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Index
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 March 31, 2023
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

https://cdn.kscope.io/2f59ef0d53d1832464a53c6b30f20b56-AFCGamma_new_logo.jpg
AFC GAMMA, INC.
(Exact name of registrant as specified in its charter)
Maryland85-1807125
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
525 Okeechobee Blvd., Suite 1650, 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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareAFCGThe Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
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
Class
Outstanding at May 10, 2023
Common stock, $0.01 par value per share20,456,538


Index
AFC GAMMA, INC.
TABLE OF CONTENTS
INDEX
3


Index
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
AFC GAMMA, INC.
CONSOLIDATED BALANCE SHEETS
As of
March 31, 2023December 31, 2022
(unaudited)
Assets
Loans held for investment at fair value (cost of $102,811,826 and $100,635,985 at March 31, 2023 and December 31, 2022, respectively, net)
$99,924,201 $99,226,051 
Loans held for investment at carrying value, net275,211,195 285,177,112 
Loan receivable held at carrying value, net2,220,653 2,220,653 
Current expected credit loss reserve(14,408,793)(13,538,077)
Loans held for investment at carrying value and loan receivable held at carrying value, net of current expected credit loss reserve263,023,055 273,859,688 
Cash and cash equivalents80,605,744 140,372,841 
Interest receivable3,860,493 5,257,475 
Prepaid expenses and other assets420,155 460,844 
Total assets$447,833,648 $519,176,899 
Liabilities
Interest reserve$1,690,334 $3,200,944 
Accrued interest2,217,083 1,036,667 
Due to affiliate20,031 18,146 
Dividends payable11,473,971 11,403,840 
Current expected credit loss reserve585,838 754,128 
Accrued management and incentive fees3,704,219 3,891,734 
Accrued direct administrative expenses1,086,027 1,843,652 
Accounts payable and other liabilities1,611,267 836,642 
Senior notes payable, net87,565,548 97,131,777 
Line of credit payable, net 60,000,000 
Total liabilities109,954,318 180,117,530 
Commitments and contingencies (Note 10)
Shareholders’ equity
Preferred stock, par value $0.01 per share, 10,000 shares authorized at March 31, 2023 and December 31, 2022 and 125 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively
1 1 
Common stock, par value $0.01 per share, 50,000,000 shares authorized at March 31, 2023 and December 31, 2022 and 20,489,234 and 20,364,000 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively
204,892 203,640 
Additional paid-in capital349,085,320 348,817,914 
Accumulated (deficit) earnings(11,410,883)(9,962,186)
Total shareholders’ equity337,879,330 339,059,369 
Total liabilities and shareholders’ equity$447,833,648 $519,176,899 
See accompanying notes to the consolidated financial statements
1

Index
AFC GAMMA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three months ended
March 31,
 20232022
Revenue
Interest income$18,500,486 $18,635,853 
Interest expense(1,668,160)(1,700,115)
Net interest income16,832,326 16,935,738 
Expenses
Management and incentive fees, net (less rebate of $478,645 and $387,493, respectively)
3,704,219 3,847,213 
General and administrative expenses2,006,135 1,144,444 
Stock-based compensation280,578 990,023 
Professional fees420,898 399,368 
Total expenses6,411,830 6,381,048 
Provision for current expected credit losses(702,426)(905,129)
Realized (losses) gains on sales of investments, net(26,384)450,000 
Gain (loss) on extinguishment of debt1,986,381  
Change in unrealized (losses) gains on loans at fair value, net(1,477,691)80,843 
Net income before income taxes10,200,376 10,180,404 
Income tax expense175,102 18,284 
Net income$10,025,274 $10,162,120 
Earnings per common share:
Basic earnings per common share (in dollars per share)$0.49 $0.53 
Diluted earnings per common share (in dollars per share)$0.49 $0.52 
Weighted average number of common shares outstanding:
Basic weighted average shares of common stock outstanding (in shares)20,303,797 19,319,993 
Diluted weighted average shares of common stock outstanding (in shares)20,489,163 19,591,472 
See accompanying notes to the consolidated financial statements

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Index
AFC GAMMA, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)

