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,~~June 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

(State or other jurisdiction of incorporation or organization)

85-1807125

(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

Common Stock, $0.01 par value per share

Trading Symbol(s)

AFCG

Name of each exchange on which registered

Nasdaq

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

Common stock, $0.01 par value

Outstanding at ~~May 11,~~August 5, 2021

~~13,366,877~~16,386,527

AFC GAMMA, INC.

TABLE OF CONTENTS

INDEX

Part I.	Financial Information
Item 1.	Financial Statements	1
	Balance Sheets as of ~~March 31,~~June 30, 2021 (unaudited) and December 31, 2020	1
	~~Statement~~Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2021 (unaudited)	2
	~~Statement~~Statements of Stockholders’ Equity for the three and six months ended ~~March 31,~~June 30, 2021 (unaudited)	3
	Statement of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2021 (unaudited)	4
	Notes to Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18 22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31 38
Item 4.	Controls and Procedures	34 42
Part II.	Other Information	35 43
Item 1.	Legal Proceedings	35 43
Item 1A.	Risk Factors	35 43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35 43
Item 3.	Defaults Upon Senior Securities	36 44
Item 4.	Mine Safety Disclosures	36 44
Item 5.	Other Information	36 44
Item 6.	Exhibits	36 44

~~Table of Contents~~

Index

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

AFC GAMMA, INC.

BALANCE SHEETS

	As Of						As Of
	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
	(unaudited)						(unaudited)
Assets
Loans held for investment at fair value (cost of $48,833,111 and $46,994,711 at March 31, 2021 and December 31, 2020, respectively, net)	$	50,252,049		$	48,558,051
Loans held for investment at fair value (cost of $43,916,537 and $46,994,711 at June 30, 2021 and December 31, 2020, respectively, net)							$	44,852,315		$	48,558,051

Loans held for investment at carrying value		39,152,936			31,837,031			105,404,185			31,837,031
Loan receivable at carrying value		3,240,855			3,348,263			3,011,140			3,348,263
Current expected credit loss reserve		(248,317	)		(404,860	)		(701,143	)		(404,860	)
Loans held for investment at carrying value and loan receivable at carrying value, net of current expected credit loss reserve		42,145,474			34,780,434			107,714,182			34,780,434

Cash and cash equivalents		126,793,972			9,623,820			124,604,872			9,623,820
Interest receivable		1,205,304			927,292			1,150,669			927,292
Prepaid expenses and other assets		1,109,038			72,095			189,000			72,095
Total assets	$	221,505,837		$	93,961,692		$	278,511,038		$	93,961,692

Liabilities
Interest reserve	$	3,243,484		$	1,325,750		$	5,547,863		$	1,325,750
Current expected credit loss reserve		283,180			60,537			476,140			60,537
Accrued management fees		876,662			222,127
Accrued management and incentive fees								2,078,871			222,127
Accrued direct administrative expenses		365,567			550,671			530,939			550,671
Accounts payable and other liabilities		404,939			154,895			1,420,503			154,895
Total liabilities		5,173,832			2,313,980			10,054,316			2,313,980
Commitments and contingencies (Note 10)								0			0
Stockholders' Equity
Preferred stock, par value $0.01 per share, 10,000 shares authorized at March 31, 2021 and December 31, 2020 and 125 shares issued and outstanding at March 31, 2021 and December 31, 2020		1			1
Common stock, par value $0.01 per share, 25,000,000 and 15,000,000 shares authorized at March 31, 2021 and December 31, 2020, respectively, and 13,366,877 and 6,179,392 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		133,669			61,794
Preferred stock, par value $0.01 per share, 10,000 shares authorized at June 30, 2021 and December 31, 2020 and 125 shares issued and outstanding at June 30, 2021 and December 31, 2020								1			1
Common stock, par value $0.01 per share, 25,000,000 and 15,000,000 shares authorized at June 30, 2021 and December 31, 2020, respectively, and 16,116,877 and 6,179,392 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively								161,169			61,794
Additional paid-in-capital		216,504,726			91,068,197			269,061,069			91,068,197
Accumulated earnings (deficit)		(306,391	)		517,720			(765,517	)		517,720
Total stockholders' equity		216,332,005			91,647,712			268,456,722			91,647,712

Total liabilities and stockholders' equity	$	221,505,837		$	93,961,692		$	278,511,038		$	93,961,692

(See accompanying notes to the Financial Statements)

1

~~Table of Contents~~

Index

AFC GAMMA, INC.

~~STATEMENT~~STATEMENTS OF OPERATIONS

	For the three months ended March 31, 2021			For the three months ended June 30, 2021			For the six months ended June 30, 2021
	(unaudited)			(unaudited)			(unaudited)
Revenue
Interest Income	$	4,685,005		$	8,748,519		$	13,433,524
Total revenue		4,685,005			8,748,519			13,433,524
Expenses
Management and incentive fees, net (less rebate of $237,743)		876,662
General and administrative expense		462,518
Management and incentive fees, net (less rebate of $182,707 and $420,450, respectively)					2,078,871			2,955,533
General and administrative expenses					706,865			1,169,383
Stock-based compensation		1,599,115			11,457			1,610,572
Professional fees		135,453			194,594			330,047
Total expenses		3,073,748			2,991,787			6,065,535
Provision for current expected credit losses		(66,100	)		(645,786	)		(711,886	)
Change in unrealized gains / (losses) on loans at fair value, net		(144,402	)		(483,159	)		(627,561	)
Net income before income taxes		1,400,755			4,627,787			6,028,542
Income tax expense		-			0			0
Net income	$	1,400,755		$	4,627,787		$	6,028,542

Earnings per common share:
Basic earnings per common share (in dollars per share)	$	0.20		$	0.34		$	0.58
Diluted earnings per common share (in dollars per share)	$	0.19		$	0.34		$	0.57

Weighted average number of common shares outstanding:
Basic weighted average shares of common stock outstanding (in shares)		7,144,670			13,457,536			10,318,542
Diluted weighted average shares of common stock outstanding (in shares)		7,485,048			13,775,246			10,636,252

(See accompanying notes to the Financial Statements)

2

Index

AFC GAMMA, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

Three months ended June 30, 2021
	Preferred Stock		Common Stock				Additional Paid- In-Capital		Accumulated Earnings (Deficit)			Total Stockholders' Equity
	Preferred Stock		Shares		Amount		Additional Paid- In-Capital		Accumulated Earnings (Deficit)			Total Stockholders' Equity
Balance at March 31, 2021	$	1		13,366,877	$	133,669	$	216,504,726	$	(306,391	)	$	216,332,005
Issuance of common stock, net of offering cost		0		2,750,000		27,500		52,544,886		0			52,572,386
Stock-based compensation		0		-		0		11,457		0			11,457
Dividends declared and paid on common shares ($0.38 per share)		0		-		0		0		(5,079,413	)		(5,079,413	)
Dividends declared and paid on preferred shares ($60 per share)		0		-		0		0		(7,500	)		(7,500	)
Net income		0		-		0		0		4,627,787			4,627,787
Balance at June 30, 2021	$	1		16,116,877	$	161,169	$	269,061,069	$	(765,517	)	$	268,456,722

Six months ended June 30, 2021
	Preferred Stock		Common Stock				Additional Paid- In-Capital		Accumulated Earnings (Deficit)			Total Stockholders' Equity
	Preferred Stock		Shares		Amount		Additional Paid- In-Capital		Accumulated Earnings (Deficit)			Total Stockholders' 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		0		9,937,485		99,375		176,382,300		0			176,481,675
Stock-based compensation		0		-		0		1,610,572		0			1,610,572
Dividends declared and paid on common shares ($0.74 per share)		0		-		0		0		(7,304,279	)		(7,304,279	)
Dividends declared and paid on preferred shares ($60 per share)		0		-		0		0		(7,500	)		(7,500	)
Net income		0		-		0		0		6,028,542			6,028,542
Balance at June 30, 2021	$	1		16,116,877	$	161,169	$	269,061,069	$	(765,517	)	$	268,456,722

(See accompanying notes to the Financial Statements)

3

Index

AFC GAMMA, INC.

STATEMENT OF CASH FLOWS

	For the six months ended June 30, 2021
Operating activities:	(unaudited)
Net income	$	6,028,542
Adjustments to reconcile net income / (loss) to net cash provided by / (used in) operating activities:
Provision for current expected credit losses		711,886
Change in unrealized gains / (losses) on loans at fair value, net		627,561
Accretion of deferred loan original issue discount and other discounts		(2,275,032	)
Stock-based compensation		1,610,572
PIK interest		(1,267,093	)
Changes in operating assets and liabilities:
Interest reserve		(702,887	)
Interest receivable		(223,377	)
Prepaid expenses and other assets		(116,905	)
Accrued management fees, net		1,856,744
Accrued direct administrative expenses		(19,732	)
Accounts payable and other liabilities		1,265,608
Net cash provided by / (used in) operating activities		7,495,887

Cash flows from investing activities:
Issuance of and fundings on loans		(76,918,926	)
Proceeds from sales of Assigned Rights		2,313,130
Principal repayment of loans		12,921,065
Net cash provided by / (used in) investing activities		(61,684,731	)

Cash flows from financing activities:
Proceeds from sale of common stock		180,277,500
Payment of offering costs		(3,795,825	)
Dividends paid		(7,311,779	)
Net cash provided by / (used in) financing activities		169,169,896

Change in cash, cash equivalents and restricted cash		114,981,052
Cash, cash equivalents and restricted cash, beginning of period		9,623,820
Cash, cash equivalents and restricted cash, end of period	$	124,604,872

Supplemental disclosure of non-cash financing and investing activity:
Interest reserve withheld from funding of loan	$	4,925,000

Supplemental information:
Interest paid during the period	$	0
Income taxes paid during the period	$	0

(See accompanying notes to the Financial Statements)

24

~~Table of Contents~~

Index

~~AFC GAMMA, INC.~~

2.	SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim 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 ~~IPO~~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 ~~March 19,~~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 disclosure below regarding basis of presentation and other accounting policies that (i) are required to be disclosed quarterly, (ii) have material changes or (ii) the Company views as critical as of the date of this report.

Basis ofPresentation

The accompanying unaudited interim 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 financial statements reflect all adjustments and reclassifications that, in the opinion of management, are considered necessary for a fair statement of the balance sheets, ~~statement~~statements of operations, ~~statement~~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.

5

Index

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 ~~investments.~~loans held for investment at fair value.

The spread of a novel strain of coronavirus (“COVID-19”) has caused significant business disruptions in the United States beginning in the first quarter of 2020 and has resulted in governmental authorities implementing numerous measures to try to contain the virus, such as quarantines, shelter-in-place or total lock-down orders and business ~~imitations~~limitations and shutdowns (subject to exceptions for certain “essential” operations and businesses). Over the course of the COVID-19 pandemic, medical cannabis companies have been deemed “essential” by 29almost all states ~~administering shelter-in-place orders~~with legalized cannabis and ~~adult use cannabis has been deemed “essential” in eight of those states.~~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 ~~March 31,~~June 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 some of these measures have been lifted or scaled back, a recent resurgence of COVID-19 in certain parts of the world, including the United States, has resulted in the re-imposition of certain restrictions and may lead to more restrictions to reduce the spread of COVID-19. The extent of any 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.

5

~~Table of Contents~~

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. ~~2021-01is~~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 has adopted this new standard on January 1, 2021. The adoption of this standard did not have a material impact on the Company’s financial statements.

6

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Index

3.	LOANS HELD FOR INVESTMENT AT FAIR VALUE

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company’s portfolio included ~~four~~3 and 4 loans held at fair ~~value.~~value, respectively. The aggregate originated commitment under these loans was approximately ~~$62.4~~$47.4 million and $59.9 million, respectively, and outstanding principal was approximately ~~$52.2~~$46.7 million and $50.8 million, respectively, as of ~~March 31,~~June 30, 2021 and December 31, 2020. For the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company funded approximately ~~$1.0~~$7.7 million of outstanding ~~principal.~~principal and had repayments of approximately $12.6 million. As of ~~March 31,~~June 30, 2021 and December 31, 2020, approximately 0% and 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).

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

	As of March 31, 2021								As of June 30, 2021
	Fair Value ⁽²⁾		Carrying Value ⁽¹⁾		Outstanding Principal ⁽¹⁾		Weighted Average Remaining Life (Years)⁽³⁾		Fair Value ⁽²⁾		Carrying Value ⁽¹⁾		Outstanding Principal ⁽¹⁾		Weighted Average Remaining Life (Years)⁽³⁾

Senior Term Loans	$	50,252,049	$	48,833,111	$	52,212,608		3.1	$	44,852,315	$	43,916,537	$	46,653,209		2.6
Total loans held at fair value	$	50,252,049	$	48,833,111	$	52,212,608		3.1	$	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.~~ 14 to our unaudited financial statements.

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

7

Index

The following table presents changes in loans held at fair value as of and for the ~~three~~six months ended ~~March 31, 2021:~~June 30, 2021:

	Principal		Original Issue Discount			Unrealized Gains / (Losses)			Fair Value			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		$	50,831,235		$	(3,836,524	)	$	1,563,340		$	48,558,051
Change in unrealized gains / (losses) on loans at fair value, net		-		-			(144,402	)		(144,402	)		0			0			(627,561	)		(627,561	)
New fundings		992,000		(142,982	)		-			849,018			7,677,701			(501,346	)		0			7,176,355
Loan repayments													(12,000,000	)		0			0			(12,000,000	)
Loan amortization payments													(583,324	)		0			0			(583,324	)
Accretion of original issue discount		-		600,009			-			600,009			0			1,601,197			0			1,601,197
PIK Interest		389,373		-			-			389,373			727,597			0			0			727,597
Total loans held at fair value at March 31, 2021	$	52,212,608	$	(3,379,497	)	$	1,418,938		$	50,252,049
Total loans held at fair value at June 30, 2021												$	46,653,209		$	(2,736,673	)	$	935,779		$	44,852,315

A more detailed listing of the Company’s loans held at fair value portfolio based on information available as of ~~March 31,~~June 30, 2021 is as follows:

Collateral Location
Collateral
Type ⁽⁹⁾

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
$ 32,834,697 $ 32,384,888 $ 34,672,331 17.0 %
⁽⁵⁾
5/8/2024 P/I
Private Co. B MI C
2,495,922 2,290,381 2,548,159 17.0 %
⁽⁶⁾
9/1/2023 P/I

Public Co. A NV C
2,874,629 2,840,108 2,945,317 14.0 %
⁽⁷⁾
12/21/2021 I/O

Sub. Of Public Co. C FL C
12,046,801 11,317,734 12,046,801 18.0 %
⁽⁸⁾
2/18/2025 P/I

Total loans held at fair value $ 50,252,049 $ 48,833,111 $ 52,212,608

	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	$	33,059,982	$	32,543,647	$	34,654,069		17.0	%	⁽⁵⁾	5/8/2024		P/I
Private Co. B	MI		C		8,909,663		8,503,029		9,059,140		17.0	%	⁽⁶⁾	9/1/2023		P/I
Public Co. A - Real Estate Loan	NV		C		2,882,670		2,869,861		2,940,000		14.0	%	⁽⁷⁾	1/26/2023		I/O
Total loans held at fair value				$	44,852,315	$	43,916,537	$	46,653,209

7

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(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 Footnote ~~14.~~ 14 to our unaudited 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 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)

Loan to Subsidiary of Public Company C is a $15,000,000 aggregate loan commitment with an initial funding of $3,000,000 at a base interest rate of 13.5% and PIK interest rate of 3% and subsequent advances of $9,000,000 at a base interest rate of 19%. The weighted average interest rate is 18.0% at March 31, 2021.

~~(9)~~

C = Cultivation Facilities, D = ~~Dispensaries~~Dispensaries.

8

Index

4.	LOANS HELD FOR INVESTMENT AT CARRYING VALUE

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company’s portfolio included ~~four~~10 and ~~three~~3 loans, respectively, held at carrying value. The aggregate originated commitment under these loans was approximately ~~$65~~$136.3 million and ~~$44~~$44.0 million, respectively, and outstanding principal was approximately ~~$42.9~~$114.4 million and $33.9 million, respectively, as of ~~March 31,~~June 30, 2021 and December 31, 2020. ~~During~~For the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company funded approximately ~~$8.9~~$79.9 million of outstanding principal. As of ~~March 31,~~June 30, 2021 and December 31, 2020, approximately ~~49%~~44% 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% ~~and 1%~~, ~~respectively,~~ 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 ~~March 31,~~June 30, 2021 and December 31, 2020:

As of March 31, 2021

Outstanding
Principal ⁽¹⁾

Original Issue
Discount

Carrying
Value ⁽¹⁾

Weighted Average
Remaining Life
(Years)⁽²⁾

��
Senior Term Loans $ 42,940,850 $ (3,787,914 ) $ 39,152,936 4.5
Total loans held at carrying value $ 42,940,850 $ (3,787,914 ) $ 39,152,936 4.5

	As of December 31, 2020									As of June 30, 2021
	Outstanding Principal ⁽¹⁾		Original Issue Discount			Carrying Value ⁽¹⁾		Weighted Average Remaining Life (Years)⁽²⁾		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	$	114,376,084	$	(8,971,899	)	$	105,404,185		3.8
Total loans held at carrying value	$	33,907,763	$	(2,070,732	)	$	31,837,031		4.7	$	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

(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 ~~March 31,~~June 30, 2021 and December 31, 2020.

