Sunrise Realty Trust, Inc. 10-Q

Item 1. Financial Statements SUNRISE REALTY TRUST, INC. CONSOLIDATED BALANCE SHEETS As of March 31, 2025 December 31, 2024 (unaudited) Assets Loans held for investment at carrying value, net $ 230,494,191 $ 130,733,630 Current expected credit loss reserve ( 13,713 ) ( 21,782 ) Loans held for investment at carrying value, net of current expected credit loss reserve 230,480,478 130,711,848 Cash and cash equivalents 1,642,780 184,626,770 Interest receivable 1,672,886 1,138,561 Prepaid expenses and other assets 646,421 1,058,601 Total assets $ 234,442,565 $ 317,535,780 Liabilities Accrued interest $ 132,297 $ 131,617 Dividends payable 4,026,448 2,941,964 Current expected credit loss reserve 144,115 18,398 Accrued management and incentive fees — 393,063 Accrued direct administrative expenses 640,437 715,574 Accounts payable and other liabilities 1,491,170 357,417 Line of credit payable 43,200,000 123,840,000 Line of credit payable to affiliate — 75,000,000 Total liabilities 49,634,467 203,398,033 Commitments and contingencies (Note 7) Shareholders' equity Preferred stock, par value $ 0.01 per share, 10,000 and 0 shares authorized at March 31, 2025 and December 31, 2024 and 0 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively — — Common stock, par value $ 0.01 per share, 50,000,000 shares authorized at March 31, 2025 and December 31, 2024 and 13,421,494 and 7,004,676 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively 134,215 70,047 Additional paid-in capital 186,555,228 115,022,034 Accumulated (deficit) earnings ( 1,881,345 ) ( 954,334 ) Total shareholders' equity 184,808,098 114,137,747 Total liabilities and shareholders' equity $ 234,442,565 $ 317,535,780 See accompanying notes to the consolidated financial statements 1 Index SUNRISE REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three months ended March 31, 2025 2024 Revenue Interest income $ 4,958,523 $ 2,026,306 Interest expense ( 336,159 ) — Net interest income 4,622,364 2,026,306 Expenses Management and incentive fees — — General and administrative expenses 753,126 543 Stock-based compensation 243,621 — Professional fees 408,532 263,418 Total expenses 1,405,279 263,961 (Provision for) reversal of current expected credit losses ( 117,648 ) — Net income before income taxes 3,099,437 1,762,345 Income tax expense — — Net income $ 3,099,437 $ 1,762,345 Earnings per common share: Basic earnings per common share $ 0.27 $ 0.26 Diluted earnings per common share $ 0.27 $ 0.26 Weighted average number of common shares outstanding: Basic weighted average shares of common stock outstanding 11,208,015 6,889,032 Diluted weighted average shares of common stock outstanding 11,221,016 6,889,032 See accompanying notes to the consolidated financial statements 2 Index SUNRISE REALTY TRUST, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (unaudited) Three months ended March 31, 2025 Member's Equity Common Stock Additional Paid-In Capital Accumulated Earnings (Deficit) Total Shareholders' Equity Shares Amount Balance as of December 31, 2024 $ — 7,004,676 $ 70,047 $ 115,022,034 $ ( 954,334 ) $ 114,137,747 Issuance of common stock, net of offering costs — 6,400,000 64,000 71,289,741 — 71,353,741 Stock-based compensation — 16,818 168 243,453 — 243,621 Dividends declared on common shares ($ 0.30 per share) — — — — ( 4,026,448 ) ( 4,026,448 ) Net income — — — — 3,099,437 3,099,437 Balance as of March 31, 2025 $ — 13,421,494 $ 134,215 $ 186,555,228 $ ( 1,881,345 ) $ 184,808,098 Three months ended March 31, 2024 Member's Equity Common Stock Additional Paid-In Capital Accumulated Earnings (Deficit) Total Shareholders' Equity Shares Amount Balance as of December 31, 2023 $ 31,234,622 — $ — $ — $ — $ 31,234,622 Capital contributions — — — 17,000,000 — 17,000,000 Distributions — — — ( 2,600,000 ) — ( 2,600,000 ) Effect of corporate conversion on member's equity ( 31,234,622 ) 100 1 30,999,999 234,622 — Net income — — — — 1,762,345 1,762,345 Balance as of March 31, 2024 $ — 100 $ 1 $ 45,399,999 $ 1,996,967 $ 47,396,967 See accompanying notes to the consolidated financial statements 3 Index SUNRISE REALTY TRUST, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) Three months ended March 31, 2025 2024 Operating activities: Net income $ 3,099,437 $ 1,762,345 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Provision for (reversal of) current expected credit losses 117,648 — Amortization of deferred financing costs 68,050 — Accretion of deferred loan original issue discount and other discounts ( 292,672 ) ( 14,094 ) Stock-based compensation 243,621 — Interest drawn on loans ( 3,740,082 ) — Changes in operating assets and liabilities: Interest receivable ( 534,325 ) ( 838,558 ) Prepaid expenses and other assets 378,337 — Accrued interest 680 — Accrued management and incentive fees ( 393,063 ) — Accrued direct administrative expenses ( 75,137 ) — Accounts payable and other liabilities 212,915 208,115 Net cash provided by (used in) operating activities ( 914,591 ) 1,117,808 Cash flows from investing activities: Issuance of and fundings on loans ( 104,743,576 ) ( 48,859,181 ) Principal repayment of loans 9,015,769 2,445,037 Net cash (used in) provided by investing activities ( 95,727,807 ) ( 46,414,144 ) Cash flows from financing activities: Net transfers and distributions from (to) Former Parent — 17,000,000 Proceeds from sale of common stock 72,588,000 — Payment of offering costs - equity offering ( 313,421 ) — Distributions — ( 2,600,000 ) Payment of financing costs ( 34,207 ) — Borrowings on revolving credit facilities 81,060,000 — Repayment of revolving credit facilities ( 236,700,000 ) — Dividends paid to common shareholders ( 2,941,964 ) — Net cash provided by (used in) financing activities ( 86,341,592 ) 14,400,000 Net increase (decrease) in cash and cash equivalents ( 182,983,990 ) ( 30,896,336 ) Cash and cash equivalents, beginning of period 184,626,770 31,244,622 Cash and cash equivalents, end of period $ 1,642,780 $ 348,286 Supplemental disclosure of non-cash activity: OID withheld from funding of loans $ 1,412,778 $ 281,888 Dividends declared and not yet paid $ 4,026,448 $ — Offering costs included in accounts payable and other liabilities $ 920,838 $ — Supplemental information: Interest paid during the period $ 267,429 $ — Income taxes paid during the period $ — $ — See accompanying notes to the consolidated financial statements 4 Index SUNRISE REALTY TRUST, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As of March 31, 2025 (unaudited) 1. ORGANIZATION Sunrise Realty Trust, Inc. (the “Company” or “SUNS”) was formed on August 28, 2023, and converted from a Delaware limited liability company to a Maryland corporation in February 2024. The Company is an institutional lender that provides debt capital solutions to the commercial real estate (“CRE”) market in the Southern United States. The Company focuses on originating, underwriting and managing CRE debt investments and providing capital to high-quality borrowers and sponsors with transitional business plans collateralized by CRE assets with opportunities for near-term value creation, as well as recapitalization opportunities. The Company intends to further diversify its investment portfolio, targeting investments in senior mortgage loans, mezzanine loans, B-notes, commercial mortgage-backed securities (“CMBS”) and debt-like preferred equity securities across CRE asset classes. The Company intends for its investment mix to include high quality residential (including multi-family, condominiums and single-family residential communities), retail, office, hospitality, industrial, mixed-use and specialty-use real estate. The Company operates in one operating segment. SUNS is externally managed and advised by Sunrise Manager LLC (“SUNS Manager” or the “Manager”), a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”) . The Company conducts