|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification Number)
|
Title of each class
|
Trading Symbol(s)
|
Name of
each exchange on which registered
|
Large accelerated filer ☐
|
Accelerated filer ☐
|
|
Smaller reporting company
|
Emerging growth company
|
Class
Common stock, $0.01 par value
|
Outstanding at August 5, 2021
|
Part I.
|
||
Item 1.
|
1
|
|
1
|
||
2 |
||
3 |
||
4 |
||
5 |
||
Item 2.
|
22 |
|
Item 3.
|
38 |
|
Item 4.
|
42 |
|
Part II.
|
43 |
|
Item 1.
|
43 |
|
Item 1A.
|
43 |
|
Item 2.
|
43 |
|
Item 3.
|
44 |
|
Item 4.
|
44 |
|
Item 5.
|
44 |
|
Item 6.
|
44 |
As Of
|
||||||||
June 30, 2021
|
December 31, 2020
|
|||||||
(unaudited)
|
||||||||
Assets
|
||||||||
Loans held for investment at fair value (cost of $
|
$
|
|
$
|
|
||||
|
||||||||
Loans held for investment at carrying value
|
|
|
||||||
Loan receivable at carrying value
|
|
|
||||||
Current expected credit loss reserve
|
(
|
)
|
(
|
)
|
||||
Loans held for investment at carrying value and loan receivable at carrying value, net of current expected credit loss reserve
|
|
|
||||||
|
||||||||
Cash and cash equivalents
|
|
|
||||||
Interest receivable
|
|
|
||||||
Prepaid expenses and other assets
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
Liabilities
|
||||||||
Interest reserve
|
$
|
|
$
|
|
||||
Current expected credit loss reserve
|
|
|
||||||
Accrued management and incentive fees
|
|
|
||||||
Accrued direct administrative expenses
|
|
|
||||||
Accounts payable and other liabilities
|
|
|
||||||
Total liabilities
|
|
|
||||||
Commitments and contingencies (Note 10)
|
||||||||
Stockholders' Equity
|
||||||||
Preferred stock, par value $
|
|
|
||||||
Common stock, par value $
|
|
|
||||||
Additional paid-in-capital
|
|
|
||||||
Accumulated earnings (deficit)
|
(
|
)
|
|
|||||
Total stockholders' equity
|
|
|
||||||
Total liabilities and stockholders' equity
|
$
|
|
$
|
|
For the three
months ended
June 30,
2021
|
For the six
months ended
June 30,
2021
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Revenue
|
||||||||
Interest Income
|
$
|
|
$
|
|
||||
Total revenue
|
|
|
||||||
Expenses
|
||||||||
Management and incentive fees, net (less rebate of $
|
|
|
||||||
General and administrative expenses
|
|
|
||||||
Stock-based compensation
|
|
|
||||||
Professional fees
|
|
|
||||||
Total expenses
|
|
|
||||||
Provision for current expected credit losses
|
(
|
)
|
(
|
)
|
||||
Change in unrealized gains / (losses) on loans at fair value, net
|
(
|
)
|
(
|
)
|
||||
Net income before income taxes
|
|
|
||||||
Income tax expense
|
|
|
||||||
Net income
|
$
|
|
$
|
|
||||
Earnings per common share:
|
||||||||
Basic earnings per common share (in dollars per share)
|
$
|
|
$
|
|
||||
Diluted earnings per common share (in dollars per share)
|
$
|
|
$
|
|
||||
Weighted average number of common shares outstanding:
|
||||||||
Basic weighted average shares of common stock outstanding (in shares)
|
|
|
||||||
Diluted weighted average shares of common stock outstanding (in shares)
|
|
|
Three months ended June 30, 2021
|
||||||||||||||||||||||||
Preferred
Stock
|
Common Stock
|
Additional Paid-
In-Capital
|
Accumulated
Earnings
(Deficit)
|
Total
Stockholders'
Equity
|
||||||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||||||
Balance at March 31, 2021
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
||||||||||||
Issuance of common stock, net of offering cost
|
|
|
|
|
|
|
||||||||||||||||||
Stock-based compensation
|
|
-
|
|
|
|
|
||||||||||||||||||
Dividends declared and paid on common shares ($
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Dividends declared and paid on preferred shares ($
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Net income
|
|
-
|
|
|
|
|
||||||||||||||||||
Balance at June 30, 2021
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
Six
months ended June 30, 2021
|
||||||||||||||||||||||||
Preferred
Stock
|
Common Stock
|
Additional Paid-
In-Capital
|
Accumulated
Earnings
(Deficit)
|
Total
Stockholders'
Equity
|
||||||||||||||||||||
Shares
|
Amount
|
|||||||||||||||||||||||
Balance at December 31, 2020
|
$
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||||||
Issuance of common stock, net of offering cost
|
|
|
|
|
|
|
||||||||||||||||||
Stock-based compensation
|
|
-
|
|
|
|
|
||||||||||||||||||
Dividends declared and paid on common shares ($
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Dividends declared and paid on preferred shares ($
|
|
-
|
|
|
(
|
)
|
(
|
)
|
||||||||||||||||
Net income
|
|
-
|
|
|
|
|
||||||||||||||||||
Balance at June 30, 2021
|
$
|
