SEC Filing | AFC Gamma Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-39995

AFC GAMMA, INC.

(Exact name of registrant as specified in its charter)

Maryland		85-1807125
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

525 Okeechobee Blvd., Suite 1770, West Palm Beach, FL 33401

(Address of principal executive offices) (Zip Code)

(561) 510-2390

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	AFCG	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☐

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☒

Smaller reporting company ☐

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at November 4, 2021
Common stock, $0.01 par value	16,442,812

AFC GAMMA, INC.

TABLE OF CONTENTS

INDEX

Part I.	Financial Information
Item 1.	Financial Statements	1
	Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020	1
	Consolidated Statements of Operations for the three and nine months ended September 30, 2021 (unaudited) and from July 31, 2020 (date of commencement of operations) to September 30, 2020	2
	Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2021 (unaudited) and from July 31, 2020 (date of commencement of operations) to September 30, 2020	3
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 (unaudited) and from July 31, 2020 (date of commencement of operations) to September 30, 2020	5
	Notes to Consolidated Financial Statements (unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	41
Part II.	Other Information	41
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52
Item 3.	Defaults Upon Senior Securities	53
Item 4.	Mine Safety Disclosures	53
Item 5.	Other Information	53
Item 6.	Exhibits	54

Index

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AFC GAMMA, INC.

CONSOLIDATED BALANCE SHEETS

	As of
	September 30, 2021			December 31, 2020
	(unaudited)
Assets
Loans held for investment at fair value (cost of $73,934,116 and $46,994,711 at September 30, 2021 and December 31, 2020, respectively, net)	$	76,293,824		$	48,558,051

Loans held for investment at carrying value		153,161,781			31,837,031
Loan receivable at carrying value		2,774,455			3,348,263
Current expected credit loss reserve		(1,145,629	)		(404,860	)
Loans held for investment at carrying value and loan receivable at carrying value, net of current expected credit loss reserve		154,790,607			34,780,434

Cash and cash equivalents		69,974,391			9,623,820
Interest receivable		2,434,719			927,292
Prepaid expenses and other assets		391,235			72,095
Total assets	$	303,884,776		$	93,961,692

Liabilities
Interest reserve	$	8,254,295		$	1,325,750
Due to affiliate		9,550,625			-
Dividends payable		7,070,409			-
Current expected credit loss reserve		692,266			60,537
Accrued management and incentive fees		2,542,935			222,127
Accrued direct administrative expenses		846,711			550,671
Accounts payable and other liabilities		520,591			154,895
Total liabilities		29,477,832			2,313,980
Commitments and contingencies (Note 10)
Stockholders’ Equity
Preferred stock, par value $0.01 per share, 10,000 shares authorized at September 30, 2021 and December 31, 2020 and 125 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		1			1
Common stock, par value $0.01 per share, 25,000,000 and 15,000,000 shares authorized at September 30, 2021 and December 31, 2020, respectively, and 16,442,812 and 6,179,392 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		163,866			61,794
Additional paid-in-capital		274,148,323			91,068,197
Accumulated earnings		94,754			517,720
Total stockholders’ equity		274,406,944			91,647,712

Total liabilities and stockholders’ equity	$	303,884,776		$	93,961,692

(See accompanying notes to the consolidated financial statements)

Index

AFC GAMMA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the three months ended September 30, 2021			Period from July 31, 2020 to September 30, 2020		For the nine months ended September 30, 2021			Period from July 31, 2020 to September 30, 2020
	(unaudited)					(unaudited)
Revenue
Interest income	$	10,616,538		$	1,594,769	$	24,050,062		$	1,594,769
Total revenue		10,616,538			1,594,769		24,050,062			1,594,769
Expenses
Management and incentive fees, net (less rebate of $256,989, $84,167, $677,439 and $84,167, respectively)		2,542,936			142,067		5,498,469			142,067
General and administrative expenses		858,663			204,262		2,028,046			204,262
Organizational expenses		-			616,190		-			616,190
Stock-based compensation		51,429			-		1,662,001			-
Professional fees		396,147			89,800		726,194			89,800
Total expenses		3,849,175			1,052,319		9,914,710			1,052,319
Provision for current expected credit losses		(660,612	)		-		(1,372,498	)		-
Realized gains / (losses) on loans at fair value, net		400,000			-		400,000			-
Change in unrealized gains / (losses) on loans at fair value, net		1,423,929			1,563,800		796,368			1,563,800
Net income before income taxes		7,930,680			2,106,250		13,959,222			2,106,250
Income tax expense		-			-		-			-
Net income	$	7,930,680		$	2,106,250	$	13,959,222		$	2,106,250