its business through the parent company, Sunrise Realty Trust, Inc., and several subsidiaries. The Company consolidates all of its subsidiaries, which are consolidated within the Company’s consolidated financial statements. The Company intends to elect to be taxed as a REIT for United States federal income tax purposes under the Internal Revenue Code (the “Code”), commencing with the taxable year ending December 31, 2024. The Company generally will not be subject to United States federal income taxes on its REIT taxable income as long as it annually distributes all of its REIT taxable income prior to the deduction for dividends paid to shareholders and complies with various other requirements as a REIT. Spin-Off On July 9, 2024, Advanced Flower Capital Inc. (f/k/a AFC Gamma, Inc.) (“AFC” or the “Former Parent”) announced the completion of the previously announced separation and spin-off of AFC’s CRE portfolio into an independent, publicly traded company, SUNS (the “Spin-Off”). The Spin-Off was effected by the transfer of AFC’s CRE portfolio from AFC to SUNS and the distribution of all of the outstanding shares of SUNS’ common stock, par value $ 0.01 per share (the “Common Stock”) to all of AFC’s shareholders of record as of the close of business on July 8, 2024 (the “Record Date”). AFC’s shareholders of record as of the Record Date received one share of SUNS Common Stock for every three shares of AFC common stock held as of the Record Date. The Spin-Off was completed on July 9, 2024 (the “Distribution Date”). On the Distribution Date, SUNS became an independent, publicly traded company, trading on the Nasdaq Capital Market under the symbol “SUNS”. AFC retained no ownership interest in the Company following the Spin-Off. In connection with the Spin-Off, the Company entered into several agreements with AFC that govern the relationship between the Company and AFC following the Spin-Off, including the Separation and Distribution Agreement and the Tax Matters Agreement. These agreements provide for the allocation between AFC and SUNS of the assets, liabilities and obligations (including, among others, investments, property and tax-related assets and liabilities) of AFC and its subsidiaries attributable to periods prior to, at and after the Spin-Off. Moreover, in preparation for the Spin-Off, the management of SUNS entered into a new management agreement with SUNS Manager, which became effective concurrently with the completion of the Spin-Off. The Manager also entered into (i) an Administrative Services Agreement (the “Administrative Services Agreement”) with TCG Services LLC, an affiliate of the Manager and Leonard Tannenbaum, the Company’s Executive Chairman, and Robyn Tannenbaum, the Company’s President, and (ii) a Services Agreement (the “Services Agreement”) with SRT Group LLC, an affiliate of the Manager, Mr. Tannenbaum, Mrs. Tannenbaum, Mr. Sedrish and Mr. Hetzel. 5 Index 2. SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited interim financial statements should be read in conjunction with the audited financial statements and results of operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the U.S. Securities and Exchange Commission (“SEC”). Refer to Note 2 to the Company’s Annual Report on Form 10-K for a description of the Company’s significant accounting policies. The Company has included disclosures below regarding basis of presentation and other accounting policies that (i) are required to be disclosed quarterly, (ii) have material changes or (iii) the Company views as critical as of the date of this report. Basis of Presentation The accompanying unaudited interim consolidated financial statements and related notes have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the rules and regulations of the SEC applicable to interim financial information and include the accounts of the Company and its wholly-owned subsidiaries. The unaudited interim consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and for the periods presented. All intercompany balances and transactions have been eliminated in consolidation. The historical financial statements of the Company for the periods prior to the completion of the Spin-Off are prepared from AFC’s historical accounting records and are presented on a standalone basis as if the Company’s operations have been conducted independently from AFC. This Quarterly Report on Form 10-Q includes financial information of the Company through July 9, 2024 (prior to consummation of the Separation, the Distribution and the Spin-Off) and the period from July 9, 2024 to March 31, 2025 (from and after consummation of the Separation, the Distribution and the Spin-Off), and does not fully reflect what the Company’s results of operations, cash flows and financial condition would have been had it been an independent company for prior periods presented. The aggregate net effect of transactions between the Company and related parties that hav e been historically settled other than in cash are reflected in the Balance Sheets as Member’s Equity and Shareholder’s Equity and in the Statements of Cash Flows as Net Transfers and Distributions From (to) Former Parent. For additional information, see Note 12, “Related Party Transactions,” and Note 8, “Shareholders’ Equity.” The current period’s results of operations will not necessarily be indicative of results that ultimately may be realized for the year ending December 31, 2025. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Significant estimates include the current expected credit losses (“CECL”) reserve. Recent Accounting Pronouncements The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of this extended transition period. As a result, the Company will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies, which may make comparison of the Company’s financials to those of other public companies more difficult. In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 improves the transparency of income tax disclosures related to rate reconciliation and income taxes. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The 6 Index amendments should be applied prospectively, however, retrospective application is permitted. The adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements. In November 2024, the FASB issued ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025, the FASB issued ASU 2025-01—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”), which requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The adoption of ASU 2024-03 is not expected to have a material impact on the Company’s consolidated financial statements. 3. LOANS HELD FOR INVESTMENT AT CARRYING VALUE As of March 31, 2025 and December 31, 2024, t he Company’s portfolio included twelve and nine loans held at carrying value, respectively. The aggregate originated commitment under these loans was approximately $ 352.1 million and $ 190.9 million, resp ectively, and outstanding principal was approximately $ 233.4 million and $ 132.6 million, respectively, as of March 31, 2025 and December 31, 2024. During the three months ended March 31, 2025, the Company funded approximately $ 109.8 million of new loans and additional principal on existing loans and had approximately $ 9.0 million of principal repayments of loans held at carrying value. As of March 31, 2025 and December 31, 2024, approximately 89 % and 79 % , respectively, of the Company’s loans held at carrying value had floating interest rates. As of March 31, 2025, t hese floating benchmark rates included one-month Secured Overnight Financing Rate (“SOFR”) quoted at 4.3 % and subject to a weighted average floor of 4.1 % based on outstanding principal. The following tables summarizes the Company’s loans held at carrying value as of March 31, 2025 and December 31, 2024: As of March 31, 2025 Outstanding Principal (1) Original Issue