8

~~Table of Contents~~

The following table presents changes in loans held at carrying value as of and for the ~~three~~six months ended ~~March 31,~~June 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 8,863,455 (1,824,614 ) 7,038,841
Accretion of original issue discount - 107,432 107,432
PIK Interest 169,632 169,632
Total loans held at carrying value at March 31, 2021 $ 42,940,850 $ (3,787,914 ) $ 39,152,936

	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

9

Index

A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of ~~March 31,~~June 30, 2021 is as follows:

	Collateral Location	Collateral Type ⁽⁸⁾		Outstanding Principal ⁽¹⁾		Original Issue Discount			Carrying Value ⁽¹⁾		Interest Rate				Maturity Date ⁽²⁾	Payment Terms ⁽³⁾		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	$	13,895,465	$	(807,869	)	$	13,087,596		17.0	%	⁽⁴⁾	12/1/2025		P/I	PA	C , D	$	16,571,443	$	(764,590	)	$	15,806,853		17.0	%	⁽⁵⁾	12/1/2025		P/I
Private Co. D	OH, AR		D		12,045,385		(983,237	)		11,062,148		15.0	%	⁽⁵⁾	1/1/2026		P/I	OH, AR	D		12,107,055		(930,564	)		11,176,491		15.0	%	⁽⁶⁾	1/1/2026		P/I
Sub. of Public Co. D	PA		C		10,000,000		(172,194	)		9,827,806		12.9	%	⁽⁶⁾	12/18/2024		I/O	PA	C		10,000,000		(160,714	)		9,839,286		12.9	%	⁽⁷⁾	12/18/2024		I/O
Private Co. E	OH		C , D		7,000,000		(1,824,614	)		5,175,386		17.0	%	⁽⁷⁾	4/1/2026		P/I	OH	C , D		11,174,533		(2,936,883	)		8,237,650		17.0	%	⁽⁸⁾	4/1/2026		P/I
Private Co. F																		MO	C , D		6,166,025		(1,915,902	)		4,250,123		17.0	%	⁽⁹⁾	5/1/2026		P/I
Public Co. E																		MI	C		15,000,000		(985,714	)		14,014,286		13.0	%	⁽¹⁰⁾	4/29/2025		P/I
Sub. of Private Co. G																		NJ	C , D		22,075,778		(836,722	)		21,239,056		17.0	%	⁽¹¹⁾	5/1/2026		P/I
Public Co. F																		IL, FL, NV, OH, MA, MI, MD, AR, NV, AZ	C , D		10,000,000		(184,000	)		9,816,000		9.8	%	⁽¹²⁾	5/30/2023		I/O
Sub. of Private Co. H																		IL	C		5,781,250		(146,810	)		5,634,440		15.0	%	⁽¹³⁾	5/11/2023		I/O
Private Co. I																		MD	C , D		5,500,000		(110,000	)		5,390,000		13.0	%	⁽¹⁴⁾	7/9/2021		I/O
Total loans held at carry value				$	42,940,850	$	(3,787,914	)	$	39,152,936										$	114,376,084	$	(8,971,899	)	$	105,404,185

(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)

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

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

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

(5)	Base interest rate of 12% plus LIBOR (LIBOR floor of 1%) and PIK interest rate of 4%.

(6)	Base interest rate of 13% and PIK interest rate of 2%.

(7)	Base interest rate of 12.9%.

(8)	Base interest rate of 12% plus LIBOR (LIBOR floor of 1%) and PIK interest rate of 4%.

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

(10)	Base interest rate of 13%.

(11)	Base interest rate of 12% plus LIBOR (LIBOR floor of 1%) and PIK interest rate of 4%.

~~(5)~~(12)

Base interest rate of 9.8%.

(13)	Base interest rate of 15%.

(14)	Base interest rate of 13% ~~and PIK interest rate of 2%~~.

10

Index

~~(6)~~

~~Base interest rate of 12.9%.~~5.

~~(7)~~

~~Base interest rate of 12% plus LIBOR (LIBOR floor of 1%) and PIK interest rate of 4%.~~

~~(8)~~

~~C = Cultivation Facilities, D = Dispensaries~~

5.	LOAN RECEIVABLE AT CARRYING VALUE

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company’s portfolio included ~~one~~1 loan receivable at carrying value. The originated commitment under this loan was approximately $4$4.0 million and outstanding principal was approximately ~~$3.2~~$3.0 million and $3.4 million as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company received repayments of ~~$0.1 million~~$337,741 of outstanding principal.

The following table presents changes in loans receivable as of and for the ~~three~~six months ended ~~March 31,~~June 30, 2021:

	Principal			Original Issue Discount			Carrying Value			Principal			Original Issue Discount			Carrying Value

Total loans receivable at carrying value at December 31, 2020	$	3,352,176		$	(3,913	)	$	3,348,263		$	3,352,176		$	(3,913	)	$	3,348,263
Principal repayment of loans		(107,717	)		-			(107,717	)		(337,741	)		-			(337,741	)
Accretion of original issue discount		-			309			309			-			618			618
Total loans receivable at carrying value at March 31, 2021	$	3,244,459		$	(3,604	)	$	3,240,855
Total loans receivable at carrying value at June 30, 2021										$	3,014,435		$	(3,295	)	$	3,011,140

9

~~Table of Contents~~

7.	INTEREST RECEIVABLE

The following ~~tables~~table summarize the interest receivable by the Company as of ~~March 31,~~June 30, 2021 and December 31, 2020:

	As of March 31, 2021		As of December 31, 2020		As of June 30, 2021		As of December 31, 2020

Interest receivable	$	954,349	$	675,795	$	722,716	$	675,795
PIK receivable		210,588		177,183		362,040		177,183
Unused fees		40,367		74,314
Unused fees receivable						65,913		74,314
Total interest receivable	$	1,205,304	$	927,292	$	1,150,669	$	927,292

8.	INTEREST RESERVE

At ~~March 31,~~June 30, 2021 and December 31, 2020, the Company had ~~two~~4 and ~~one~~1 loans, respectively, that included a loan funded interest reserve. For the three and six months ended ~~March 31,~~June 30, 2021, ~~approximately $82 thousand~~$620,621 and $702,887, respectively, of interest income was earned and disbursed from the interest reserve.

The following table presents changes in interest reserve as of and for the three and six months ended ~~March 31,~~June 30, 2021:

	Three months ended March 31, 2021			Three months ended June 30, 2021			Six months ended June 30, 2021
Initial reserves	$	1,325,750
Beginning reserves				$	3,243,484		$	1,325,750
New reserves		2,000,000			2,925,000			4,925,000
Reserves disbursed		(82,266	)		(620,621	)		(702,887	)
Total Interest reserve	$	3,243,484
Ending reserves				$	5,547,863		$	5,547,863

9.

DEBT

~~The~~

In July 2020, the Company obtained a secured revolving credit loan (the “Revolving Loan”) from AFC Finance, LLC, an affiliate of the Company’s management. The Revolving Loan ~~has~~had a loan commitment of $40,000,000 and ~~bears~~had an interest rate of 8% per annum, payable in cash in arrears. The Company did not incur any fees or cost related to the origination of the Revolving Loan and the Revolving Loan ~~does~~did not have any unused fees. The maturity date of the Revolving Loan iswas 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 Revolving Credit Agreement (as defined below) with an aggregate principal amount equal to or greater than $50.0 million (any such financing, a “Refinancing Credit Facility ~~(as defined below)~~”) in accordance with terms inof the credit agreement governing the Revolving Loan ~~agreement.~~(the “Revolving Credit Agreement”). The Revolving Loan iswas secured by the assets of the Company.

On May 7, 2021, the Company amended the Revolving Credit Agreement from AFC Finance, LLC, an affiliate of the Company’s management. The amendment to the Revolving Credit Agreement increased the loan commitment from $40,000,000 to $50,000,000, decreased the interest rate from 8% per annum to 6% per annum, removed Gamma Lending Holdco LLC as a lender and extended the maturity date from July 31, 2021 to the earlier of (i) December 31, 2021 or (ii) the date of the closing of any Refinancing Credit Facility. The Company did not incur any fees or cost related to the amendment of the Revolving Loan and the Revolving Loan does not have any unused fees. For the three and six months ended ~~March 31,~~June 30, 2021, the Company ~~did not utilize its~~has 0t drawn on the Revolving Loan ~~and therefore no~~or incurred any fees or interest expense ~~was incurred. The~~related to the Revolving ~~Loan was amended in May 2021, see Note 17. Subsequent Events.~~

Loan.

1113

~~Table of Contents~~

Index

10.	COMMITMENTS AND CONTINGENCIES

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company had the following commitments to fund various senior term loans, equipment loans and bridge loans.

	As of March 31, 2021			As of December 31, 2020			As of June 30, 2021			As of December 31, 2020

Total original loan commitments	$	130,684,459		$	107,292,176		$	187,721,250		$	107,292,176
Less: drawn commitments		(97,214,795	)		(87,467,057	)		(163,721,408	)		(87,467,057	)
Total undrawn commitments	$	33,469,664		$	19,825,119		$	23,999,842		$	19,825,119

The Company from time to time may be a party to litigation in the normal course of business. As of ~~March 31,~~June 30, 2021, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

~~We provide~~

The Company provides loans to established companies operating in the cannabis industry which involves significant risks, including the risk of strict enforcement against the Company’s borrowers of ~~federal laws regarding~~ the federal illegality of cannabis, the Company’s borrowers’ inability to renew or otherwise maintain their licenses or other requisite authorizations for their cannabis operations, and such loans lack of liquidity, and wethe Company could lose all or part of any of ~~our investments.~~the Company’s loans.

~~Our~~

The Company’s ability to grow or maintain our business depends on state laws pertaining to the cannabis industry. New laws that are adverse to ~~our portfolio companies~~the Company’s borrowers may be enacted, and current favorable state or national laws or enforcement guidelines relating to cultivation, production and distribution of cannabis may be modified or eliminated in the future, which would impede ~~our~~the Company’s ability to grow and could materially adversely affect ~~our~~the Company’s business.

Management’s plan to mitigate risks include monitoring the legal landscape as deemed appropriate. Also, should a loan default or otherwise be seized, the Company may be prohibited from owning cannabis assets and thus could not take possession of collateral, in which case the Company would look to sell the loan, which could result in the Company realizing a loss on the transaction.

11.	STOCKHOLDERS’ EQUITY

Series A Preferred Stock

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company has authorized 10,000 preferred shares and issued 125 of the preferred shares designated as 12.0% Series A Cumulative Non-Voting Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”).

The Series A Preferred Stock entitles the holders thereof to receive cumulative cash dividends at a rate per annum of 12.0% of the liquidation preference of $1,000 per share plus all accumulated and unpaid dividends thereon. The Company generally may not declare or pay, or set apart for payment, any dividend or other distribution on any shares of the Company’s stock ranking junior to the Series A Preferred Stock as to dividends, including the Company’s common stock, or redeem, repurchase or otherwise make payments on any such shares, unless full, cumulative dividends on all outstanding shares of Series A Preferred Stock have been declared and paid or set apart for payment for all past dividend periods. The holders of the Series A Preferred Stock generally have no voting rights except in limited circumstances, including certain amendments to the Company’s charter and the authorization or issuance of equity securities senior to or on parity with the Series A Preferred Stock. The Series A Preferred Stock is not convertible into shares of any other class or series of our stock. The Series A Preferred Stock is senior to all other classes and series of shares of the Company’s stock as to dividend and redemption rights and rights upon the Company’s liquidation, dissolution and winding up.

Upon written notice to each record holder of the Series A Preferred Stock as to the effective date of redemption, the Company may redeem the shares of the outstanding Series A Preferred Stock at the Company’s option, in whole or in part, at any time for cash at a redemption price equal to $1,000 per share, for a total of $125,000 for the 125 shares outstanding, plus all accrued and unpaid dividends thereon to and including the date fixed for redemption, plus a redemption premium of $50 per share if the shares are redeemed on or before December 31, 2021. Shares of the Series A Preferred Stock that are redeemed shall no longer be deemed outstanding shares of the Company and all rights of the holders of such shares will terminate.

14

Index

Common Stock

The Board of Directors of the Company (the “Board”) approved a ~~seven-for-one~~7-for-one stock split of the Company's common stock effective on January 25, 2021. All common shares, stock options, and per share information presented in the financial statements have been adjusted to reflect the stock split on a retroactive basis for all periods presented, including reclassifying an amount equal to the increase in par value of common stock from additional paid-in capital. There was no change in the par value of the Company's common stock. Upon consummation of the Company’s IPO, any stockholder that held fractional shares received cash in lieu of such fractional shares based on the public offering price of the shares of the Company’s common stock at IPO. This resulted in the reduction of 15 shares issued and outstanding.

On March 23, 2021, the Company completed its IPO of 6,250,000 shares of its common stock at a price of $19.00 per share, raising $118,750,000 in gross proceeds. The underwriters also exercised their over-allotment option to purchase up to an additional 937,500 shares of the Company’s common stock at a price of $19.00 per share, which was completed on March 26, 2021, raising $17,812,500 in additional gross proceeds. The underwriting commissions of $8,312,500 and $1,246,875, respectively, are reflected as a reduction of additional paid-in capital on the statement of stockholders’ equity. The Company incurred approximately $3,093,836 of expenses in connection with the IPO, which is reflected as a reduction in additional paid-in capital. The net proceeds to the Company totaled approximately $123,909,289.

On June 28, 2021, the Company completed an offering of 2,750,000 shares of its common stock at a price of $20.50 per share, raising $56,375,000 in gross proceeds. The underwriting commissions of $3,100,625 are reflected as a reduction of additional paid-in capital on the statement of stockholders’ equity. The Company incurred approximately $701,989 of expenses in connection with the offering, which is reflected as a reduction in additional paid-in capital. The net proceeds to the Company totaled approximately $52,572,386.

Subsequent to the period ended June 30, 2021, the underwriters partially exercised their over-allotment option to purchase 269,650 shares of the Company’s common stock at a price of $20.50 per share, which was completed on July 6, 2021, raising $5,527,825 in additional gross proceeds or $5,223,795 in net proceeds after underwriting commissions of $304,030, which is reflected as a reduction of additional paid-in capital on the statement of stockholders’ equity.

The Company intends to use the net proceeds of the IPO and additional offering (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. Until appropriate investments can be identified, the Company may invest this balance in interest-bearing short-term investments, including money market accounts or funds, commercial mortgage-backed securities and corporate bonds, which are consistent with the Company’s intention to qualify as a REIT and to maintain our exclusion from registration under the Investment Company Act of 1940, as amended.

12

~~Table of Contents~~

Equity Incentive Plan

The Company has established an equity incentive compensation plan (the “Plan”). The Company’s Board authorized the adoption of the Plan ~~(the~~(as amended, the “2020 Plan”) and approved stock option grants of 1,616,098 shares of common stock as of ~~March 31,~~June 30, 2021. The Board or one or more committees appointed by the Board ~~will administer~~administers the 2020 Plan. The 2020 Plan authorizes stock options, stock appreciation rights, restricted stock, stock bonuses, stock units and other forms of awards granted or denominated in the Company’s common stock or units of common stock. The 2020 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Any award may be structured to be paid or settled in cash. The Company currently intends to grant stock options to participants in the 2020 Plan, but it may also grant any other type of award available under the 2020 Plan in the future. Persons eligible to receive awards under the 2020 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company, employees of the Manager and certain directors and consultants and other service providers to the Company or any of its subsidiaries.

~~The current~~

15

Index

As of June 30, 2021, the maximum number of shares of the Company common stock that may be delivered pursuant to awards under the 2020 Plan (the “Share Limit”) equals ~~2,100,000 shares.~~2,375,000 shares, which is an increase of 275,000 shares compared to March 31, 2021 under the evergreen provision in the 2020 Plan in connection with the public offering of common stock by the Company in June 2021. Subsequent to the period ended June 30, 2021, the Company issued an additional 269,650 shares of common stock to the underwriters in connection with their partial exercise of an over-allotment option, which increased the Share Limit of the 2020 Plan by 26,965 under the evergreen provision in the 2020 Plan, for a total maximum Share Limit of 2,401,965. Shares that are subject to or underlie awards that expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the 2020 Plan will not be counted against the Share Limit and will again be available for subsequent awards under the 2020 Plan. Shares that are exchanged by a participant or withheld by the Company as full or partial payment in connection with any award granted under the 2020 Plan, as well as any shares exchanged by a participant or withheld by us to satisfy tax withholding obligations related to any award granted under the 2020 Plan, will not be counted against the Share Limit and will again be available for subsequent awards under the 2020 Plan. To the extent that an award is settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will not be counted against the Share Limit and will again be available for subsequent awards under the 2020 Plan.