Earnings per common share:
Basic earnings per common share (in dollars per share)	$	0.48		$	0.39	$	1.13		$	0.39
Diluted earnings per common share (in dollars per share)	$	0.47		$	0.39	$	1.10		$	0.39

Weighted average number of common shares outstanding:
Basic weighted average shares of common stock outstanding (in shares)		16,402,984			5,376,411		12,368,977			5,376,411
Diluted weighted average shares of common stock outstanding (in shares)		16,776,648			5,376,411		12,742,641			5,376,411

(See accompanying notes to the consolidated financial statements)

Index

AFC GAMMA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

Three months ended September 30, 2021
	Preferred		Common Stock				Additional Paid-In		Accumulated Earnings			Total Stockholders’
	Stock		Shares		Amount		Capital		(Deficit)			Equity
Balance at June 30, 2021	$	1		16,116,877	$	161,169	$	269,061,069	$	(765,517	)	$	268,456,722
Issuance of common stock, net of offering cost		-		269,650		2,697		5,035,825		-			5,038,522
Stock-based compensation		-		56,285		-		51,429		-			51,429
Dividends declared on common shares ($0.43 per share)		-		-		-		-		(7,070,409	)		(7,070,409	)
Dividends declared on preferred shares ($60 per share)		-		-		-		-		-			-
Net income		-		-		-		-		7,930,680			7,930,680
Balance at September 30, 2021	$	1		16,442,812	$	163,866	$	274,148,323	$	94,754		$	274,406,944

Period from July 31, 2020 (date of commencement of operations) to September 30, 2020
	Preferred		Common Stock				Additional Paid-In		Accumulated Earnings		Total Stockholders’
	Stock		Shares		Amount		Capital		(Deficit)		Equity
Balance at July 31, 2020	$	-		-	$	-	$	-	$	-	$	-
Issuance of common stock		-		5,376,411		53,764		78,695,168		-		78,748,932
Net income		-		-		-		-		2,106,250		2,106,250
Balance at September 30, 2020	$	-		5,376,411	$	53,764	$	78,695,168	$	2,106,250	$	80,855,182

(See accompanying notes to the consolidated financial statements)

Index

AFC GAMMA, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

Nine months ended September 30, 2021
	Preferred		Common Stock				Additional Paid-In		Accumulated Earnings			Total Stockholders’
	Stock		Shares		Amount		Capital		(Deficit)			Equity
Balance at December 31, 2020	$	1		6,179,392	$	61,794	$	91,068,197	$	517,720		$	91,647,712
Issuance of common stock, net of offering cost		-		10,263,420		102,072		181,418,125		-			181,520,197
Stock-based compensation		-		-		-		1,662,001		-			1,662,001
Dividends declared on common shares ($1.17 per share)		-		-		-		-		(14,374,688	)		(14,374,688	)
Dividends declared on preferred shares ($60 per share)		-		-		-		-		(7,500	)		(7,500	)
Net income		-		-		-		-		13,959,222			13,959,222
Balance at September 30, 2021	$	1		16,442,812	$	163,866	$	274,148,323	$	94,754		$	274,406,944

Period from July 31, 2020 (date of commencement of operations) to September 30, 2020
	Preferred		Common Stock				Additional Paid-In		Accumulated Earnings		Total Stockholders’
	Stock		Shares		Amount		Capital		(Deficit)		Equity
Balance at July 31, 2020	$	-		-	$	-	$	-	$	-	$	-
Issuance of common stock		-		5,376,411		53,764		78,695,168		-		78,748,932
Net income		-		-		-		-		2,106,250		2,106,250
Balance at September 30, 2020	$	-		5,376,411	$	53,764	$	78,695,168	$	2,106,250	$	80,855,182

(See accompanying notes to the consolidated financial statements)

