Chicago Atlantic BDC, Inc.
For the period ended Dec 31, 2024. Filed Mar 31, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 31, 2025
LIEN$9.07-0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-28.
0001140361-24-015752
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-31.
0001140361-25-011094
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 82 previous paragraphs and 122 current paragraphs.
53 unchanged; 26 reworded; 43 added; 3 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 50 previous and 70 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (43)
Current report
Overview
Current report
We are a specialty finance company focused on investing in companies in highly complex and highly regulated industries typically underserved by other capital providers, including investing across the cannabis ecosystem through investments in the form of direct loans to privately held cannabis companies. Although we primarily focus on investments in the cannabis industry, we may also invest in growth and technology companies, esoteric and asset-based lending opportunities, and liquidity solutions opportunities as described further below.
Current report
The following describes the four primary current sub-strategies of our principal investment strategy. We are not required to have a minimum investment in any of these sub-strategies.
Current report
Cannabis
Current report
The Adviser seeks to invest in cannabis companies that it believes have some or all of the following characteristics:
Current report
Growth & Technology
Current report
Our growth and technology sub-strategy is focused on industry leaders and disruptive companies that are experiencing strong growth trajectories and typically need capital to support continued revenue growth or expansion of the business. In most cases, these businesses have found a niche in their respective markets, proven their customer value proposition, and have already reached significant revenue milestones. These businesses include both private equity and venture capital backed businesses, as well as non-sponsor backed companies. In most cases, a significant amount of equity capital has been raised, resulting in low overall loan to enterprise value.
Current report
The Adviser seeks to invest in growth and technology focused companies that it believes have some or all of the following characteristics:
Current report
Esoteric & Asset-Based Lending
Current report
The esoteric and asset-based lending sub-strategy is focused on established companies with strong cash flow profiles in industries that carry idiosyncratic or reputational risks, which limit access to traditional sources of capital. The sub-strategy also includes companies or opportunities that have strong asset collateral coverage, low loan values or other attractive risk-reward features. The lack of access to traditional sources of capital typically enables us to extract lender-friendly terms and covenants from companies with relatively low leverage and overall credit risk.
Current report
The Adviser seeks to invest in esoteric industries or companies in need of asset-based loans that it believes have some or all of the following characteristics:
Current report
Liquidity Solutions
Current report
The liquidity solutions lending sub-strategy is typically focused on event-driven opportunities including, but not limited to, mergers, acquisitions, refinancings, dividend recaps or other strategically driven liquidity needs to established businesses. These businesses also tend to be in complex industries, have time-sensitive aspects to financing, or require idiosyncratic structuring expertise that enables us to extract relatively lender friendly terms and covenants.
Current report
The Adviser seeks to invest in liquidity solutions opportunities that it believes have some or all of the following characteristics:
Current report
(1) The Company uses the North American Industry Classification System (“NAICS”) code for classifying the industry grouping of its portfolio companies, excluding any portfolio company operating in the cannabis industry.
Current report
(1) The Company uses the North American Industry Classification System (“NAICS”) code for classifying the industry grouping of its portfolio companies, excluding any portfolio company operating in the cannabis industry.
Current report
Total interest income increased by $8.2 million or 69.6% for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase was primarily attributable to the increase in the principal balance of our debt investments, which increased from $55 million to $277 million during the year ended December 31, 2024 as a result of the Loan Portfolio Acquisition.
Current report
Additionally, non-recurring fee income increased by approximately $1.6 million for the year ended December 31, 2024, compared to the year ended December 31, 2023. The increase is primarily attributable to non-refundable upfront fees recognized in connection with the origination of eight new investments during the year ended December 31, 2024, excluding assets acquired in the Loan Portfolio Acquisition, compared to only one new investment originated in the year ended December 31, 2023.