Three months ended
March 31,
 20232022
Net income$10,025,274 $10,162,120 
Other comprehensive income (loss):
Reversal of unrealized loss to recognized loss on debt securities available for sale held at fair value
 168,750 
Total other comprehensive income (loss) 168,750 
Total comprehensive income$10,025,274 $10,330,870 
See accompanying notes to the consolidated financial statements
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Index
AFC GAMMA, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(unaudited)
Three months ended March 31, 2023
Preferred
Stock
Common StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive Income (Loss)Accumulated
Earnings
(Deficit)
Total
Shareholders’
Equity
SharesAmount
Balance at December 31, 2022$1 20,364,000 $203,640 $348,817,914 $ $(9,962,186)$339,059,369 
Stock-based compensation— 125,234 1,252 267,406 — — 268,658 
Dividends declared on common shares ($0.56 per share)
— — — — — (11,473,971)(11,473,971)
Net income— — — — — 10,025,274 10,025,274 
Balance at March 31, 2023$1 20,489,234 $204,892 $349,085,320 $ $(11,410,883)$337,879,330 
Three months ended March 31, 2022
Preferred
Stock
Common StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive Income (Loss)Accumulated
Earnings
(Deficit)
Total
Shareholders’
Equity
SharesAmount
Balance at December 31, 2021$1 16,442,812 $163,866 $274,172,934 $(168,750)$(1,092,877)$273,075,174 
Issuance of common stock, net of offering costs— 3,291,832 32,918 62,940,025 — — 62,972,943 
Stock-based compensation— 8,296 — 990,023 — — 990,023 
Dividends declared on common shares ($0.55 per share)
— — — — — (10,858,617)(10,858,617)
Other comprehensive income (loss)— — — — 168,750 — 168,750 
Net income— — — — — 10,162,120 10,162,120 
Balance at March 31, 2022$1 19,742,940 $196,784 $338,102,982 $ $(1,789,374)$336,510,393 
See accompanying notes to the consolidated financial statements


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Index
AFC GAMMA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three months ended
March 31,
20232022
Operating activities: 
Net income$10,025,274 $10,162,120 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
Provision for current expected credit losses702,426 905,129 
Realized losses (gains) on sale of investments, net26,384 (450,000)
(Gain) loss on extinguishment of debt(1,986,381) 
Change in unrealized losses (gains) on loans at fair value, net1,477,691 (80,843)
Accretion of deferred loan original issue discount and other discounts(1,236,946)(3,965,878)
Amortization of deferred financing costs - revolving credit facility39,258 50,982 
Amortization of deferred financing costs - senior notes157,652 161,979 
Stock-based compensation268,658 990,023 
Payment-in-kind interest(4,503,746)(1,618,761)
Changes in operating assets and liabilities  
Interest receivable1,409,750 177,673 
Prepaid expenses and other assets1,431 373,765 
Interest reserve(3,010,610)(4,175,108)
Accrued interest1,180,416 1,417,883 
Accrued management and incentive fees, net(187,515)1,024,169 
Accrued direct administrative expenses(757,625)(417,740)
Accounts payable and other liabilities776,510 109,954 
Net cash provided by (used in) operating activities4,382,627 4,665,347 
Cash flows from investing activities:  
Issuance of and fundings on loans(1,523,332)(50,463,213)
Proceeds from sales of loans13,693,481  
Principal repayment of loans2,821,467 20,415,460 
Net cash provided by (used in) investing activities14,991,616 (30,047,753)
Cash flows from financing activities:  
Proceeds from sale of common stock 63,939,722 
Payment of offering costs - equity offering (966,779)
Dividends paid to common shareholders(11,403,840)(8,221,406)
Repayment of senior notes(7,737,500) 
Repayment on revolving credit facility(60,000,000)(75,000,000)
Net cash provided by (used in) financing activities(79,141,340)(20,248,463)
Net (decrease) increase in cash and cash equivalents(59,767,097)(45,630,869)
Cash and cash equivalents, beginning of period140,372,841 109,246,048 
Cash and cash equivalents, end of period$80,605,744 $63,615,179 
Supplemental disclosure of non-cash activity:  
Interest reserve withheld from funding of loans$1,500,000 $ 
OID withheld from funding of loans$ $1,067,675 
Receivable in connection with sale of loan$ $10,600,000 
Receivable in connection with sale of securities$ $15,900,000 
Change in other comprehensive income (loss) during the period$ $168,750 
Dividends declared and not yet paid$11,473,971 $10,858,617 
Supplemental information:  
Interest paid during the period$290,834 $69,271 
Income taxes paid during the period$ $ 
See accompanying notes to the consolidated financial statements
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Index
AFC GAMMA, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
As of March 31, 2023
(unaudited)
1.    ORGANIZATION
AFC Gamma, Inc. (the “Company” or “AFCG”) is an institutional lender to the commercial real estate sector that was founded in July 2020 by a veteran team of investment professionals. The Company primarily originates, structures, underwrites, invests in and manages senior secured commercial real estate loans and other types of loans and debt securities, with a specialization in loans to cannabis industry operators in states that have legalized medical and/or adult-use cannabis.
The Company is a Maryland corporation and completed its initial public offering (the “IPO”) in March 2021. The Company is externally managed by AFC Management, LLC, a Delaware limited liability company (the Company’s “Manager”), pursuant to the terms of the Amended and Restated Management Agreement, dated January 14, 2021, between the parties (as amended from time to time, the “Management Agreement”). The Company’s wholly-owned subsidiary, AFCG TRS1, LLC, a Delaware limited liability company (“TRS1”), operates as a taxable real estate investment trust subsidiary (a “TRS”). TRS1 began operating in July 2021, and the financial statements of TRS1 have been consolidated within the Company’s consolidated financial statements beginning with the quarter ended September 30, 2021.
The Company operates in one operating segment and is primarily focused on financing senior secured loans and other types of loans primarily to (i) senior secured loans to cannabis industry operators in states where medical and/or adult-use cannabis is legal and (ii) secured loans to commercial real estate owners, operators and related businesses. These loans are generally held for investment and are secured, directly or indirectly, by real estate, equipment, the value associated with licenses (where applicable) 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 real estate investment trust (“REIT”) for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”). 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.
2.    SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and results of operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the 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 subsidiary. 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 current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the year ending December 31, 2023.