Index

AFC GAMMA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the nine months ended September 30, 2021			Period from July 31, 2020 to September 30, 2020
Operating activities:	(unaudited)
Net income	$	13,959,222		$	2,106,250
Adjustments to reconcile net income to net cash provided by / (used in) operating activities:
Provision for current expected credit losses		1,372,498			-
Realized gain on sale of loans		(400,000	)		-
Change in unrealized (gains) / losses on loans at fair value, net		(796,368	)		(1,563,800	)
Accretion of deferred loan original issue discount and other discounts		(4,038,816	)		(173,110	)
Stock-based compensation		1,662,001			-
PIK interest		(2,787,847	)		(79,707	)
Changes in operating assets and liabilities
Interest reserve		(2,521,923	)		-
Interest receivable		(1,507,427	)		(783,673	)
Prepaid expenses and other assets		(319,140	)		(25,029	)
Accrued management and incentive fees, net		2,320,808			142,067
Accrued direct administrative expenses		296,040			202,534
Accounts payable and other liabilities		366,696			118,040
Net cash provided by / (used in) operating activities		7,605,744			(56,428	)

Cash flows from investing activities:
Issuance of and fundings on loans		(156,345,116	)		(780,000	)
Proceeds from sales of Assigned Rights		2,313,130			-
Proceeds from sales of loans		10,400,000			-
Principal repayment of loans		22,168,395			137,340
Net cash used in investing activities		(121,463,591	)		(642,660	)

Cash flows from financing activities:
Proceeds from sale of common stock		185,501,295			31,946,092
Payment of offering costs		(3,981,098	)		-
Dividends paid		(7,311,779	)		-
Net cash provided by financing activities		174,208,418			31,946,092

Change in cash, cash equivalents and restricted cash		60,350,571			31,247,004
Cash, cash equivalents and restricted cash, beginning of period		9,623,820			-
Cash, cash equivalents and restricted cash, end of period	$	69,974,391		$	31,247,004

Supplemental disclosure of non-cash financing and investing activity
Loans acquired for issuance of shares of common stock	$	-		$	46,802,840
Interest reserve withheld from funding of loans	$	9,450,468		$	1,400,000
OID withheld from funding of loans	$	12,391,624		$	320,000
Loans funded from amounts due to affiliate	$	9,549,625		$	-

Supplemental information:
Interest paid during the period	$	-		$	-
Income taxes paid during the period	$	-		$	-

(See accompanying notes to the consolidated financial statements)

Index

AFC GAMMA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of September 30, 2021

(unaudited)

1.	ORGANIZATION

AFC Gamma, Inc. (the “Company” or “AFCG”) is a commercial real estate finance company primarily engaged in originating, structuring, and underwriting senior secured loans and other types of loans. The Company was formed and commenced operations on July 31, 2020. The Company is a Maryland corporation and completed its initial public offering (the “IPO”) in March 2021. The Company is externally managed by AFC Management, LLC (“AFC Management” or the Company’s “Manager”), a Delaware limited liability company, pursuant to the terms of a management agreement (as amended, the “Management Agreement”). The Company’s wholly owned subsidiary, AFCG TRS1, LLC (“TRS”), was formed under the laws of the State of Delaware on December 31, 2020, and operates as a taxable real estate investment trust (“REIT”) subsidiary. TRS began operating in July 2021, and the financial statements of TRS have been consolidated within the Company’s consolidated financial statements beginning with the quarter ended September 30, 2021.

The Company operates as one operating segment and is primarily focused on financing senior secured loans and other types of loans for established cannabis industry operators in states where medical and/or adult use cannabis is legal. These loans are generally held for investment and are secured, directly or indirectly, by real estate, equipment, the value associated with licenses and/or other assets of borrowers depending on the applicable laws and regulations governing such borrowers.

The Company has elected to be taxed as a REIT for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2020. 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 stockholders and complies with various other requirements as a REIT.

2.	SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited financial statements and the related management’s discussion and analysis of financial condition and results of operations included in the Company’s final prospectus relating to our follow-on public offering filed with the Securities and Exchange Commission (“SEC”) in accordance with Rule 424(b) of the Securities Act of 1933, as amended (the “Securities Act”) on June 24, 2021 (the “Final Prospectus”).

Refer to Note 2 to the Company’s financial statements in the Final Prospectus 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 United States generally accepted accounting principles (“GAAP”) and in conformity with the rules and regulations of the SEC applicable to interim financial information. These unaudited interim consolidated financial statements reflect all adjustments and reclassifications that, in the opinion of management, are considered necessary for a fair statement of the balance sheets, statements of operations, statements of stockholders’ equity, and statement of cash flows for the periods presented.

The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the year ending December 31, 2021.

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 valuation of loans held for investment at fair value.