The exercise price of any options granted under the 2020 Plan will be at net asset value or greater; provided, however, the exercise price will be at least equal to the market price of the underlying shares on the grant date. The options granted under the 2020 Plan have an ordinary term of up to ten years. An option may either be an incentive stock option or a nonqualified stock option. Options generally may not be transferred to third parties for value and do not include dividend equivalent rights.

The following table summarizes the (i) non-vested options granted, (ii) vested options granted and (iii) forfeited options granted for the Company’s directors and officers and employees of the Manager as of ~~March 31,~~June 30, 2021 and December 31, 2020:

	As of March 31, 2021			As of December 31, 2020			As of June 30, 2021			As of December 31, 2020
Non-vested		183,114			142,814			183,114			142,814
Vested		1,449,518			800,618			1,449,518			800,618
Forfeited		(16,534	)		(16,534	)		(19,534	)		(16,534	)
Balance		1,616,098			926,898			1,613,098			926,898

The Company uses the Black-Scholes option pricing model to value stock options in determining the share-based compensation expense. Forfeitures are recognized as they occur. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the date of grant. The expected dividend yield was based on the Company’s expected dividend yield at grant date. Expected volatility is based on the estimated average volatility of similar companies due to the lack of historical volatilities of the Company’s common stock. The share-based compensation expense for the Company was approximately ~~$1,599,115~~$11,457 and $1,610,572 for the three and six months ended ~~March 31, 2021.~~June 30, 2021, respectively.

The following table presents the assumptions used in the option pricing model of options granted under the 2020 Plan:

Assumptions	Range
Expected volatility		40% - 50	%
Expected dividend yield		10% - 20	%
Risk-free interest rate		0.5% - 1.5	%
Expected forfeiture rate		0	%

13

~~Table of Contents~~

The following ~~table~~tables summarizes stock option activity during the three and six months ended ~~March 31,~~June 30, 2021:

	Three months ended March 31, 2021		Weighted-Average Grant Date Fair Value Per Option		Three months ended June 30, 2021			Weighted-Average Grant Date Fair Value Per Option
Balance as of December 31, 2020		926,898	$	0.91
Balance as of March 31, 2021						1,616,098		$	1.08
Granted		689,200		1.31		0			0
Exercised		-		-		0			0
Forfeited		-		-		(3,000	)		1.31
Balance as of March 31, 2021		1,616,098	$	1.08
Balance as of June 30, 2021						1,613,098		$	1.08

16

Index

	Six months ended June 30, 2021			Weighted-Average Grant Date Fair Value Per Option
Balance as of December 31, 2020		926,898		$	0.91
Granted		689,200			1.31
Exercised		0			0
Forfeited		(3,000	)		1.31
Balance as of June 30, 2021		1,613,098		$	1.08

12.	EARNINGS PER SHARE

~~The~~The following information sets forth the computations of basic weighted average earnings per common share for the three and six months ended ~~March 31,~~ June 30,2021:

	Three months ended March 31, 2021		Three months ended June 30, 2021		Six months ended June 30, 2021

Net income / (loss) attributable to common stockholders	$	1,400,755	$	4,627,787	$	6,028,542
Divided by:
Basic weighted average shares of common stock outstanding		7,144,670		13,457,536		10,318,542
Diluted weighted average shares of common stock outstanding		7,485,048		13,775,246		10,636,252
Basic weighted average earnings per common share	$	0.20	$	0.34	$	0.58
Diluted weighted average earnings per common share	$	0.19	$	0.34	$	0.57

13.	INCOME TAX

The income tax ~~provisions~~provision for the Company was $0 for the ~~three~~six months ended ~~March 31,~~June 30, 2021.

For the three and six months ended ~~March 31,~~June 30, 2021, the Company incurred no0 expense for United ~~Stated~~States federal excise tax. Excise tax represents a 4% tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the period. If it is determined that an excise tax liability exists for the current period, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The expense is calculated in accordance with applicable tax regulations.

The Company does ~~not~~0t have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months.

14.	FAIR VALUE

The Company’s loans are typically valued using a yield analysis, which is typically performed for non-credit impaired loans to ~~portfolio companies~~borrowers where the Company does not own a controlling equity position. To determine fair value using a yield analysis, a current price is imputed for the loan based upon an assessment of the expected market yield for a similarly structured loan with a similar level of risk. In the yield analysis, the Company considers the current contractual interest rate, the maturity and other terms of the loan relative to risk of the company and the specific loan. A key determinant of risk, among other things, is the leverage through the loan relative to the enterprise value of the ~~portfolio company.~~borrower. As loans held by the Company are substantially illiquid with no active loan market, the Company depends on primary market data, including newly funded loans, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.

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The following tables summarize the significant unobservable inputs the Company used to value the loans categorized within Level 3 as of ~~March 31,~~June 30, 2021 and December 31, 2020. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values.

	As of March 31, 2021										As of June 30, 2021
				Unobservable Input											Unobservable Input
	Fair Value		Primary Valuation Techniques	Input	Estimated Range			Weighted Average				Fair Value		Primary Valuation Techniques	Input	Estimated Range			Weighted Average
Senior Term Loans	$	50,252,049	Yield analysis	Market Yield		17.07% - 20.61	%		20.33	%		$	44,852,315	Yield analysis	Market Yield		17.21% - 20.47	%		20.24	%
Total Investments	$	50,252,049										$	44,852,315

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	As of December 31, 2020
				Unobservable Input
	Fair Value		Primary Valuation Techniques	Input	Estimated Range			Weighted Average
Senior Term Loans	$	48,558,051	Yield analysis	Market Yield		15.79% - 20.75	%		20.20	%
Total Investments	$	48,558,051

Changes in market yields may change the fair value of certain of the Company’s loans. Generally, an increase in market yields may result in a decrease in the fair value of certain of the Company’s loans.

Due to the inherent uncertainty of determining the fair value of loans that do not have a readily available market value, the fair value of the Company’s loans may fluctuate from period to period. Additionally, the fair value of the Company’s loans may differ significantly from the values that would have been used had a ready market existed for such loans and may differ materially from the values that the Company may ultimately realize. Further, such loans are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the Company was required to liquidate a loan in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it.

In addition, changes in the market environment and other events that may occur over the life of the loans may cause the gains or losses ultimately realized on these loans to be different than the unrealized gains or losses reflected in the valuations currently assigned.

The following ~~table presents~~tables present fair value measurements of loans held at fair value as of ~~March 31,~~June 30, 2021 and December 31, 2020:

Fair Value Measurement Using as of March 31, 2021
Total Level 1 Level 2 Level 3
Loans held at fair value $
50,252,049

-

-
$
50,252,049

Total $
50,252,049 - - $
50,252,049

	Fair Value Measurement Using as of December 31, 2020								Fair Value Measurement Using as of June 30, 2021
	Total		Level 1		Level 2		Level 3		Total		Level 1		��	Level 2		Level 3
Loans held at fair value	$	48,558,051		-		-	$	48,558,051	$	44,852,315		0			0	$	44,852,315
Total	$	48,558,051		-		-	$	48,558,051	$	44,852,315		0			0	$	44,852,315

	Fair Value Measurement Using as of December 31, 2020
	Total		Level 1		Level 2		Level 3
Loans held at fair value	$	48,558,051		0		0	$	48,558,051
Total	$	48,558,051		0		0	$	48,558,051

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The following table presents changes in loans that use Level 3 inputs as of and for the ~~three~~six months ended ~~March 31,~~June 30, 2021:

	Three months ended March 31, 2021			Six months ended June 30, 2021
Total loans using Level 3 inputs at December 31, 2020	$	48,558,051
Total loans using Level 3 inputs at December 31, 2020				$	48,558,051
Change in unrealized gains / (losses) on loans at fair value, net		(144,402	)		(627,561	)
Additional funding		992,000			7,677,701
Original issue discount and other discounts, net of costs		(142,982	)		(501,346	)
Loan repayments					(12,000,000	)
Loan amortization payments					(583,324	)
Accretion of original issue discount		600,009			1,601,197
PIK Interest		389,373			727,597
Total loans using Level 3 inputs at March 31, 2021	$	50,252,049
Total loans using Level 3 inputs at June 30, 2021				$	44,852,315

Fair Value of Financial Instruments

GAAP requires disclosure of fair value information about financial instruments, whether or not recognized at fair value in the balance sheet, for which it is practicable to estimate that value.

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The following table details the book value and fair value of the Company’s financial instruments not recognized at fair value in the balance sheet:

	As of March 31, 2021				As of June 30, 2021
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets
Cash and cash equivalents	$	126,793,972	$	126,793,972	$	124,604,872	$	124,604,872
Loans held for investment at carrying value	$	39,152,936	$	41,661,386	$	105,404,185	$	110,407,362
Loan receivable at carrying value	$	3,240,855	$	3,066,014	$	3,011,140	$	2,868,235

Estimates of fair value for cash and cash equivalents are measured using observable, quoted market prices, or Level 1 inputs. All other fair value significant estimates are measured using unobservable inputs, or Level 3 inputs.

15.	RELATED PARTY TRANSACTIONS

Management Agreement

Pursuant to the Management Agreement, the Manager manages the loans and day-to-day operations of the Company, subject at all times to the further terms and conditions set forth in the Management Agreement and such further limitations or parameters as may be imposed from time to time by the Company’s Board.

The Manager will receive base management fees (the “Base Management Fee”) that are calculated and payable quarterly in arrears, in an amount equal to 0.375% of the Company’s Equity (as defined below), subject to certain adjustments, less 50% of the aggregate amount of any other fees (“Outside Fees”), including any agency fees relating to our loans, but excluding the Incentive Compensation (as defined below) and any diligence fees paid to and earned by the Manager and paid by third parties in connection with the Manager's due diligence of potential ~~loans~~.loans.

Prior to the IPO, the quarterly base management fee was equal to 0.4375% of the Company’s Equity, subject to certain adjustments, less 100% of the aggregate amount of any Outside Fees, including any agency fees relating to our loans, but excluding the Incentive Compensation and any diligence fees paid to and earned by the Manager and paid by third parties in connection with the Manager's due diligence of potential ~~loans~~.loans.

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In addition to the Base Management Fee, the Manager is entitled to receive incentive compensation (the “Incentive Compensation” or “Incentive Fees”) under the Management Agreement. Under the Management Agreement, the Company will pay Incentive Fees to the Manager based upon the Company’s achievement of targeted levels of Core Earnings. “Core Earnings” is defined in the Management Agreement as, for a given period means the net income (loss) for such period, computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) the Incentive Compensation, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between the Manager and the Company’s independent directors and approved by a majority of the independent directors. The Incentive Compensation for the three and six months ended ~~March 31,~~June 30, 2021 was approximately ~~$662,730.~~$1,442,047 and $2,104,777, respectively.

The Company shall pay all of its costs and expenses and shall reimburse the Manager or its affiliates for expenses of the Manager and its affiliates paid or incurred on behalf of the Company, excepting only those expenses that are specifically the responsibility of the Manager pursuant to the Management Agreement.

The following table summarizes the related party costs incurred by the Company for the three and six months ended ~~March 31, 2021.~~June 30, 2021:

	Three months ended March 31, 2021			Three months ended June 30, 2021			Six months ended June 30, 2021
Affiliate Payments
Affiliate Costs
Management fees	$	451,675		$	819,531		$	1,271,206
Less other fees earned		(237,743	)		(182,707	)		(420,450	)
Incentive fees earned		662,730			1,442,047			2,104,777
General and administrative expenses reimbursable to Manager		365,567			423,939			789,506
Total	$	1,242,229		$	2,502,810		$	3,745,039

Amounts payable to the Company’s Manager as of ~~March 31,~~June 30, 2021 and December 31, 2020 were ~~$1,242,229~~$2,609,810 and $728,298, respectively.

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Investments in Loans

From time to time, the Company may co-invest with other investment vehicles managed by the Company’s Manager or its affiliates, including the Manager, and their portfolio companies, including by means of splitting loans, participating in loans or other means of syndicating loans. The Company is not obligated to provide, nor has it provided, any financial support to the other managed investment vehicles. As such, the Company’s risk is limited to the carrying value of its investment in any such loan. As of and for the ~~three~~six months ended ~~March 31,~~June 30, 2021, there were no0 co-investments held by the Company.

In connection with investments in loans, the Company may receive the option to assign the right (the “Assigned Right”) to acquire warrants and/or equity of the borrower. The Company may sell the Assigned Right, and the sale may be to an affiliate of the Company. For the three and six months ended ~~March 31,~~June 30, 2021, the Company sold approximately ~~$1,208,216~~$1,104,914 and $2,313,130, respectively, of Assigned Rights to an affiliate which are accounted for as additional original issue discount and accreted over the life of the loans. As of March 31, 2021, the Company had a receivable from an affiliate related to the Assigned Rights sold during the three months ended March 31, 2021 in the amount of approximately $1,104,914 which is included on the balance sheet in the prepaid expense and other assets line.

Secured Revolving Credit From Affiliate

The Company has ~~a secured revolving credit loan (the “Revolving Loan”)~~the Revolving Loan from AFC Finance, LLC, an affiliate of the Company’s management. Refer to footnote 9 to our unaudited financial statements for more information.

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16.	DIVIDENDS AND DISTRIBUTIONS

The following table summarizes the Company’s dividends declared and paid during the ~~three~~six months ended ~~March 31,~~June 30, 2021:

	Record Date	Payment Date	Common Share distribution amount		Taxable Ordinary Income		Return of Capital		Section 199A Dividends		Record Date	Payment Date	Common Share Distribution Amount		Taxable Ordinary Income		Return of Capital		Section 199A Dividends

Regular cash dividend	3/15/2021	3/31/2021	$	0.36	$	0.36	$	-	$	0.36	3/15/2021	3/31/2021	$	0.36	$	0.36	$	0	$	0.36
Regular cash dividend											6/15/2021	6/30/2021	$	0.38	$	0.38	$	0	$	0.38
Total cash dividend			$	0.36	$	0.36	$	-	$	0.36			$	0.74	$	0.74	$	0	$	0.74

17.	SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the financial statements were available to be issued. There were no material subsequent events, other than that described below, that required disclosure in these financial statements.

Subsequent to quarter end, the underwriters partially exercised their over-allotment option under the Company’s follow-on public offering to purchase 269,650 shares of the Company’s common stock at a price of $20.50 per share, which was completed on July 6, 2021. Refer to footnote 11 to our unaudited financial statements for more information.

In April 2021, Sub. Of Public Co. C repaid their loan in full. The loan had an original maturity date of February 2025 and the outstanding principal on the date of repayment was approximately $12.1 million. The Company received an exit fee of $750,000 and a prepayment premium of $750,000 upon repayment of the loan.

~~In April~~July 2021, the Company entered into a commitment to fund a $19.75 million senior secured term loan which is contingent on the borrower raising additional equity as required by the loan agreement. Until the borrower meets the required criteria in the loan agreement, the commitment has a ticking fee based on the aggregate commitment amount as follows: (a) 6.0% from the date of closing through July 26, 2021 and (b) 6.5% from and after July 27, 2021 through August 9, 2021 or the initial funding date, whichever is earlier. Once funded, the loan will have a per annum interest rate of 12.0% plus LIBOR with a LIBOR floor of 1.0%. The loan will have a maturity date of August 3, 2026, an unused fee of 3.0%, an exit fee of 3.0%, OID of 4.0% and an interest reserve of $0.75 million.

In July 2021, Private Company I refinanced their bridge loan which had a maturity date of July 9, 2021 which had an interest rate of 13.0% and OID of 4.0%. The new senior secured loan of $15.5 million was syndicated by the Company’s Manager between the Company and A BDC Warehouse, LLC (“ABW”), an affiliate of the Company that is wholly-owned by Mr. and Mrs. Tannenbaum, with ABW holding approximately one-third of the principal amount. The Company committed and funded approximately $10.1 million of the new loan which has a per annum interest rate of 12.0% plus LIBOR, with a LIBOR floor of 1.0%, and PIK interest rate of 2.5%. The loan has a maturity date of August 1, 2026, an exit fee of 3.0% and OID of 4.0%. As part of the refinancing agreement, the exit fee on the bridge loan was waived and the borrower was credited for a ~~$13~~portion of the original OID on the bridge loan.

In July 2021, the Company entered into a commitment to fund a $3.0 million ~~senior term~~bridge loan and funded ~~$5.25~~$3.0 million at closing. The loan has an interest rate of ~~13% and PIK interest of 4% with a step down to 2% once certain criteria are met as defined in the loan agreement. The loan has~~13.0%, a maturity date of ~~May 2026, an unused fee of 3%,~~August 31, 2021, an exit fee of ~~15%~~10.0% which is reduced to 2.0% upon refinancing the loan with a senior secured loan with the Company, and OID of ~~15.5%~~4.0%.