Discount Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior mortgage loans (3)(4) $ 202,709,486 $ ( 2,647,593 ) $ 200,061,893 2.5 Subordinate debt 30,671,220 ( 238,922 ) 30,432,298 2.4 Total loans held at carrying value $ 233,380,706 $ ( 2,886,515 ) $ 230,494,191 2.5 As of December 31, 2024 Outstanding Principal (1) Original Issue Discount Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior mortgage loans (3) $ 109,300,553 $ ( 1,495,512 ) $ 107,805,041 2.6 Subordinate debt 23,255,736 ( 327,147 ) 22,928,589 2.4 Total loans held at carrying value $ 132,556,289 $ ( 1,822,659 ) $ 130,733,630 2.6 (1) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted OID and loan origination costs. (2) Weighted average remaining life is calculated based on the carrying value of each respective group of loans as of March 31, 2025 and December 31, 2024 . (3) Senior mortgage loans include senior loans that also have a contiguous subordinate loan because as a whole, the expected credit quality of the subordinate loan is more similar to that of a senior loan. (4) If the Company holds both the A-note and B-note, the loan is categorized as a senior mortgage loan. 7 Index The following table presents changes in loans held at carrying value as of and for the three months ended March 31, 2025: Principal Original Issue Discount Carrying Value Total loans held at carrying value at December 31, 2024 $ 132,556,289 $ ( 1,822,659 ) $ 130,733,630 New fundings 106,100,104 ( 1,356,528 ) 104,743,576 Interest drawn on loans 3,740,082 — 3,740,082 Accretion of original issue discount — 292,672 292,672 Loan repayments ( 9,015,769 ) — ( 9,015,769 ) Total loans held at carrying value at March 31, 2025 $ 233,380,706 $ ( 2,886,515 ) $ 230,494,191 A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of March 31, 2025 is as follows: Loan Type Location Outstanding Principal (1) Original Issue Discount Carrying Value (1) Interest Rate Maturity Date (2) Payment Terms (3) Senior mortgage loans: Residential Austin, TX $ 13,818,709 $ ( 105,655 ) $ 13,713,054 9.0 % (4) 7/3/2027 I/O Hospitality San Antonio, TX 26,793,821 ( 212,333 ) 26,581,488 10.9 % (5) 8/9/2027 I/O Residential PBG, FL 28,614,957 ( 309,896 ) 28,305,061 12.6 % (6) 9/1/2027 I/O Residential PBG, FL 24,321,302 ( 273,438 ) 24,047,864 10.6 % (7) 9/1/2027 I/O Residential Fort Lauderdale, FL 4,964,427 ( 242,308 ) 4,722,119 11.4 % (8) 12/30/2026 I/O Hospitality Austin, TX 30,635,540 ( 355,556 ) 30,279,984 9.8 % (9) 12/11/2027 I/O Residential Aventura, FL 28,711,352 ( 280,769 ) 28,430,583 9.3 % (10) 1/27/2027 I/O Net Leased Tenant New Orleans, LA 599,378 ( 415,556 ) 183,822 10.1 % (11) 1/30/2028 I/O Residential Dallas, TX 44,250,000 ( 452,083 ) 43,797,917 8.0 % (12) 3/14/2028 I/O Subordinate debt: Residential Sarasota, FL 23,891,764 ( 183,227 ) 23,708,537 13.0 % (13) 5/12/2027 I/O Residential Miami, FL 2,246,271 ( 111,944 ) 2,134,327 13.3 % (14) 11/15/2027 I/O Residential Miami, FL 4,533,185 56,250 4,589,435 14.8 % (15) 12/13/2028 I/O Total loans held at carrying value $ 233,380,706 $ ( 2,886,515 ) $ 230,494,191 (1) The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted OID and loan origination costs. (2) Certain loans are subject to contractual extension options and may be subject to performance based or other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications. (3) I/O = interest-only, P/I = principal and interest. P/I loans may include interest-only periods for a portion of the loan term. (4) Base interest rate of 4.25 % plus SOFR (SOFR floor of 4.75 %). (5) Base interest rate of 6.35 % plus SOFR (SOFR floor of 4.50 %). (6) Base interest rate of 8.25 % plus SOFR (SOFR floor of 4.00 %). (7) Base interest rate of 6.25 % plus SOFR (SOFR floor of 4.00 %). (8) Cash interest rate represents a blended rate of differing cash interest rates applicable to each of the A-Notes and B-Notes to which the Company is a lender under the credit agreements. The A-Notes bear interest at a base interest rate of 4.75 % plus SOFR (SOFR floor of 4.75 %) and the B-Notes bear interest at a base interest rate of 11.00 % plus SOFR (SOFR floor of 4.75 %). (9) Base interest rate of 5.50 % plus SOFR (SOFR floor of 4.00 %). (10) Base interest rate of 5.00 % plus SOFR (SOFR floor of 4.00 %). (11) Base interest rate of 5.60 % plus SOFR (SOFR floor of 4.50 %). (12) Base interest rate of 3.65 % plus SOFR (SOFR floor of 3.90 %). 8 Index (13) Base interest rate of 13.00 %. (14) Base interest rate of 13.25 %. (15) Base interest rate of 9.50 % plus SOFR (SOFR floor of 4.00 %) and PIK interest rate of 1.00 %. 4. CURRENT EXPECTED CREDIT LOSSES As of March 31, 2025 and December 31, 2024, the Company’s CECL Reserve for its loans held at carrying value is approximately $ 157.8 thousand and $ 40.2 thousand, respectively, or 0.07 %, and 0.03 %, respectively, of the Company’s total loans held at carrying value of approximately $ 230.5 million and $ 130.7 million, respectively, and is bifurcated between the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value of approximately $ 13.7 thousand and $ 21.8 thousand, respectively, and a liability for unfunded commitments of approximately $ 144.1 thousand and $ 18.4 thousand, respectively. The liability was based on the unfunded portion of the loan commitment over the full contractual period over which the Company is exposed to credit risk through a current obligation to extend credit. Management considered the likelihood that funding will occur and, if funded, the expected credit loss on the funded portion. Activity related to the CECL Reserve for outstanding balances and unfunded commitments on the Company’s loans held at carrying value as of and for the three months ended March 31, 2025 was as follows: Outstanding (1) Unfunded (2) Total Balance at December 31, 2024 $ 21,782 $ 18,398 $ 40,180 Provision for (reversal of) current expected credit losses ( 8,069 ) 125,717 117,648 Write-offs — — — Recoveries — — — Balance at March 31, 2025 $ 13,713 $ 144,115 $ 157,828 (1) As of March 31, 2025 and December 31, 2024, the CECL Reserve related to outstanding balances on loans held at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets. (2) As of March 31, 2025 and December 31, 2024, the CECL Reserve related to unfunded commitments on loans held at carrying value is recorded within current expected credit loss reserve as a liability in the Company’s consolidated balance sheets. The Company continuously evaluates the credit quality of each loan by assessing the risk factors of each loan and assigning a risk rating based on a variety of factors. Risk factors may include property type, geographic and local market dynamics, physical condition, projected cash flow, loan structure and exit plan, loan-to-value ratio, fixed charge coverage ratio, project sponsorship, and other factors deemed necessary by the Company. Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows: Rating Definition 1 Very Low Risk — Investment exceeds performance expectations. Trends and risk factors since time of investment are favorable. 2 Low Risk — Investment performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable. 3 Medium Risk — Performing investments requiring closer monitoring. Trends and risk factors show some deterioration. 4 High Risk/ Potential for Loss — Investment underperforming with the potential of some interest loss. Trends and risk factors are negative. 5 Impaired/ Loss Likely — Investment underperforming with expected loss of interest, and full recovery of principal is unlikely. The risk ratings are primarily based on historical data as well as taking into account future economic conditions. 