Index

Over the course of the coronavirus (“COVID-19”) pandemic, medical cannabis companies have been deemed “essential” by almost all states with legalized cannabis and stay-at-home orders. Consequently, the impact of the COVID-19 pandemic and the related regulatory and private sector response on our financial and operating results for the period ended September 30, 2021 was somewhat mitigated as all of our borrowers were permitted to continue to operate during this pandemic. Regardless, the full extent of the economic impact of the business disruptions caused by COVID-19 is uncertain. The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving, and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including the regulated cannabis industry. Although most of these measures have been lifted or scaled back, surges of COVID-19 in certain parts of the world, including the United States, have resulted and may in the future result in the re-imposition of certain restrictions and may lead to more restrictions to reduce the spread of COVID-19. The full effect that these disruptions may have on the operations and financial performance of the Company will depend on future developments, including possible impacts on the performance of the Company’s loans, general business activity, and ability to generate revenue, which cannot be determined.

Recent Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Updated (“ASU”) No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU No. 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company is currently evaluating the impact of adopting this ASU on its financial statements.

In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope, which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU No. 2021-01 is effective immediately for all entities. An entity may elect to apply the amendments on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the date of the issuance of a final update, up to the date that financial statements are available to be issued. If an entity elects to apply any of the amendments for an eligible hedging relationship, any adjustments as a result of those elections must be reflected as of the date the entity applies the election. The amendments do not apply to contract modifications made after December 31, 2022, new hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients in which the accounting effects are recorded through the end of the hedging relationship (including periods after December 31, 2022). The Company is currently evaluating the impact, if any, of this ASU on its financial statements.

In October 2020, the FASB issued ASU No. 2020-08, Codification Improvements to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs, which is an update to clarify that an entity should reevaluate whether a callable debt security is within the scope of 310-20-35-33 for each reporting period. ASU No. 2020-08 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early application is not permitted. For all other entities, the amendments in ASU No. 2020-08 are effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early application is permitted for all other entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. All entities should apply the amendments in this update on a prospective basis as of the beginning of the period of adoption for existing or newly purchased callable debt securities. The Company adopted this new standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements.

3.	LOANS HELD FOR INVESTMENT AT FAIR VALUE

As of September 30, 2021 and December 31, 2020, the Company’s portfolio included three and four loans held at fair value, respectively. The aggregate originated commitment under these loans was approximately $75.9 million and $59.9 million, respectively, and outstanding principal was approximately $77.0 million and $50.8 million, respectively, as of September 30, 2021 and December 31, 2020. For the nine months ended September 30, 2021, the Company funded approximately $37.7 million of outstanding principal and had repayments of approximately $13.1 million. As of September 30, 2021 and December 31, 2020, 0.0% and approximately 6.0%, respectively, of the Company’s loans held at fair value have floating interest rates. As of December 31, 2020, these floating rates were subject to LIBOR floors, with a weighted average floor of 2.5%, calculated based on loans with LIBOR floors. References to LIBOR or “L” are to 30-day LIBOR (unless otherwise specifically stated).

Index

The following tables summarize the Company’s loans held at fair value as of September 30, 2021 and December 31, 2020:

	As of September 30, 2021
	Fair Value ⁽²⁾		Carrying Value ⁽¹⁾		Outstanding Principal ⁽¹⁾		Weighted Average Remaining Life (Years)⁽³⁾

Senior Term Loans	$	76,293,824	$	73,934,116	$	76,995,548		2.5
Total loans held at fair value	$	76,293,824	$	73,934,116	$	76,995,548		2.5

	As of December 31, 2020
	Fair Value ⁽²⁾		Carrying Value ⁽¹⁾		Outstanding Principal ⁽¹⁾		Weighted Average Remaining Life (Years)⁽³⁾

Senior Term Loans	$	48,558,051	$	46,994,711	$	50,831,235		3.3
Total loans held at fair value	$	48,558,051	$	46,994,711	$	50,831,235		3.3

(1)	The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted purchase discount, deferred loan fees and loan origination costs.

(2)	Refer to Note 14 to our unaudited consolidated financial statements.

(3)	Weighted average remaining life is calculated based on the fair value of the loans as of September 30, 2021 and December 31, 2020.