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
For the six
months ended
June 30, 2021
|
||||
Operating activities:
|
(unaudited)
|
|||
Net income
|
$
|
|
||
Adjustments to reconcile net income / (loss) to net cash provided by / (used in) operating activities:
|
||||
Provision for current expected credit losses
|
|
|||
Change in unrealized gains / (losses) on loans at fair value, net
|
|
|||
Accretion of deferred loan original issue discount and other discounts
|
(
|
)
|
||
Stock-based compensation
|
|
|||
PIK interest
|
(
|
)
|
||
Changes in operating assets and liabilities:
|
||||
Interest reserve
|
(
|
)
|
||
Interest receivable
|
(
|
)
|
||
Prepaid expenses and other assets
|
(
|
)
|
||
Accrued management fees, net
|
|
|||
Accrued direct administrative expenses
|
(
|
)
|
||
Accounts payable and other liabilities
|
|
|||
Net cash provided by / (used in) operating activities
|
|
|||
Cash flows from investing activities:
|
||||
Issuance of and fundings on loans
|
(
|
)
|
||
Proceeds from sales of Assigned Rights
|
|
|||
Principal repayment of loans
|
|
|||
Net cash provided by / (used in) investing activities
|
(
|
)
|
||
Cash flows from financing activities:
|
||||
Proceeds from sale of common stock
|
|
|||
Payment of offering costs
|
(
|
)
|
||
Dividends paid
|
(
|
)
|
||
Net cash provided by / (used in) financing activities
|
|
|||
Change in cash, cash equivalents and restricted cash
|
|
|||
Cash, cash equivalents and restricted cash, beginning of period
|
|
|||
Cash, cash equivalents and restricted cash, end of period
|
$
|
|
||
Supplemental disclosure of non-cash financing and investing activity:
|
||||
Interest reserve withheld from funding of loan
|
$
|
|
||
Supplemental information:
|
||||
Interest paid during the period
|
$
|
|
||
Income taxes paid during the period
|
$
|
|
1. |
ORGANIZATION
|
2. |
SIGNIFICANT ACCOUNTING POLICIES
|
3. |
LOANS HELD FOR INVESTMENT AT FAIR VALUE
|
As of June 30, 2021
|
||||||||||||||||
Fair Value (2)
|
Carrying Value (1)
|
Outstanding
Principal (1)
|
Weighted Average
Remaining Life
(Years)(3)
|
|||||||||||||
Senior Term Loans
|
$
|
|
$
|
|
$
|
|
|
|||||||||
Total loans held at fair value
|
$
|
|
$
|
|
$
|
|
|
As of December 31, 2020
|
||||||||||||||||
Fair Value (2)
|
Carrying Value (1)
|
Outstanding
Principal (1)
|
Weighted Average
Remaining Life
(Years)(3)
|
|||||||||||||
Senior Term Loans
|
$
|
|
$
|
|
$
|
|
|
|||||||||
Total loans held at fair value
|
$
|
|
$
|
|
$
|
|
|
(1) |
|
(2) |
|
(3) |
|
Principal
|
Original Issue
Discount
|
Unrealized Gains
/ (Losses)
|
Fair Value
|
|||||||||||||
Total loans held at fair value at December 31, 2020
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
|||||||
Change in unrealized gains / (losses) on loans at fair value, net
|
|
|
(
|
)
|
(
|
)
|
||||||||||
New fundings
|
|
(
|
)
|
|
|
|||||||||||
Loan repayments |
( |
) | ( |
) | ||||||||||||
Loan amortization payments |
( |
) | ( |
) | ||||||||||||
Accretion of original issue discount
|
|
|
|
|
||||||||||||
PIK Interest
|
|
|
|
|
||||||||||||
Total loans held at fair value at June 30, 2021
|
$
|
|
$
|
(
|
)
|
$
|
|
$
|
|
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
|
|
$
|
|
$
|
|
$
|
|
|
%
|
(5)
|
|
|
||||||||||||||
Private Co. B
|
MI
|
C |
|
|
|
|
|
%
|
(6)
|
|
|
|||||||||||||||||
Public Co. A - Real Estate Loan
|
NV
|
C |
|
|
|
|
|
%
|
(7)
|
|
|
|
||||||||||||||||
Total loans held at fair value
|
$
|
|
$
|
|
$
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
(5) |
|
(6) |
|
(7) |
|
4. |
LOANS HELD FOR INVESTMENT AT CARRYING VALUE
|
As of June 30, 2021
|
||||||||||||||||
Outstanding
Principal (1)
|
Original
Issue
Discount
|
Carrying
Value (1)
|
Weighted Average
Remaining Life
(Years)(2)
|
|||||||||||||
Senior Term Loans
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
Total loans held at carrying value
|
$
|
|
$
|
(
|
)
|
$
|
|
As of December 31, 2020
|
||||||||||||||||
Outstanding
Principal (1)
|
Original
Issue
Discount
|
Carrying
Value (1)
|
Weighted Average
Remaining Life
(Years)(2)
|
|||||||||||||
Senior Term Loans
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||||||
Total loans held at carrying value
|
$
|
|
$
|
(
|
)
|
$
|
|
(1) |
|
(2) |
|
Principal
|
Original Issue
Discount
|
Carrying Value
|
||||||||||
Total loans held at carrying value at December 31, 2020
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
New fundings
|
( |
) | ||||||||||
Accretion of original issue discount
|
-
|
|||||||||||
PIK interest | - | |||||||||||
Total loans held at carrying value at June 30, 2021
|
$
|
|
$
|
(
|
)
|
$
|
|
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
