Chicago Atlantic Real Estate Finance, Inc.

Previous wording

Our Manager and its affiliates seek to originate real estate loans between $5 million and $200 million, generally with one- to five-year terms and amortization when terms exceed three years. We generally act as co-lenders in such transactions and intend to hold up to $50 million of the aggregate loan amount, with the remainder to be held by affiliates or third party co-investors. We may revise such concentration limits from time to time as our loan portfolio grows. Other investment vehicles managed by our Manager or affiliates of our Manager may co-invest with us or hold positions in a loan where we have also invested, including by means of splitting commitments, participating in loans or other means of syndicating loans. We will not engage in a co-investment transaction with an affiliate where the affiliate has a senior position to the loans held by us. To the extent that an affiliate provides financing to one of our borrowers, such loans will be working capital loans or loans that are subordinate to our loans. We may also serve as co-lenders in loans originated by third parties and, in the future, we may also acquire loans or loan participations. Loans that have one to two year maturities are generally interest only loans.

Current wording

Our Manager and its affiliates seek to originate real estate loans between $5 million and $200 million, generally with one- to five-year terms and amortization when terms exceed three years. We generally act as co-lenders in such transactions and intend to hold up to $50 million of the aggregate loan amount, with the remainder to be held by affiliates or third party co-investors. We may revise such concentration limits from time to time as our loan portfolio grows. Other investment vehicles managed by our Manager or affiliates of our Manager may co-invest with us or hold positions in a loan where we have also invested, including by means of splitting commitments, participating in loans or other means of syndicating loans. We will not engage in a co-investment transaction with an affiliate where the affiliate has a senior position to the loan held by us. To the extent that an affiliate provides financing to one of our borrowers, such loans will be working capital loans or loans that are subordinate to our loans. We may also serve as co-lenders in loans originated by third parties and, in the future, we may also acquire loans or loan participations. Loans that have one to two year maturities are generally interest only loans.

Previous wording

Our loans are secured by real estate and, in addition, when lending to owner-operators in the cannabis industry, other collateral, such as equipment, receivables, licenses or other assets of the borrowers to the extent permitted by applicable laws and regulations. In addition, we seek to impose strict loan covenants and seek personal or corporate guarantees for additional protection. As of September 30, 2024 and December 31, 2023, 20.2% and 27.1%, respectively, of the principal of loans held in our portfolio are backed by personal or corporate guarantees. We aim to maintain a portfolio diversified across jurisdictions and across verticals, including cultivators, processors, dispensaries, as well as ancillary businesses. In addition, we may invest in borrowers that have equity securities that are publicly traded on the Canadian Stock Exchange (“CSE”) in Canada and/or over-the-counter in the United States.

Current wording

Our loans are secured by real estate and, in addition, when lending to owner-operators in the cannabis industry, other collateral, such as equipment, receivables, licenses or other assets of the borrowers to the extent permitted by applicable laws and regulations. In addition, we seek to impose strict loan covenants and seek personal or corporate guarantees for additional protection. As of March 31, 2025 and December 31, 2024, 61.2% and 50.0%, respectively, of the principal of loans held in our portfolio are backed by personal or corporate guarantees. We aim to maintain a portfolio diversified across jurisdictions and across verticals, including cultivators, processors, dispensaries, as well as ancillary businesses. In addition, we may invest in borrowers that have equity securities that are publicly traded on the Canadian Stock Exchange (“CSE”) in Canada and/or over-the-counter in the United States.

Previous wording

We generate revenue primarily in the form of interest income on loans. As of September 30, 2024 and December 31, 2023, approximately 62.8% and 80.5%, respectively, of our portfolio was comprised of floating rate loans, and 37.2% and 19.5% of our portfolio was comprised of fixed rate loans, respectively. The floating rate loans described above are variable based upon the Prime Rate plus an applicable margin, and in many cases, a Prime Rate floor.

Current wording

We generate revenue primarily in the form of interest income on loans. As of March 31, 2025 and December 31, 2024, approximately 58.5% and 62.1%, respectively, of our total portfolio was comprised of floating rate loans, and 41.5% and 37.9% of our total portfolio was comprised of fixed rate loans, respectively. The floating rate loans described above are variable based upon the Prime Rate plus an applicable margin, and in many cases, a Prime Rate floor. We have one floating rate loan, which comprises approximately 0.1% of the aggregate portfolio outstanding principal that bears a rate based on SOFR.