Current report
Our operating expenses for the years ended December 31, 2024 and December 31, 2023 are presented below:
Current report
For the year ended December 31, 2024, operating expenses increased by $6.9 million, or 130.3%, compared to the year ended December 31, 2023. This increase was primarily driven by transaction expenses related to the Loan Portfolio Acquisition, which increased from $0.7 million for the year ended December 31, 2023 to $5.3 million for the year ended December 31, 2024, as the majority of expenses incurred with respect to the Loan Portfolio Acquisition were incurred during the year ended December 31, 2024.
Current report
Additionally, management fee and income-based incentive fees increased from $1.0 million and $1.5 million, respectively, for the year ended December 31, 2023, to $1.5 million and $2.3 million, respectively, for the year ended December 31, 2024. These increases were primarily due to higher average assets and an increase in investment income resulting from the Loan Portfolio Acquisition.
Current report
Furthermore, professional fees, general and administrative expenses, audit expense, administrative fees, other expenses, and legal expenses for the year ended December 31, 2024 either increased or remained consistent compared to the year ended December 31, 2023, reflecting the increase in complexity, portfolio size, and growth of the Company following the completion of the Loan Portfolio Acquisition.
Current report
During the year ended December 31, 2024, the net change in unrealized appreciation (depreciation) on our investments was primarily driven by the performance of our loan portfolio and the conversion of unrealized appreciation (depreciation) to realized gain (loss). During the year ended December 31, 2023, the net change in unrealized appreciation (depreciation) on our investments was primarily driven by the performance of our loan portfolio.
Current report
On October 1, 2024, in connection with the New Investment Advisory Agreement, the Company entered into a new license agreement (the “New License Agreement”) with the Adviser pursuant to which the Adviser has agreed to grant the Company a nonexclusive, royalty-free license to use the name “Chicago Atlantic.” Under the New License Agreement, the Company will have a right to use the “Chicago Atlantic” name, for so long as the Adviser or one of its affiliates remains the Company’s investment adviser. Other than with respect to this limited license, the Company will have no legal right to the “Chicago Atlantic” name. The New License Agreement does not materially differ from the prior license agreement between the Company and the Adviser, other than with respect to the licensed name.
Current report
On October 1, 2024, in connection with the New Investment Advisory Agreement, the Company and the Adviser entered into an expense limitation agreement (the “Expense Limitation Agreement”) pursuant to which the Adviser has agreed to cap the Company’s operating expenses (excluding base management fees, incentive fees, expenses related to the Loan Portfolio Acquisition, and litigation and indemnification expenses) at an annualized rate of 2.15% of the Company’s net assets through September 30, 2025.
Current report
In connection with the Loan Portfolio Acquisition and the Joint Venture, the Board and the officers of the Company changed as follows: (i) Frederick C. Herbst (Independent Director), John Mazarakis (Partner at Chicago Atlantic), and Jason Papastavrou (Independent Director) joined the Board, to serve until the 2025, 2026, and 2027 annual meetings of stockholders, respectively, and until their respective successors are duly elected and qualified; (ii) Andreas Bodmeier (Partner at Chicago Atlantic) replaced Mr. Gordon as Chief Executive Officer of the Company; (iii) Mr. Gordon became Executive Chairman of the Board and Co-Chief Investment Officer of the Company; (iv) Umesh Mahajan became Co-Chief Investment Officer of the Company in addition to remaining Chief Financial Officer and Secretary of the Company; and (v) Dino Colonna (Partner at the Adviser) became the President of the Company. Each officer of the Company will serve until his successor has been duly elected and qualified, or until the earlier of his resignation or removal.
Current report
In addition, in connection with the Loan Portfolio Acquisition and the Joint Venture, the Company has been renamed “Chicago Atlantic BDC, Inc.,” and its ticker symbol has been changed to “LIEN,” and the Adviser has been renamed “Chicago Atlantic BDC Advisers, LLC.” The changes to the Company’s name and ticker symbol became effective in the market at the open of business on October 2, 2024.
Current report
On February 11, 2025, the Company entered into a senior secured revolving credit agreement (the “Credit Agreement”) among the Company, as borrower, Western Alliance Trust Company, N.A. (“WATC”), as administrative agent, Western Alliance Bank, as an issuing bank and as the initial lender, and the other lenders party thereto from time to time.