In ~~April~~July 2021, Flower Loan Holdco, LLC, an affiliated entity in which Mr. Tannenbaum is the majority ultimate beneficial owner (“FLH”), purchased approximately $8.5 million of the senior secured credit facility with Private Company A from a third-party lender, and the Company has a 30-day option to purchase such amount from FLH. The Company and the Company’s Manager, as agent, subsequently amended and restated the senior secured credit facility with Private Company A to, among other things, increase the loan amount by $10.0 million, which the agent syndicated to ABW. The amendment also allows for the borrower to draw up to an additional $20 million from a designee of the agent, subject to the agent’s satisfaction that certain conditions have been met. Separately, FLH entered into a ~~commitment for~~new credit facility with Private Company A under which the borrower may draw up to $40.0 million (the “Bridge Loan”), which is secured by collateral separate from collateral securing the Company’s credit facility. In connection with the Bridge Loan and a ~~$15 million senior term loan~~related equity raise by Private Company A (the “Equity Raise”), the Manager or its designees are entitled to (i) appoint three of the seven members of Private Company A’s board of directors and ~~funded $15 million at closing. The loan has~~(ii) receive a number of warrants to purchase common stock of Private Company A. In connection with the Equity Raise, an ~~interest rate of 13%. The loan has a maturity date of April 2025 and OID of 7%.~~

In April 2021, the Company entered into a commitment for a $22 million senior term loan and funded $22 million at closing, including a $2 million interest reserve. The loan has an interest rate of 12% plus LIBOR, with a 1% LIBOR floor, and PIK interest of 4% with step downs to 2% and 1.5% once certain criteria are met as defined in the loan agreement. The loan has a maturity date of May 2026, an exit fee of 10%, provided that if certain criteria are met as defined in the loan agreement the exit fee is 2%, and OID of 4%.

~~On May 7, 2021, the Company amended its secured revolving credit loan (the “Revolving Loan”) from AFC Finance, LLC, an affiliate~~investment vehicle controlled by Jonathan Kalikow, one of the Company’s management. The amendment to the Revolving Loan increased the loan commitment from $40,000,000 to $50,000,000, decreased the interest rate from 8% per annum to 6% per annum, removed Gamma Lending Holdco LLC as a lenderdirectors and ~~extended the maturity date from July 31, 2021 to the earlier of (i) December 31, 2021 or (ii) the date~~executive officers, acquired approximately 8.8% of the ~~closing~~equity interest of ~~any credit facility where~~Private Company A on a fully-diluted basis. Following the ~~proceeds are incurred to refund, refinance~~transactions described above, Mr. Kalikow beneficially held or ~~replace the Revolving Credit Agreement with an aggregate principal amount equal to or greater than $50 million. The~~controlled through investment vehicles a total of approximately 10.1% of Private Company ~~did not incur any fees or cost related to the amendment of the Revolving Loan and the Revolving Loan does not have any unused fees.~~A’s equity interest on a fully-diluted basis. As of the date of these ~~financial statements,~~transactions, Mr. Tannenbaum beneficially held approximately 16.7% of Private Company A’s equity interest on a fully-diluted basis through investment vehicles, which amount reflects two acquisitions of additional equity of Private Company A from third-party stockholders during the three months ended June 30, 2021. Following the transactions described above, Mr. Tannenbaum beneficially held approximately 21.8% of Private Company ~~has not drawn~~A’s equity interest on a fully-diluted basis through investment vehicles. Given Mr. Tannenbaum’s equity ownership, each of the ~~Revolving Loan or incurred any fees or interest expense related to~~transactions with Private Company A described above were reviewed and approved by the ~~Revolving Loan.~~Company’s Audit & Valuation Committee of the Board in accordance with the Company’s Amended and Restated Code of Business Conduct and Ethics and its Related-Persons Transaction Policy.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Statement Regarding Forward-Looking Information

Some of the statements contained in this quarterly report constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend such statements to be covered by the safe harbor provisions contained therein. The information contained in this section should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q. This description contains forward-looking statements that involve risks and uncertainties. Actual results could differ significantly from the results discussed in the forward-looking statements due to the factors set forth in “Risk Factors” in our final prospectus relating to our ~~initial~~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 ~~March 19,~~June 24, 2021 (the “Final Prospectus”). In addition, some of the statements in this quarterly report (including in the following discussion) constitute forward-looking statements, which relate to future events or the future performance or financial condition of AFC Gamma, Inc. (“AFCG” and the “Company,” “we,” “us” and “our”). The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:

use of proceeds of the ~~IPO;~~IPO and our follow-on public offering;

our business and investment strategy;

our projected operating ~~results, including our projections for distributable earnings for the second quarter of 2021;~~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;

~~our projected operating results;~~

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~~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.

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We use words such as “anticipates,” “believes,” “expects,” “intends,” “will,” “should,” “may” and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. Our actual results and financial condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Risk Factors” and the other information included in our Final Prospectus and elsewhere in this quarterly report on Form 10-Q.

We have based the forward-looking statements included in this quarterly report on information available to us on the date of this quarterly report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the SEC, including annual reports on Form 10-K, registration statements on Form S-11, quarterly reports on Form 10-Q and current reports on Form 8-K.

Available Information

We routinely post important information for investors on our website, www.afcgamma.com. We intend to use this webpage as a means of disclosing material information, for complying with our disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis. AFCG encourages investors, analysts, the media and others interested in AFCG to monitor the Investors section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations, webcasts and other information we post from time to time on our website. To sign-up for email-notifications, please visit the “Email Alerts” section of our website under the “IR Resources” section and enter the required information to enable notifications.

Overview

AFC Gamma, Inc. (the ~~‘Company”~~“Company” or “AFCG” or “we”) is a commercial real estate finance company founded in July 2020 by a veteran team of investment professionals. We originate, structure and underwrite senior secured loans and other types of loans for established cannabis industry operators in states that have legalized medicinal and/or adult use cannabis. As states continue to legalize cannabis for medical and adult use, an increasing number of companies operating in the cannabis industry need financing. Due to the capital constrained cannabis market which does not typically have access to traditional bank financing, we believe we are well positioned to become a prudent financing source to established cannabis industry operators given our stringent underwriting criteria, size and scale of operations and institutional infrastructure. Our objective is to provide attractive risk-adjusted returns over time through cash distributions and capital appreciation by providing loans to state law compliant cannabis companies. The loans we originate are primarily structured as senior loans secured by real estate, equipment, licenses and/or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties. Our targeted borrowers will sometimes be publicly traded on the Canadian Stock Exchange and/or over-the-counter in the United States. Our loans typically have up to a five-year maturity and contain amortization and/or cash flow sweeps. ~~As of March 31,~~From January 1, 2020 to June 30, 2021, members of our management team, provided by our Manager, and the members of the Investment Committee of our Manager, who advises on our investments and operations, had sourced loans worth approximately ~~$5.5~~$6.6 billion across the cannabis industry in various states while maintaining a robust pipeline of potentially actionable opportunities.

We are externally managed by our Manager, AFC Management, LLC, a Delaware limited liability company, pursuant to the terms of our Management Agreement.

We commenced operations on July 31, 2020 and completed our IPO in March 2021. We are incorporated in Maryland and intend to elect and qualify to be taxed as a real estate investment trust (“REIT”), commencing with our taxable year ~~ending~~ended December 31, 2020. We generally will not be subject to U.S. federal income taxes on our taxable income to the extent that we annually distribute all or substantially all of our taxable income to stockholders and maintain our intended qualification as a REIT. We also intend to operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

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We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies which may make comparison of our financials to those of other public companies more difficult.

We could remain an “emerging growth company” for up to five years from our initial public offering, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our common stock that is held by non-affiliates exceeds ~~$700~~$700.0 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt during the preceding three year period.

Developments during the ~~First~~Second Quarter of 2021:

On ~~March 23,~~June 28, 2021, we completed ~~our initial~~a public offering ~~(“IPO”)~~ of ~~6,250,000~~2,750,000 shares of our common stock at a price of ~~$19.00~~$20.50 per share, raising $118.8 million in gross proceeds. The underwriters also exercised their over-allotment option to purchase up to an additional 937,500 shares of our common stock at a price of $19.00 per share, which was completed on May 26, 2021, raising $17.8 million$56,375,000 in gross proceeds. The underwriting commissions of ~~$8.3 million and $1.2 million, respectively,~~$3,100,625 are reflected as a reduction of additional paid-in capital on the statement of stockholders’ equity. We incurred approximately ~~$3.1 million~~$701,989 of expenses in connection with the ~~IPO,~~offering, which is reflected as a reduction in additional paid-in capital. The net proceeds to us totaled approximately ~~$123.9 million.~~ $52,572,386.

Subsequent to the period ended June 30, 2021, the underwriters partially exercised their over-allotment option to purchase 269,650 shares of our common stock at a price of $20.50 per share, which was completed on July 6, 2021, raising $5,527,825 in additional gross proceeds or $5,223,795 in net proceeds after underwriting commissions of $304,030, which is reflected as a reduction of additional paid-in capital on the statement of stockholders’ equity.

We intend to use the net proceeds of the ~~IPO~~offering (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 our investment strategy and (iii) for working capital and other general corporate purposes. Until appropriate investments can be identified, we may invest this balance in interest-bearing short-term investments, including money market accounts or funds, commercial mortgage-backed securities and corporate bonds, which are consistent with our intention to qualify as a REIT and to maintain our exclusion from registration under the Investment Company Act.

Updates to Our Loan Portfolio during the ~~First~~Second Quarter of 2021

In January 2021, Public Company A and its related loan parties entered into Modification Agreements for each of the Public Company A loans pursuant to which we agreed, subject to certain terms and conditions, to forbear from exercising our rights and remedies regarding defaults by the loan parties resulting from, among other things, the loan parties’ failure to timely pay taxes due, incurrence of mechanic’s liens and tax liens on assets, failure to notify the lenders of such failure to pay and incurrence of liens, failure to make payments due in January 2021 under the Public Company A loans in an aggregate amount of $789,177 owed to all lenders, failure to make payment obligations owed to third party creditors and failure to enter into specified debt restructuring transactions. In exchange for such agreement to forbear, we and the other lenders received certain consideration. Such defaults were unrelated to the COVID-19 pandemic. Under the modification agreement relating to the Public Company A real estate loan (the “RE Modification Agreement”), we and the other lenders agreed to forbear until the earlier of December 21, 2021 and the existence of any new event of default, and the terms of the real estate loan were modified to, among other things, (i) extend the maturity date from June 27, 2021 to December 21, 2021, (ii) modify the interest rate to 14.0%, with 12.0% paid monthly and 2.0% paid at maturity and (iii) add an exit fee of $1.0 million payable upon payment in full of the real estate loan on the maturity date. The RE Modification Agreement also provided for the establishment of an interest reserve for the payment of the last three months of interest on the real estate loan. Additional consideration for the RE Modification Agreement included (w) a modification fee in an amount equal to 3.0% per annum on the outstanding principal of the real estate loan from May 19, 2020 to the effective date of the RE Modification Agreement less certain fees previously paid, (x) the right to acquire common shares of Public Company A in an aggregate amount equal to $1.2 million, (y) the right to acquire warrants to purchase common shares of Public Company A and (z) reimbursement of certain expenses. We sold our portion of the rights to acquire the common shares and warrants received as considerations for the RE Modification Agreement to the administrative agent under the Public Company A real estate loan documents. Under the modification agreement relating to Public Company A equipment loan (the “Equipment Modification Agreement” and, together with the RE Modification Agreement, the “Modification Agreements”), we and the other lenders agreed to forbear until the earlier of February 5, 2024 and the existence of any new event of default, and the terms of the equipment loan were modified to, among other things, (i) amend the payment schedule allowing for reduced monthly payments for three months, with the reduced amounts amortized equally over the remaining monthly payments, (ii) add an exit fee of $500,000 due at the end of the term of the agreement governing the equipment loan, (iii) release a certain guarantor, and (iv) add a new parent company guarantee. Additional consideration for the Equipment Modification Agreement included (x) a modification fee in an amount equal to 6.0% per annum on the outstanding principal of the equipment loan from May 19, 2020 through and including the effective date of the Equipment Modification Agreement less certain fees previously paid, (y) an additional fee of $500,000 payable in equal monthly installments commencing April 5, 2021 and (z) reimbursement of certain expenses. In connection with the Modification Agreements, Public Company A consummated the initial closing of $10.1 million of its non-brokered convertible debenture offering for up to $25.0 million of debenture units. The net proceeds received by Public Company A from the convertible debenture offering are intended to be used for working capital, previous debt obligations and general corporate purposes. The loan parties have since paid the January 2021 payments under the Public Company A loans and there are no delinquent payment obligations owed to us under the agreements governing the Public Company A loans. To the best of our knowledge, Public Company A has repaid in full the other monetary obligations it owed under the Modification Agreement. While Public Company A was able to obtain these modifications and consummate the above-referenced convertible debentures offering, Public Company A and its related loan parties may have difficulty meeting their future obligations. None of our other borrowers are now, or have previously been, in default under their respective loan agreements with us.

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~~Table of Contents~~

In March 2021, we entered into a commitment to Private Co. E for a $21 million senior term loan and funded $7 million at closing, including a $2 million interest reserve. The loan has an interest rate of 12% plus LIBOR per annum with a LIBOR floor of 1% and PIK interest of 4%. The loan has a maturity date of April 2026, an unused fee of 3% and OID of 8.7%. Private Co. E is a single-state medical cannabis operator in Ohio. Its operations consist of a cultivation facility currently in construction and an operational dispensary. The real estate collateral for this senior term loan includes both the dispensary and cultivation facility in Ohio.

~~Sale of Assigned Rights~~

In January 2021 we sold our Assigned Rights to acquire and/or assign (i) 578,476 common shares of Public Company A and (ii) warrants to purchase approximately 289,238 common shares of Public Company A at an exercise price based on a specified formula tied to the volume weighted average trading price of such common shares, to the third-party administrative agent under the Public Company A loans for an aggregate purchase price of $103,302.

In March 2021, we sold to AFC Warehouse Holding, LLC, an affiliate of the Manager and us, an Assigned Right to acquire and/or assign a warrant to purchase 1,382,000 common shares of Private Co. E at an exercise price of $0.01 per share for an aggregate purchase price of $1,104,614, representing the fair value of such Assigned Right as of the date of such sale, as determined by management and the majority of independent directors (based on various subjective and objective factors, including input from an independent third-party valuation firm).

~~Dividends Declared Per Share~~

In December 2020, we declared a seven-for-one stock split in the form of a stock dividend, pursuant to which six additional shares of our common stock shall be issued for each outstanding share of our common stock, payable on January 25, 2021 to each stockholder of record as of the close of business on January 21, 2021 out of our authorized but unissued shares of common stock.

In March 2021, we declared a regular cash dividend of $0.36 per share of our common stock, relating to the first quarter of 2021, paid on March 31, 2021 to stockholders of record as of March 15, 2021. The aggregate amount of the regular cash dividend payment was approximately $2.2 million.

~~The payment of these dividends are not indicative of our ability to pay such dividends in the future.~~

~~Recent Developments~~

In May 2021, we declared a regular cash dividend of $0.38 per share of our common stock, relating to the second quarter of 2021 which will be paid on June 30, 2021 to stockholders of record as of June 15, 2021. The aggregate amount of the regular cash dividend payment will be approximately $5.1 million. The payment of this dividend is not indicative of our ability to pay such dividends in the future.

~~Subsequent to March 31, 2021, we closed 3 loans, committed to $50 million, funded $42.3 million, and were repaid approximately $12.1 million, for net fundings of approximately $30.2 million.~~

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~~Table of Contents~~

In April 2021, Sub. Of Public Co. C repaid ~~their~~its loan in full. The loan had an original maturity date of February 2025 and the outstanding principal on the date of repayment was approximately $12.1 million. We received an exit fee of $750,000 and a prepayment premium of $750,000 upon repayment of the loan.

In April 2021, we entered into a commitment with Private Co. F to fund a ~~$13~~$13.0 million senior secured term loan and funded $5.25 million at closing, including a $925,000 interest reserve. The loan has an interest rate of ~~13%~~13.0% and PIK interest rate of 4%4.0% with a step down to 2%a rate of 2.0% once certain criteria are met as defined in the loan agreement. The loan has a maturity date of May 2026, an unused fee of 3%3.0%, an exit fee of ~~15%~~15.0% and OID of 15.5%. The borrower is a medical cannabis operator in Missouri. The real estate collateral for this senior term loan includes the borrower’s cultivation and two dispensary facilities in Missouri.

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Index

In April 2021, we entered into a commitment with Public Co. E to fund a $15 million senior secured term loan and funded $15 million at closing. The loan has an interest rate of ~~13%~~13.0%. The loan has a maturity date of April 2025, which is subject to an optional maturity extension for 364 days, and OID of 7%7.0%. The borrower is a multi-state medical and recreational cannabis ~~provided~~provider with operations in Florida, Texas, Michigan and Pennsylvania. The real estate collateral for this senior term loan includes the borrower’s cultivation facility in Michigan.