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Index
Use of Estimates in the Preparation of Financial Statements
The preparation of consolidated 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 and current expected credit losses (“CECL”).
Recent Accounting Pronouncements
None.
3.    LOANS HELD FOR INVESTMENT AT FAIR VALUE
As of March 31, 2023 and December 31, 2022, the Company’s portfolio included three loans held at fair value. The aggregate originated commitment under these loans was approximately $104.3 million and $104.3 million, respectively, and outstanding principal was approximately $104.2 million and $102.4 million as of March 31, 2023 and December 31, 2022, respectively. For the three months ended March 31, 2023, the Company gross funded approximately $0.8 million of additional principal and had no principal repayments of loans held at fair value. As of March 31, 2023 and December 31, 2022, none of the Company’s loans held at fair value had floating interest rates.
The following tables summarize the Company’s loans held at fair value as of March 31, 2023 and December 31, 2022:
As of March 31, 2023
Fair Value(1)
Carrying Value(2)
Outstanding
Principal(2)
Weighted Average
Remaining Life
(Years)(3)
Senior term loans$99,924,201 $102,811,826 $104,172,301 1.0
Total loans held at fair value$99,924,201 $102,811,826 $104,172,301 1.0
As of December 31, 2022
Fair Value(1)
Carrying Value(2)
Outstanding
Principal(2)
Weighted Average
Remaining Life
(Years)(3)
Senior term loans$99,226,051 $100,635,985 $102,376,546 1.2
Total loans held at fair value$99,226,051 $100,635,985 $102,376,546 1.2
(1)Refer to Note 14 to the Company's unaudited interim consolidated financial statements.
(2)The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discount (“OID”) and loan origination costs.
(3)Weighted average remaining life is calculated based on the fair value of the loans as of March 31, 2023 and December 31, 2022.
7