Current report
Under the Credit Agreement, the lenders have agreed to extend credit to the Company on a revolving basis in an initial aggregate amount of up to $100,000,000 with an option for the Company to request additional commitments, in a minimum amount of $5,000,000, at one or more times from existing and/or new lenders at their election. The Credit Agreement also provides for the issuance of letters of credit in an aggregate face amount of up to $5,000,000.
Current report
Availability under the Credit Agreement (the “Revolving Period”) will terminate on February 11, 2027, and the Credit Agreement has a scheduled maturity date of March 31, 2028.
Current report
Borrowings under the Credit Agreement bear interest at the annual rate of one-month term Secured Overnight Financing Rate plus 3.00%. The Company will pay a commitment fee of 0.50% per annum on the average daily unused portion of commitments under the Credit Agreement during the Revolving Period. The Company also will be required to pay letter of credit participation fees and a fronting fee on the average daily amount of the lenders’ exposure with respect to any letters of credit issued at the request of the Company under the Credit Agreement.
Current report
In connection with the Company entering into the Credit Agreement, the Board approved a clarification, as proposed by the Company and the Adviser, of the Expense Limitation Agreement, that the interest expense, fees, and other costs associated with the Credit Agreement, and any future interest expense, fees, and other costs associated with raising debt and/or equity capital for the Company are not subject to, and do not count towards, the expense cap of 2.15% per annum under the Expense Limitation Agreement.
Current report
Additionally, on February 11, 2025, WATC and the Company entered into a custody agreement (the “WATC Custody Agreement”), pursuant to which WATC was appointed to serve as the Company’s custodian to hold securities, loans, cash, and other assets on behalf of the Company. Either party may terminate the WATC Custody Agreement at any time upon sixty (60) days’ prior written notice. In addition, Western Alliance Bank (“WAB”) and the Company entered into two substantively identical custody agreements (the “WAB Custody Agreements” and together with the WATC Custody Agreement, the “Custody Agreements”), pursuant to which WAB was appointed to hold and act as the Company’s custodian with respect to all Deposit Accounts (as defined in the WAB Custody Agreements) for funds of the Company placed through the ICS Deposit Placement Agreement (included with the WAB Custody Agreements).
Current report
On February 14, 2025, Mr. Mahajan resigned from his position as Chief Financial Officer of the Company. Mr. Mahajan’s decision to resign from his position as Chief Financial Officer of the Company was due to his desire to focus more attention on his duties as the Co-Chief Investment Officer of the Company, and was not due to a disagreement on any matter related to the Company’s operations, policies or practices.
Current report
On February 14, 2025, the Board appointed Martin Rodgers to the position of Chief Financial Officer of the Company. Mr. Rodgers will serve as Chief Financial Officer of the Company until his successor has been duly elected and qualified, or until the earlier of his resignation or removal.
Current report
Mr. Rodgers has over 35 years of accounting, finance, project and risk management experience, and serves as the Senior Managing Director of Finance and Accounting at Chicago Atlantic Group, LP. Prior to joining Chicago Atlantic, Mr. Rodgers spent 15 years at First Eagle Alternative Credit, a $20 billion alternative credit manager specializing in bank syndicated loans and direct lending debt, in various roles, including Director of Finance and Administration and Director of Alternative Credit Risk, with responsibilities for fund accounting, performance measurement, enterprise risk management, and special projects. Mr. Rodgers started his career in the United Kingdom and spent 4 years in the audit practice at PricewaterhouseCoopers. He has also held positions at Goldman Sachs, Abbot Laboratories, and Jefferson Wells. Mr. Rodgers holds a Bachelor of Arts (Accountancy and Economics) degree from the University of Stirling in Scotland and is a member of the Institute of Chartered Accountants of Scotland.