In April 2021, we entered into a commitment with Sub of Private Co. G to fund a $22 million senior secured term loan and funded $22 million at closing, including a $2$2.0 million interest reserve. The loan has an interest rate of ~~12%~~12.0% plus LIBOR, with a 1%1.0% LIBOR floor, and PIK interest rate of 4%4.0% with step downs to 2%2.0% and 1.5% once certain criteria are met as defined in the loan agreement. The loan has a maturity date of May 2026, an exit fee of ~~10%~~10.0%, provided that if certain criteria are met as defined in the loan agreement the exit fee is 2%2.0%, and OID of 4%4.0%. The borrower’s parent entity has licenses across nine states, and the real estate collateral for this senior term loan includes the borrower’s retail facility in New Jersey and its cultivation facility under construction in New Jersey. This senior term loan relates to ~~the Syndication Letters, as defined~~certain syndication letter agreements by and ~~discussed in~~among our ~~Final Prospectus,~~Manager, AFC Investments, LLC, one of our affiliates that is beneficially owned by Mr. and Mrs. Tannenbaum, and us, whereby the loan was initially contemplated as a $46,150,000 commitment and our Manager had syndicated ~~$22~~$22.0 million to us and $24,150,000 to an affiliate, AFC Investments, LLC, subject to satisfactory diligence and definitive loan documentation. The final negotiated loan commitment was for ~~$22~~$22.0 million and AFCG holds the entire amount, with no portion syndicated to AFC Investments, LLC.

In May 2021, we entered into a syndicated senior secured term loan facility with a commitment with Sub of Private Co. H to fund approximately $5.8 million out of a total aggregate principal amount of $37.0 million. We funded our loan commitment at closing. The loan has an interest rate of 15.0% per annum. The loan has an initial maturity date of May 2023, which is subject to two optional maturity extensions of six months each, subject to payment of a 2.0% fee in the case of the first optional extension and approval of all lenders in the case of the second optional extension. The loan has an OID of approximately 2.8%. The loan has an exit fee of 3.0%, an agent fee of $185,000 and a closing fee of $690,000. The borrower is a subsidiary of a multi-state operator with assets in Arkansas, Florida and Illinois. The borrower is a single-state operator that is currently expanding their cultivation facility in Illinois, which is licensed to grow both recreational and medical use cannabis. The borrower also operates two additional dispensaries in the state, one licensed to sell medical use cannabis and the other licensed to sell both recreational and medical use cannabis. The real estate collateral for the borrower consists of a cultivation facility in Illinois.

In May 2021, we entered into a commitment with Public Co. F to fund a $10.0 million senior secured term loan and funded $10.0 million at closing. The loan has an interest rate of 9.75% per annum. The loan has a maturity date of May 2023 and OID of 2.0%. The borrower is a multi-state operator with operations across 14 states. The real estate collateral for the borrower includes five cultivation facilities across Illinois, Florida, Nevada, Ohio, and Massachusetts and eight dispensaries across Illinois, Michigan, Maryland, Arkansas, Ohio, Nevada, Florida, and Arizona.

In June 2021, we entered into a commitment with Private Co. I to fund a $5.5 million secured bridge loan and funded $5.5 million at closing. The loan has a short-term maturity date of July 9, 2021 in anticipation of refinancing under a larger credit facility. The loan has an interest rate of 13.0% per annum, with OID of 4.0%, and an agent fee of 1.0%. The loan also has an exit fee of 10.0% if the loan is not refinanced by us and/or one of our affiliates. The borrower is a single state operator in Maryland, a limited license state, with an existing cultivation and processing operation in the state, as well as one operational dispensary. The bridge loan was refinanced subsequent to quarter end. Refer to “Recent Developments” for more information.

Sale of Assigned Rights

On June 29, 2021, we sold to AFC Warehouse Holding, LLC, an affiliate of the Manager and us, an Assigned Right to acquire and/or assign a warrant to purchase 1,978,000 common shares of Private Co. E at an exercise price of $0.01 per share for an aggregate purchase price of $1,104,614, representing the fair value of such Assigned Right as of the date of such sale, as determined by management and a majority of independent directors (based on various subjective and objective factors, including input from an independent third-party valuation firm).

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Index

Dividends Declared Per Share

In May 2021, we ~~amended~~declared a regular cash dividend of $0.38 per share of our common stock, relating to the second quarter of 2021, which was paid on June 30, 2021 to stockholders of record as of June 15, 2021. The aggregate amount of the regular cash dividend payment was approximately $5.1 million.

The payment of these dividends are not indicative of our ability to pay such dividends in the future.

Recent Developments

Subsequent to quarter end, the underwriters partially exercised their over-allotment option to purchase 269,650 shares of the Company’s common stock at a price of $20.50 per share, which was completed on July 6, 2021. Refer to footnote 11 to our unaudited financial statements included elsewhere in this quarterly report for more information.

Subsequent to June 30, 2021, we closed 3 loans including one that is contingent upon the borrower raising additional equity, committed to $27.3 million, of which $19.8 million is contingent, and funded $10.9 million of principal.

In July 2021, the Company entered into a commitment to fund a $19.75 million senior secured ~~revolving credit~~term loan which is contingent on the borrower raising additional equity as required by the loan agreement. Until the borrower meets the required criteria in the loan agreement, ~~dated~~the commitment has a ticking fee based on the aggregate commitment amount as follows: (a) 6.0% from the date of closing through July 26, 2021 and (b) 6.5% from and after July 27, 2021 through August ~~18, 2020,~~9, 2021 or the initial funding date, whichever is earlier. Once funded, the loan will have a per annum interest rate of 12.0% plus LIBOR, with a LIBOR floor of 1.0%. The loan will have a maturity date of August 3, 2026, an unused fee of 30%, an exit fee of 3.0%, OID of 4.0.% and an interest reserve of $0.75 million.

In July 2021, Private Company I refinanced their bridge loan which had a maturity date of July 9, 2021 which had an interest rate of 13.0% and OID of 4.0%. The new senior secured loan of $15.5 million was syndicated by the Company’s Manager between the Company and ~~among us, as borrower, and AFC Finance,~~A BDC Warehouse, LLC (“ABW”), an affiliate of ~~ours~~the Company that is wholly-owned by Mr. and ~~our management, as~~Mrs. Tannenbaum, with ABW holding approximately one-third of the principal amount. The Company committed and funded approximately $10.1 million of the new loan which has a ~~lender~~per annum interest rate of 12.0% plus LIBOR, with a LIBOR floor of 1.0%, and ~~agent~~PIK interest rate of 2.5%. The loan has a maturity date of August 1, 2026, an exit fee of 3.0% and ~~Gamma Lending~~OID of 4.0%. As part of the refinancing agreement, the exit fee on the bridge loan was waived and the borrower was credited for a portion of the original OID on the bridge loan.

In July 2021, the Company entered into a commitment to fund a $3.0 million bridge loan and funded $3.0 million at closing. The loan has an interest rate of 13.0%, a maturity date of August 31, 2021, an exit fee of 10.0% which is reduced to 2.0% upon refinancing the loan with a senior secured loan with the Company, and OID of 4.0%.

In July 2021, Flower Loan Holdco, LLC, an affiliated entity in which Mr. Tannenbaum is the majority ultimate beneficial owner (“FLH”), purchased approximately $8.5 million of the senior secured credit facility with Private Company A from a third-party lender, and the Company has a 30-day option to purchase such amount from FLH. The Company and the Company’s Manager, as agent, subsequently amended and restated the senior secured credit facility with Private Company A to, among other things, increase the loan amount by $10.0 million, which the agent syndicated to ABW. The amendment also allows for the borrower to draw up to an additional $20 million from a designee of the agent, subject to the agent’s satisfaction that certain conditions have been met. Separately, FLH entered into a new credit facility with Private Company A under which the borrower may draw up to $40.0 million (the “Bridge Loan”), which is secured by collateral separate from collateral securing the Company’s credit facility. In connection with the Bridge Loan and a related equity raise by Private Company A (the “Equity Raise”), the Manager or its designees are entitled to (i) appoint three of the seven members of Private Company A’s board of directors and (ii) receive a number of warrants to purchase common stock of Private Company A. In connection with the Equity Raise, an investment vehicle controlled by Jonathan Kalikow, ~~our Head of Real Estate and~~ one of ~~our~~the Company’s directors and his father , as a lender (as may be amended, supplemented, amended and restated or otherwise modified from time to time, the “Revolving Credit Agreement”). The amendment to the Revolving Credit Agreement increased the loan commitment from $40 million to $50 million, decreased the interest rate from 8% per annum to 6% per annum, removed Gamma Lending Holdco LLC as a party thereto and extended the maturity date from July 31, 2021 to the earlier of (i) December 31, 2021 or (ii) the dateexecutive officers, acquired approximately 8.8% of the ~~closing~~equity interest of ~~any credit facility where~~Private Company A on a fully-diluted basis. Following the ~~proceeds are incurred to refund, refinance~~transactions described above, Mr. Kalikow beneficially held or ~~replace the Revolving Credit Agreement with an aggregate principal amount equal to or greater than $50 million (any such financing,~~controlled through investment vehicles a ~~“Refinancing Credit Facility”) in accordance with the terms in the Revolving Credit Agreement. We did not incur any fees or cost related to the amendment~~total of ~~the Revolving Credit Agreement and the Revolving Credit Agreement does not have any unused fees.~~approximately 10.1% of Private Company A’s equity interest on a fully-diluted basis. As of the date of ~~this quarterly report, we have not drawn~~these transactions, Mr. Tannenbaum beneficially held approximately 16.7% of Private Company A’s equity interest on a fully-diluted basis through investment vehicles, which amount reflects two acquisitions of additional equity of Private Company A from third-party stockholders during the ~~Revolving Credit Agreement or incurred any fees or~~three months ended June 30, 2021. Following the transactions described above, Mr. Tannenbaum beneficially held approximately 21.8% of Private Company A’s equity interest ~~expense related to~~on a fully-diluted basis through investment vehicles. Given Mr. Tannenbaum’s equity ownership, each of the ~~Revolving Credit Agreement.~~transactions with Private Company A described above were reviewed and approved by the Company’s Audit & Valuation Committee of the Board in accordance with the Company’s Amended and Restated Code of Business Conduct and Ethics and its Related-Persons Transaction Policy.

Key Financial Measures and Indicators

As a commercial real estate finance company, we believe the key financial measures and indicators for our business are Distributable Earnings, Adjusted Distributable Earnings, book value per share and dividends declared per share.

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Index

Non-GAAP Metrics

Distributable Earnings and Adjusted Distributable Earnings

In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use Distributable Earnings and Adjusted Distributable Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan activity and operations. Each of Distributable Earnings and Adjusted Distributable Earnings is a measure that is not prepared in accordance with GAAP. We use these non-GAAP financial measures both to explain our results to stockholders and the investment community and in the internal evaluation and management of our businesses. Our management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures permit investors and stockholders to assess the overall performance of our business using the same tools that our management uses to evaluate our past performance and prospects for future performance.

The determination of Distributable Earnings is substantially similar to the determination of Core Earnings under our Management Agreement, provided that Core Earnings is a component of the calculation of any Incentive Fees earned under the Management Agreement for the applicable time period, and thus Core Earnings is calculated ~~prior~~without giving effect to Incentive Fee expense, while the calculation of Distributable Earnings accounts for any Incentive Fees earned for such time period. We define Distributable Earnings as, for a specified period, the net income (loss) computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) depreciation and amortization, (iii) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss); provided that Distributable Earnings does not exclude, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash, (iv) provision for current expected credit losses and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of such independent directors. We define Adjusted Distributable Earnings, for a specified period, as Distributable Earnings excluding certain non-recurring organizational expenses (such as one-time expenses related to our formation and start-up).

We believe providing Distributable Earnings and Adjusted Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to stockholders in assessing the overall performance of our business. As a REIT, we are required to distribute at least 90% of our annual REIT taxable income and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of such taxable income. Given these requirements and our belief that dividends are generally one of the principal reasons that stockholders invest in our common stock, we generally intend to attempt to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our Board. Distributable Earnings is one of many factors considered by our Board in declaring dividends and, while not a direct measure of net taxable income, over time, the measure can be considered a useful indicator of our dividends.

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~~Table of Contents~~

Distributable Earnings and Adjusted Distributable Earnings are “non-GAAP financial measures” and should not be considered as substitutes for GAAP net income. We caution readers that our methodology for calculating Distributable Earnings and Adjusted Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our reported Distributable Earnings and Adjusted Distributable Earnings may not be comparable to similar measures presented by other REITs.

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Index

The following table provides a reconciliation of GAAP net income to Distributable Earnings and Adjusted Distributable Earnings:

For the three
months ended
March 31, 2021

Net Income $ 1,400,755
Adjustments to net income
Non-Cash Equity compensation expense 1,599,115
Depreciation and amortization -
Unrealized (gain), losses or other non-cash items 144,402
Provision for current expected credit losses 66,100
One-time events pursuant to changes in GAAP and certain non-cash charges -
Distributable Earnings $ 3,210,372
Adjustments to Distributable Earnings
Organizational expense -
Adjusted Distributable Earnings $ 3,210,372
Basic weighted average shares of common stock outstanding (in shares) 7,144,670
Adjusted Distributable Earnings per weighted Average Share $ 0.45

	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

Book Value Per Share

We believe that book value per share is helpful to stockholders in evaluating our growth as we scale our equity capital base and continue to invest in our target investments. The book value per share of our common stock as of ~~March 31,~~June 30, 2021 and December 31, 2020 was approximately ~~$16.18~~$16.66 and $14.83, respectively, on a post-split basis.

Dividends Declared Per Share

In December 2020, we declared a seven-for-one stock split in the form of a stock dividend, pursuant to which six additional shares of our common stock were issued for each outstanding share of our common stock, payable on January 25, 2021 to each stockholder of record as of the close of business on January 21, 2021 out of our authorized but unissued shares of common stock.

In March 2021, we declared a regular cash dividend of $0.36 per share of our common stock, relating to the first quarter of 2021which was paid on ~~March 31,~~June 30, 2021 to stockholders of record as of March 15, 2021. The aggregate amount of the regular cash dividend payment was approximately $2.2 million. The payment of this dividend is not indicative of our ability to pay such dividends in the future.

In May 2021, we declared a regular cash dividend of $0.38 per share of our common stock, relating to the second quarter of 2021 which ~~will be~~was paid on June 30, 2021 to stockholders of record as of June 15, 2021. The aggregate amount of the regular cash dividend payment will be approximately ~~$5.1million.~~$5.1 million. The payment of this dividend is not indicative of our ability to pay such dividends in the future.

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~~Table of Contents~~

Factors Impacting our Operating Results

The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our assets and the supply of, and demand for, commercial real estate debt and other financial assets in the marketplace. Our net interest income, which includes the accretion and amortization of OID, is recognized based on the contractual rate and the outstanding principal balance of the loans we originate. Interest rates will vary according to the type of loan, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, some of which cannot be predicted with any certainty. Our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers.

Results of Operations

We commenced operations on July 31, 2020 and therefore, have no period to compare results for the three and six months ended ~~March 31,~~June 30, 2021. We are currently in the process of investing the proceeds of our ~~IPO.~~offerings. Results for the initial period of our operations are not indicative of the results we expect when our investment strategy has been fully implemented.

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Index

Our net income allocable to our common stockholders for the three and six months ended ~~March 31,~~June 30, 2021 was approximately ~~$1.4~~$4.6 million and $6.0 million or ~~$0.20~~$0.34 and $0.58 per basic weighted average common ~~share.~~share, respectively. Net income of approximately ~~$1.4~~$4.6 million and $6.0 million for the three and six months ended June 30, 2021, respectively, was comprised of approximately ~~$4.7~~$8.7 million and $13.4 in total revenues, operating expenses of approximately ~~$0.6~~$0.9 million and $1.5 million, stock-based compensation expense of $11,457 and approximately $1.6 million, management and incentive fees of approximately ~~$0.9~~$2.1 million and $3.0 million, change in the provision for current expected credit losses of approximately ~~$0.1~~$0.6 million and $0.7 million and a net change in unrealized gain on loans of approximately ~~$0.1 million.~~$0.5 million and $0.6 million, respectively.

Investments in loans held at fair value are recorded on the trade date at cost, which reflects the amount of principal funded net of any original issue discounts. An unrealized gain arises when the value of the loan portfolio exceeds its cost, and an unrealized loss arises when the value of the loan portfolio is less than its cost. The net change in unrealized gain of approximately ~~$0.1~~$0.5 million and $0.6 million for the three and six months ended ~~March 31,~~June 30, 2021, respectively, was mainly driven by the net change in the valuation of the loans.

For the three and six months ended ~~March 31,~~June 30, 2021, we incurred fees payable to our ~~manager~~Manager for a Base Management Fee of ~~$213,932,~~$636,824 and $850,757, which was net of a Base Management Fee Rebate of ~~$237,743.~~$182,707 and $420,450, respectively. The Incentive Compensation ~~fee~~fees payable to our ~~manager~~Manager for the three and six months ended ~~March 31,~~June 30, 2021 ~~was $662,730.~~were $1,442,047 and $2,104,777, respectively.