Previous wording

To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute annually to our stockholders at least 90% of our REIT taxable income prior to the deduction for dividends paid. To the extent that 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 Code), we will pay tax at regular corporate rates on that undistributed portion. Furthermore, if we distribute less than the sum of 1) 85% of our ordinary income for the calendar year, 2) 95% of our capital gain net income for the calendar year, and 3) any undistributed shortfall from our 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 a non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed. 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. Our 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 it is determined that our estimated current year taxable income will be in excess of estimated dividend distributions (including capital gain dividend) for the current year from such income, we will accrue excise tax on estimated excess taxable income as such taxable income is earned. The annual expense is calculated in accordance with applicable tax regulations. Excise tax expense, if any, is included in the line item, income tax expense. For the nine months ended September 30, 2024, we did not incur excise tax expense.

Current wording

To qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute annually to our stockholders at least 90% of our REIT taxable income prior to the deduction for dividends paid. To the extent that 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 Code), we will pay tax at regular corporate rates on that undistributed portion. Furthermore, if we distribute less than the sum of 1) 85% of our ordinary income for the calendar year, 2) 95% of our capital gain net income for the calendar year, and 3) any undistributed shortfall from our 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 a non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed. 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. Our 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 it is determined that our estimated current year taxable income will be in excess of estimated dividend distributions (including capital gain dividend) for the current year from such income, we will accrue excise tax on estimated excess taxable income as such taxable income is earned. The annual expense is calculated in accordance with applicable tax regulations. Excise tax expense, if any, is included in the line item, income tax expense. For the three months ended March 31, 2025, we did not incur excise tax expense.

Previous wording

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 will be subject to interest rate risk in connection with our assets and our related financing obligations. During the third quarter, the prime rate decreased by 50 basis points from 8.50% as of June 30, 2024 to 8.00% as of September 30, 2024. As of September 30, 2024, 43.1% of the Company's loan portfolio bears a fixed interest rate or has a prime rate floor equal to or greater than that prevailing prime rate.

Current wording

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.

Previous wording

Our operating results will 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. Periods of rising interest rates may, over time, cause:

Current wording

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 are 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.

Previous wording

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. As of September 30, 2024, 94.3% of our floating rate loans, based on principal outstanding have interest rate floors, and one loan is subject to an interest rate cap (Note 3) as shown below:

Current wording

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. As of March 31, 2025, 58.5% of our floating rate loans, based on total principal outstanding have interest Prime rate floors as summarized below:

Previous wording

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. We intend to continue to capitalize on these opportunities and grow the size of our portfolio.

Current wording

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. We intend to continue to capitalize on these opportunities and growing the size of our portfolio.

Previous wording

Updates to Our Loan Portfolio during the Third Quarter of 2024

Current wording

Updates to Our Loan Portfolio during the First Quarter of 2025

Previous wording

During the three months ended September 30, 2024, we declared an ordinary cash dividend of $0.47 per share of our common stock, relating to the third quarter of 2024, which was paid on October 15, 2024 to stockholders of record as of the close of business on September 30, 2024. The total amount of the cash dividend payment was approximately $9.3 million.

Current wording

During the three months ended March 31, 2025, we declared an ordinary cash dividend of $0.47 per share of our common stock, relating to the first quarter of 2025, which was paid on April 15, 2025 to stockholders of record as of the close of business on March 31, 2025. The total amount of the cash dividend payment was approximately $9.8 million.

Previous wording

Management and incentive fees to our Manager was approximately $5.2 million for the nine months ended September 30, 2024, as compared to approximately $5.5 million for the nine months ended September 30, 2023, a decrease of $0.3 million or 6%. Management fees were approximately $3.2 million for the nine months ended September 30, 2024, as compared to approximately $3.0 million for the nine months ended September 30, 2023. The slight increase in management fees was primarily attributable to fewer origination fee offsets in the nine months ended September 30, 2024 of approximately $92 thousand, compared to approximately $130 thousand for the nine months ended September 30, 2023, offset by an increase in weighted average equity as defined by the Management Agreement for the comparable period. Incentive fees were approximately $2.0 million for the nine months ended September 30, 2024, as compared to approximately $2.5 million for the nine months ended September 30, 2023, primarily driven by higher trailing twelve month Core Earnings in the nine month period ending September 30, 2023 compared to the same period ending September 30, 2024.