Current report
On March 13, 2025, each of Mr. Frederick Herbst and Mr. Jason Papastavrou resigned from his position as Director of the Company. Each of Mr. Herbst’s and Mr. Papastavrou’s decision to resign from his position as Director of the Company was not due to a disagreement on any matter related to the Company’s operations, policies or practices.
Current report
On March 13, 2025, the Board appointed Ms. Supurna VedBrat to replace Mr. Herbst as a Class 1 Director of the Company, to serve until the Company’s annual meeting of stockholders to be held in 2025, or until her successor is duly elected and qualified. On March 13, 2025, the Board appointed Mr. Patrick McCauley to replace Mr. Papastavrou as a Class 3 Director of the Company, to serve until the Company’s annual meeting of stockholders to be held in 2027, or until his successor is duly elected and qualified.
Current report
Ms. VedBrat has had a professional career spanning over 25 years of experience in both the U.S. and Europe, and within the financial and technologies industries. Since 2023, Ms. VedBrat has served as a consultant. Previously, Ms. VedBrat was Head of Global Trading at BlackRock from July 2011 to February 2023, where she oversaw the company’s trading function across asset classes and regions. Ms. VedBrat was responsible for driving innovation and setting the trading platform’s strategic vision focused on growth and sustainable scalable trading solutions. Ms. VedBrat also served as a member of BlackRock’s Global Operating Committee and the Investment Subcommittee. Ms. VedBrat served as the President of Strategic Solutions Consulting from January 2009 to July 2011 and as a fixed income, commodities and distressed debt analyst at Bank of America from March 2004 to January 2009. Ms. VedBrat has served two terms each on the Commodity Futures Trading Commission (CFTC) Technology Advisory Committee (TAC) and the CFTC Global Markets Advisory Committee (GMAC). Previously, Ms. VedBrat held various positions at Bank of America, ING Barings in London, and Lehman Brothers in New York. She started her career as a software engineer with IBM at their research center. Ms. VedBrat serves on the boards of directors of Roadzen, Inc. and South Street Securities LLC. She also serves on the board of Women in Derivatives (WIND), a non-profit with a mission to advance women in the workforce. Ms. VedBrat was given the Financial Markets Luminary award by Women in Derivatives. Ms. VedBrat was ranked #8 on the Institutional Investor’s 2018 Trading Tech 40 list. She was also a recipient of the Markets Media Women in Finance Award for Excellence in Leadership. Ms. VedBrat holds a Bachelor of Arts (Honors) degree in Mathematics from Delhi University and a Bachelor of Arts (High Honors) degree in Computer Science from Rutgers University.
Current report
Mr. McCauley is Chief Executive Officer and Owner of Bridgewell Agribusiness LLC (SWAB), a commodity-based sales and trading company headquartered in Portland, Oregon. SWAB sources food and agricultural products for industrial and retail food companies. In January 2018, Mr. McCauley purchased SWAB from Bridgewell Resources, where he served as President and Chief Executive Officer since October 2013. Bridgewell Resources is a similar platform to SWAB, focusing on sales and trading of lumber-based products across a range of construction, utility, and retail markets. Prior to working at Bridgewell Resources, Mr. McCauley spent 22 years at Susquehanna International Group (SIG), a global quantitative financial trading firm based in Philadelphia, Pennsylvania. At SIG, Mr. McCauley held a number of key positions including Chief Operating Officer, Head of Business Development, Head of Equity Trading and Head of Trader Development and Education. Mr. McCauley regularly conducts seminars that explore the principles of Decision Science applied to managerial decision-making and strategic business management. In addition, he has developed a curriculum that he has taught as an independent study course for local high school students. Mr. McCauley holds a Bachelor of Arts degree from Swarthmore College and a Master of Business Administration degree from Vanderbilt University.
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Removed paragraphs (3)
Previous report
For the year ended December 31, 2023, total investment income was approximately $11.9 million, which is attributable to $0.2 million of fee income related to structuring fees and $11.7 million of interest income. For the nine months ended December 31, 2022, total investment income was approximately $4.0 million, which is attributable to $0.4 million of fee income related to structuring fees and $3.6 million of interest income.