9 Index As of March 31, 2025, the carrying value, excluding the CECL Reserve, of the Company’s loans held at carrying value within each risk rating by year of origination is as follows: Risk Rating: 2025 2024 Total 1 $ — $ — $ — 2 77,001,757 153,492,434 230,494,191 3 — — — 4 — — — 5 — — — Total $ 77,001,757 $ 153,492,434 $ 230,494,191 5. INTEREST RECEIVABLE The following table summarizes the interest receivable balance for the Company as of March 31, 2025 and December 31, 2024: As of March 31, 2025 As of December 31, 2024 Interest receivable $ 1,658,532 $ 1,118,927 Unused fees receivable 10,551 11,821 Other fees receivable 3,803 7,813 Total interest receivable $ 1,672,886 $ 1,138,561 6. DEBT Revolving Credit Facility On November 6, 2024, the Company entered into the Loan and Security Agreement (as amended, restated or otherwise modified from time to time, the “Revolving Credit Agreement”) by and among the Company, as borrower, the lenders party thereto, and East West Bank, as administrative agent, joint lead arranger, joint book runner, co-syndication agent and co-documentation agent (“East West Bank”). The Revolving Credit Agreement provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) that contains initial aggregate commitments of $ 50.0 million from one or more FDIC-insured banking institutions, which may be borrowed, repaid and redrawn, subject to a borrowing base based on eligible loan obligations held by the Company and subject to the satisfaction of other conditions provided under the Revolving Credit Agreement. Pursuant to the terms of the Revolving Credit Agreement, the amount of total commitments may be increased to up to $ 200.0 million in aggregate, subject to available borrowing base and lenders’ willingness to provide additional commitments. The Revolving Credit Facility has a maturity date of November 8, 2027. Interest is payable on the Revolving Credit Facility in cash in arrears at the rate per annum of SOFR plus 2.75 %, with a SOFR floor of 2.63 %; provided, however, that the interest rate will increase by an additional 0.25 % during any Increase Rate Month (as defined in the Revolving Credit Agreement). The Company is required to pay certain fees to the agent and the lenders under the Revolving Credit Agreement, including a $ 75.0 thousand agent fee payable to the agent and a 0.25 % per annum loan fee payable ratably to the lenders, in each case, payable on the closing date and on the annual anniversary thereafter. Commencing on the six-month anniversary of the closing date, the Revolving Credit Facility has an unused line fee of 0.25 % per annum, payable semi-annually in arrears. Based on the terms of the Revolving Credit Agreement, the unused line fee is waived if our average revolver usage exceeds the minimum amount required per the Revolving Credit Agreement. Based on the terms of the Revolving Credit Agreement, the Company did not incur an unused line fee during the three months ended March 31, 2025. In connection with the Revolving Credit Agreement and related amendments, the Company incurred certain closing costs of approximately $ 0.6 million, which were included in prepaid expenses and other assets on the Company’s consolidated balance sheets and amortized over the life of the facility. The Revolving Credit Facility is guaranteed by certain material subsidiaries of the Company and is secured by substantially all assets of the Company; provided that upon the meeting of certain conditions, the facility will be secured only by certain 10 Index assets of the Company comprising of or relating to loan obligations designed for inclusion in the borrowing base. In addition, the Company is subject to various financial and other covenants, including a liquidity and debt service coverage ratio covenant. On December 9, 2024, the Company entered into Amendment Number One to Loan and Security Agreement, by and among the Company and certain of its subsidiaries, as borrowers, the lenders party thereto and East West Bank, pursuant to which, among other things, the maximum revolver usage was temporarily increased until January 8, 2025, to the sum of (i) $ 50.0 million plus (ii) the lesser of $ 75.0 million and the aggregate amount of funds maintained in the Company’s borrowing base cash account. Following January 8, 2025, the maximum revolver usage automatically reverted back to $ 50.0 million. On December 30, 2024, the Company entered into Amendment Number Two to Loan and Security Agreement, by and among the Company and certain of its subsidiaries, as borrowers, the lenders party thereto, and East West Bank, pursuant to which, among other things, the parties agreed to additional representations, covenants and other amendments to maintain its REIT status and limit the use of participation interests in any underlying obligor loan receivables secured as collateral. On February 26, 2025, the Company entered into Amendment Number Three to Loan and Security Agreement, by and among the Company and certain of its subsidiaries, as borrowers, the lenders party thereto, and East West Bank, pursuant to which, among other things, the parties agreed to reduce the procedural requirements for obligor loan receivables to become eligible under the borrowing base. As of March 31, 2025 and December 31, 2024, outstanding borrowings under the Revolving Credit Facility were $ 43.2 million and $ 123.8 million, respectively, and $ 6.8 million and $ 1.2 million were available for borrowing as of March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025 , the interest rate on the Company’s borrowings under the Revolving Credit Facility was 7.07 %. SRTF Credit Facility In September 2024, the Company entered into an unsecured revolving credit agreement (the “Credit Agreement”), by and between the Company, as borrower, and SRT Finance LLC, as agent and lender. SRT Finance LLC is indirectly owned by Leonard M. Tannenbaum, Executive Chairman of the Company’s Board of Directors and one of the Company’s officers, and Robyn Tannenbaum, President of the Company, along with their family members and associated family trusts. The Credit Agreement provides for an unsecured revolving credit facility (the “SRTF Revolving Credit Facility”) with a $ 50.0 million commitment, which may be borrowed, repaid and redrawn, subject to a draw fee and the other conditions provided in the Credit Agreement. Interest is payable on the SRTF Revolving Credit Facility at 1-month SOFR (subject to a 3.0 % floor) plus a margin of 2.75 %, with a maturity date of December 31, 2025. The Company did not incur any fees or costs related to the origination of the SRTF Revolving Credit Facility, and the SRTF Revolving Credit Facility did not have any unused fees. On November 6, 2024, in conjunction with the entry by the Company into the Revolving Credit Facility, the Company terminated the unsecured revolving credit agreement (the “Credit Agreement”) dated September 26, 2024, by and between the Company, as borrower, and SRT Finance LLC, as agent and lender. Upon execution of the Revolving Credit Facility, the lenders’ commitments under the Credit Agreement were terminated and the liability of the Company and its subsidiaries with respect to their obligations under the Credit Agreement was discharged. On December 9, 2024, the Company entered into a new unsecured revolving credit agreement (the “SRTF Credit Agreement”), by and among the Company, as borrower, the lenders party thereto from time to time, and SRT Finance LLC, as agent and lender. SRT Finance LLC continues to be indirectly owned by Mr. Tannenbaum and Mrs. Tannenbaum, along with their family members and associated family trusts. The SRTF Credit Agreement provides for an unsecured revolving credit facility (the “SRTF Credit Facility”) with a $ 75.0 million commitment, which may be borrowed, repaid and redrawn, subject to a draw fee and the other conditions provided in the SRTF Credit Agreement. Interest is payable on the SRTF Credit Facility at a rate per annum equal to 8.00 %. The SRTF Credit Facility matures on the earlier of (i) May 31, 2028 and (ii) the date of the closing of any Refinancing Indebtedness (as defined in the SRTF Credit Agreement) with an aggregate principal amount equal to or greater than $ 75.0 million. Commencing on January 1, 2026, the Company is required to pay an annual fee equal to 1.00 % of the aggregate commitments ratably to the lenders, payable on the first business day of each calendar year; provided that the fee due and payable on January 3, 2028 will be prorated on the basis of a year of 360 days for the actual number of days elapsed from and including January 1, 2028 until and excluding May 31, 2028. In connection with the SRTF Credit Agreement, the Company incurred certain closing costs of approximately $ 20.0 thousand, which were included in prepaid expenses and other assets on the Company’s consolidated balance sheets and amortized over the life of the facility. 