Index
The following table presents changes in loans held at fair value as of and for the three months ended March 31, 2023:
Principal Original Issue
Discount
Unrealized Gains (Losses)Fair Value
Total loans held at fair value at December 31, 2022$102,376,546 $(1,740,561)$(1,409,934)$99,226,051 
Change in unrealized (losses) gains on loans at fair value, net— — (1,477,691)(1,477,691)
New fundings802,884 — — 802,884 
Accretion of original issue discount— 380,086 — 380,086 
PIK interest992,871 — — 992,871 
Total loans held at fair value at March 31, 2023$104,172,301 $(1,360,475)$(2,887,625)$99,924,201 
As of March 31, 2023, the Company had one loan held at fair value on non-accrual status with an outstanding principal amount of approximately $1.2 million with a related unrealized loss recorded of approximately $(1.2) million.
A more detailed listing of the Company’s loans held at fair value portfolio based on information available as of March 31, 2023 is as follows:
Collateral Location
Collateral
Type (1)
Fair
Value (2)
Carrying
Value (3)
Outstanding
Principal (3)
Interest
Rate
Maturity Date (4)
Payment
Terms (5)
Private Co. AAZ, MI, MD, MA, NMC, D$83,552,001 $85,244,168 $86,421,309 16.1 %
(6)
5/8/2024P/I
Public Co. A(9)
NVC 1,213,416 1,213,416 15.0 %
(7)
9/30/2023I/O
Private Co. BMIC, D16,372,200 16,354,242 16,537,576 18.7 %
(8)
9/1/2023P/I
Total loans held at fair value$99,924,201 $102,811,826 $104,172,301   
(1)C = Cultivation Facilities, D = Dispensary/Retail Facilities.
(2)Refer to Note 14 to the Company’s unaudited interim consolidated financial statements.
(3)The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of OID and loan origination costs.
(4)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.
(5)I/O = interest-only, P/I = principal and interest. P/I loans may include interest-only periods for a portion of the loan term.
(6)Base weighted average interest rate of 12.6% and payment-in-kind (“PIK”) weighted average interest rate of 3.5%.
(7)Base interest rate of 7.5% and PIK interest rate of 7.5%.
(8)Base weighted average interest rate of 14.7% and PIK interest rate of 4.0%. As amended, an additional 4.0% PIK interest rate is applicable from January 15, 2023 to April 30, 2023.
(9)As of October 1, 2022, this loan was placed on non-accrual status.
4.    LOANS HELD FOR INVESTMENT AT CARRYING VALUE
As of March 31, 2023 and December 31, 2022, the Company’s portfolio included nine loans held at carrying value. The aggregate originated commitment under these loans was approximately $313.1 million and $338.9 million, respectively, and outstanding principal was approximately $284.5 million and $296.6 million, respectively, as of March 31, 2023 and December 31, 2022. During the three months ended March 31, 2023, the Company funded approximately $2.2 million of additional principal and sold $15.0 million of the Company’s investment in Subsidiary of Public Company M. As of March 31, 2023 and December 31, 2022, approximately 77% and 73%, respectively, of the Company’s loans held at carrying value had floating interest rates. As of March 31, 2023, these floating benchmark rates included one-month LIBOR subject to a weighted average floor of 1.0% and quoted at 4.9%, one-month Secured Overnight Financing Rate (“SOFR”) subject to a weighted average floor of 1.0% and quoted at 4.8% and U.S. prime rate subject to a weighted average floor of 4.9% and quoted at 8.0%.
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Index
The following tables summarize the Company’s loans held at carrying value as of March 31, 2023 and December 31, 2022:
As of March 31, 2023
Outstanding
Principal(1)
Original
Issue
Discount
Carrying
Value(1)
Weighted
Average
Remaining Life
(Years)(2)
Senior term loans$284,494,385 $(9,283,190)$275,211,195 2.9
Total loans held at carrying value$284,494,385 $(9,283,190)$275,211,195 2.9
 As of December 31, 2022
 
Outstanding
Principal(1)
Original
Issue
Discount
Carrying
Value(1)
Weighted
Average
Remaining Life
(Years)(2)
    
Senior term loans$296,584,529 $(11,407,417)$285,177,112 3.1
Total loans held at carrying value$296,584,529 $(11,407,417)$285,177,112 3.1

(1)The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted OID and loan origination costs.
(2)Weighted average remaining life is calculated based on the carrying value of the loans as of March 31, 2023 and December 31, 2022.

The following table presents changes in loans held at carrying value as of and for the three months ended March 31, 2023:
Principal Original Issue
Discount
Carrying Value
Total loans held at carrying value at December 31, 2022$296,584,529 $(11,407,417)$285,177,112 
New fundings2,220,448 — 2,220,448 
Accretion of original issue discount— 856,860 856,860 
Loan repayments(998,142)— (998,142)
Sale of loans(15,000,000)1,267,367 (13,732,633)
PIK interest3,510,875 — 3,510,875 
Loan amortization payments(1,823,325)— (1,823,325)
Total loans held at carrying value at March 31, 2023$284,494,385 $(9,283,190)$275,211,195 
9