|
$
|
|
$
|
(
|
)
|
$
|
|
|
% |
(5)
|
|
|
|||||||||||
Private Co. D
|
OH, AR
|
D |
( |
) | % |
(6)
|
|||||||||||||||||||
Sub. of Public Co. D
|
PA
|
C |
|
( |
) |
|
% | (7) |
|
|
|||||||||||||||
Private Co. E
|
OH
|
C , D
|
|
(
|
)
|
|
|
% | (8) |
|
|||||||||||||||
Private Co. F |
MO | C , D |
( |
) | % | (9) | |||||||||||||||||||
Public Co. E | MI | C |
( |
) | % | (10) | |||||||||||||||||||
Sub. of Private Co. G |
NJ | C , D |
( |
) | % | (11) | |||||||||||||||||||
Public Co. F |
IL, FL, NV,
OH, MA, MI, MD,
AR, NV, AZ
|
C , D | ( |
) | % | (12) |
|||||||||||||||||||
Sub. of Private Co. H |
IL | C |
( |
) | % | (13) | |||||||||||||||||||
Private Co. I |
MD | C , D |
( |
) | % | (14) | |||||||||||||||||||
Total loans held at carry value
|
$ | $ | ( |
) |
$
|
|
(1) |
|
(2) |
|
(3) |
|
(4) |
C = Cultivation Facilities,
D = Dispensaries.
|
(5) |
|
(6) |
|
(7) |
|
(8) |
|
(9) |
|
(10) |
|
(11) |
|
(12) |
|
5.
|
LOAN RECEIVABLE AT CARRYING VALUE
|
Principal
|
Original Issue
Discount
|
Carrying
Value
|
||||||||||
Total loans receivable at carrying value at December 31, 2020
|
$
|
|
$
|
(
|
)
|
$
|
|
|||||
Principal repayment of loans
|
(
|
)
|
-
|
(
|
)
|
|||||||
Accretion of original issue discount | - | |||||||||||
Total loans receivable at carrying value at June 30,
2021
|
$
|
|
$
|
(
|
)
|
$
|
|
6.
|
CURRENT EXPECTED CREDIT LOSSES
|
Outstanding (1)
|
Unfunded (2)
|
Total
|
||||||||||
Balance at March 31, 2021
|
$
|
|
$
|
|
$
|
|
||||||
Provision for current expected credit losses
|
|
|
|
|
||||||||
Write-offs
|
|
|
|
|||||||||
Recoveries
|
|
|
|
|||||||||
Balance at June 30, 2021
|
$
|
|
$
|
|
$
|
|
|
Outstanding (1)
|
Unfunded (2)
|
Total
|
|||||||||
Balance at December 31, 2020
|
$
|
|
$
|
|
$
|
|
||||||
Provision for current expected credit losses
|
|
|
|
|||||||||
Write-offs
|
|
|
|
|||||||||
Recoveries
|
|
|
|
|||||||||
Balance at June 30, 2021
|
$
|
|
$
|
|
$
|
|
(1)
|
|
(2)
|
|
Rating
|
Definition
|
||
1
|
Very Low Risk
|
||
2
|
Low Risk
|
||
3
|
Medium Risk
|
||
4
|
High Risk/ Potential for Loss
|
||
5
|
Impaired/Loss Likely
|
Risk Rating:
|
2021
|
2020
|
Total
|
||||||||||
1
|
$
|
|
$
|
|
$
|
|
|||||||
2
|
|
|
|
||||||||||
3
|
|
|
|
||||||||||
4
|
|
|
|
||||||||||
5
|
|
|
|
||||||||||
Total
|
$
|
|
$
|
|
$
|
|
7. |
INTEREST RECEIVABLE
|
As of
June 30, 2021
|
As of
December 31, 2020
|
|||||||
Interest receivable
|
$
|
|
$
|
|
||||
PIK receivable
|
|
|
||||||
Unused fees receivable
|
|
|
||||||
Total interest receivable
|
$
|
|
$
|
|
|
8. |
INTEREST RESERVE
|
Three months ended
June 30, 2021
|
Six months ended
June 30, 2021
|
|||||||
Beginning reserves
|
$ |
$
|
|
|||||
New reserves
|
||||||||
Reserves disbursed
|
( |
) |
(
|
)
|
||||
Ending reserves
|
$ |
$
|
|
9. |
DEBT
|
10. |
COMMITMENTS AND CONTINGENCIES
|
As of June 30, 2021
|
As of December 31, 2020
|
|||||||
Total original loan commitments
|
$
|
|
$
|
|
||||
Less: drawn commitments
|
(
|
)
|
(
|
)
|
||||
Total undrawn commitments
|
$
|
|
$
|
|
11. |
STOCKHOLDERS’ EQUITY
|
As of
June 30, 2021
|
As of
December 31, 2020
|
|||||||
Non-vested |
||||||||
Vested |
||||||||
Forfeited
|
(
|
)
|
(
|
)
|
||||
Balance |
Assumptions
|
Range
|
|||
Expected volatility
|
|
%
|
||
Expected dividend yield
|
|
%
|
||
Risk-free interest rate
|
|
%
|
||
Expected forfeiture rate
|
|
%
|
Three months ended
June 30, 2021
|
Weighted-Average
Grant Date Fair
Value Per Option
|
|||||||
Balance as of March 31, 2021
|
|
$
|
|
|||||
Granted
|
|
|
||||||
Exercised
|
|
|
||||||
Forfeited
|
(
|
)
|
|
|||||
Balance as of June 30, 2021
|
|
$
|
|
Six months ended
June 30, 2021
|
Weighted-Average
Grant Date Fair
Value Per Option
|
|||||||
Balance as of December 31, 2020
|
|
$
|
|
|||||
Granted
|
|
|
||||||
Exercised
|
|
|
||||||
Forfeited
|
(
|
)
|
|
|||||
Balance as of June 30, 2021
|
|
$
|
|
12. |
EARNINGS PER SHARE
|
|
Three months ended
June 30, 2021
|
Six months ended
June 30, 2021
|
||||||
|
||||||||
Net income / (loss) attributable to common stockholders
|
$
|
|
$
|
|
||||
Divided by:
|
||||||||
Basic weighted average shares of common stock outstanding
|
|
|
||||||
Diluted weighted average shares of common stock outstanding
|
|
|
||||||
Basic weighted average earnings per common share
|
$
|
|
$
|
|
||||
Diluted weighted average earnings per common share
|
$
|
|
$
|
|
13. |
INCOME TAX
|
14. |
FAIR VALUE
|
As of June 30, 2021
|
|||||||||||||||
Unobservable Input
|
|||||||||||||||
Fair Value
|
Primary Valuation
Techniques
|
Input
|
Estimated Range
|
Weighted
Average
|
|||||||||||
Senior Term Loans |
$
|
|
Yield analysis | Market Yield | % | % | |||||||||
Total Investments
|
$
|
|
