The Transactions; Valuations At the Closing, (x) CALP shall sell and transfer to the Company, and the Company shall purchase and acquire from CALP, the Loan Portfolio, including all of CALP’s right, title and interest in, to and under each loan in the Loan Portfolio, the loan documents, collateral and files relating to each loan in the Loan Portfolio, and all amounts received by CALP after the Closing Cut-off Time (as defined below) arising under or in connection with each such loan (the “Contributed Investment Assets”), and (y) the Company shall issue and sell to CALP, and CALP shall purchase and acquire from the Company, such number of newly issued shares of the Company’s common stock (the “Purchased Shares”) equal to (i) the fair value of the Contributed Investment Assets (the “Contributed Investment Assets Fair Value”) as of the Closing Cut-off Time, divided by (ii) the SSIC NAV Per Share. The “SSIC NAV Per Share” means the SSIC NAV (as defined below) divided by the number of outstanding shares of the Company’s common stock as of the Closing Cut-off Time. Promptly, and within twenty-four (24) hours following 5:00 p.m. Central time on the second day (excluding Sundays and holidays) immediately prior to the Closing Date (the “Closing Cut-off Time”), the Company will deliver to CALP a calculation of the net asset value of the Company (the “SSIC NAV”) and the Contributed Investment Assets Fair Value as of the Closing Cut-off Time, in each case using the valuation policies and procedures of the Company (the “Calculation Notice”). To the extent that CALP does not agree with the calculation of the SSIC NAV or the Contributed Investment Assets Fair Value presented by the Company and set forth in the Calculation Notice, the parties shall negotiate in good faith to agree upon the calculation of the SSIC NAV or the Contributed Investment Assets Fair Value, as the case may be, prior to Closing. Closing Conditions Consummation of the Transactions is subject to certain closing conditions, including (1) requisite approvals of the Company’s stockholders, (2) finalization of the Contributed Investment Assets Fair Value and SSIC NAV calculations, (3) the absence of certain legal impediments or challenges to the consummation of the Transactions by a governmental entity, (4) the effectiveness of a registration statement registering the issuance of the new shares of the Company’s common stock and the listing of the new shares of the Company’s common stock on the NASDAQ Global Market, (5) the Purchased Shares, after giving effect to the Stock Issuance, would collectively constitute at least 65 %, but no more than 75 %, of the total issued and outstanding shares of the Company’s common stock, (6) the absence of a “material adverse effect” on the applicable party (or the Adviser) and (7) subject to certain exceptions, the accuracy of the representations, warranties and other factual statements and compliance with the covenants set forth in the Loan Portfolio Acquisition Agreement. No-Solicitation The Loan Portfolio Acquisition Agreement provides that the Company must immediately terminate any existing discussions and negotiations regarding any competing proposals and may not solicit competing proposals, or, subject to certain exceptions, enter into discussions or negotiations or provide information in connection with any competing proposal. However, the Board may, subject to certain conditions (including engaging in negotiations with CALP, if CALP wishes to negotiate), change its recommendation to the stockholders of the Company and, subject to payment by the Company of a termination fee in an amount of $ 6,046,613 (the “Termination Fee”), terminate the Loan Portfolio Acquisition Agreement to enter into a definitive agreement with respect to a superior proposal if the Board (acting on the recommendation of the Special Committee) determines in good faith, after consultation with its outside financial advisor and outside legal counsel that the failure to take such action would be reasonably likely to constitute a breach of the standard of conduct applicable to the directors of the Company under applicable law (taking into account, among other factors, any changes to the Loan Portfolio Acquisition Agreement proposed by CALP). Termination; Termination Fees The Loan Portfolio Acquisition Agreement contains certain reciprocal termination rights for both parties, including if the Transactions are not consummated on or before November 18, 2024 or if the requisite approvals of the Company stockholders are not obtained. In addition, the Loan Portfolio Acquisition Agreement contains certain termination rights for the Company and CALP, including the right of the Company to terminate the Agreement in order for the Company to enter into a definitive agreement with respect to a superior proposal, subject to complying with certain requirements and the payment by the Company to CALP of the Termination Fee. CALP also has a right to terminate the Loan Portfolio Acquisition Agreement in the event the Board changes its recommendation to the stockholders of the Company (subject to payment of the Termination Fee) or in the event the Company or the Board materially breaches their respective nonsolicitation obligations (subject to payment of the Termination Fee in certain circumstances). The Termination Fee is also payable in the event of certain other terminations when a competing proposal has been made public (or was otherwise known