11 Index As of March 31, 2025 and December 31, 2024, outstanding borrowings under the SRTF Credit Facility were zero and $ 75.0 million, respectively, and $ 75.0 million and zero were available for borrowing as of March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025 , the interest rate on the Company’s borrowings under the SRTF Credit Facility was 8.00 %. The Company did not incur any interest expense during the three months ended March 31, 2024. The following table reflects a summary of interest expense incurred during the three months ended March 31, 2025: Three Months Ended March 31, 2025 Revolving Credit Facility SRTF Revolving Credit Facility Total Borrowings Interest expense $ 245,505 $ 22,604 $ 268,109 Unused fee expense — — — Amortization of deferred financing costs 66,633 1,417 68,050 Total interest expense $ 312,138 $ 24,021 $ 336,159 7. COMMITMENTS AND CONTINGENCIES As of March 31, 2025 and December 31, 2024, the Company had the following commitments to fund various investments: As of March 31, 2025 As of December 31, 2024 Total loan commitments $ 352,076,936 $ 190,921,475 Less: drawn commitments ( 233,380,706 ) ( 132,556,289 ) Total undrawn commitments $ 118,696,230 $ 58,365,186 The Company from time to time may be a party to litigation in the normal course of business. The Company investigates these claims as they arise. If the potential loss from any claim or legal claim is considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. As of March 31, 2025, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations. 8. SHAREHOLDERS’ EQUITY Corporate Conversion On February 20, 2024, the Company completed a corporate conversion, converting from a Delaware limited liability company to a Maryland corporation. Pursuant to the certificate of incorporation effected in connection with the corporate conversion, the Company’s authorized capital stock consists of 50,000,000 shares of voting Common Stock and 10,000 shares of Preferred Stock (defined below), par value $ 0.01 per share. Preferred Stock As of March 31, 2025 and December 31, 2024, the Company authorized 10,000 and zero shares of Preferred Stock, par value $ 0.01 per share (the “Preferred Stock”), respectively, of which none have been issued. The Company’s Board of Directors (the “Board of Directors”) has the authority, without action by our shareholders, to issue up to 10,000 shares of Preferred Stock in one or more series or classes and to designate the rights, preferences and privileges of each series or class, which may be greater than the rights of SUNS’ Common Stock. There were no shares of Preferred Stock designated or outstanding as of March 31, 2025 and December 31, 2024, respectively. 12 Index Common Stock As of March 31, 2025 and December 31, 2024, the Company authorized 50,000,000 shares of Common Stock, respectively, and issued 13,421,494 and 7,004,676 shares of Common Stock, respectively. On January 29, 2025, the Company completed a registered public offering of 5,750,000 shares of common stock at a public offering price of $ 12.00 per share (the “January 2025 Offering”), of which 1,000,000 shares of common stock were sold to Leonard M. Tannenbaum, the Company’s Executive Chairman, at the public offering price. The Company received net proceeds from the January 2025 Offering of $ 65.3 million, net of underwriting discounts of $ 3.7 million. In connection with the January 2025 Offering, the underwriters were granted an over-allotment option to purchase up to an additional 862,500 shares of the Company’s common stock. On January 31, 2025, the underwriters partially exercised the over-allotment option with respect to 650,000 shares of common stock and the Company received additional net proceeds of $ 7.3 million, net of underwriting discounts of $ 0.5 million. The Company incurred approximately $ 1.2 million of expenses in connection with the offering. After giving effect to the partial exercise of the over-allotment option, the total number of shares sold by the Company in the public offering was 6,400,000 shares and total gross proceeds, before deducting underwriting discounts and commissions, and other offering expenses payable by the Company, were approximately $ 76.8 million. The net proceeds to the Company totaled approximately $ 71.4 million. Spin-Off On July 1, 2024, the Board of Directors approved a forward stock split of shares of the Company’s Common Stock, at a ratio of 68,890.32 -for-one (to be effected in the form of a stock dividend for purposes of the Maryland General Corporation Law), pursuant to which 68,890.32 additional shares of the Company’s Common Stock were issued for each outstanding share of the Company’s Common Stock (the “Forward Stock Split”), payable prior to the consummation of the Spin-Off. The Forward Stock Split took effect immediately prior to the distribution of the shares of the Company’s common stock to the shareholders of AFC common stock. As a result of the Forward Stock Split, the number of outstanding shares of the Company’s Common Stock increased to 6,889,032 shares outstanding as of July 9, 2024, of which 88,685 were restricted shares at the time of Spin-Off. The Spin-Off was effected by the transfer of AFC’s CRE portfolio from AFC to SUNS and the distribution of all of the outstanding shares of SUNS Common Stock to all of AFC’s shareholders of record as of the close of business on July 8, 2024. AFC’s shareholders of record as of the Record Date received one share of SUNS Common Stock for every three shares of AFC common stock held as of the close of business on July 8, 2024, the Record Date for the distribution, as well as a cash payment in lieu of any fractional shares. The Spin-Off was completed on July 9, 2024. Immediately after the Spin-Off, the Company was no longer a wholly owned subsidiary of AFC. On July 9, 2024, AFC non-vested restricted stock awards that were outstanding on the Distribution Date were converted into AFC restricted stock awards and SUNS restricted stock awards. Upon completion of the Spin-Off, the AFC restricted stock awards were converted into 88,685 shares of SUNS restricted stock. The vesting schedule remains the same as the original awards. Stock Incentive Plan The Company has established the 2024 Stock Incentive Plan (the “2024 Plan”). The 2024 Plan authorizes stock options, stock appreciation rights, restricted stock, stock bonuses, stock units and other forms of awards granted or denominated in the Company’s Common Stock or units of Common Stock. The 2024 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Any award may be structured to be paid or settled in cash. The Company has granted, and currently intends to continue to grant, restricted stock awards to participants in the 2024 Plan, but it may also grant any other type of award available under the 2024 Plan in the future. Persons eligible to receive awards under the 2024 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company, employees of the Manager and certain directors, consultants and other service providers to the Company or any of its subsidiaries. In February 2025, the Company’s Board of