Previous report
The increase in investment income during the twelve months ended December 31, 2023 in comparison to the nine months ended December 31, 2022 is due to the increase in interest income driven by the increase of debt investments and timing. For the twelve months ended December 31, 2023, there was approximately $8.1 million of additional interest income compared to the nine months ended December 31, 2022. Of the $8.1 million increase in interest income, approximately $0.6 million is due to a one-time prepayment premium, approximately $1.3 million is due to the increase in debt investments, approximately $1.7 million is due to floating rate securities earning interest at higher rates than the previous year, and approximately $4.5 million is due to timing. The $4.5 million timing increase is due to two factors. First, approximately $2.7 million of the timing increase is attributable to investments made in 2022 being fully deployed and earning interest during the twelve months ended December 31, 2023. For the nine months ended December 31, 2022, these investments were not fully deployed or earning interest during the entire nine month period. Had these investments been made as of April 1, 2022, the nine months ended December 31, 2022 would have generated an additional $2.7 million in interest income. Second, approximately $1.8 million of the timing increase is due to the additional three months of interest earned in the full fiscal year ended December 31, 2023, as compared to the nine months ended December 31, 2022.
Previous report
Our operating expenses are comprised primarily of professional fees for legal, administration, audit and directors, and our management fees.
Reworded paragraphs (26)
Previous wording
The following discussion and analysis or our financial condition and results of operations should be read together with the consolidated financial statements and the related notes that are included in Item 8 of Part II of this annual report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Item 1A. Risk Factors.” Please also see the section entitled “Special Note Regarding Forward-Looking Statements.” Refer to Item 7 of Management’s Discussion and Analysis of Financial Condition and Results of Operations in our December 31, 2022 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the fiscal year December 31, 2022 compared to the fiscal year ended March 31, 2022.
Current wording
The following discussion and analysis or our financial condition and results of operations should be read together with the consolidated financial statements and the related notes that are included in Item 8 of Part II of this annual report on Form 10-K. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under the section entitled “Item 1A. Risk Factors.” Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”
Previous wording
We were formed in January 2021 as a Maryland corporation and structured as an externally managed, closed-end, non-diversified management investment company. We have elected to be treated as a BDC under the 1940 Act. In addition, for U.S. federal income tax purposes we have elected to be treated, and intend to qualify annually to be treated, as a RIC under Subchapter M of the Code, commencing with our taxable year ended March 31, 2022. On November 8, 2022, our Board of Directors approved a change in our fiscal year end from March 31 to December 31.
Current wording
We were formed in January 2021 as a Maryland corporation and are structured as an externally managed, closed-end, non-diversified management investment company. We have elected to be treated as a BDC under the 1940 Act. In addition, for U.S. federal income tax purposes we have elected to be treated, and intend to qualify annually to be treated, as a RIC under Subchapter M of the Code, commencing with our taxable year ended March 31, 2022.
Previous wording
Our investment objective is to maximize risk-adjusted returns on equity for our shareholders. We seek to capitalize on what we believe to be nascent cannabis industry growth and drive return on equity by generating current income from our debt investments and capital appreciation from our equity and equity-related investments. We intend to achieve our investment objective by investing primarily in secured debt, unsecured debt, equity warrants and direct equity investments in privately held businesses. We intend that our debt investments will often be secured by either a first or second priority lien on the assets of the portfolio company, can include either fixed or floating rate terms and will generally have a term of between three and six years from the original investment date. To date, we have invested in first lien secured, fixed and floating rate debt with terms of two to four years. We expect our secured loans to be secured by various types of assets of our borrowers. While the types of collateral securing any given secured loan will depend on the nature of the borrower’s business, common types of collateral we expect to secure our loans include real property and certain personal property, including equipment, inventory, receivables, cash, intellectual property rights and other assets to the extent permitted by applicable laws and the regulations governing our borrowers. Certain attractive assets of our borrowers, such as cannabis licenses and cannabis inventory, may not be able to be used as collateral or transferred to us. See “Item 1A. Risk Factors—Risks Relating to Our Investments—Certain assets of our borrowers may not be used as collateral or transferred to us due to applicable state laws and regulations governing the cannabis industry, and such restrictions could negatively impact our profitability.” In some of our portfolio investments, we expect to receive nominally priced equity warrants and/or make direct equity investments in connection with a debt investment. In addition, a portion of our portfolio may be comprised of derivatives, including total return swaps.