Current wording

Base management and incentive fees payable to our Manager remained consistent over the comparative period. Management fees were approximately $1.2 million for the three months ended March 31, 2025, as compared to approximately $1.1 million for the three months ended March 31, 2024. The slight increase in management fees was primarily attributable to the increase in weighted average equity as defined by the Management Agreement for the comparable period. The origination fee offsets in the three months ended March 31, 2025 were approximately $4 thousand, compared to approximately $16 thousand for the three months ended March 31, 2024. Incentive fees were approximately $0.5 million for the three months ended March 31, 2025, as compared to approximately $0.7 million for the three months ended March 31, 2024.

Previous wording

General and administrative expenses and professional fees decreased by approximately $22 thousand for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The decrease was primarily due to a decrease in professional fees in the third quarter of 2024.

Current wording

General and administrative expenses and professional fees decreased by approximately $151 thousand for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The decrease was primarily due to a decrease in overhead reimbursements for costs incurred by the Manager on behalf of the Company, which were approximately $1.1 million for the three months ended March 31, 2025, compared to approximately $1.2 million for the three months ended March 31, 2024.

Previous wording

Stock based compensation expense increased by approximately $0.3 million for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. The increase over the comparable period is driven by the incremental expense recognized on the 187,335 restricted stock awards granted to employees of our Manager on April 1, 2024.

Current wording

Stock based compensation expense increased slightly by approximately $0.1 million for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The increase over the comparative period is driven by the incremental expense recognized on the 187,335 of restricted stock awards granted on during 2024, which had not been granted as of March 31, 2024.

Previous wording

Changes in portfolio risk composition resulting from principal paydowns and new fundings contributed to the reversal/decrease, with reserves on new 2024 originations representing a larger portion of the reserve than loans originated as of September 30, 2023. As of September 30, 2024 approximately 72.3% of our loans carry a risk rating of "1" or "2", compared with 66.2% as of September 30, 2023. Additionally, loans risk rated "3" and "4" decreased to approximately 27.7% of the portfolio at September 30, 2024, from 33.8% of the portfolio at September 30, 2023, as a result of improved valuations and borrower specific performance, as well as portfolio composition resulting from advance and repayment activity. Furthermore, during the third quarter, the Company transferred $13.0 million of principal of Loan #2 from loans held for investment to loans held for sale, and reversed approximately $0.2 million of the CECL reserve in connection with the transfer.

Current wording

Changes in portfolio risk composition resulting from principal paydowns and new fundings also contributed to the decrease with reserves on new 2024 originations representing a larger portion of the reserve than loans originated as of March 31, 2024. As of March 31, 2025 and March 31, 2024 approximately 60.3% and 59.5% of our loans carry a risk rating of "1" or 2".

Previous wording

We record a reserve liability 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. There is $6.0 million of unfunded commitments as of September 30, 2024 relating to one borrower, and this unfunded commitment carries a $0 CECL reserve. This unfunded commitment was advanced in October 2024.

Current wording

We record a reserve liability 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. The reserve recorded applicable to the $19.8 million of unfunded commitments as of March 31, 2025 is approximately $45 thousand.

Previous wording

As of September 30, 2024 and December 31, 2023, our portfolio of loans held for investment had a weighted-average yield-to-maturity internal rate of return (“YTM IRR”) of 18.2% and 19.4%, and was substantially secured by real estate and, with respect to certain of our loans, substantially all assets of the borrowers and certain of their subsidiaries, including equipment, receivables, and licenses. YTM IRR is calculated using various inputs, including (i) cash and PIK interest, which is capitalized and added to the outstanding principal balance of the applicable loan, (ii) original issue discount (“OID”), (iii) amortization, (iv) unused fees, and (v) exit fees. Certain of our loans have extension fees, which are not included in our YTM IRR calculations, but may increase YTM IRR if such extension options are exercised by borrowers.

Current wording

As of both March 31, 2025 and December 31, 2024, our portfolio included 30 loans held for investment, with a carrying value of approximately $399.5 million and $402.5 million, respectively, prior to the reserve for current expected credit losses. The aggregate outstanding principal was approximately $401.5 million and $404.7 million as of March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025 and December 31, 2024, our loan portfolio had a weighted-average yield-to-maturity internal rate of return (“YTM IRR”) of 16.9% and 17.2%, respectively, and was substantially secured by real estate and, with respect to certain of our loans, substantially all assets of the borrowers and certain of their subsidiaries, including equipment, receivables, and licenses. YTM IRR is calculated using various inputs, including (i) cash and paid-in-kind (“PIK”) interest, which is capitalized and added to the outstanding principal balance of the applicable loan, (ii) original issue discount (“OID”), (iii) amortization, (iv) unused fees, and (v) exit fees. Certain of our loans have extension fees, which are not included in our YTM IRR calculations, but may increase YTM IRR if such extension options are exercised by borrowers.