The following table presents changes in loans held at fair value as of and for the nine months ended September 30, 2021:

	Principal			Original Issue Discount			Unrealized Gains/ (Losses)		Fair Value

Total loans held at fair value at December 31, 2020	$	50,831,235		$	(3,836,524	)	$	1,563,340	$	48,558,051
Change in unrealized gains / (losses) on loans at fair value, net		-			-			796,368		796,368
New fundings		37,701,104			(1,130,623	)		-		36,570,481
Loan repayments		(12,000,000	)		-			-		(12,000,000	)
Loan amortization payments		(1,093,659	)		-			-		(1,093,659	)
Accretion of original issue discount		-			1,905,715			-		1,905,715
PIK interest		1,556,868			-			-		1,556,868
Total loans held at fair value at September 30, 2021	$	76,995,548		$	(3,061,432	)	$	2,359,708	$	76,293,824

A more detailed listing of the Company’s loans held at fair value portfolio based on information available as of September 30, 2021 is as follows:

	Collateral Location	Collateral Type ⁽⁸⁾		Fair Value ⁽²⁾		Carrying Value ⁽¹⁾		Outstanding Principal ⁽¹⁾		Interest Rate				Maturity Date ⁽³⁾	Payment Terms ⁽⁴⁾

Private Co. A	AZ, MI, MD, MA		C , D	$	62,853,367	$	60,857,429	$	63,391,847		16.4	%	⁽⁵⁾	5/8/2024		P/I
Private Co. B	MI		C		10,535,737		10,171,757		10,663,701		17.0	%	⁽⁶⁾	9/1/2023		P/I
Public Co. A	NV		C		2,904,720		2,904,930		2,940,000		14.0	%	⁽⁷⁾	1/26/2023		I/O
Total loans held at fair value				$	76,293,824	$	73,934,116	$	76,995,548

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

(2)	Refer to Note 14 to our unaudited consolidated financial statements.

(3)

Certain loans are subject to contractual extension options and may be subject to performance based or other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications.

(4)	I/O = interest-only, P/I = principal and interest. P/I loans may include interest-only periods for a portion of the loan term.

(5)	Base interest rate of 13% and payment-in-kind (“PIK”) interest rate of 3.4%.

(6)	Base interest rate of 13% and PIK interest rate of 4%.

(7)	Base interest rate of 12% and PIK interest rate of 2%.

(8)	C = Cultivation Facilities, D = Dispensaries.

Index

4.	LOANS HELD FOR INVESTMENT AT CARRYING VALUE

As of September 30, 2021 and December 31, 2020, the Company’s portfolio included 12 and three loans, respectively, held at carrying value. The aggregate originated commitment under these loans was approximately $217.0 million and $44.0 million, respectively, and outstanding principal was approximately $164.4 million and $33.9 million, respectively, as of September 30, 2021 and December 31, 2020. For the nine months ended September 30, 2021, the Company funded approximately $139.2 million of outstanding principal. As of September 30, 2021 and December 31, 2020, approximately 68% and 35%, respectively, of the Company’s loans held at carrying value have floating interest rates. These floating rates are subject to LIBOR floors, with a weighted average floor of 1.0%, calculated based on loans with LIBOR floors. References to LIBOR or “L” are to 30-day LIBOR (unless otherwise specifically stated).

The following tables summarize the Company’s loans held at carrying value as of September 30, 2021 and December 31, 2020:

	As of September 30, 2021
	Outstanding Principal ⁽¹⁾		Original Issue Discount			Carrying Value ⁽¹⁾		Weighted Average Remaining Life (Years)⁽²⁾

Senior Term Loans	$	164,361,340	$	(11,199,559	)	$	153,161,781		4.0
Total loans held at carrying value	$	164,361,340	$	(11,199,559	)	$	153,161,781		4.0

	As of December 31, 2020
	Outstanding Principal ⁽¹⁾		Original Issue Discount			Carrying Value ⁽¹⁾		Weighted Average Remaining Life (Years)⁽²⁾

Senior Term Loans	$	33,907,763	$	(2,070,732	)	$	31,837,031		4.7
Total loans held at carrying value	$	33,907,763	$	(2,070,732	)	$	31,837,031		4.7

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

(2)	Weighted average remaining life is calculated based on the carrying value of the loans as of September 30, 2021 and December 31, 2020.