For the three and six months ended ~~March 31,~~June 30, 2021, our Manager will be reimbursed for approximately ~~$365,567~~$423,939 and $789,506, respectively, for out-of-pocket costs incurred on our behalf.

Provision for Current Expected Credit Losses

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, the increase to our provision for current expected credit loss was ~~$66,100~~$711,886 and the balance as of ~~March 31,~~June 30, 2021 was ~~$531,497~~$1,177,283 or ~~125~~109 basis points of our total loans held at carrying value and loans receivable at carrying value commitment balance of ~~$42,393,791~~$108,415,325 and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value and loans receivable at carrying value of ~~$248,317~~$701,143 and (ii) a liability for unfunded commitments of ~~$283,180.~~$476,140. The liability is based on the unfunded portion of loan commitments over the full contractual period over which we are 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. We continuously evaluate the credit quality of each loan by assessing the risk factors of each loan.

Loan Portfolio

As of ~~March 31,~~June 30, 2021 and December 31, 2020, ~~the Company’s~~our portfolio included three and four loans, respectively, held at fair value. The aggregate originated commitment under these loans was approximately ~~$62.4~~$47.4 million and $59.9 million, respectively, and outstanding principal was approximately ~~$52.2~~$46.7 million and $50.8 million ~~respectively,~~ as of ~~March 31,~~June 30, 2021 and December 31, ~~2020.~~2020, respectively. For the ~~three~~six months ended ~~March 31,~~June 30, 2021, the Company funded approximately ~~$1.0~~$7.7 million of outstanding ~~principal.~~principal and had repayments of approximately $12.6 million. As of ~~March 31,~~June 30, 2021 and December 31, 2020, ~~approximately~~ 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).

24

~~Table of Contents~~

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

	As of March 31, 2021								As of June 30, 2021
	Fair Value ⁽²⁾		Carrying Value ⁽¹⁾		Outstanding Principal ⁽¹⁾		Weighted Average Remaining Life (Years)⁽³⁾		Fair Value ⁽²⁾		Carrying Value ⁽¹⁾		Outstanding Principal ⁽¹⁾		Weighted Average Remaining Life (Years)⁽³⁾

Senior Term Loans	$	50,252,049	$	48,833,111	$	52,212,608		3.1	$	44,852,315	$	43,916,537	$	46,653,209		2.6
Total loans held at fair value	$	50,252,049	$	48,833,111	$	52,212,608		3.1	$	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

29

Index

	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 ~~March 31,~~June 30, 2021 and December 31, 2020.

The following table presents changes in loans held at fair value as of and for the ~~three~~six months ended ~~March 31,~~June 30, 2021:

	Principal		Original Issue Discount			Unrealized Gains / (Losses)			Fair Value			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		$	50,831,235		$	(3,836,524	)	$	1,563,340		$	48,558,051
Change in unrealized gains / (losses) on loans at fair value, net		-		-			(144,402	)		(144,402	)		-			-			(627,561	)		(627,561	)
New fundings		992,000		(142,982	)		-			849,018			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		-		600,009			-			600,009			-			1,601,197			-			1,601,197
PIK Interest		389,373		-			-			389,373			727,597			-			-			727,597
Total loans held at fair value at March 31, 2021	$	52,212,608	$	(3,379,497	)	$	1,418,938		$	50,252,049
Total loans held at fair value at June 30, 2021												$	46,653,209		$	(2,736,673	)	$	935,779		$	44,852,315

As of ~~March 31,~~June 30, 2021 and December 31, 2020, ~~the Company’s~~our portfolio included ~~four~~ten and three loans, respectively, held at carrying value. The aggregate originated commitment under these loans was approximately ~~$65~~$136.3 million and ~~$44~~$44.0 million, respectively, and outstanding principal was approximately ~~$42.9~~$114.4 million and $33.9 million, respectively, as of ~~March 31,~~June 30, 2021 and December 31, 2020. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, ~~the Company~~we funded approximately ~~$8.9~~$79.9 million of outstanding principal. As of ~~March 31,~~June 30, 2021 and December 31, 2020, approximately ~~49%~~44% and 35%, respectively, of ~~the Company’s~~our loans held at carrying value have floating interest rates. These floating rates are subject to London Interbank Offered Rate (“LIBOR”) floors, with a weighted average floor of 1% and 1%, respectively, calculated based on loans with LIBOR floors. References to LIBOR or “L” are to 30-day LIBOR (unless otherwise specifically stated).

25

~~Table of Contents~~

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

	As of March 31, 2021									As of June 30, 2021
	Outstanding Principal ⁽¹⁾		Original Issue Discount			Carrying Value ⁽¹⁾		Weighted Average Remaining Life (Years)⁽²⁾		Outstanding Principal ⁽¹⁾		Original Issue Discount			Carrying Value ⁽¹⁾		Weighted Average Remaining Life (Years)⁽²⁾

Senior Term Loans	$	42,940,850	$	(3,787,914	)	$	39,152,936		4.5	$	114,376,084	$	(8,971,899	)	$	105,404,185		3.8
Total loans held at carrying value	$	42,940,850	$	(3,787,914	)	$	39,152,936		4.5	$	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

30

Index

	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 ~~March 31,~~June 30, 2021 and December 31, 2020.

The following table presents changes in loans held at carrying value as of and for the ~~three~~six months ended ~~March 31,~~June 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 8,863,455 (1,824,614 ) 7,038,841
Accretion of original issue discount - 107,432 107,432
PIK Interest 169,632 169,632
Total loans held at carrying value at March 31, 2021 $ 42,940,850 $ (3,787,914 ) $ 39,152,936

	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

As of ~~March 31,~~June 30, 2021 and December 31, 2020, ~~the Company’s~~our portfolio included one loan receivable at carrying value. The originated commitment under this loan was approximately $4$4.0 million and outstanding principal was approximately ~~$3.2~~$3.0 million and $3.4 million as of ~~March 31,~~June 30, 2021 and December 31, 2020, respectively. During the ~~three~~six months ended ~~March 31,~~June 30, 2021, ~~the Company~~we received repayments of ~~$0.1 million~~$337,741 of outstanding principal.

The following table presents changes in loans receivable as of and for the ~~three~~six months ended ~~March 31,~~June 30, 2021:

	Principal			Original Issue Discount			Carrying Value			Principal			Original Issue Discount			Carrying Value

Total loans receivable at carrying value at December 31, 2020	$	3,352,176		$	(3,913	)	$	3,348,263		$	3,352,176		$	(3,913	)	$	3,348,263
Principal repayment of loans		(107,717	)		-			(107,717	)		(337,741	)		-			(337,741	)
Accretion of original issue discount		-			309			309			-			618			618
Total loans receivable at carrying value at March 31, 2021	$	3,244,459		$	(3,604	)	$	3,240,855
Total loans receivable at carrying value at June 30, 2021										$	3,014,435		$	(3,295	)	$	3,011,140

31

Index

The below table summarizes our total loan portfolio as of ~~March 31, 2021, unless otherwise specified.~~June 30, 2021.

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

Loan Names Status
Original
Funding Date⁽¹⁾

Loan
Maturity

Total Loan
Commitment

% of Total
AFCG

Principal
Balance as of
3/31/2021

Cash Interest
Rate

Paid In Kind
("PIK")

Fixed/
Floating

Amortization
During Term

YTM ⁽²⁾

Public Co. A - Real Estate Loan⁽³⁾
Funded: 7/3/2019 1/26/2023 $ 2,940,000 2.3 % $ 2,945,479 12.0 % 2.0 % Fixed No 20
%
Public Co. A - Equipment Loan⁽³⁾
Funded: 8/5/2019 3/5/2024 4,000,000 3.1 % 3,244,459 12.0 % N/A Fixed Yes 17 %
Sub. of Public Co. C⁽⁴⁾⁽⁵⁾
Funded: 2/12/2020 2/18/2025 15,000,000 11.7 % 12,046,801 16.8 % 3.0 % Fixed Yes 49. %
Private Co. A Funded: 5/8/2020 5/8/2024 34,000,000 26.5 % 34,672,331 13.0 % 4.0 % Fixed Yes 24 %
Private Co. B Funded: 9/10/2020 9/1/2023 10,500,000 8.2 % 2,548,159 13.0 % 4.0 % Fixed Yes 26 %
Private Co. C Funded: 11/5/2020 12/1/2025 22,000,000 17.1 % 13,895,465 13.0 % 4.0 % Floating Yes 22 %
Sub. of Public Co. D⁽⁶⁾
Funded: 12/18/2020 12/18/2024 10,000,000 7.8 % 10,000,000 12.9 % N/A Fixed No 14 %
Private Co. D Funded: 12/23/2020 1/1/2026 12,000,000 9.3 % 12,045,385 13.0 % 2.0 % Fixed Yes 20
%
Private Co. E
Funded: 3/30/2021 4/1/2026 21,000,000 14.0 % 7,000,000 13.0 % 4.0 % Floating Yes 23 %
Subtotal $ 131,440,000 100.0 % $ 98,398,079 13.4 % 3.0 % 23 %
Wtd Average

26

~~Table of Contents~~

Borrower names have been kept confidential due to confidentiality agreement obligations.

(1) All loans originated prior to ~~7/31/~~July 31, 2020 were purchased from an affiliated entity at fair value which approximated accreted and/or amortized cost plus accrued interest on ~~7/31/~~July 31, 2020.

(2) ~~Yield to Maturity (“YTM”)~~Estimated YTM includes a variety of fees and features that ~~enhance~~affect the total yield, which may include, ~~Original Issue Discount (“OID”),~~but is not limited to, OID, exit fees, prepayment fees, ~~extension~~unused fees and ~~unused fees. Original Issue Discount or "OID"~~contingent features. OID is recognized as a discount to the funded loan principal and ~~are~~is accreted to income over the term of the loan. Loans originated before ~~7/31/~~July 31, 2020 were acquired by ~~AFC,~~us, net of unaccreted OID, which ~~AFC accretes~~we accrete to income over the remaining term of the loan. In some cases, additional OID is recognized from additional purchase discounts attributed to the fair value of equity positions that were separated from the loans prior to our acquisition of such loans.

The estimated YTM calculations require management to make estimates and assumptions, including, but not limited to, the timing and amounts of loan draws on delayed draw loans, the timing collectability of exit fees, ~~and~~ the probability and timing of ~~prepayments.~~prepayments and the probability of contingent features occurring. For example, our credit agreements with Private Company C, Private Company E, Private Company F, and Subsidiary of Private Company G contain provisions pursuant to which certain PIK interest rates and fees earned by us under such credit agreements will decrease upon the satisfaction of certain specified criteria which we believe may improve the risk profile of the applicable borrower. To be conservative, we have not assumed any prepayment penalties or early payoffs in our estimated YTM calculation. Estimated YTM is based on current management estimates and assumptions, which may change. Actual results could differ from those ~~estimates. To be conservative, no prepayment penalties or early payoffs were assumed.~~estimates and assumptions.

(3) ~~The yield to maturity or “YTM”~~Estimated YTM for ~~Loans~~the loans with Public ~~Co. A - Real Estate Loan, Public Co. A - Equipment Loan, Private Co.~~Company A, Private ~~Co.~~Company A, Private Company D, and Private ~~Co.~~Company E is enhanced by purchase discounts attributed to the fair value of equity warrants that were separated from the loans prior to ~~the AFC's~~our acquisition of ~~the Loans.~~such loans. The purchase discounts accrete to income over the respective remaining ~~term~~terms of the ~~loan. Private Co. E equity value is a preliminary value.~~applicable loans.

(4) Loans to Subsidiary Of Public Company D and Public Company E do not reflect each borrower’s option to request a maturity extension for an additional 364 days from the respective original loan maturity date, each of which we are not obligated to grant.

(5) Loan ~~includes~~to Subsidiary of Private Company H does not reflect the borrower’s option to request up to two maturity extensions each for an additional six months from the then-existing loan maturity date. The first extension, which is available at the borrower’s sole option, is subject to a ~~$3,000,000 initial funding,~~payment of a ~~$15,000,000~~2.0% fee. The second extension is subject to the approval of all lenders.

(6) Estimated YTM for bridge loan ~~commitment,~~to Private Company I is not presented due to the loan’s short-term nature, which ~~has interest~~results in a high estimated YTM that ~~includes 3% PIK; amortization exceeds PIK. The loan also includes two early advances totaling $9,000,000 against the $15,000,000 total loan commitment, with a 19% interest rate. Statistics shown are~~management does not believe is indicative of our expected YTM for the ~~$15,000,000~~average loans of the types that constitute our portfolio. In July 2021, the bridge loan ~~commitment, except~~to Private Company I was refinanced by a larger credit facility that contains economic terms more consistent with the ~~weighted average interest rate, which is based on the weighted average interest rate currently.~~

~~(5) YTM for Sub. Of Public Co. C assumes a repayment date~~remainder of ~~4/13/2021.~~our portfolio. Refer to ~~recent developments~~“—Recent Developments” for more information on the ~~repayment of this~~new loan.

~~(6) Loan has an optional extension for 364 days, but we do not have to participate in the extension, so it was not included nor assumed.~~

Illustrative Description of Borrowers:

Public Company A

Single-state cultivator, producer and full-service brand fulfillment partner that produces a wide range of products in the Nevada market. Public Company A operates a +/- 400,000 square foot greenhouse and 55,000 square foot processing and custom packaging facility, which is capable of producing 140,000 pounds of dry flower per year. ~~Public Company A also operates a +/- 25,000 square foot indoor cultivation facility and commercial kitchen.~~ The real estate collateral of Public Company A ~~includes~~consists of a greenhouse and processing facility in Nevada.

~~Subsidiary of Public Company C~~

Single-state vertically-integrated cultivator and retailer with operations in Florida, one of the fastest growing markets in the United States. Operations consist of two greenhouse cultivation facilities, eight dispensaries and a car delivery system to extend its retail network. The real estate collateral of Subsidiary of Public Company C includes two cultivation facilities in Florida.

Private Company A

Multi-state operator with operations in ~~seven~~six states. Private Company A is a vertically integrated cultivator and retailer of both medical and adult-use cannabis that primarily operates under its own brand. Private Company A’s business segments include cultivation, extraction and processing, retail products, and dispensaries. The real estate collateral of Private Company A ~~includes~~consists of three cultivation facilities across Arizona and Michigan and ~~nine~~ten dispensaries across Arizona, Maryland, Massachusetts and Michigan.

32

Index

Private Company B

Single-state operator currently constructing an indoor cultivation facility to wholesale product to the medical and adult use markets in Michigan. Private Company B produces high-end cannabis strains and intends to focus on the high-end, top-tier cannabis niche. The management team has over 20 years’ experience in the cannabis industry, including ten years in Michigan. The real estate collateral for Private Company B ~~includes~~consists of a cultivation facility in Michigan.

Private Company C

Single-state vertically integrated cultivator and retailer of medical cannabis. Private Company C operates under a Chapter 20 Clinical Registrant license and has partnered to collaborate on multifaceted studies to substantiate safety and positive therapeutic outcomes. Private Company C currently operates a cultivation facility and three dispensaries with the ability to add three additional dispensary locations. The real estate collateral of Private Company C ~~includes~~consists of a cultivation facility and dispensary in Pennsylvania.

Subsidiary of Public Company D

Public Company D participates in the medical and adult use market across Canada and in several US states where cannabis has been legalized for therapeutic or adult use. Subsidiary of Public Company D is a premier medical marijuana cultivator, processor and distributor in Pennsylvania. Public Company D also has operators in California and New Jersey. The real estate collateral for Subsidiary of Public Company D ~~includes~~consists of a cultivation facility in Pennsylvania.

Private Company D

Multi-state operator who operates five dispensaries, the maximum ~~number~~amount of dispensaries allowed by law for any operator, in the State of Ohio and one dispensary in Arkansas. Private Company D historical focus has been dispensary operations and has licenses in other states, where it also operates dispensaries. The real estate collateral for Private Company D ~~includes two~~consists of three dispensaries inacross Ohio and ~~one in~~ Arkansas.

27

~~Table of Contents~~

Private Company E

Single-state operator who operates one dispensary and is currently constructing an indoor cultivation facility to wholesale product for medical use in Ohio. Private Company E approaches the medical cannabis market from the healthcare and scientific perspectives of its founders and key executives, differentiating it in the industry. The real estate collateral for Private Company E consists of a cultivation and processing facility and a dispensary in Ohio.

Private Company F

Single-state operator currently constructing a cultivation/manufacturing facility and two dispensaries in Missouri and will lease two additional dispensary locations for a total of four dispensaries in the state. Private Company F’s management team has extensive experience operating retail operations in other states. The real estate collateral for Private Company F consists of a cultivation/manufacturing facility and two dispensaries in Missouri.

Public Company E

Multi-state operator with operations in four states. Public Company E is a vertically integrated cultivator and retailer in both Florida and Texas with cultivation in Michigan and retail operations in Pennsylvania. Public Company E’s Florida operations consist of two cultivation and processing locations as well as 23 dispensaries across the state. The real estate collateral for Public Company E consists of a cultivation facility in Michigan.