Previous wording

All loans originated prior to April 1, 2021 were purchased from affiliated entities at fair value plus accrued interest on or subsequent to April 1, 2021. Loan numbering in the table above is maintained from origination for purposes of comparability and may not be sequential due to maturities, payoffs, or refinancings.

Current wording

Loan numbering in the table above is maintained from origination for purposes of comparability and may not be sequential due to maturities, payoffs, or refinancings.

Previous wording

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

Current wording

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

Previous wording

"P" = prime rate and depicts floating rate loans that pay interest at the prime rate plus a specific percentage; "PIK" = paid-in-kind interest.

Current wording

"P" = prime rate; "SOFR"= Secured Overnight Financing Rate. "P" and "SOFR" represent floating rate loans that pay interest at the designed benchmark rate plus an applicable spread; "PIK" = paid-in-kind interest.

Previous wording

The aggregate principal balance outstanding of Loan #3 is comprised of two tranches. The first tranche has a principal balance $16.8 million, a floating interest rate of prime plus 7.75% cash and 2.75% PIK and a maturity date of January 29, 2027. The second tranche has a principal balance of $4.3 million, and bears an interest rate of 15.00% and 2.00% PIK, and a maturity date of November 29, 2024. The statistics presented reflect the weighted average of the rate terms under both tranches for the total aggregate loan commitment.

Current wording

The aggregate principal balance outstanding of Loan #3 is comprised of two tranches. The first tranche has a principal balance of approximately $16.9 million, bears a floating interest rate of prime plus 10.375% cash and 2.75% PIK and has a maturity date of January 29, 2027. The second tranche has a principal balance of approximately $4.4 million, bears an interest rate of 15.00% cash and 2.00% PIK, and a maturity date of May 29, 2026. The statistics presented reflect the weighted average of the rate terms under both tranches for the total aggregate loan principal, however only the maturity date for the first tranche has been presented in the table above.

Previous wording

The following tables present changes in loans held for investment at carrying value as of and for the nine months ended September 30, 2024 and 2023:

Current wording

The following tables present changes in loans held for investment at carrying value as of and for the three months ended March 31, 2025 and 2024:

Previous wording

Distributable Earnings is a measure that is not prepared in accordance with GAAP. 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; 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).

Current wording

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. Each of Distributable Earnings and Adjusted Distributable Earnings is a measure that is not prepared in accordance with GAAP. 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; 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).

Previous wording

The book value per share of our common stock as of September 30, 2024 and December 31, 2023 was approximately $15.05 and $14.94, respectively.

Current wording

The book value per share of our common stock as of March 31, 2025 and December 31, 2024 was approximately $14.87 and $14.83, respectively.

Previous wording

Our primary sources of cash generally consist of unused borrowing capacity under our financing sources, the net proceeds of future offerings of equity or debt securities, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating results. On a long-term basis, 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. 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, we expect the demand for capital will continue to increase as operators seek to enter and build out new markets. In the short-term, we expect the principal amount of the loans we originate will increase and that we will need to raise additional equity and/or debt financing to increase our liquidity. We expect to achieve this through recycling capital from loan paydowns, repayments, and sales of common stock related to our shelf registration statement.

Current wording

Our primary sources of cash generally consist of unused borrowing capacity under our financing sources, the net proceeds of future offerings of equity or debt securities, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating results. On a long-term basis, 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. 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. In the short-term, we expect the principal amount of the loans we originate to increase and that we will need to raise additional equity and/or debt financing to increase our liquidity. We expect to achieve this through recycling capital from loan paydowns, repayments, and sales of common stock related to our shelf registration statement.

Previous wording

As of September 30, 2024 and December 31, 2023, all of our cash was unrestricted and totaled approximately $6.8 million and $7.9 million, respectively. We believe that our cash on hand, capacity available under our Revolving Loan, the Unsecured Notes and cash flows from operations for the next twelve months will be sufficient to satisfy the operating requirements of our business through at least the next twelve months. The sources of financing for our target investments are described below.