Directors approved grants of restricted stock to the Company’s directors and certain officers, as well as certain employees of the Manager or its affiliates, with an aggregate of 19,625 shares of restricted stock granted to such eligible persons. The restricted stock awards granted in February 2025 under the 2024 Plan vest over a three-year period, with approximately 33 % vesting on each of the first, second and third anniversaries of the vesting commencement date. 13 Index As of March 31, 2025 , there were 132,462 shares of restricted stock granted under the 2024 Plan. As of March 31, 2025 , the maximum number of shares of the Company’s Common Stock that may be delivered pursuant to awards under the 2024 Plan (the “Share Limit”) equaled 1,191,122 shares, of which 1,058,660 shares remained available for future issuance under the 2024 Plan. At the discretion of the Company’s Board of Directors, the Company waived the evergreen provision in connection with the Minimum Annual Increase (as defined in the 2024 Plan) under the 2024 Plan for the 2024 fiscal year. In January 2025, the Company completed an offering of the Company’s Common Stock and pursuant to the evergreen provision in the 2024 Plan with respect to the public offerings, the total number of shares reserved for issuance under the 2024 Plan automatically increased by ten percent of the total number of shares of Common Stock sold by the Company in the January 2025 Offering, which equaled 640,000 shares. Shares that are subject to or underlie awards that expire or, for any reason, are cancelled, terminated, forfeited, fail to vest or are not paid or delivered under the 2024 Plan will not be counted against the Share Limit and will again be available for subsequent awards under the 2024 Plan. The stock-based compensation expense for the Company was approximately $ 0.2 million and zero for the three months ended March 31, 2025 and 2024, respectively. The following table summarizes restricted stock (i) converted upon Spin-Off, (ii) granted, (iii) vested and (iv) forfeited for the Company’s directors and officers and employees of the Manager as of March 31, 2025 and December 31, 2024: As of March 31, 2025 As of December 31, 2024 Converted upon Spin-Off 88,685 88,685 Granted 135,269 115,644 Vested ( 35,476 ) ( 805 ) Forfeited ( 2,807 ) — Balance 185,671 203,524 The fair value of the Company’s restricted stock awards is based on the Company’s stock price on the date of grant. The following tables summarize the restricted stock activity as of and during the three months ended March 31, 2025: Number of shares of restricted stock Weighted-average grant date fair value Balance as of December 31, 2024 203,524 $ 13.16 Granted 19,625 11.78 Vested ( 34,671 ) 13.13 Forfeited ( 2,807 ) 13.27 Balance as of March 31, 2025 185,671 $ 13.02 The total fair value of shares vested during the three months ended March 31, 2025 was approximately $ 0.5 million. During the three months ended March 31, 2025 , 19,625 shares of restricted stock were granted with a weighted-average grant date fair value of $ 11.78 . There were no shares of restricted stock that were granted or that vested during the three months ended March 31, 2024. As of March 31, 2025 , there was approximately $ 2.1 million of total unrecognized compensation cost related to non-vested restricted stock. That cost is expected to be recognized over a weighted-average period of 2.30 years. 9. EARNINGS PER SHARE In connection with the Spin-Off, all of the outstanding shares of the Company’s Common Stock were distributed to AFC’s shareholders of record as of the close of business on July 8, 2024 and AFC’s shareholders received one share of the Company’s Common Stock for every three shares of AFC common stock held. As a result, on July 9, 2024, the Company had 6,889,032 shares of Common Stock outstanding. This share amount is utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Spin-Off. For periods prior to the Spin-Off, there were no dilutive equity instruments, as there were no equity awards of the Company outstanding prior to the Spin-Off. After the Spin-Off, actual outstanding shares are used to calculate both basic and diluted weighted average number of common shares outstanding. 14 Index The following information sets forth the computations of basic and diluted weighted average earnings per common share for the three months ended March 31, 2025 and 2024: Three months ended March 31, 2025 2024 Net income attributable to common shareholders $ 3,099,437 $ 1,762,345 Dividends paid on unvested restricted stock ( 85,480 ) — Net income attributable to common shareholders 3,013,957 1,762,345 Divided by: Basic weighted average shares of common stock outstanding 11,208,015 6,889,032 Weighted average unvested restricted stock 13,001 — Diluted weighted average shares of common stock outstanding 11,221,016 6,889,032 Basic weighted average earnings per common share $ 0.27 $ 0.26 Diluted weighted average earnings per common share $ 0.27 $ 0.26 Diluted earnings per common share was computed using the treasury stock method for restricted stock. Diluted weighted average earnings per common share excluded 87,463 and zero weighted average unvested restricted stock due to anti-dilutive effect for the three months ended March 31, 2025 and 2024, respectively. 10. INCOME TAX Prior to the Spin-Off, the Company was a wholly-owned subsidiary of AFC and was a disregarded entity for tax purposes. As such, the Company did not file a tax return. The Company’s entire share of taxable income or loss was previously included in the tax return of AFC. The Company was formed on August 28, 2023 and converted from a Delaware limited liability company to a Maryland corporation in February 2024. The Company intends to elect to be taxed as a REIT for U.S. federal income tax purposes, commencing with the taxable year ending December 31, 2024. The Company believes that, commencing with such taxable year, the Company is organized and operated in such manner as to qualify for taxation as a REIT under the U.S. federal income tax laws, and the Company intends to continue to operate in such a manner. However, no assurances can be given that our beliefs or expectations will be fulfilled, since qualification as a REIT depends on our continuing to satisfy numerous asset, income, and distribution tests, which in turn depends, in part, on our operating results. The Company will elect to be taxed as a REIT only if the Company believes that we have been organized in conformity with the requirements for qualification and taxation as a REIT under the U.S. federal income tax laws, and that our method of operation will enable us to satisfy the requirements for qualification and taxation as a REIT under the U.S. federal income tax laws for such taxable year and thereafter. So long as the Company qualifies for taxation as a REIT, the Company generally will not be subject to U.S. federal income tax on the portion of our taxable income or capital gain that is distributed to shareholders annually. The income tax provision for the Company was zero for the three months ended March 31, 2025 . For the three months ended March 31, 2025 , the Company incurred no expense for U.S. federal excise tax. Excise tax represents a 4 % tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the period. If it is determined that an excise tax liability exists for the current period, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The expense is calculated in accordance with applicable tax regulations. The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months. 11. FAIR VALUE Fair Value of Financial Instruments GAAP requires disclosure of fair value information about financial instruments, whether or not recognized at fair value in the balance sheets, for which it is practicable to estimate that value. 