Index
A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of March 31, 2023 is as follows:
Collateral Location
Collateral
Type (1)
Outstanding
Principal (2)
Original
Issue
Discount
Carrying
Value (2)
Interest
Rate
Maturity
Date (3)
Payment
Terms (4)
Private Co. CPAC, D$21,966,639 $(513,885)$21,452,754 18.8 %
(5)
12/01/2025P/I
Sub. of Private Co. GNJ, PAC, D75,131,829 (1,680,770)73,451,059 18.3 %
(6)
05/01/2026P/I
Sub. of Private Co. HILC5,781,250 (6,673)5,774,577 15.0 %
(7)
05/11/2023I/O
Private Co. K MAC, D13,000,255 (815,813)12,184,442 18.8 %
(8)
05/03/2027P/I
Private Co. IMDC, D11,195,707 (154,074)11,041,633 21.4 %
(9)
08/01/2026P/I
Private Co. J MOC, D22,651,213 (475,589)22,175,624 20.9 %
(10)
09/01/2025P/I
Sub. of Public Co. HCT, IA, IL, ME, MI, NJ, PAC, D75,000,000 (3,049,221)71,950,779 13.8 %
(11)
01/01/2026I/O
Private Co. LMO, OHC, D50,945,492 (1,982,143)48,963,349 12.0 %
(12)
05/01/2026P/I
Sub. of Public Co. MIL, MI, MA, NJ, OH, PAC, D8,822,000 (605,022)8,216,978 9.5 %
(13)
08/27/2025I/O
Total loans held at carrying value$284,494,385 $(9,283,190)$275,211,195 
(1)C = Cultivation Facilities, D = Dispensary/Retail Facilities.
(2)The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted OID and loan origination costs.
(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 9.0% plus U.S. prime rate (U.S. prime rate floor of 4.0%) and PIK interest rate of 2.0%.
(6)Base interest rate of 10.25% plus U.S. prime rate (U.S. prime rate floor of 4.5%). As amended, 75.0% of the monthly cash interest is paid in kind from December 1, 2022 to May 1, 2023.
(7)Base interest rate of 15.0%.
(8)Base interest rate of 12.0% plus SOFR (SOFR floor of 1.0%) and PIK interest rate of 2.0%.
(9)Base interest rate of 12.0% plus LIBOR (LIBOR floor of 1.0%) and PIK interest rate of 4.5%. As amended, between 50.0% and 60.0% of the monthly cash interest is paid in kind from October 1, 2022 to April 1, 2023.
(10)Base interest rate of 12.0% plus LIBOR (LIBOR floor of 1.0%) and PIK interest rate of 4.0%. Effective April 1, 2023, Private Company J transitioned from LIBOR to SOFR.
(11)Base interest rate of 5.8% plus U.S. prime rate (U.S. prime rate floor of 5.5%).
(12)Base interest rate of 12.0%.
(13)Base interest rate of 9.5%.
5.    LOAN RECEIVABLE HELD AT CARRYING VALUE
As of March 31, 2023 and December 31, 2022, the Company’s portfolio included one loan receivable held at carrying value. The originated commitment under this loan was $4.0 million and outstanding principal was approximately $2.2 million and $2.2 million as of March 31, 2023 and December 31, 2022, respectively. During the three months ended March 31, 2023, the Company had no principal repayments.
10

Index
The following table presents changes in loans receivable as of and for the three months ended March 31, 2023:
Principal Original Issue
Discount
Carrying
Value
Total loan receivable held at carrying value at December 31, 2022$2,222,339 $(1,686)$2,220,653 
Accretion of original issue discount—   
Total loan receivable held at carrying value at March 31, 2023$2,222,339 $(1,686)$2,220,653 
As of March 31, 2023, the Company had one loan receivable held at carrying value on non-accrual status with an outstanding principal amount of approximately $2.2 million with a related current expected credit loss reserve recorded of approximately $1.1 million.
6.    CURRENT EXPECTED CREDIT LOSSES
The Company estimates its current expected credit losses (“CECL”) on both the outstanding balances and unfunded commitments on loans held for investment and requires consideration of a broader range of historical experience adjusted for current conditions and reasonable and supportable forecast information to inform the “CECL Reserve” using a model that considers multiple datapoints and methodologies that may include the likelihood of default and expected loss given default for each individual loan, discounted cash flows (“DCF”), and other inputs which may include the risk rating of the loan, how recently the loan was originated compared to the measurement date, and expected prepayment if applicable. Calculation of the CECL Reserve requires loan specific data, which may include fixed charge coverage ratio, loan-to-value, property type and geographic location. Estimating the CECL Reserve also requires significant judgment with respect to various factors, including but not limited to (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of the Company’s loan portfolio and (iv) the Company’s current and future view of the macroeconomic environment. The Company may consider loan-specific qualitative factors on certain loans to estimate its CECL Reserve, which may include (i) whether cash from the borrower’s operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and (iii) the liquidation value of collateral. For loans where the Company has deemed the borrower/sponsor to be experiencing financial difficulty, the Company may elect to apply a practical expedient in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a specific CECL allowance. In order to estimate the future expected loan losses relevant to the Company’s portfolio, the Company may consider historical market loan loss data provided by a third-party data service. The third party’s loan database includes historical loss data for commercial mortgage-backed securities (“CMBS”), which the Company believes is a reasonably comparable and available data set to its type of loans.
As of March 31, 2023 and December 31, 2022, the Company’s CECL Reserve for its loans held at carrying value and loan receivable held at carrying value is approximately $15.0 million and $14.3 million, respectively, or 5.40% and 4.97%, respectively, of the Company’s total loans held at carrying value and loan receivable held at carrying value of approximately $277.4 million and $287.4 million, respectively, and is bifurcated between the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loan receivable held at carrying value of approximately $14.4 million and $13.5 million, respectively, and a liability for unfunded commitments of approximately $0.6 million and $0.8 million, respectively. The liability was based on the unfunded portion of the loan commitment over the full contractual period over which the Company is exposed to credit risk through a current obligation to extend credit. Management considered the likelihood that funding will occur, and if funded, the expected credit loss on the funded portion.
11