As of December 31, 2020
|
|||||||||||||||
Unobservable Input
|
|||||||||||||||
Fair Value
|
Primary Valuation
Techniques
|
Input
|
Estimated Range
|
Weighted
Average
|
|||||||||||
Senior Term Loans
|
$ |
|
Yield analysis
|
Market Yield
|
|
%
|
|
%
|
|||||||
Total Investments
|
$ |
|
Fair Value Measurement Using as of June 30, 2021
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Loans held at fair value
|
$ |
|
|
|
$ |
|
||||||||||
Total
|
$ |
|
|
|
$ |
|
Fair Value Measurement Using as of December 31, 2020
|
||||||||||||||||
Total
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Loans held at fair value
|
$ |
|
|
|
$ |
|
||||||||||
Total
|
$ |
|
|
|
$ |
|
Six months ended
June 30, 2021
|
||||
Total loans using Level 3 inputs at December 31, 2020
|
$
|
|
||
Change in unrealized gains / (losses) on loans at fair value, net
|
(
|
)
|
||
Additional funding
|
|
|||
Original issue discount and other discounts, net of costs
|
(
|
)
|
||
Loan repayments |
( |
) | ||
Loan amortization payments |
( |
) | ||
Accretion of original issue discount
|
|
|||
PIK Interest
|
|
|||
Total loans using Level 3 inputs at June 30, 2021
|
$
|
|
As of June 30, 2021
|
||||||||
Carrying
Value
|
Fair Value
|
|||||||
Financial assets
|
||||||||
Cash and cash equivalents
|
$
|
|
$
|
|
||||
Loans held for investment at carrying value
|
$
|
|
$
|
|
||||
Loan receivable at carrying value
|
$
|
|
$
|
|
15. |
RELATED PARTY TRANSACTIONS
|
|
Three months ended
June 30, 2021
|
Six months ended
June 30, 2021
|
||||||
Affiliate Costs
|
||||||||
Management fees
|
$
|
|
$
|
|
||||
Less other fees earned
|
(
|
)
|
(
|
)
|
||||
Incentive fees earned
|
|
|
||||||
General and administrative expenses reimbursable to Manager
|
|
|
||||||
Total
|
$
|
|
$
|
|
16. |
DIVIDENDS AND DISTRIBUTIONS
|
Record Date |
Payment
Date
|
Common Share
Distribution
Amount
|
Taxable
Ordinary
Income
|
Return of
Capital
|
Section
199A
Dividends
|
||||||||||||||
Regular cash dividend
|
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||
Regular cash dividend | $ |
$ |
$ |
$ |
|||||||||||||||
Total cash dividend
|
$
|
|
$
|
|
$
|
|
$
|
|
17. |
SUBSEQUENT EVENTS
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
• |
use of proceeds of the IPO and our follow-on public offering;
|
• |
our business and investment strategy;
|
• |
our projected operating results;
|
• |
the impact of the COVID-19 pandemic, on our business and the United States and global economies;
|
• |
the ability of our Manager to locate suitable loan opportunities for us, monitor, service and administer our loans and execute our investment strategy;
|
• |
allocation of loan opportunities to us by our Manager;
|
• |
actions and initiatives of the U.S. or state governments and changes to government policies and the execution and impact of these actions, initiatives and policies, including the fact that cannabis remains
illegal under federal law; the state of the United States, European Union and Asian economies generally or in specific geographic regions;
|
• |
the estimated growth in and evolving market dynamics of the cannabis market;
|
• |
the demand for cannabis cultivation and processing facilities;
|
• |
shifts in public opinion regarding cannabis;
|
• |
the state of the U.S. economy generally or in specific geographic regions;
|
• |
economic trends and economic recoveries; and
|
• |
the amount, collectability and timing of cash flows, if any, from our loans;
|
• |
our ability to obtain and maintain financing arrangements;
|
• |
our expected leverage;
|
• |
changes in the value of our loans;
|
• |
our expected portfolio of loans;
|
• |
our expected investment and underwriting process;
|
• |
rates of default or decreased recovery rates on our loans;
|
• |
the degree to which our hedging strategies may or may not protect us from interest rate volatility;
|
• |
changes in interest rates of our loans and impacts of such changes on our results of operations, cash flows and the market value of our loans;
|
• |
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 and similar matters;
|
• |
our ability to maintain our exemption from registration under the Investment Company Act of 1940 (the “1940 Act”);
|
• |
our ability to qualify and maintain our qualification as a real estate investment trust (“REIT”) for United States federal income tax purposes;
|
• |
estimates relating to our ability to make distributions to our stockholders in the future;
|
• |
our understanding of our competition; and
|
• |
market trends in our industry, interest rates, real estate values, the securities markets or the general economy.