Index

The following table presents changes in loans held at carrying value as of and for the nine months ended September 30, 2021:

	Principal			Original Issue Discount			Carrying Value

Total loans held at carrying value at December 31, 2020	$	33,907,763		$	(2,070,732	)	$	31,837,031
New fundings		139,222,598			(11,261,001	)		127,961,597
Accretion of original issue discount		-			2,132,174			2,132,174
Realized gain on sale of loans		400,000			-			400,000
Sale of loans		(10,400,000	)		-			(10,400,000	)
PIK interest		1,230,979			-			1,230,979
Total loans held at carrying value at September 30, 2021	$	164,361,340		$	(11,199,559	)	$	153,161,781

A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of September 30, 2021 is as follows:

	Collateral Location	Collateral Type ⁽⁴⁾		Outstanding Principal ⁽¹⁾		Original Issue Discount			Carrying Value ⁽¹⁾		Interest Rate				Maturity Date ⁽²⁾	Payment Terms ⁽³⁾

Private Co. C	PA		C , D	$	19,333,872	$	(721,311	)	$	18,612,561		17.0	%	⁽⁵⁾	12/1/2025		P/I
Sub. of Public Co. D	PA		C		10,000,000		(149,235	)		9,850,765		12.9	%	⁽⁶⁾	12/18/2024		I/O
Private Co. D	OH, AR		D		12,169,041		(877,891	)		11,291,150		15.0	%	⁽⁷⁾	1/1/2026		P/I
Private Co. E	OH		C , D		14,220,552		(2,782,310	)		11,438,242		17.0	%	⁽⁸⁾	4/1/2026		P/I
Private Co. F	MO		C , D		9,799,658		(1,816,803	)		7,982,855		17.0	%	⁽⁹⁾	5/1/2026		P/I
Public Co. E	MI		C		5,000,000		(307,143	)		4,692,857		13.0	%	⁽¹⁰⁾	4/29/2025		P/I
Sub. of Private Co. G	NJ		C , D		42,945,657		(2,498,443	)		40,447,214		14.3	%	⁽¹¹⁾	5/1/2026		P/I
Public Co. F	IL, FL, NV, OH, MA, MI, MD,AR, NV, AZ		C , D		10,000,000		(160,000	)		9,840,000		9.8	%	⁽¹²⁾	5/30/2023		I/O
Sub. of Private Co. H	IL		C		5,781,250		(126,790	)		5,654,460		15.0	%	⁽¹³⁾	5/11/2023		I/O
Private Co. K	MA		C , D		7,000,000		(763,667	)		6,236,333		13.0	%	⁽¹⁴⁾	08/03/2026		P/I
Private Co. I	MD		C , D		10,109,310		(225,184	)		9,884,126		15.5	%	⁽¹⁵⁾	8/1/2026		P/I
Private Co. J	MO		C		18,002,000		(770,782	)		17,231,218		15.0	%	⁽¹⁶⁾	09/01/2025		P/I
Total loans held at carrying value				$	164,361,340	$	(11,199,559	)	$	153,161,781

(1)	The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted purchase discount, deferred loan fees and loan origination costs.

(2)

(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)	C = Cultivation Facilities, D = Dispensaries.

(5)	Base interest rate of 12.0% plus LIBOR (LIBOR floor of 1.0%) and PIK interest rate of 4.0%.

(6)	Base interest rate of 12.9%.

(7)	Base interest rate of 13.0% and PIK interest rate of 2.0%.

(8)	Base interest rate of 12.0% plus LIBOR (LIBOR floor of 1.0%) and PIK interest rate of 4.0%.

(9)	Base interest rate of 13.0% and PIK interest rate of 4.0%.

(10)	Base interest rate of 13.0%.

(11)	Base interest rate of 11.5% plus LIBOR (LIBOR floor of 1.0%) and PIK interest rate of 1.8%.

(12)	Base interest rate of 9.8%.

(13)	Base interest rate of 15.0%.

(14)	Base interest rate of 12.0% plus LIBOR (LIBOR floor of 1.0%)

(15)	Base interest rate of 12.0% plus LIBOR (LIBOR floor of 1.0%) and PIK interest rate of 2.5%.

(16)	Base interest rate of 12.0% plus LIBOR (LIBOR floor of 1.0%) and PIK interest rate of 2.0%.

Index

5.	LOAN RECEIVABLE AT CARRYING VALUE

As of September 30, 2021 and December 31, 2020, the Company’s portfolio included one loan receivable at carrying value. The originated commitment under this loan was approximately $4.0 million and outstanding principal was approximately $2.8 million and $3.4 million as of September 30, 2021 and December 31, 2020, respectively. During the nine months ended September 30, 2021, the Company received repayments of approximately $0.6 million of outstanding principal.

The following table presents changes in loans receivable as of and for the nine months ended September 30, 2021:

	Principal			Original Issue Discount			Carrying Value

Total loans receivable at carrying value at December 31, 2020	$	3,352,176		$	(3,913	)	$	3,348,263
Principal repayment of loans		(574,735	)		-			(574,735	)