Index
Activity related to the CECL Reserve for outstanding balances and unfunded commitments on the Company’s loans held at carrying value and loan receivable held at carrying value as of and for the three months ended March 31, 2023 was as follows:
Outstanding (1)
Unfunded (2)
Total
Balance at December 31, 2022$13,538,077 $754,128 $14,292,205 
Provision for current expected credit losses870,716 (168,290)702,426 
Write-offs   
Recoveries   
Balance at March 31, 2023$14,408,793 $585,838 $14,994,631 
(1)As of March 31, 2023 and December 31, 2022, the CECL Reserve related to outstanding balances on loans held at carrying value and loan receivable held at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets.
(2)As of March 31, 2023 and December 31, 2022, 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 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. 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:
RatingDefinition
1Very Low Risk — Materially exceeds performance metrics included in original or current credit underwriting and business plan
2Low Risk — Collateral and business performance exceeds substantially all performance metrics included in original or current credit underwriting and business plan
3Medium Risk — Collateral and business performance meets, or is on track to meet underwriting expectations; business plan is met or can reasonably be achieved
4High Risk/ Potential for Loss — Collateral performance falls short of underwriting, material differences from business plans, defaults may exist, or may soon exist absent material improvement. Risk of recovery of interest exists
5Impaired/ Loss Likely — Performance is significantly worse than underwriting with major variances from business plan observed. Loan covenants or financial milestones have been breached; exit from loan or refinancing is uncertain. Full recovery of principal is unlikely
The risk ratings are primarily based on historical data as well as taking into account future economic conditions.
As of March 31, 2023, the carrying value, excluding the CECL Reserve, of the Company’s loans held at carrying value and loan receivable held at carrying value within each risk rating by year of origination is as follows:
Risk Rating:202220212020Total
1$ $ $ $ 
2    
369,364,769 77,725,356 21,452,755 168,542,880 
4 106,668,315  106,668,315 
5  2,220,653 2,220,653 
Total$69,364,769 $184,393,671 $23,673,408 $277,431,848 
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7.    INTEREST RECEIVABLE
The following table summarizes the interest receivable by the Company as of March 31, 2023 and December 31, 2022:
As of
March 31, 2023
As of
December 31, 2022
Interest receivable$2,317,982 $3,722,134 
PIK receivable1,501,100 1,409,678 
Unused fees receivable41,411 125,663 
Total interest receivable$3,860,493 $5,257,475 
8.    INTEREST RESERVE
At March 31, 2023 and December 31, 2022, the Company had one and three loans, respectively, that included a loan-funded interest reserve. For the three months ended March 31, 2023 and 2022, approximately $3.2 million and $4.2 million, respectively, of aggregate interest income was earned and disbursed from the interest reserves.
The following table presents changes in interest reserve as of and for the three months ended March 31, 2023 and 2022:
Three months ended
March 31,
20232022
Beginning reserves$3,200,944 $4,782,271 
New reserves1,716,985  
Reserves disbursed(3,227,595)(4,175,108)
Ending reserves$1,690,334 $607,163 
9.    DEBT
Revolving Credit Facility
On April 29, 2022, the Company entered into the Loan and Security Agreement (the “Revolving Credit Agreement”) by and among the Company, the other loan parties from time to time party thereto, the lenders party thereto, and the lead arranger, bookrunner and administrative agent party thereto, pursuant to which, the Company obtained a $60.0 million senior secured revolving credit facility (the “Revolving Credit Facility”). The Revolving Credit Facility has a maturity date of April 29, 2025.
The Revolving Credit Facility contains aggregate commitments of $60.0 million from two FDIC-insured banking institutions (which may be increased to up to $100.0 million in aggregate, subject to available borrowing base and additional commitments) which may be borrowed, repaid and redrawn, subject to a borrowing base based on eligible loan obligations held by the Company and subject to the satisfaction of other conditions provided under the Revolving Credit Facility. Interest is payable on the Revolving Credit Facility at the greater of (1) the applicable base rate plus 0.50% and (2) 4.50%, as provided in the Revolving Credit Agreement, payable in cash in arrears. During the year ended December 31, 2022, the Company incurred a one-time commitment fee expense of approximately $0.5 million, which is included in prepaid expenses and other assets on the Company’s unaudited interim consolidated balance sheets and amortized over the life of the facility. Commencing on the six-month anniversary of the closing date, the Revolving Credit Facility has an unused line fee of 0.25% per annum, to be paid semi-annually in arrears, which is included within interest expense in the Company’s unaudited interim consolidated statements of operations. As of March 31, 2023 and December 31, 2022, the outstanding loan balance under the Revolving Credit Facility was $0.0 million and $60.0 million, respectively. All borrowings that were previously outstanding as of December 31, 2022 were repaid in full on January 3, 2023.
The obligations of the Company under the Revolving Credit Facility are secured by certain assets of the Company comprising of or relating to loan obligations designated for inclusion in the borrowing base. In addition, the Company is subject to various financial and other covenants, including: (1) liquidity of at least $5.0 million, (2) annual debt service coverage of at least 1.5 to 1.0 and (3) secured debt not to exceed 25% of total consolidated assets of the Company and its subsidiaries.
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Termination of AFC Finance Revolving Credit Facility
In July 2020, the Company obtained a secured revolving credit line (the “AFCF Revolving Credit Facility”) from AFC Finance, LLC and Gamma Lending HoldCo LLC, each affiliates of the Company’s management, secured by the assets of the Company. The AFCF Revolving Credit Facility originally had a loan commitment of $40.0 million at an interest rate of 8% per annum, payable in cash in arrears. The maturity date of the AFCF Revolving Credit Facility was the earlier of (i) July 31, 2021 and (ii) the date of the closing of any credit facility where the proceeds are incurred to refund, refinance or replace the AFCF Revolving Credit Agreement, in accordance with terms of the credit agreement governing the AFCF Revolving Credit Facility (the “AFCF Revolving Credit Agreement”).