Subsidiary of Private Company G

Private Company G is a multi-state operator with assets across nine states. Subsidiary of Private Company G operates in New Jersey as an alternative treatment center which allows for one cultivation facility and three dispensary operations, all of which are being constructed using the proceeds of the loan to Subsidiary of Private Company G. The real estate collateral for Subsidiary of Private Company G consists of a cultivation facility and dispensary operation in New Jersey.

33

Index

Subsidiary of Private Company H

Private Company H is a multi-state operator with assets in Arkansas, Florida, Maryland and Illinois. Subsidiary of Private Company H is a single-state operator that is currently expanding their cultivation facility in Illinois, which is licensed to grow both recreational and medical use cannabis. Subsidiary of Private Company H also operates two additional dispensaries in the state, one licensed to sell medical use cannabis and the other licensed to sell both recreational and medical use cannabis. The real estate collateral for Subsidiary of Private Company H consists of a cultivation facility in Illinois.

Public Company F

Public Company F is an Illinois based multi-state operator with approximately 75 retail locations across 14 states and has expanded via an aggressive M&A strategy. The real estate collateral for Public Company F consists of five cultivation facilities across Illinois, Florida, Nevada, Ohio, and Massachusetts and eight dispensaries across Illinois, Michigan, Maryland, Arkansas, Ohio, Nevada, Florida, and Arizona.

Private Company I

Private Company I is a Maryland based single-state operator with an existing cultivation and processing operation in the state, as well as one operational dispensary.

Collateral Overview

Our loans are secured by various types of assets of our borrowers, including real property and certain personal property, including licenses, equipment, and other assets to the extent permitted by applicable laws and the regulations governing our borrowers.

The below table represents the real estate collateral securing our loans as of ~~March 31,~~June 30, 2021. The values in the table below were measured at the time of underwriting and based on various sources of data available at such time.

													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.

Borrower Status Date
AFCG
Commitment,
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 2.3 % $ 30,000,000 9.8 % $ 72,000,000 2.40 x $ 7,056,000 2.40 x
Public Co. A - Equipment Loan Funded 8/5/2019 $ 4,000,000 3.1 % $ 20,000,000 20.0 % $ 0 0.00 x $ 0 0.00 x
Subsidiary of Public Co. C⁽³⁾
Funded 2/12/2020 $ 15,000,000 11.7 % $ 15,000,000 100.0 % $ 30,723,143 2.05 x $ 30,723,143 2.05 x
Private Co. A⁽⁴⁾
Funded 5/8/2020 $ 34,000,000 26.5 % $ 42,500,000 80.0 % $ 51,339,031 1.21 x $ 41,071,225 1.21 x
Private Co. B⁽⁵⁾
Funded 9/10/2020 $ 10,500,000 8.2 % $ 10,500,000 100.0 % $ 19,536,098 1.86 x $ 19,536,098 1.86 x
Private Co. C⁽⁶⁾
Funded 11/5/2020 $ 22,000,000 17.1 % $ 22,000,000 100.0 % $ 23,733,050 1.08 x $ 23,733,050 1.08 x
Subsidiary of Public Co. D⁽⁷⁾
Funded 12/18/2020 $ 10,000,000 7.8 % $ 120,000,000 8.3 % $ 26,058,332 0.22 x $ 2,171,528 0.22 x
Private Co. D⁽⁸⁾
Funded 12/23/2020 $ 12,000,000 9.3 % $ 12,000,000 100.0 % $ 7,538,589 0.63 x $ 7,538,589 0.63 x
Private Co. E⁽⁹⁾
Funded 3/30/2021 $ 21,000,000 14.0 % $ 21,000,000 100.0 % $ 16,102,000 0.89 x $ 16,102,000 0.77 x
$ 131,440,000 100.0 % $ 293,000,000 $ 247,030,242 0.85 x $ 147,931,632 1.13 x
34

(1) Real Estate value based on appraised value, if available. In addition, if loan funds acquisition and/or construction, figure includes expected total basis on future construction and/or acquisitions plus appraised value.

Index

~~(2) Public Company A real estate based on cost basis.~~

~~(3) Subsidiary of Public Company C real estate based on existing cultivation property and the completed and stabilized value of the to-be-built facility.~~

~~(4) Private Company A real estate based on appraised value plus future basis.~~

~~(5) Private Company B real estate based on total cost basis, as completed.~~

~~(6) Private Company C real estate based on total cost basis, as completed.~~

~~(7) Subsidiary of Public Company D real estate based on total cost basis.~~

~~(8) Private Company D real estate based on appraised value.~~

~~(9) Private Company E real estate based on total cost basis, as completed.~~

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions to our stockholders and meet other general business needs. We use significant cash to purchase our target investments, repay principal and interest on our borrowings, make distributions to our stockholders and fund our operations.

Our primary sources of cash generally consist of unused borrowing capacity under our Revolving Credit Agreement, the net proceeds of future debt or equity offerings, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating results. We expect that our primary sources of financing will be, to the extent available to us, through (a) credit facilities and (b) public and private offerings of our equity and debt securities. In the future, we may utilize other sources of financing to the extent available to us. As the cannabis industry continues to evolve and to the extent that additional states legalize cannabis, the demand for capital continues to increase as operators seek to enter and build out new markets. We expect the principal amount of the loans we originate to increase and that we will need to raise additional equity and/or debt funds to increase our liquidity in the near future.

As of ~~March 31,~~June 30, 2021 and December 31, 2020, all of our cash was unrestricted and totaled approximately ~~$126.8~~$124.6 million and $9.6 million, respectively.

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~~Table of Contents~~

The sources of financing for our target investments are described below.

Revolving Credit Facility

Pursuant to the terms of the Revolving Credit Agreement, our revolving credit facility provides revolving loan commitments of up to $50.0 million and bears interest at a fixed rate of 6% per annum, payable in cash in arrears. As of each of ~~March 31,~~June 30, 2021 and December 31, 2020, we did not have any borrowings outstanding under our Revolving Credit Agreement. Future proceeds under the Revolving Credit Agreement are available to fund loans and bridge capital contributions and for general corporate purposes. We did not incur any fees or costs related to the origination of the Revolving Credit Agreement and we are not required to pay any commitment fees under the Revolving Credit Agreement. Our obligations under the Revolving Credit Agreement and the other loan documents delivered in connection therewith are secured by a first priority security interest in substantially all of our existing and future assets. The maturity date of the Revolving Credit Agreement is the earlier of (i) December 31, 2021 and (ii) a Refinancing Credit Facility. The Revolving Credit Agreement provides for certain covenants, including requiring us to deliver financial information and any notices of default, and conducting business in the normal course. To the best of our knowledge, as of ~~March 31,~~June 30, 2021, we were in compliance in all material respects with all covenants contained in our Revolving Credit Agreement. In addition, the Revolving Credit Agreement contains customary events of default. In the case of an event of default, the lenders may terminate the commitments under the secured revolving credit facility and require immediate repayment of all outstanding borrowings. Such termination and acceleration would occur automatically in the event of certain bankruptcy events.

Other Credit Facilities, Warehouse Facilities and Repurchase Agreements

In the future, we may also use other sources of financing to fund the origination or acquisition of our target investments, including other credit facilities and other secured and unsecured forms of borrowing. These financings may be collateralized or non-collateralized and may involve one or more lenders. We expect that these facilities will typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates.

35

Index

Capital Markets

We may seek to raise further equity capital and issue debt securities in order to fund our future investments in loans.

Cash Flows

The following table sets forth changes in cash, cash equivalents and restricted cash for the ~~three~~six months ended ~~March 31,~~June 30, 2021:

	For the three months ended March 31, 2021			For the six months ended June 30, 2021
Net Income	$	1,400,755		$	6,028,542
Adjustments to reconcile net income to net cash provided by / (used in) operating activities and changes in operating assets and liabilities		970,030			1,467,345
Net cash provided by operating activities		2,370,785			7,495,887
Net cash used in investing activities		(6,885,056	)		(61,684,731	)
Net cash provided by financing activities		121,684,423			169,169,896
Change in cash, cash equivalents and restricted cash	$	117,170,152		$	114,981,052

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~~Table of Contents~~

Net Cash Provided by Operating Activities

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, net cash provided by operating activities totaled approximately ~~$2.4~~$7.5 million. For the ~~three~~six months ended ~~March 31,~~June 30, 2021, adjustments to net income related to operating activities primarily included net change in unrealized gain on loans at fair value of approximately ~~$0.1~~$0.6 million, stock-based compensation expense of approximately $1.6 million, PIK interest of approximately ~~$0.6~~$1.3 million, accretion of deferred loan original issue discount and other discounts of approximately $2.3 million, provision for current expected credit losses of approximately $0.7 million and change in other assets and liabilities of approximately ~~$0.7~~$2.1 million.

Net Cash Used in Investing Activities

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, net cash used in investing activities totaled approximately ~~$6.9~~$61.7 million. The net cash used in investing activities was primarily a result of the cash used for the origination and funding of loans held for investment of approximately ~~$7.1~~$76.9 million exceeding the cash received from principal repayment of loans held for investment of approximately ~~$0.1~~$12.9 million and cash received from the sale of Assigned Rights of approximately ~~$0.1~~$2.3 million for the ~~three~~six months ended ~~March 31,2021.~~June 30, 2021.

Net Cash Provided by Financing Activities

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, net cash provided by financing activities totaled approximately ~~$121.7~~$169.2 million and related to proceeds from the issuance of our common stock in our IPO and follow-on public offering of approximately ~~$123.9~~$180.3 million, less offering costs of approximately ~~$2.2~~$3.8 million and less approximately $7.3 million in dividends paid.

Contractual Obligations and Other Commitments

Our contractual obligations as of ~~March 31,~~June 30, 2021 and December 31, 2020 are as follows:

	As of March 31, 2021										As of June 30, 2021
	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
Unfunded Commitments	$	33,469,664		-		-		-	$	33,469,664	$	23,999,842		-		-		-	$	23,999,842
Total	$	33,469,664		-		-		-	$	33,469,664	$	23,999,842		-		-		-	$	23,999,842

36

Index

	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

As of ~~March 31,~~June 30, 2021 and December 31, 2020, all unfunded commitments were due in less than one year.

We may enter into certain contracts that may contain a variety of indemnification obligations. The maximum potential future payment amount we could be required to pay under these indemnification obligations may be unlimited.

Off-Balance Sheet Arrangements

Off-balance sheet commitments consist of unfunded commitments on delayed draw loans. Other than as set forth in this quarterly report on Form 10-Q, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, special purpose entities or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities or entered into any commitment or intend to provide additional funding to any such entities.

Leverage Policies

We currently do not intend to have leverage of more than one times equity and intend to have substantially less drawn on any revolving credit agreements than available commitments under those agreements. Although we are not required to maintain any particular leverage ratio, we expect to employ prudent amounts of leverage and, when appropriate, to use debt as a means of providing additional funds for the acquisition of loans, to refinance existing debt or for general corporate purposes. Leverage is primarily used to provide capital for forward commitments until additional equity is raised or additional medium- to long-term financing is arranged. This policy is subject to change by management and our Board.

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~~Table of Contents~~

Dividends

We will elect to be taxed as a REIT for United States federal income tax purposes and, as such, anticipate annually distributing to our stockholders at least 90% of our REIT taxable income, prior to the deduction for dividends paid and excluding our net capital gain. If we distribute less than 100% of our REIT taxable income in any tax year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858 of the Internal Revenue Code of 1986, as amended (the “Code”)), we will pay tax at regular corporate rates on that undistributed portion. Furthermore, if we distribute less than the sum of (i) 85% of our ordinary income for the calendar year, (ii) 95% of our capital gain net income for the calendar year and (iii) any undistributed shortfall from its prior calendar year (the “Required Distribution”) to our stockholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the subsequent year), then we are required to pay non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed. Any of these taxes would decrease cash available for distribution to our stockholders. The 90% distribution requirement does not require the distribution of net capital gains. However, if we elect to retain any of our net capital gain for any tax year, we must notify our stockholders and pay tax at regular corporate rates on the retained net capital gain. The stockholders must include their proportionate share of the retained net capital gain in their taxable income for the tax year, and they are deemed to have paid the REIT’s tax on their proportionate share of the retained capital gain. Furthermore, such retained capital gain may be subject to the nondeductible 4% excise tax. If we determine that our estimated current year taxable income (including net capital gain) will be in excess of estimated dividend distributions (including capital gains dividends) for the current year from such income, we will accrue excise tax on a portion of the estimated excess taxable income as such taxable income is earned.

37

Index

To the extent that our cash available for distribution is less than the amount required to be distributed under the REIT provisions of the Code, we may be required to fund distributions from working capital or through equity, equity-related or debt financings or, in certain circumstances, asset sales, as to which our ability to consummate transactions in a timely manner on favorable terms, or at all, cannot be assured, or we may make a portion of the Required Distribution in the form of a taxable stock distribution or distribution of debt securities.

Any future determination to actually pay dividends or other distributions will be at the discretion of our Board, subject to compliance with applicable law and any contractual provisions, including under agreements for indebtedness we may incur, that restrict or limit our ability to pay dividends, and will depend upon, among other factors, our results of operations, financial condition, earnings, capital requirements, the annual distribution requirements under the REIT provisions of the Code, our REIT taxable income and other factors that our Board deems relevant. Under the Maryland General Corporation Law, we generally may only pay a dividend or other distribution if, after giving effect to the distribution, we would be able to pay our indebtedness as it becomes due in the usual course of business and our total assets exceed our total liabilities.

Critical Accounting Policies and Estimates

As of ~~March 31,~~June 30, 2021, there were no significant changes in or changes in the application of our critical accounting policies or estimates from those presented in the Final Prospectus.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risks in the ordinary course of our business. These risks primarily relate to fluctuations in interest rates. Our loans are typically valued using a yield analysis, which is typically performed for non-credit impaired loans to borrowers. Changes in market yields may change the fair value of certain of our loans. Generally, an increase in market yields may result in a decrease in the fair value of certain of our loans, however this is mitigated to the extent our loans bear interest at a floating rate. As of ~~March 31,~~June 30, 2021, a decrease of 50 bps or increase of 50 bps of the market yield would have resulted in a change in unrealized gain / (loss) of approximately ~~$0.3~~$0.4 million and ~~$0.5~~$(0.5) million, respectively. As of ~~March 31,~~June 30, 2021, we had ~~two~~three floating-rate loans, representing approximately ~~21%~~30% of our loan portfolio based on aggregate outstanding principal balances, subject to a weighted average LIBOR floor of approximately ~~1.0%~~1% with LIBOR quoted as ~~0.11%~~0.146%. We estimate that a hypothetical 100 basis points increase in LIBOR would result in an increase in annual interest income of approximately ~~$23,221~~$0.1 million and a decrease in LIBOR would not affect our interest income due to the LIBOR floor on our loans. This assumes that the weighted average LIBOR floor of our floating-rate loans remains at approximately ~~1.0%~~1%.

Potential Impact of LIBOR Transition

The Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates the London Interbank Offered Rate, or LIBOR, has announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021. However, for U.S dollar LIBOR, the relevant date has been deferred to at least June 30, 2023 for certain tenors (including overnight and one, three, six and 12 months), at which time the LIBOR administrator has indicated that it intends to cease publication of U.S. dollar LIBOR. Despite this deferral, the LIBOR administrator has advised that no new contracts using U.S. dollar LIBOR should be entered into after December 31, 2021. These actions indicate that the continuation of U.S. LIBOR on the current basis cannot and will not be guaranteed after June 30, 2023. Moreover, it is possible that U.S. LIBOR will be discontinued or modified prior to June 30, 2023.

As of ~~March 31, 2020, two~~June 30, 2021, three of our loans, representing approximately ~~21%~~30% of our loan portfolio based on aggregate outstanding principal balances, paid interest at a variable rate tied to LIBOR. If LIBOR is no longer available, our applicable loan documents generally allow us to choose a new index based upon comparable information. However, if LIBOR is no longer available, we may need to renegotiate some of our agreements to determine a replacement index or rate of interest. There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate. As such, the potential effect of any such event on our cost of capital and net investment income cannot yet be determined and any changes to benchmark interest rates could increase our financing costs, which could impact our results of operations, cash flows and the market value of our loans. In addition, the elimination of LIBOR and/or changes to another index could result in mismatches with the interest rate of loans that we are financing.

38

Index

Changes in Fair Value of Our Assets

We generally hold our target investments as long-term loans; however, we may occasionally classify some of our loans as held for sale. We may carry our loans at fair value or carrying value in our balance sheet. As of ~~March 31,~~June 30, 2021 and December 31, 2020, ~~respectively,~~three and four of our loans held for investment, respectively, were carried at fair value within loans held at fair value in our balance sheets, with changes in fair value recorded through earnings.

We evaluate our loans on a quarterly basis and fair value is determined by our Board through its independent Audit and Valuation Committee. We use an independent third-party valuation firm to provide input in the valuation of all of our unquoted investments, which we consider along with other various subjective and objective factors in making our evaluations.