15 Index The following table details the book value and fair value of the Company’s financial instruments not recognized at fair value in the unaudited interim balance sheets as of March 31, 2025 : As of March 31, 2025 Carrying Value Fair Value Financial assets: Cash and cash equivalents $ 1,642,780 $ 1,642,780 Loans held for investment at carrying value $ 230,494,191 $ 232,111,442 Estimates of fair value for cash and cash equivalents are measured using observable, quoted market prices, or Level 1 inputs. The Company’s loans held for investment are measured using unobservable inputs, or Level 3 inputs. 12. RELATED PARTY TRANSACTIONS Management Agreement On February 22, 2024, the Company and the Manager, entered into a management agreement (the “Management Agreement”), effective upon the listing of the Company’s Common Stock. Following the completion of the Spin-Off on July 9, 2024, the Company is managed by its Board of Directors and the Company’s executive officers and by SUNS Manager, as provided for under our Management Agreement. Pursuant to the Management Agreement, the Manager manages the loans and day-to-day operations of the Company, subject at all times to the further terms and conditions set forth in the Management Agreement and such further limitations or parameters as may be imposed from time to time by the Company’s Board of Directors. The Manager receives base management fees (the “Base Management Fees”) that are calculated and payable quarterly in arrears, in an amount equal to 0.375 % of the Company’s Equity (as defined in the Management Agreement), subject to certain adjustments, less 50 % of the aggregate amount of any other fees (“Outside Fees”), including any agency fees relating to the Company’s loans, but excluding the Incentive Compensation (as defined below) and any diligence fees paid to and earned by the Manager and paid by third parties in connection with the Manager’s due diligence of potential loans. There was no Base Management Fees incurred for the three months ended March 31, 2025 and 2024. Refer to fee waiver below. In addition to the Base Management Fees, the Manager is entitled to receive incentive compensation (the “Incentive Compensation” or “Incentive Fees”) with respect to each fiscal quarter (or portion thereof that the Management Agreement is in effect) based upon the Company’s achievement of targeted levels of Core Earnings. “Core Earnings” is defined in the Management Agreement as, for a given period, the net income (loss) for such period, computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) Incentive Compensation, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between the Manager and the Company’s independent directors and approval by a majority of the independent directors. There was no Incentive Compensation incurred for the three months ended March 31, 2025 and 2024. Refer to fee waiver below. Fee Waiver From time to time, the Manager may waive fees it would otherwise be entitled to under the terms of the Management Agreement. The Manager has agreed to waive (i) the inclusion of the net proceeds from the January 2025 Offering in the Company’s Equity for purposes of calculating the management fee until the earlier of (a) December 31, 2025 and (b) the quarter in which the total amount of the net proceeds of the January 2025 Offering have been utilized to fund loans in our portfolio and (ii) an additional $ 1.0 million in fees. For the three months ended March 31, 2025, $ 568,790 of Base Management Fees and $ 298,306 of Incentive Fees were waived. 16 Index Administrative Services Agreement In July 2024, SUNS Manager entered into the Administrative Services Agreement with TCG Services LLC, an affiliate of SUNS Manager, Mr. Tannenbaum and Mrs. Tannenbaum. The Administrative Services Agreement sets forth the terms on which TCG Services LLC will provide SUNS certain administrative services, including providing personnel, office facilities, information technology and other equipment and legal, accounting, human resources, clerical, bookkeeping and record keeping services at such facilities as well as other services. Services Agreement In July 2024, SUNS Manager entered into a Services Agreement with SRT Group LLC, an affiliate of SUNS Manager, Mr. Tannenbaum, Mrs. Tannenbaum, Mr. Sedrish and Mr. Hetzel. The Services Agreement sets forth the terms on which SRT Group LLC will provide SUNS its investment personnel. The Company is required to pay all of its allocable costs and expenses and reimburse the Manager or its affiliates for such expenses paid or incurred on behalf of the Company by the Manager or its affiliates, excepting only those expenses that are specifically the responsibility of the Manager pursuant to the Management Agreement. Until the completion of the Spin-Off, there were no Base Management Fees or Incentive Fees incurred by the Company. The following table summarizes the related party costs incurred by the Company for the three months ended March 31, 2025 and 2024: Three months ended March 31, 2025 2024 Affiliate costs Base management fees $ — $ — Incentive fees earned — — General and administrative expenses reimbursable to Manager 617,554 — Total $ 617,554 $ — Amounts payable to the Company’s Manager as of March 31, 2025 and December 31, 2024 were approximately $ 0.6 million and $ 1.1 million , respectively. The Company’s Manager is beneficially owned by certain officers as of the date of this Quarterly Report on Form 10-Q : 63.1 %, by Mr. Tannenbaum, the Company’s Executive Chairman, 8.1 % by Mrs. Tannenbaum, the Company’s President, 9.3 % by other Tannenbaum family members and trusts, and 7.0 % by Mr. Sedrish, the Company’s Chief Executive Officer. Investments in Loans From time to time, the Company may co-invest with other investment vehicles managed by the SUNS Manager or its affiliates, including by means of splitting loans, participating in loans or other means of syndicating loans. The Company is not obligated to provide, nor has it provided, any financial support to the other managed investment vehicles. As such, the Company’s risk is limited to the carrying value of its investment in any such loan. Additionally, SUNS Manager or its affiliates, may from time to time serve as administrative and collateral agents to the lenders under our co-investments. As of March 31, 2025, there were twelve co-invested loans held by the Company and affiliates of the Company. Unsecured Revolving Credit Facility with Affiliate The Company entered the Revolving Credit Facility with SRT Finance LLC, an affiliate of the Company and Mr. and Mrs. Tannenbaum. Refer to Note 6 for more information. 17 Index 13. DIVIDENDS AND DISTRIBUTIONS The following table summarizes the Company’s dividends declared during the three months ended March 31, 2025. No dividends were declared during the three months ended March 31, 2024 . Declaration Date Record Date Payment Date Per Common Share Distribution Amount Total Distribution Amount Regular cash dividend 3/4/2025 3/31/2025 4/15/2025 $ 0.30 $ 4,026,448 2025 Period Subtotal $ 0.30 $ 4,026,448 14. REPORTABLE SEGMENTS ASC 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company is an institutional lender that provides debt capital solutions to CRE markets in the Southern United States. The Company generates revenue from originating and investing in secured CRE loans and providing capital to high-quality borrowers and sponsors with transitional business plans collateralized by CRE assets with opportunities for near-term value creation, as well as recapitalization opportunities. The accounting policies of the institutional lending segment are the same as those described in the summary of significant accounting policies. The presentation of financial results as one reportable segment is consistent with the way the Company operates its business and is consistent with the manner in which the Company’s Chief Operating Decision Maker (“CODM”), the