Current wording
Our investment objective is to maximize risk-adjusted returns on equity for our shareholders. We seek to capitalize on, among other things, what we believe to be nascent cannabis industry growth, and drive return on equity by generating current income from our debt investments and capital appreciation from our equity and equity-related investments. We intend to achieve our investment objective by investing primarily in secured debt, unsecured debt, equity warrants and direct equity investments in privately held businesses. We intend that our debt investments will often be secured by either a first or second priority lien on the assets of the portfolio company, can include either fixed or floating rate terms and will generally have a term of between three and six years from the original investment date. To date, we have been focused on investing in first lien secured, fixed and floating rate debt with terms of two to four years. We expect our secured loans to be secured by various types of assets of our borrowers. While the types of collateral securing any given secured loan will depend on the nature of the borrower’s business, common types of collateral we expect to secure our loans include real property and certain personal property, including equipment, inventory, receivables, cash, intellectual property rights and other assets to the extent permitted by applicable laws and the regulations governing our borrowers. Certain attractive assets of our cannabis borrowers, such as cannabis licenses and cannabis inventory, may not be able to be used as collateral or transferred to us. See “Item 1A. Risk Factors—Risks Relating to Our Investments—Certain assets of our borrowers may not be used as collateral or transferred to us due to applicable state laws and regulations governing the cannabis industry, and such restrictions could negatively impact our profitability.” In some of our portfolio investments, we expect to receive nominally priced equity warrants and/or make direct equity investments in connection with a debt investment. In addition, a portion of our portfolio may be comprised of derivatives, including total return swaps.
Previous wording
The loans in which we tend to invest typically pay interest at rates which are determined periodically on the basis of PRIME plus a premium. The loans in which we have invested and expect to invest are typically made to U.S. and, to a limited extent, non-U.S. (including emerging market) corporations, partnerships and other business entities which operate in various industries and geographical regions. These loans typically are not rated or are rated below investment grade. Securities rated below investment grade are often referred to as “high-yield” or “junk” securities, and may be considered a higher risk than debt instruments that are rated above investment grade.
Current wording
The loans in which we tend to invest typically pay interest at rates which are determined periodically on the basis of U.S. Prime Rate (“PRIME”) or Secured Overnight Financing Rate (“SOFR”) plus a premium. The loans in which we have invested and expect to invest are typically made to U.S. and, to a limited extent, non-U.S. (including emerging market) corporations, partnerships and other business entities which operate in various industries and geographical regions. These loans typically are not rated or are rated below investment grade. Securities rated below investment grade are often referred to as “high-yield” or “junk” securities, and may be considered a higher risk than debt instruments that are rated above investment grade.
Previous wording
We have typically invested in and expect to continue to invest in loans made primarily to private leveraged middle-market companies with up to $100 million of earnings before interest, taxes, depreciation and amortization, or “EBITDA.” Our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. We expect that our investments will generally range between $4 million and $40 million each, although we expect that this investment size will vary proportionately with the size of our capital base. We have an active pipeline of investments and are currently reviewing approximately $422 million of potential investments in varying stages of underwriting.
Current wording
We have typically invested in and expect to continue to invest in loans made primarily to private leveraged lower middle-market and middle-market companies with up to $100 million of earnings before interest, taxes, depreciation and amortization, or “EBITDA.” Our business model is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. We expect that our investments will generally range between $2 million and $50 million each, although we expect that this investment size will vary proportionately with the size of our capital base. We have an active pipeline of investments and are currently reviewing approximately $644 million of potential investments in varying stages of underwriting.