On May 7, 2021, the Company amended the AFCF Revolving Credit Agreement (the “First Amendment”). The First Amendment (i) increased the loan commitment from $40.0 million to $50.0 million, (ii) decreased the interest rate from 8% per annum to 6% per annum, (iii) removed Gamma Lending HoldCo LLC as a lender and (iv) extended the maturity date from July 31, 2021 to the earlier of (A) December 31, 2021 or (B) the date of the closing of any refinancing credit facility.
On November 3, 2021, the Company entered into the Second Amendment to the AFCF Revolving Credit Agreement (the “Second Amendment”). Under the Second Amendment, payments to AFC Finance, LLC for interest, commitment fees and unused fees (net applicable taxes) were required to be paid directly or indirectly through AFC Finance, LLC to charitable organizations designated by AFC Finance, LLC. The Second Amendment also (i) increased the loan commitment from $50.0 million to $75.0 million, (ii) decreased the interest rate from 6% per annum to 4.75% per annum, (iii) introduced a one-time commitment fee of 0.25%, to be paid in three equal quarterly installments, and an unused line fee of 0.25% per annum, to be paid quarterly in arrears, (iv) provided an optional buyout provision for the holders of the 2027 Senior Notes upon an event of default under the AFCF Revolving Credit Agreement and (v) extended the fixed element of the maturity date from December 31, 2021 to September 30, 2022. Pursuant to the Second Amendment, the Company incurred a one-time commitment fee expense of approximately $0.2 million in November 2021, payable in three quarterly installments that began in the first quarter of 2022, which was amortized over the life of the loan.
On April 29, 2022, upon the Company’s entry into the Revolving Credit Facility, the Company terminated the AFCF Revolving Credit Agreement. In connection with the termination, the Company paid the remaining amount of the commitment fee outstanding of approximately $0.1 million and accelerated the remaining deferred financing costs of approximately $0.1 million in the second quarter of 2022. There were no other payments, premiums or penalties required to be paid in connection with the termination.
2027 Senior Notes
On November 3, 2021, the Company issued $100.0 million in aggregate principal amount of senior unsecured notes due in May 2027 (the “2027 Senior Notes”). The 2027 Senior Notes accrue interest at a rate of 5.75% per annum. Interest on the 2027 Senior Notes is due semi-annually on May 1 and November 1 of each year, which began on May 1, 2022. The net proceeds from the offering were approximately $97.0 million, after deducting the initial purchasers’ discounts and commissions and estimated offering fees and expenses payable by the Company. The Company used the proceeds from the issuance of the 2027 Senior Notes (i) to fund loans related to unfunded commitments to existing borrowers, (ii) to originate and participate in commercial loans to companies operating in the cannabis industry that are consistent with the Company’s investment strategy and (iii) for working capital and other general corporate purposes. The terms of the 2027 Senior Notes are governed by an indenture, dated November 3, 2021, among us, as issuer, and TMI Trust Company, as trustee (the “Indenture”).
Under the Indenture, the Company is required to cause all of its existing and future subsidiaries to guarantee the 2027 Senior Notes, other than certain immaterial subsidiaries as set forth in the Indenture. Subsequent to the Company’s investment in the senior secured loan to Private Company I being transferred to TRS1 on April 1, 2022, TRS1 was added as a subsidiary guarantor under the Indenture. As of March 31, 2023, the 2027 Senior Notes are guaranteed by TRS1.
Prior to February 1, 2027, the Company may redeem the 2027 Senior Notes in whole or in part, at a price equal to the greater of 100% of the principal amount of the 2027 Senior Notes being redeemed or a make-whole premium set forth in the Indenture, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date. On or after February 1, 2027, we may redeem the 2027 Senior Notes in whole or in part at a price equal to 100% of the principal amount of the 2027 Senior Notes being redeemed, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. The Indenture also requires us to offer to purchase all of the 2027 Senior Notes at a purchase price equal to 101% of the principal amount of the 2027 Senior Notes, plus accrued and unpaid interest if a “change of control triggering event” (as defined in the Indenture) occurs.
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The Indenture contains customary terms and restrictions, subject to a number of exceptions and qualifications, including restrictions on the Company’s ability to (1) incur additional indebtedness unless the Annual Debt Service Charge (as defined in the Indenture) is no less than 1.5 to 1.0, (2) incur or maintain total debt in an aggregate principal amount greater than 60% of the Company’s consolidated Total Assets (as defined in the Indenture), (3) incur or maintain secured debt in an aggregate principal amount greater than 25% of the Company’s consolidated Total Assets (as defined in the Indenture), and (4) merge, consolidate or sell substantially all of the Company’s assets. In addition, the Indenture also provides for customary events of default. If any event of default occurs, any amount then outstanding under the Indenture may immediately become due and payable. These events of default are subject to a number of important exceptions and qualifications set forth in the Indenture.
During the three months ended March 2023, the Company repurchased $10.0 million in principal amount of the Company’s 2027 Senior Notes at 77.4% of par value, plus accrued interest. This resulted in a gain on extinguishment of debt of approximately $2.0 million, recorded within the unaudited interim consolidated statements of operations. Following this transaction, as of March 31, 2023, the Company had $90.0 million in principal amount of the 2027 Senior Notes outstanding.
The 2027 Senior Notes are due on May 1, 2027. Scheduled principal payments on the 2027 Senior Notes as of March 31, 2023 are as follows:
2027 Senior Notes
Year
2023 (remaining)$ 
2024 
2025 
2026 
202790,000,000 
Thereafter 
Total principal$90,000,000 
The following table reflects a summary of interest expense incurred during the three months ended March 31, 2023 and 2022.