|
For the three
months ended
June 30, 2021
|
For the six
months ended
June 30, 2021
|
|||||||
Net Income
|
$
|
4,627,787
|
$
|
6,028,542
|
||||
Adjustments to net income
|
||||||||
Non-Cash Equity compensation expense
|
11,457
|
1,610,572
|
||||||
Depreciation and amortization
|
-
|
-
|
||||||
Unrealized (gain), losses or other non-cash items
|
483,159
|
627,561
|
||||||
Provision for current expected credit losses
|
645,786
|
711,886
|
||||||
One-time events pursuant to changes in GAAP and certain non-cash charges
|
-
|
-
|
||||||
Distributable Earnings
|
$
|
5,768,189
|
$
|
8,978,561
|
||||
Adjustments to Distributable Earnings
|
||||||||
Organizational expense
|
-
|
-
|
||||||
Adjusted Distributable Earnings
|
$
|
5,768,189
|
$
|
8,978,561
|
||||
Basic weighted average shares of common stock outstanding (in shares)
|
13,457,536
|
10,318,542
|
||||||
Adjusted Distributable Earnings per weighted Average Share
|
$
|
0.43
|
$
|
0.87
|
As of June 30, 2021
|
||||||||||||||||
Fair Value
(2)
|
Carrying
Value (1)
|
Outstanding
Principal (1)
|
Weighted
Average
Remaining Life
(Years)(3)
|
|||||||||||||
Senior Term Loans
|
$
|
44,852,315
|
$
|
43,916,537
|
$
|
46,653,209
|
2.6
|
|||||||||
Total loans held at fair value
|
$
|
44,852,315
|
$
|
43,916,537
|
$
|
46,653,209
|
2.6
|
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 Footnote 14 to our unaudited financial statements included elsewhere in this quarterly report.
|
(3) |
Weighted average remaining life is calculated based on the fair value of the loans as of June 30, 2021 and December 31, 2020.
|
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
|
-
|
-
|
(627,561
|
)
|
(627,561
|
)
|
||||||||||
New fundings
|
7,677,701
|
(501,346
|
)
|
-
|
7,176,355
|
|||||||||||
Loan repayments
|
(12,000,000
|
)
|
-
|
-
|
(12,000,000
|
)
|
||||||||||
Loan amortization payments
|
(583,324
|
)
|
-
|
-
|
(583,324
|
)
|
||||||||||
Accretion of original issue discount
|
-
|
1,601,197
|
-
|
1,601,197
|
||||||||||||
PIK Interest
|
727,597
|
-
|
-
|
727,597
|
||||||||||||
Total loans held at fair value at June 30, 2021
|
$
|
46,653,209
|
$
|
(2,736,673
|
)
|
$
|
935,779
|
$
|
44,852,315
|
As of June 30, 2021
|
||||||||||||||||
Outstanding
Principal (1)
|
Original Issue
Discount
|
Carrying
Value (1)
|
Weighted Average
Remaining Life
(Years)(2)
|
|||||||||||||
Senior Term Loans
|
$
|
114,376,084
|
$
|
(8,971,899
|
)
|
$
|
105,404,185
|
3.8
|
||||||||
Total loans held at carrying value
|
$
|
114,376,084
|
$
|
(8,971,899
|
)
|
$
|
105,404,185
|
3.8
|
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
|
(3) |
The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted original issue discount and loan origination costs.
|
(4) |
Weighted average remaining life is calculated based on the carrying value of the loans as of June 30, 2021 and December 31, 2020.