Previous wording
We are a specialty finance company that may invest across the cannabis ecosystem through investments in the form of direct loans to, and equity ownership of, privately held cannabis companies. All of our investments are designed to be compliant with all applicable laws and regulations within the jurisdictions in which they are made or to which we are otherwise subject, including U.S. federal laws. We will make equity investments only in companies that are compliant with all applicable laws and regulations within the jurisdictions in which they are located or operate, including U.S. federal laws. We may make loans to companies that we determine based on our due diligence are licensed in, and complying with, state-regulated cannabis programs, regardless of their status under U.S. federal law, so long as the investment itself is designed to be compliant with all applicable laws and regulations in the jurisdiction in which the investment is made or to which we are otherwise subject, including U.S. federal law. We are externally managed by SSC and seek to expand the compliant cannabis investment activities of SSC’s leading investment platform in the cannabis industry. We primarily seek to partner with private equity firms, entrepreneurs, business owners and management teams to provide credit and equity financing alternatives to support buyouts, recapitalizations, growth initiatives, refinancings and acquisitions across cannabis companies, including cannabis-enabling technology companies, cannabis-related health and wellness companies, and hemp and CBD distribution companies. Under normal circumstances, each such cannabis company derives at least 50% of its revenues or profits from, or commits at least 50% of its assets to, activities related to cannabis at the time of our investment in the cannabis company. We are not required to invest a specific percentage of our assets in such cannabis companies, and we may make debt and equity investments in other companies in the health and wellness sector.
Current wording
All of our cannabis investments are designed to be compliant with all applicable laws and regulations within the jurisdictions in which they are made or to which we are otherwise subject, including U.S. federal laws. We will make equity investments only in companies that are compliant with all applicable laws and regulations within the jurisdictions in which they are located or operate, including U.S. federal laws. We may make loans to companies that we determine based on our due diligence are licensed in, and complying with, state-regulated cannabis programs, regardless of their status under U.S. federal law, so long as the investment itself is designed to be compliant with all applicable laws and regulations in the jurisdiction in which the investment is made or to which we are otherwise subject, including U.S. federal law. We are externally managed by the Adviser and seek to expand the compliant cannabis investment activities of the Adviser’s leading investment platform in the cannabis industry. We primarily seek to partner with private equity firms, entrepreneurs, business owners and management teams to provide credit and equity financing alternatives to support buyouts, recapitalizations, growth initiatives, refinancings and acquisitions across cannabis companies, including cannabis-enabling technology companies, cannabis-related health and wellness companies, and hemp and CBD distribution companies. Under normal circumstances, each such cannabis company derives at least 50% of its revenues or profits from, or commits at least 50% of its assets to, activities related to cannabis at the time of our investment in the cannabis company. We are not required to invest a specific percentage of our assets in such cannabis companies, and we may make debt and equity investments in other companies regardless of sector.
Previous wording
We are externally managed by SSC. SSC also provides the administrative services necessary for us to operate. We believe that our ability to leverage the existing investment management platform of SSC enables us to operate more efficiently and with lower overhead costs than other newly formed funds of comparable size.
Current wording
We are externally managed by the Adviser. The Adviser also provides the administrative services necessary for us to operate. We believe that our ability to leverage the existing investment management platform of Chicago Atlantic enables us to operate more efficiently and with lower overhead costs than other funds of comparable size.
Previous wording
We generate revenues primarily in the form of interest income from the investments we hold. In addition, we may generate income from dividends on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. Our debt investments typically have a term of three to six years. Our loan portfolio will bear interest at a fixed or floating rate, subject to interest rate floors in certain cases. Interest on our debt investments will generally be payable either monthly or quarterly, but may be semi-annually.
Current wording
We generate revenues primarily in the form of interest income from the investments we hold. In addition, we may generate income from dividends on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. Our debt investments typically have a term of two to six years. Our loan portfolio will bear interest at a fixed or floating rate, subject to interest rate floors in certain cases. Interest on our debt investments will generally be payable either monthly or quarterly, but may be semi-annually.