Three months ended
March 31, 2023
2027 Senior NotesRevolving Credit FacilityAFCF Revolving Credit FacilityTotal Borrowings
Interest expense$1,408,750 $26,667 $ $1,435,417 
Unused fee expense 35,833  35,833 
Amortization of deferred financing costs157,652 39,258  196,910 
Total interest expense$1,566,402 $101,758 $ $1,668,160 

Three months ended
March 31, 2022
2027 Senior NotesRevolving Credit FacilityAFCF Revolving Credit FacilityTotal Borrowings
Interest expense$1,421,529 $ $19,792 $1,441,321 
Unused fee expense  45,833 45,833 
Amortization of deferred financing costs161,979  50,982 212,961 
Total interest expense$1,583,508 $ $116,607 $1,700,115 
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10.    COMMITMENTS AND CONTINGENCIES
As of March 31, 2023 and December 31, 2022, the Company had the following commitments to fund various investments:
As of
March 31, 2023
As of
December 31, 2022
Total original loan commitments$421,357,243 $447,101,864 
Less: drawn commitments(389,499,749)(401,476,418)
Total undrawn commitments$31,857,494 $45,625,446 
The Company from time to time may be a party to litigation in the normal course of business. As of March 31, 2023, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.
On March 17, 2023, the Company appointed Brandon Hetzel to serve as its Chief Financial Officer and Treasurer in place of Brett Kaufman, effective as of such date, with Mr. Kaufman’s employment with AFC Management, LLC, the Company’s external manager (the “Manager”), terminated, effective as of April 17, 2023 (the “Separation Date”). In connection with his termination, Mr. Kaufman will receive (i) twelve (12) months’ worth of his current base salary, (ii) his annual target bonus, (iii) continued payment by our Manager of 100% of the COBRA premiums for him and his dependents for a period of twelve (12) months following his Separation Date, (iv) accelerated vesting of one (1) additional tranche of each of Mr. Kaufman’s outstanding equity awards, and (v) extension of the exercise period for Mr. Kaufman’s outstanding options until one (1) year following the Separation Date, contingent on Mr. Kaufman executing and not revoking a release of claims in favor of the Company. During the three months ended March 31, 2023, the Company recorded approximately $0.7 million in severance expense, recorded within general and administrative expenses within the unaudited interim consolidated statements of operations.
The Company primarily provides loans to companies operating in the cannabis industry which involves significant risks, including the risk of strict enforcement against the Company’s borrowers on the federal illegality of cannabis, the Company’s borrow