Current wording

As of March 31, 2025 and December 31, 2024, all of our cash was unrestricted and totaled approximately $9.9 million and $26.4 million, respectively. We believe that our cash on hand, capacity available under our Revolving Loan, and cash flows from operations for the next twelve months will be sufficient to satisfy the operating requirements of our business through at least the next twelve months. The sources of financing for our target investments are described below.

Previous wording

As of September 30, 2024 and December 31, 2023, unamortized debt issuance costs related to the Revolving Loan, including all amendments and amendments and restatements thereto, as applicable, of $261,217 and $366,592, respectively, are recorded in other receivables and assets, net on the consolidated balance sheets.

Current wording

As of March 31, 2025 and December 31, 2024, unamortized debt issuance costs related to the Revolving Loan, including all amendments and amendments and restatements thereto, as applicable, of $254,229 and $305,075, respectively, are recorded in other receivables and assets, net on the consolidated balance sheets.

Previous wording

For the nine months ended September 30, 2024, the Company had net paydowns of $(12.0) million against the Revolving Loan. As of September 30, 2024, the Company had $56.0 million available and $54.0 million outstanding under the Revolving Loan (Note 6).

Current wording

As of and for the three months ended March 31, 2025, the Company had net repayments of $17.0 million against the Revolving Loan. As of March 31, 2025, the Company had $72.0 million available and $38.0 million outstanding under the Revolving Loan (Note 7 of Part 1, Item 1 -Financial Information).

Previous wording

On October 18, 2024, the Company entered into a Loan Agreement by and among the Company and the various financial institutions party thereto, for an aggregate commitment of $50.0 million in unsecured notes (the "Unsecured Notes"). The Unsecured Notes have a contractual four year term maturing on October 18, 2028 and bear an interest rate of 9.00% per annum. The $50.0 million aggregate commitment was advanced on the closing date and proceeds were used to temporarily repay outstanding obligations on the Revolving Loan and for other working capital purposes. The Company incurred debt issuance costs of approximately $0.9 million related to Unsecured Notes, which were capitalized and are subsequently amortized through maturity.

Current wording

The $50.0 million aggregate commitment was advanced on the closing date and proceeds were used to temporarily repay outstanding obligations on the Revolving Loan and for other working capital purposes. The Company incurred debt issuance costs of approximately $0.9 million related to Unsecured Notes, which were capitalized and offset against the outstanding face value of the Unsecured Notes within the line item titled Notes Payable, net on the consolidated balance sheets.

Previous wording

We may seek to raise further equity capital and issue debt securities in order to fund our future investments in loans. Our Shelf Registration Statement became effective on January 19, 2023, allowing us to sell, from time to time in one or more offerings, up to $500 million of our securities, including common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of our common stock, preferred stock, or debt securities. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering. We may also access liquidity through our ATM Program, which was established in June 2023, pursuant to which we may sell, from time to time, up to $75.0 million of our common stock.

Current wording

We may seek to raise further equity capital and issue debt securities in order to fund our future investments in loans. Our Shelf Registration Statement became effective on January 19, 2023, allowing us to sell, from time to time in one or more offerings, up to $500 million of our securities, including common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of our common stock, preferred stock, or debt securities. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering. We may also access liquidity through our ATM Program, which was established in June 2023 and amended in March 2025, pursuant to which we may sell, from time to time, up to $100.0 million of our common stock.

Previous wording

For the nine months ended September 30, 2024, the Company sold an aggregate of 1,309,503 shares of the Company’s common stock under the Sales Agreement at a weighted average price of $15.88 per share, generating net proceeds of approximately $20.4 million.

Current wording

During the quarter ended March 31, 2024, the Company sold an aggregate of 896,443 shares of the Company’s common stock under the Sales Agreement at a weighted average price of $15.93 per share, generating net proceeds of approximately $13.9 million.

Previous wording

The following table sets forth changes in cash and cash equivalents for the nine months ended September 30, 2024 and 2023, respectively:

Current wording

The following table sets forth changes in cash and cash equivalents for the three months ended March 31, 2025 and 2024, respectively:

Previous wording

For the nine months ended September 30, 2024 and 2023, we reported “Net cash provided by operating activities” of approximately $21.3 million and $12.9 million, respectively. Net cash provided by operating activities increased approximately $8.4 million, primarily attributable to a change in the interest reserve for applied interest payments of approximately $2.9 million, decrease in the purchase of debt securities, at fair value of $3.4 million, a decrease in related party payables of $1.9 million, and an increase in stock based compensation expense of $1.3 million. These changes were offset by a decrease in net income over the comparable period of approximately $0.2 million, a decrease in interest receivable of approximately $1.5 million, and an increase in PIK interest income of $1.4 million, over the comparable period.