Company’s Chief Executive Officer, evaluates performance and makes resource and operating decisions for the business. The Company has no operations outside of the United States. The Company’s portfolio exhibits similar economic characteristics, similar yields and is operated using consistent business strategies. The Company operates as one operating segment and has one reportable operating segment for activities related to institutional lending. The CODM assesses performance and evaluates the allocation of resources of the Company on a consolidated basis, based on the Company’s net income, which is reported on the Company’s consolidated statements of operations. The CODM is regularly provided with only the consolidated expenses, as noted on the consolidated statement of operations. Significant segment expenses are listed on the accompanying consolidated statement of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets. The CODM uses net income to evaluate income generated from segment assets and in deciding the amount of dividends to be distributed, as well as using net income as a basis for evaluating lender terms for CRE loans with borrowers and sponsors. Interest income earned on the Company’s portfolio was concentrated with five borrowers each comprising more than 10% of consolidated interest income for an aggregate amount of $ 4.0 million, or 81 %, of consolidated interest income during the three months ended March 31, 2025. Interest income earned on the Company’s portfolio was concentrated with two borrowers each comprising more than 10% of consolidated interest income for an aggregate amount of $ 2.0 million, or 98 %, of consolidated interest income during the three months ended March 31, 2024. 15. SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date the consolidated financial statements were available to be issued. There were no material subsequent events that required disclosure in these unaudited interim financial statements. 18 Index CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q (this “Quarterly Report”), filed by Sunrise Realty Trust, Inc. (the “Company,” “SUNS,” “we,” “us,” and “our”), and the information incorporated by reference herein, or made in other reports, filings with the SEC, and press releases contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we intend such statements to be covered by the safe harbor provisions contained therein. These forward-looking statements are based on our current intent, belief, expectations and views of future events. The forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results or performance, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “could,” “would,” “will,” “can,” “continuing,” “may,” “aim,” “intend,” “ongoing,” “plan,” “predict,” “potential,” “should,” “seeks,” “likely to” or words or phrases of similar meaning. Specifically, this Quarterly Report includes forward-looking statements regarding (i) our portfolio and strategies for the growth of our commercial real estate lending business; (ii) our working capital, liquidity and capital requirements; (iii) potential state and federal legislative and regulatory matters; (iv) our expectations and estimates regarding certain tax, legal and accounting matters, including the impact on our financial statements and/or those of our borrowers; (v) the amount, collectability and timing of cash flows, if any, from our loans; (vi) our expected ranges of originations and repayments; (vii) estimates relating to our ability to make distributions to our shareholders in the future; and (viii) our investment strategy. These forward-looking statements reflect management’s current views about future events, and are subject to risks, uncertainties and assumptions. Our actual results may differ materially from the future results and events expressed or implied by the forward-looking statements. Key factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following: • our ability to identify a successful business and investment strategy and execute on our strategy; • the ability of our Manager to locate suitable loan opportunities for us and to monitor and actively manage our portfolio and implement our investment strategy; • our ability to meet our expected ranges of originations and repayments; • our ability to obtain our target mix of loan and collateral types with our expected ranges of yields; • the allocation of loan opportunities to us by our Manager and our ability to close those loans; • changes in general economic conditions, in our industry and in the commercial finance and commercial real estate markets; • we have limited history of operating as an independent company, and our historical financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results; • the state of the U.S. economy generally or in the specific geographic regions in which we operate, including as a result of the impact of natural disasters; • the impact of a protracted decline in the liquidity of credit markets on our business; • the amount, collectability and timing of our cash flows, if any, from our loans; • our ability to obtain and maintain competitive financing arrangements; • our ability to achieve our expected leverage; • changes in the value of our loans; • losses that may be exacerbated due to the concentration of our portfolio in a limited number of loans and borrowers; • our investment and underwriting process; • the rates of default or recovery rates on our loans; • the degree to which our hedging strategies may or may not protect us from interest rate volatility; • the availability of investment opportunities in mortgage-related and real estate-related instruments and other securities; 19 Index • interest rate mismatches between our loans and our borrowings used to fund such loans; • the departure of any of the executive officers or key personnel supporting and assisting us from our Manager or its affiliates; • impact of and changes in governmental regulations, tax law and rates, accounting guidance, tariffs and similar matters; • the impact of a changing interest rate environment on our results of operations, cash flows and the market value of our loans; • our ability to maintain our exemption from registration under the Investment Company Act of 1940 (the “Investment Company Act”); • our ability to qualify and maintain our qualification as a real estate investment trust (a “REIT”) for U.S. federal income tax purposes; • estimates relating to our ability to make distributions to our shareholders in the future; • our understanding of our competition; • market trends in our industry, interest rates, real estate values, the securities markets or the general economy; • we may not achieve some or all of the expected benefits of the Spin-Off; • we may have indemnification liabilities to AFC under the Separation and Distribution Agreement; • there had been no public market for SUNS Common Stock prior to the Distribution and an active trading market may not be sustained or be liquid in the future, which may cause the market price of SUNS Common Stock to decline significantly and make it difficult for investors to sell their shares; • we may issue shares of preferred or common stock in the future, which could dilute your percentage ownership of SUNS; • use of proceeds of our securities offerings; and • litigation, including costs associated with prosecuting or defending claims and any adverse outcomes. The above list of factors is not exhaustive or necessarily in order of importance. Please see the section entitled “ Risk Factors ” located in our Annual Report on Form 10-K, filed with the SEC on March 6, 2025 , for a further discussion of these and other risks and uncertainties which could affect our future results. These forward-looking statements apply only as of the date of this report and we undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by applicable law.