|
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
|
79,928,825
|
(7,574,384
|
)
|
72,354,441
|
||||||||
Accretion of original issue discount
|
-
|
673,217
|
673,217
|
|||||||||
PIK interest
|
539,496
|
-
|
539,496
|
|||||||||
Total loans held at carrying value at June 30, 2021
|
$
|
114,376,084
|
$
|
(8,971,899
|
)
|
$
|
105,404,185
|
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
|
(337,741
|
)
|
-
|
(337,741
|
)
|
|||||||
Accretion of original issue discount
|
-
|
618
|
618
|
|||||||||
Total loans receivable at carrying value at June 30, 2021
|
$
|
3,014,435
|
$
|
(3,295
|
)
|
$
|
3,011,140
|
Loan Names
|
Status
|
Original
Funding
Date(1)
|
Loan
Maturity
|
AFCG Loan,
net of
Syndication
|
% of
Total
AFCG
|
Principal
Balance as of
6/30/2021
|
Cash
Interest
Rate
|
Paid
In Kind
(“PIK”)
|
Fixed/
Floating
|
Amortization
During
Term
|
YTM (2)(3)
|
|||||||||||||||||||||
Public Co. A - Real Estate Loan
|
Funded
|
7/3/2019
|
1/26/2023
|
$
|
2,940,000
|
1.6
|
%
|
$
|
2,940,000
|
12.0
|
%
|
2.0
|
%
|
Fixed
|
No
|
19
|
%
|
|||||||||||||||
Public Co. A - Equipment Loans
|
Funded
|
8/5/2019
|
3/5/2024
|
4,000,000
|
2.1
|
%
|
3,014,435
|
12.0
|
%
|
N/A
|
Fixed
|
Yes
|
18
|
%
|
||||||||||||||||||
Private Co. A
|
Funded
|
5/8/2020
|
5/8/2024
|
34,000,000
|
18.1
|
%
|
34,654,069
|
13.0
|
%
|
4.0
|
%
|
Fixed
|
Yes
|
24
|
%
|
|||||||||||||||||
Private Co. B
|
Funded
|
9/10/2020
|
9/1/2023
|
10,500,000
|
5.6
|
%
|
9,059,140
|
13.0
|
%
|
4.0
|
%
|
Fixed
|
Yes
|
26
|
%
|
|||||||||||||||||
Private Co. C
|
Funded
|
11/5/2020
|
12/1/2025
|
22,000,000
|
11.7
|
%
|
16,571,443
|
13.0
|
%
|
4.0
|
%
|
Floating
|
Yes
|
22
|
%
|
|||||||||||||||||
Sub. of Public Co. D(4)
|
Funded
|
12/18/2020
|
12/18/2024
|
10,000,000
|
5.3
|
%
|
10,000,000
|
12.9
|
%
|
N/A
|
Fixed
|
No
|
14
|
%
|
||||||||||||||||||
Private Co. D
|
Funded
|
12/23/2020
|
1/1/2026
|
12,000,000
|
6.4
|
%
|
12,107,055
|
13.0
|
%
|
2.0
|
%
|
Fixed
|
Yes
|
20
|
%
|
|||||||||||||||||
Private Co. E
|
Funded
|
3/30/2021
|
4/1/2026
|
21,000,000
|
11.2
|
%
|
11,174,533
|
13.0
|
%
|
4.0
|
%
|
Floating
|
Yes
|
26
|
%
|
|||||||||||||||||
Private Co. F
|
Funded
|
4/27/2021
|
5/1/2026
|
13,000,000
|
6.9
|
%
|
6,166,025
|
13.0
|
%
|
4.0
|
%
|
Fixed
|
Yes
|
28
|
%
|
|||||||||||||||||
Public Co. E(4)
|
Funded
|
4/29/2021
|
4/29/2025
|
15,000,000
|
8.0
|
%
|
15,000,000
|
13.0
|
%
|
N/A
|
Fixed
|
Yes
|
17
|
%
|
||||||||||||||||||
Sub of Private Co. G
|
Funded
|
4/30/2021
|
5/1/2026
|
22,000,000
|
11.7
|
%
|
22,075,778
|
13.0
|
%
|
4.0
|
%
|
Floating
|
Yes
|
18
|
%
|
|||||||||||||||||
Sub of Private Co. H(5)
|
Funded
|
5/11/2021
|
5/11/2023
|
5,781,250
|
3.1
|
%
|
5,781,250
|
15.0
|
%
|
N/A
|
Fixed
|
No
|
20
|
%
|
||||||||||||||||||
Public Co. F
|
Funded
|
5/21/2021
|
5/30/2023
|
10,000,000
|
5.3
|
%
|
10,000,000
|
9.8
|
%
|
N/A
|
Fixed
|
No
|
12
|
%
|
||||||||||||||||||
Private Co. I - Bridge Loan(6)
|
Funded
|
6/4/2021
|
7/9/2021
|
5,500,000
|
3.0
|
%
|
5,500,000
|
13.0
|
%
|
N/A
|
Fixed
|
No
|
N/A
|
|||||||||||||||||||
SubTotal |
$ | 187,721,250 |
100.0 |
% |
$ | 164,043,728 |
12.8 |
% |
3.7 |
% |
21 |
% |
||||||||||||||||||||
Wtd Average |
Real Estate
|
||||||||||||||||||||||||||||||||||
Borrower
|
Status
|
Date
|
AFCG Loan, net of Syndication
|
% of Total AFCG
|