Current wording

For the three months ended March 31, 2025 and 2024, we reported “Net cash provided by operating activities” of approximately $7.6 million and $6.9 million, respectively. Net cash provided by operating activities increased approximately $0.7 million, primarily attributable to a decrease in PIK interest of approximately $1.4 million, increase in related party net payable of approximately $2.1 million, a decrease in management and incentive fees payable of approximately $0.3 million and an increase in net income over the comparable period of approximately $1.3 million. These changes were offset by a decrease in the interest reserve for applied interest payments of approximately $2.2 million, a decrease in provision for current expected credit losses of approximately $1.4 million and an increase in stock based compensation of approximately $0.1 million, over the comparable period.

Previous wording

Net Cash Provided by Investing Activities

Current wording

Net Cash Provided by/(Used in) by Investing Activities

Previous wording

For the nine months ended September 30, 2024 and 2023, we reported “Net cash used in financing activities” of approximately $(24.4) million and $(18.7) million, respectively.

Current wording

For the three months ended March 31, 2025 and 2024, we reported “Net cash provided by/(used in) investing activities” of approximately $5.5 million and $(18.7) million, respectively.

Previous wording

For the nine months ended September 30, 2023, cash outflows primarily related to $67.4 million used for the origination and funding of loans held for investment, partially offset by $13.4 million received from the sales of loans and $62.8 million of cash received from the principal repayment of loans held for investment.

Current wording

For the three months ended March 31, 2025 cash outflows primarily related to $3.7 million used for the origination and funding of loans held for investment, partially offset by $9.2 million of cash received from the principal repayment of loans held for investment.

Previous wording

For the nine months ended September 30, 2024, cash outflows primarily related to $75.2 million used for the origination and funding of loans held for investment, partially offset by $64.2 million of cash received from the principal repayment of loans held for investment and $13.0 million of cash received from proceeds from sales of loans.

Current wording

For the three months ended March 31, 2024, cash outflows primarily related to $22.4 million used for the origination and funding of loans held for investment, partially offset by $3.7 million of cash received from the principal repayment of loans held for investment.

Previous wording

Net Cash Used in Financing Activities

Current wording

Net Cash (Used in)/Provided by Financing Activities

Previous wording

For the nine months ended September 30, 2023, cash inflows of approximately $7.2 million related to proceeds received from sales of our common stock through the registered direct offering and ATM offering of $6.0 million and $1.2 million, respectively. Additionally, we had cash inflows related to draw downs on our Revolving Loan of $64 million, which were offset by $59.0 million in repayments on our Revolving Loan, approximately $30.6 million in dividends paid, approximately $0.1 million in debt issuance costs paid, and approximately $0.3 million in offering costs paid associated with the registered direct offering and ATM offering.

Current wording

For the three months ended March 31, 2025, cash inflows of approximately $1.0 million related to proceeds received from sales of our common stock through the registered at-the-market offering, which were offset by approximately $17.0 million in net repayments on our Revolving Loan, $13.6 million in dividends paid and approximately $82 thousand in offering costs associated with the registered at-the-market offering.

Previous wording

For the nine months ended September 30, 2024, cash inflows of approximately $20.8 million related to proceeds received from sales of our common stock through the ATM offering and $73.5 million related to draw downs on our Revolving Loan, which were offset by approximately $85.5 million in repayments on our Revolving Loan, $32.4 million in dividends paid, approximately $113 thousand in debt issuance costs paid, and approximately $667 thousand in offering costs associated with the registered at-the-market offering.

Current wording

For the three months ended March 31, 2024, cash inflows of approximately $9.8 million related to proceeds received from sales of our common stock through the registered at-the-market offering and $15.3 million net draw downs on our Revolving Loan, which were offset by $13.9 million in dividends paid, approximately $50 thousand in debt issuance costs paid, and approximately $340 thousand in offering costs associated with the registered at-the-market offering.

Previous wording

The following table summarizes the Company’s dividends declared during the nine months ended September 30, 2024 and 2023, respectively.

Current wording

The following table summarizes the Company’s dividends declared during the three months ended March 31, 2025 and 2024, respectively.