Our loans are typically valued using a yield analysis, which is typically performed for non-credit impaired loans to borrowers. To determine fair value using a yield analysis, a current price is imputed for the loan based upon an assessment of the expected market yield for a similarly structured loan with a similar level of risk. In the yield analysis, we consider the current contractual interest rate, the maturity and other terms of the loan relative to risk of the borrower and the specific loan. A key determinant of risk, among other things, is the leverage through the loan relative to the enterprise value of the borrower. As loans held by us are substantially illiquid with no active transaction market, we depend on primary market data, including newly funded loans, as well as secondary market data with respect to high-yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable. Changes in market yields may change the fair value of certain of our loans. Generally, an increase in market yields may result in a decrease in the fair value of certain of our loans, however this is mitigated to the extent our loans bear interest at a floating rate.

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~~Table of Contents~~

Due to the inherent uncertainty of determining the fair value of loans that do not have a readily available market value, the fair value of our loans may fluctuate from period to period. Additionally, the fair value of our loans may differ significantly from the values that would have been used had a ready market existed for such loans and may differ materially from the values that we may ultimately realize. Further, such loans are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate our investment in a loan in a forced or liquidation sale, we could realize significantly less than the value at which we had recorded such loan investment.

Changes in Market Interest Rates and Effect on Net Interest Income

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our assets and our related financing obligations.

Our operating results depend in large part on differences between the income earned on our assets and our cost of borrowing. The cost of our borrowings generally will be based on prevailing market interest rates. During a period of rising interest rates, our borrowing costs generally will increase (a) while the yields earned on our leveraged fixed-rate loan assets will remain static, and (b) at a faster pace than the yields earned on our leveraged floating-rate loan assets, which could result in a decline in our net interest spread and net interest margin. The severity of any such decline would depend on our asset/liability composition at the time as well as the magnitude and duration of the interest rate increase. Further, an increase in short-term interest rates could also have a negative impact on the market value of our target investments. If any of these events happen, we could experience a decrease in net income or incur a net loss during these periods, which could adversely affect our liquidity and results of operations.

Interest Rate Cap Risk

We

Through our Manager, we originate both fixed and ~~may in~~floating-rate loans and going forward, we intend to have the ~~future acquire floating-rate assets.~~majority of our loans by aggregate commitments accrue at floating rates. These are assets in which the loans may be subject to periodic and lifetime interest rate caps and floors, which limit the amount by which the asset’s interest yield may change during any given period. However, our borrowing costs pursuant to our financing agreements may not be subject to similar restrictions. Therefore, in a period of increasing interest rates, interest rate costs on our borrowings could increase without limitation by caps, while the interest-rate yields on our floating-rate assets would effectively be limited. In addition, floating-rate assets may be subject to periodic payment caps that result in some portion of the interest being deferred and added to the principal outstanding. This could result in our receipt of cash income from such assets in an amount that is less than the amount that we would need to pay the interest cost on our related borrowings. These factors could lower our net interest income or cause a net loss during periods of rising interest rates, which would harm our financial condition, cash flows and results of operations.

39

Index

In July 2017, the Financial Conduct Authority announced its intention to phase out LIBOR by the end of 2021 and the IBA recently announced that it will be consulting on plans to extend the cessation date for certain tenors of U.S.-dollar LIBOR until 2023. It is not possible to predict the effect of any changes in the methods by which LIBOR is determined or regulatory activity related to LIBOR’s phase out. If LIBOR is no longer available, our applicable loan documents generally allow us to choose a new index based upon comparable information Any of these proposals or consequences could have a material adverse effect on our interest expenses.

Interest Rate Mismatch Risk

We may fund a portion of our origination of loans, or of loans that we may in the future acquire, with borrowings that are based on LIBOR, while the interest rates on these assets may be fixed or indexed to LIBOR or another index rate. Accordingly, any increase in LIBOR will generally result in an increase in our borrowing costs that would not be matched by fixed-rate interest earnings and may not be matched by a corresponding increase in floating-rate interest earnings. Any such interest rate mismatch could adversely affect our profitability, which may negatively impact distributions to our stockholders.

Our analysis of risks is based on our Manager’s experience, estimates, models and assumptions. These analyses rely on models which utilize estimates of fair value and interest rate sensitivity. Actual economic conditions or implementation of decisions by our Manager and our management may produce results that differ significantly from the estimates and assumptions used in our models and the projected results.

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~~Table of Contents~~

Market Conditions

We believe that favorable market conditions, including an imbalance in supply and demand of credit to cannabis operating companies, have provided attractive opportunities for non-bank lenders, such as us, to finance commercial real estate loans and other loans that exhibit strong fundamentals but also require more customized financing structures and loan products than regulated financial institutions can presently provide. Additionally, to the extent that additional states legalize cannabis, our addressable market will increase. WeWhile we intend to continue our track record of capitalizing on these opportunities and growing the size of our ~~portfolio.~~portfolio, we are aware that the competition for the capital we provide is increasing.

Credit Risk

We are subject to varying degrees of credit risk in connection with our loans and interest receivable. Our Manager seeks to mitigate this risk by seeking to originate loans, and may in the future acquire loans, of higher quality at appropriate prices given anticipated and unanticipated losses, by employing a comprehensive review and selection process and by proactively monitoring originated and acquired loans. Nevertheless, unanticipated credit losses could occur that could adversely impact our operating results.

In June 2016, the FASB issued ASU No. 2016-13, which replaced the incurred loss impairment methodology pursuant to GAAP with a methodology that reflects 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 credit loss estimates (the “CECL Reserve”). We adopted ASU No. 2016-13 as of July 31, 2020, the date of our commencement of operations. Subsequent period increases and decreases to expected credit losses impact earnings and are recorded within provision for current expected credit losses in our statement of operations. The CECL Reserve related to outstanding balances on loans held for investment required under ASU No. 2016-13 is a valuation account that is deducted from the amortized cost basis of our loans held at carrying value and loans receivable at carrying value in our balance sheet. The CECL Reserve related to unfunded commitments on loans held at carrying value is recorded within accounts payable and other liabilities in our balance sheet. Refer to footnote 6 to our unaudited financial statements ~~titled “Current Expected Credit Losses”~~included elsewhere in this quarterly report for more information on CECL.

We provide loans to established companies operating in the cannabis industry which involves significant risks, including the risk of strict enforcement against our borrowers of the federal illegality of cannabis, our borrowers’ inability to renew or otherwise maintain their licenses or other requisite authorizations for their cannabis operations, and such loans lack of liquidity, and we could lose all or part of any of our loans.

Our ability to grow or maintain our business depends on state laws pertaining to the cannabis industry. New laws that are adverse to our borrowers may be enacted, and current favorable state or national laws or enforcement guidelines relating to cultivation, production and distribution of cannabis may be modified or eliminated in the future, which would impede our ability to grow and could materially adversely affect our business.

Management’s plan to mitigate risks include monitoring the legal landscape as deemed appropriate. Also, should a loan default or otherwise be seized, we may be prohibited from owning cannabis assets and thus could not take possession of collateral, in which case we would look to sell the loan, which could result in us realizing a loss on the transaction.

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Index

Real Estate Risk

Commercial real estate loans are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loan or loans, as the case may be, which could also cause us to suffer losses.

Risk Management

To the extent consistent with maintaining our REIT qualification and our exemption from registration under the Investment Company Act, we seek to manage risk exposure by closely monitoring our portfolio and actively managing the financing, interest rate, credit, prepayment and convexity (a measure of the sensitivity of the duration of a loan to changes in interest rates) risks associated with holding our portfolio of loans. Generally, with the guidance and experience of our Manager:

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.

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Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

As of the end of the period covered by this quarterly report, we carried out an evaluation under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures. Based upon this evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of ~~March 31,~~June 30, 2021.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a‑15(f) and 15d‑15(f) under the Exchange Act) during the quarter ended ~~March 31,~~June 30, 2021 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

In the normal course of business, we may be subject to various legal proceedings from time to time. As of ~~March 31,~~June 30, 2021, we were not subject to any material pending legal proceedings.

Item 1A.

Risk Factors

For a discussion of our potential risks and uncertainties, see the information under the heading ~~"Risk Factors"~~“Risk Factors” in our Final Prospectus, included in the ~~Company's~~Company’s Registration Statement on Form S-11, as amended (SEC File No. ~~333-251762)~~333-257248). There have been no material changes to the risk factors disclosed in the Final Prospectus.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

There were no unregistered sales of equity securities during the ~~three~~six months ended ~~March 31,~~June 30, 2021.

Use of Proceeds

On March 18, 2021, the SEC declared effective our registration statement on Form S-11 (Registration No. 333-251762) (the ~~“Registration~~“IPO Registration Statement”) with respect to our IPO. On March 23, 2021, we completed our IPO of 6,250,000 shares of our common stock at a price of $19.00 per share, raising $118.8 million in gross proceeds. JMP Securities, Ladenburg Thalmann and Seaport Global Securities served as joint book-running managers and Lake Street served as co-manager. The underwriters also exercised their over-allotment option to purchase up to an additional 937,500 shares of common stock at a price of $19.00 per share, which was completed on March 26, 2021, raising $17.8 million in additional gross proceeds. The offering commenced on March 19, 2021 and did not terminate before all of the securities registered in the IPO Registration Statement were sold.

We received net proceeds of approximately $123.9 million from our IPO, including through the exercise of the over-allotment by the underwriters. The underwriting commissions were $8.3 million and $1.2 million, from the closing of the IPO and the over-allotment, respectively. We incurred approximately $3.1 million of expenses in connection with the IPO. All of the underwriting discounts and other expenses were direct or indirect payments to persons other than: (i) our directors, officers or any of their associates; (ii) persons owning ten percent (10%) or more of our common stock; or (iii) our affiliates.

On June 23, 2021, the SEC declared effective our registration statement on Form S-11 (Registration No. 333-257248) (the “Follow-On Registration Statement”) with respect to our follow-on public offering of common stock, in which we registered an aggregate of 3,162,500 shares of our common stock, including 412,500 shares subject to the underwriters’ over-allotment option. On June 28, 2021, we completed our follow-on public offering of 2,750,000 shares of our common stock at a price of $20.50 per share, raising $56,375,000 in gross proceeds. Jefferies, Cowen and JMP Securities served as joint book-running managers. We received net proceeds of approximately $52.6 million from our follow-on public offering. The underwriting commissions were approximately $3.1 million. We incurred approximately $0.7 million of expenses in connection with the follow-on public offering. All of the underwriting discounts and other expenses were direct or indirect payments to persons other than: (i) our directors, officers or any of their associates; (ii) persons owning ten percent (10%) or more of our common stock; or (iii) our affiliates.

As of the date of ~~the~~this quarterly report we have used ~~$52.1~~approximately $84.2 million of the net proceeds to fund loans related to new commitments since the IPO and ~~$3.9~~approximately $11.5 million of the net proceeds to fund previously unfunded commitments. We intend to use the balance of the net proceeds (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 our investment strategy and (iii) for working capital and other general corporate purposes. Until appropriate investments can be identified, we may invest this balance in interest-bearing, short-term investments, including money market accounts or funds, commercial mortgage-backed securities and corporate bonds, which are consistent with the Company’s intention to qualify as a REIT and to maintain our exclusion from registration under the Investment Company Act. None of the proceeds were used to make payments to: (i) our directors, officers or any of their associates; (ii) persons owning ten percent (10%) or more of our common stock; or (iii) our affiliates. There has been no material change in the use of proceeds as described in the Final Prospectus.]

Subsequent to the period ended June 30, 2021, the underwriters partially exercised their over-allotment option to purchase 269,650 shares of the Company’s common stock at a price of $20.50 per share, which was completed on July 6, 2021, raising approximately $5.5 million in additional gross proceeds or $5.2 million in net proceeds after underwriting commissions of approximately $0.3 million. The offering commenced on June 24, 2021 and terminated on July 23, 2021 upon expiration of the underwriters’ over-allotment option and before the sale of all securities registered in the Follow-On Registration Statement were sold.

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Repurchases of Common Stock

There were no issuer repurchases of common stock during the quarter ended ~~March 31,~~June 30, 2021.

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Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

On May 7, 2021, we amended our Revolving Credit Agreement to increase the loan commitment from $40 million to $50 million, decrease the interest rate from 8% per annum to 6% per annum, remove Gamma Lending Holdco as a lender and extend the maturity date from July 31, 2021 to the earlier of (i) December 31, 2021 or (ii) the date of the closing of any credit facility where the proceeds are incurred to refund, refinance or replace the Revolving Credit Agreement with an aggregate principal amount equal to or greater than $50.0 million in accordance with the terms in the Revolving Credit Agreement. We did not incur any fees or cost related to the amendment of the Revolving Credit Agreement and the Revolving Credit Agreement does not have any unused fees. As of the date of this quarterly report, we have not drawn on the Revolving Credit Agreement or incurred any fees or interest expense related to the Revolving Credit Agreement.

Item 6.

Exhibits

3.1	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)).
3.2	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)).
10.1	Amended and Restated Management Agreement, dated January 14, 2021, by and between AFC Gamma, Inc. and AFC Management, LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 23, 2021).
~~10.2~~	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.~~ lenders (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on May 11, 2021).
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	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.INS~~ 101.SCH	~~XBRL Instance 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)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: ~~May 11,~~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)

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45

	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	$	0	$	0	$	0
2		23,830,286		0		23,830,286
3		36,513,621		45,060,278		81,573,899
4		0		3,011,140		3,011,140
5		0		0		0
Total	$	60,343,907	$	48,071,418	$	108,415,325

	Collateral Location	Collateral Type ⁽⁹⁾		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	$	32,834,697	$	32,384,888	$	34,672,331		17.0	%	⁽⁵⁾	5/8/2024		P/I
Private Co. B	MI		C		2,495,922		2,290,381		2,548,159		17.0	%	⁽⁶⁾	9/1/2023		P/I
Public Co. A	NV		C		2,874,629		2,840,108		2,945,317		14.0	%	⁽⁷⁾	12/21/2021		I/O
Sub. Of Public Co. C	FL		C		12,046,801		11,317,734		12,046,801		18.0	%	⁽⁸⁾	2/18/2025		P/I
Total loans held at fair value				$	50,252,049	$	48,833,111	$	52,212,608

	Outstanding ⁽¹⁾			Unfunded ⁽²⁾		Total		Outstanding ⁽¹⁾		Unfunded ⁽²⁾		Total
Balance at December 31, 2020	$	404,860		$	60,537	$	465,397
Balance at March 31, 2021								$	248,317	$	283,180	$	531,497
Provision for current expected credit losses		(156,543	)		222,643		66,100		452,826		192,960		645,786
Write-offs		-			-		-		0		0		0
Recoveries		-			-		-		0		0		0
Balance at March 31, 2021	$	248,317		$	283,180	$	531,497
Balance at June 30, 2021								$	701,143	$	476,140	$	1,177,283

	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

Loan Names	Status	Original Funding Date⁽¹⁾	Loan Maturity	Total Loan Commitment		% of Total AFCG			Principal Balance as of 3/31/2021		Cash Interest Rate			Paid In Kind ("PIK")			Fixed/ Floating	Amortization During Term	YTM ⁽²⁾
Public Co. A - Real Estate Loan⁽³⁾	Funded:	7/3/2019	1/26/2023	$	2,940,000		2.3	%	$	2,945,479		12.0	%		2.0	%	Fixed	No		20	%
Public Co. A - Equipment Loan⁽³⁾	Funded:	8/5/2019	3/5/2024		4,000,000		3.1	%		3,244,459		12.0	%		N/A		Fixed	Yes		17	%
Sub. of Public Co. C⁽⁴⁾⁽⁵⁾	Funded:	2/12/2020	2/18/2025		15,000,000		11.7	%		12,046,801		16.8	%		3.0	%	Fixed	Yes		49.	%
Private Co. A	Funded:	5/8/2020	5/8/2024		34,000,000		26.5	%		34,672,331		13.0	%		4.0	%	Fixed	Yes		24	%
Private Co. B	Funded:	9/10/2020	9/1/2023		10,500,000		8.2	%		2,548,159		13.0	%		4.0	%	Fixed	Yes		26	%
Private Co. C	Funded:	11/5/2020	12/1/2025		22,000,000		17.1	%		13,895,465		13.0	%		4.0	%	Floating	Yes		22	%
Sub. of Public Co. D⁽⁶⁾	Funded:	12/18/2020	12/18/2024		10,000,000		7.8	%		10,000,000		12.9	%		N/A		Fixed	No		14	%
Private Co. D	Funded:	12/23/2020	1/1/2026		12,000,000		9.3	%		12,045,385		13.0	%		2.0	%	Fixed	Yes		20	%
Private Co. E	Funded:	3/30/2021	4/1/2026		21,000,000		14.0	%		7,000,000		13.0	%		4.0	%	Floating	Yes		23	%
			Subtotal	$	131,440,000		100.0	%	$	98,398,079		13.4	%		3.0	%				23	%
																				Wtd Average