to the Board) and was not withdrawn prior to termination and a definitive agreement is entered into a competing proposal or a competing proposal is consummated within twelve months after such termination. Representations, Warranties and Covenants The Loan Portfolio Acquisition Agreement contains customary representations and warranties by each of the Company and CALP and certain statements regarding the Adviser. The Loan Portfolio Acquisition Agreement also contains customary covenants, including, among others, covenants relating to the operation of each of the Company’s and CALP’s businesses during the period prior to Closing. The Company has agreed to convene and hold a stockholder meeting for the purpose of obtaining the approvals required of its stockholders and has agreed that the Board will, subject to certain exceptions, recommend that the Company stockholders approve the applicable proposals in connection with the Transactions. Indemnification Subject to the terms of the Loan Portfolio Acquisition Agreement, CALP will indemnify the Company for damages, losses, liabilities and expenses suffered by the Company arising out of any inaccuracy, misrepresentation or breach of certain representations of CALP with respect to the Contributed Investment Assets, subject to certain per-claim and aggregate deductibles. CALP’s maximum liability with respect to claims of indemnification by the Company will not exceed the value of such number of Purchased Shares (the “Holdback Shares”) equal to the lesser of: (x) the quotient of (i) $ 10,000,000 divided by (ii) the SSIC NAV Per Share or (y) 3 % of the total issued and outstanding shares of the Company’s common stock after giving effect to the Stock Issuance. From the time of the issuance of the Holdback Shares until the six month anniversary of the Closing Date (the “Holdback Release Date”), CALP will not be allowed to sell, transfer, distribute, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any Holdback Shares (the “Transfer Restrictions”). Upon the Holdback Release Date, the Holdback Shares that are not subject to pending claims will cease to be subject to the Transfer Restrictions. Expenses All fees and expenses incurred in connection with the Transactions will be borne by the party incurring such fees or expenses except that transfer and similar taxes incurred in connection with the consummation of the Transactions will be borne by the Company. Voting Agreement On February 18, 2024, CALP, SSC, Silver Spike Holdings, LP (“Silver Spike Holdings”), the managing member of SSC, and Scott Gordon, managing member of the general partner of Silver Spike Holdings, entered into a Voting Agreement (the “Voting Agreement”), pursuant to which, among other things, SSC has agreed (i) to vote all shares of the Company’s common stock beneficially owned by SSC in favor of the Transactions, (ii) to vote against any competing proposal or a superior proposal and (iii) not enter into any contract, option or other arrangement or understanding with respect to the transfer of any shares of the Company’s common stock beneficially owned by SSC, other than certain customary exceptions. The Voting Agreement will terminate upon the earliest to occur of: (i) the mutual consent of CALP and SSC, (ii) the termination of the Loan Portfolio Acquisition Agreement in accordance with its terms or (iii) the Closing. SSC has also the right to terminate the Voting Agreement if the Loan Portfolio Acquisition Agreement is amended in a manner materially averse to SSC without SSC’s consent. General The foregoing description of the Loan Portfolio Acquisition Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Loan Portfolio Acquisition Agreement. The representations, warranties, covenants and agreements contained in the Loan Portfolio Acquisition Agreement were made only for purposes of the Loan Portfolio Acquisition Agreement and as of specific dates; were solely for the benefit of the parties to the Loan Portfolio Acquisition Agreement (except as may be expressly set forth in the Loan Portfolio Acquisition Agreement); may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Loan Portfolio Acquisition Agreement instead of establishing these matters as facts; and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors and security holders should not rely on such representations, warranties, covenants or agreements, or any descriptions thereof, as characterizations of the actual state of facts or condition of any of the parties to the Loan Portfolio Acquisition Agreement or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties, covenants and agreements may change after the date of the Loan Portfolio Acquisition Agreement, which subsequent information may or may not be fully reflected in public disclosures by the parties to the Loan Portfolio Acquisition Agreement. Investment Strategy Change On February 20, 2024, the Company announced that the Board unanimously approved an expansion of the Company’s investment strategy to permit investments in companies outside of the cannabis and health and wellness sectors that otherwise meet the Company’s investment criteria. The investment strategy change is expected to become effective on or about April 22, 2024. Distributions On March 6, 2024, the Company's Board approved a cash dividend of $ 0.25 /share. The dividend is payable on March 28, 2024 to stockholders of record on March 20, 2024. 117 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.