Total Funded Debt Issuance
|
AFCG % of the Total Loan
|
Est. Real Estate Value (1)
|
Real Estate Collateral Coverage
|
Implied Real Estate Collateral for AFCG
|
AFCG Real Estate Collateral Coverage
|
||||||||||||||||||||||||
Public Co. A - Real Estate Loan(2)
|
Funded
|
7/3/2019
|
$
|
2,940,000
|
1.6
|
%
|
$
|
30,000,000
|
9.8
|
%
|
$
|
72,000,000
|
2.40
|
x
|
$
|
7,056,000
|
2.4
|
x
|
||||||||||||||||
Public Co. A - Equipment Loan
|
Funded
|
8/5/2019
|
$
|
4,000,000
|
2.1
|
%
|
$
|
20,000,000
|
20.0
|
%
|
$
|
0
|
0.00
|
x
|
$
|
0
|
0.0
|
x
|
||||||||||||||||
Private Co. A(3)
|
Funded
|
5/8/2020
|
$
|
34,000,000
|
18.1
|
%
|
$
|
42,500,000
|
80.0
|
%
|
$
|
53,408,035
|
1.26
|
x
|
$
|
42,726,428
|
1.3
|
x
|
||||||||||||||||
Private Co. B(4)
|
Funded
|
9/10/2020
|
$
|
10,500,000
|
5.6
|
%
|
$
|
10,500,000
|
100.0
|
%
|
$
|
19,536,098
|
1.86
|
x
|
$
|
19,536,098
|
1.9
|
x
|
||||||||||||||||
Private Co. C(5)
|
Funded
|
11/5/2020
|
$
|
22,000,000
|
11.7
|
%
|
$
|
22,000,000
|
100.0
|
%
|
$
|
23,733,050
|
1.08
|
x
|
$
|
23,733,050
|
1.1
|
x
|
||||||||||||||||
Subsidiary of Public Co. D(6)
|
Funded
|
12/18/2020
|
$
|
10,000,000
|
5.3
|
%
|
$
|
120,000,000
|
8.3
|
%
|
$
|
26,058,332
|
0.22
|
x
|
$
|
2,171,528
|
0.2
|
x
|
||||||||||||||||
Private Co. D(7)
|
Funded
|
12/23/2020
|
$
|
12,000,000
|
6.4
|
%
|
$
|
12,000,000
|
100.0
|
%
|
$
|
7,538,589
|
0.63
|
x
|
$
|
7,538,589
|
0.6
|
x
|
||||||||||||||||
Private Co. E(8)
|
Funded
|
3/30/2021
|
$
|
21,000,000
|
11.2
|
%
|
$
|
21,000,000
|
100.0
|
%
|
$
|
16,102,000
|
0.77
|
x
|
$
|
16,102,000
|
0.8
|
x
|
||||||||||||||||
Private Co. F(9)
|
Funded
|
4/27/2021
|
$
|
13,000,000
|
6.9
|
%
|
$
|
13,000,000
|
100.0
|
%
|
$
|
8,062,097
|
0.62
|
x
|
$
|
8,062,097
|
0.6
|
x
|
||||||||||||||||
Public Co. E(10)
|
Funded
|
4/29/2021
|
$
|
15,000,000
|
8.0
|
%
|
$
|
71,000,000
|
21.1
|
%
|
$
|
2,097,998
|
0.03
|
x
|
$
|
443,239
|
0.0
|
x
|
||||||||||||||||
Sub of Private Co. G(11)
|
Funded
|
4/30/2021
|
$
|
22,000,000
|
11.7
|
%
|
$
|
22,000,000
|
100.0
|
%
|
$
|
43,713,935
|
1.99
|
x
|
$
|
43,713,935
|
2.0
|
x
|
||||||||||||||||
Sub of Private Co. H(12)
|
Funded
|
5/11/2021
|
$
|
5,781,250
|
3.1
|
%
|
$
|
37,000,000
|
15.6
|
%
|
$
|
35,000,000
|
0.95
|
x
|
$
|
5,468,750
|
0.9
|
x
|
||||||||||||||||
Public Co. F(13)
|
Funded
|
5/21/2021
|
$
|
10,000,000
|
5.3
|
%
|
$
|
130,000,000
|
7.7
|
%
|
$
|
127,890,000
|
0.98
|
x
|
$
|
9,837,692
|
1.0
|
x
|
||||||||||||||||
Private Co. I - Bridge Loan(14)
|
Funded
|
6/4/2021
|
$
|
5,500,000
|
3.0
|
%
|
$
|
5,500,000
|
100.0
|
%
|
$
|
0
|
0.00
|
x
|
$
|
0
|
0.0
|
x
|
||||||||||||||||
|
|
$
|
187,721,250
|
100.0
|
%
|
$
|
556,500,000
|
$
|
435,140,134
|
0.78
|
x
|
$
|
186,389,406
|
1.0
|
x
|
(1) |
To the extent the applicable loan is intended to fund any acquisitions and/or construction, the applicable figure includes expected total basis on such future construction and/or acquisitions plus appraised
value.
|
(2) |
Public Company A real estate is based on total cost basis.
|
(3) |
Private Company A real estate is based on total cost basis
|
(4) |
Private Company B real estate is based on the expected total cost basis of a to-be-built facility, as completed. The anticipated completion date for the to-be-built facility is August 2021.
|
(5) |
Private Company C real estate is based on the cost basis of two facilities, including the capital expenditures for one facility that is being converted for cannabis cultivation purposes. The construction of
the to-be-converted facility is divided into six phases. The first phase was completed in December 2020 and the anticipated completion date for the remaining phases of construction is November 2021.
|
(6) |
Subsidiary of Public Company D real estate is based on total cost basis.
|
(7) |
Private Company D real estate is based on our internal estimations of property values.
|
(8) |
Private Company E real estate is based on the expected total cost basis, including construction expected to be completed within 12 months of loan closing.
|
(9) |
Private Company F real estate is based on the expected total cost basis, including construction expected to be completed within 12 months of loan closing.
|
(10) |
Public Company E real estate is based on total cost basis.
|
(11) |
Subsidiary of Private Company G real estate is based on the expected total cost basis, including construction expected to be completed within 12 months of loan closing.
|
(12) |
Subsidiary of Private Company H real estate is based on appraised value.
|
(13) |
Public Company F real estate is based on appraised value.
|
(14) |
The bridge loan to Private Company I was refinanced in July 2021 by a larger credit facility. Refer to “—Recent
Developments” for more information on this loan.
|
For the six
months ended
June 30, 2021
|
||||
Net Income
|
$
|
6,028,542
|
||
Adjustments to reconcile net income to net cash provided by / (used in) operating activities and changes in operating assets and liabilities
|
1,467,345
|
|||
Net cash provided by operating activities
|
7,495,887
|
|||
Net cash used in investing activities
|
(61,684,731
|
)
|
||
Net cash provided by financing activities
|
169,169,896
|
|||
Change in cash, cash equivalents and restricted cash
|
$
|
114,981,052
|
As of June 30, 2021
|
||||||||||||||||||||
Less than
1 year
|
1-3 years
|
3-5 years
|
More than
5 years
|
Total
|
||||||||||||||||
Unfunded Commitments
|
$
|
23,999,842
|
-
|
-
|
-
|
$
|
23,999,842
|
|||||||||||||
Total
|
$
|
23,999,842
|
-
|
-
|
-
|
$
|
23,999,842
|
As of December 31, 2020
|
||||||||||||||||||||
Less than
1 year
|
1-3 years
|
3-5 years
|
More than
5 years
|
Total
|
||||||||||||||||
Unfunded Commitments
|
$
|
19,825,119
|
-
|
-
|
-
|
$
|
19,825,119
|
|||||||||||||
Total
|
$
|
19,825,119
|
-
|
-
|
-
|
$
|
19,825,119
|
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk
|
• |
we manage our portfolio through an interactive process with our Manager and service our self-originated loans through our Manager’s servicer;
|
• |
we invest in a mix of floating-rate and fixed-rate loans to mitigate the interest rate risk associated with the financing of our portfolio;
|
• |
we actively employ portfolio-wide and asset-specific risk measurement and management processes in our daily operations, including utilizing our Manager’s risk management tools such as software and services
licensed or purchased from third-parties and proprietary analytical methods developed by our Manager; and
|
• |
we seek to manage credit risk through our due diligence process prior to origination or acquisition and through the use of non-recourse financing, when and where available and appropriate. In addition, with
respect to any particular target investment, prior to origination or acquisition our Manager’s investment team evaluates, among other things, relative valuation, comparable company analysis, supply and demand trends, shape-of-yield curves,
delinquency and default rates, recovery of various sectors and vintage of collateral.
|
Item 4. |
Controls and Procedures
|
Item 1. |
Legal Proceedings
|
Item 1A. |
Risk Factors
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3. |
Defaults Upon Senior Securities
|
Item 4. |
Mine Safety Disclosures
|
Item 5. |
Other Information
|
Item 6. |
Exhibits
|
Articles of Amendment and Restatement of AFC Gamma, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-11, as amended (File No. 333-251762)).
|
|
Amended and Restated Bylaws of AFC Gamma, Inc. (incorporated by reference to Exhibit 3.4 to the Company’s Registration Statement on Form S-11, as amended (File No. 333-251762)).
|
|
Amendment dated May 7, 2021, to the Secured Revolving Credit Agreement, dated August 18, 2020, by and among AFC Gamma, Inc., as borrower, AFC Finance, LLC, as agent, and AFC Finance, LLC and Gamma Lending
Holdco LLC, as lenders (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 11, 2021).
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS
|
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are
embedded within the Inline XBRL document.
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document.
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document.
|
101.LAB
|
Inline XBRL Taxonomy Extension Label Linkbase Document.
|
101.PRE
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document.
|
101.DEF
|
Inline XBRL Taxonomy Extension Definition Linkbase Document.
|
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
Date: August 5, 2021
|
|||
AFC GAMMA, INC.
|
|||
By:
|
/s/ Leonard M Tannenbaum
|
||
Leonard M Tannenbaum
Chief Executive Officer, Chairman and Director
(Principal Executive Officer)
|
By:
|
/s/ Thomas Geoffroy
|
||
Thomas Geoffroy
Chief Financial Officer and Treasurer
(Principal Financial Officer and Principal Accounting Officer)
|