Previous wording
Our investment portfolio consists of fixed and floating rate loans, and our credit facilities, if any, will bear interest at floating rates. Macro trends in base interest rates like PRIME may affect our net investment income (loss) over the long term.
Current wording
Our investment portfolio consists of fixed and floating rate loans, and our credit facilities, if any, will bear interest at floating rates. Macro trends in base interest rates like PRIME or SOFR may affect our net investment income (loss) over the long term.
Previous wording
Loan origination fees, OID, closing fees and market discount or premium are capitalized, and we accrete or amortize such amounts as interest income and using the effective yield method for term instruments. Repayments of our debt investments will reduce interest income in future periods. The frequency or volume of these repayments may fluctuate significantly. We will record prepayment premiums on loans as interest income. We may also generate revenue in the form of commitment, structuring, or due diligence fees, fees for providing managerial assistance to our portfolio companies, and consulting fees.
Current wording
We accrete premiums or amortize discounts into interest income using the effective yield method for term instruments. Repayments of our debt investments will reduce interest income in future periods. The frequency or volume of these repayments may fluctuate significantly. We will record prepayment premiums on loans as interest income. We may also generate revenue in the form of commitment, structuring, or due diligence fees, fees for providing managerial assistance to our portfolio companies, and consulting fees.
Previous wording
As of December 31, 2023, our investment portfolio had an aggregate fair value of approximately $54.1 million and was comprised of approximately $46.0 million in first lien, senior secured loans, and approximately $8.1 million in senior secured notes across five portfolio companies. As of December 31, 2022, our investment portfolio had an aggregate fair value of approximately $50.3 million and was comprised of approximately $40.7 million in first lien, senior secured loans, and approximately $9.6 million in senior secured notes across five portfolio companies.
Current wording
As of December 31, 2024, our investment portfolio had an aggregate fair value of approximately $275.2 million and was comprised of approximately $239.9 million in first lien senior secured loans, approximately $34.7 million in senior secured notes, and $0.7 million in equity securities across twenty-eight portfolio companies. As of December 31, 2023, our investment portfolio had an aggregate fair value of approximately $54.1 million and was comprised of approximately $46.0 million in first lien senior secured loans, and approximately $8.1 million in senior secured notes across five portfolio companies.
Previous wording
As of December 31, 2023 and December 31, 2022, we had two portfolio companies that represented 77.0% and 80.9%, respectively, of the fair values of our portfolio. As of December 31, 2023 and December 31, 2022, our largest portfolio company represented 38.7% and 40.64%, respectively, of the total fair values of our investments in portfolio companies.
Current wording
As of December 31, 2024 and December 31, 2023, we had three portfolio companies that represented 45.1% and 85.0%, respectively, of the fair values of our portfolio. As of December 31, 2024 and December 31, 2023, our largest portfolio company represented 18.9% and 38.7%, respectively, of the total fair values of our investments in portfolio companies.
Previous wording
During the year ended December 31, 2023, we made an aggregate of approximately $8.4 million of investments in two portfolio companies, excluding fees and discounts. During the year ended December 31, 2023, there were $6.2 million repayments received or sales of investments. During the nine months ended December 31, 2022, we made an aggregate of approximately $50.4 million of investments in five portfolio companies, excluding fees and discounts. During the nine months ended December 31, 2022, there were no repayments received or sales of investments.
Current wording
During the years ended December 31, 2024 and December 31, 2023, we made an aggregate of approximately $240.5 million and $8.4 million of investments in twenty-eight and two portfolio companies, excluding fees and discounts, respectively. During the years ended December 31, 2024 and December 31, 2023, there were $21.4 million and $6.2 million repayments received or sales of investments.
Previous wording
The following table provides a summary of the changes in the investment portfolio for the year ended December 31, 2023 and the nine months ended December 31, 2022:
Current wording
The following table provides a summary of the changes in the investment portfolio for the years ended December 31, 2024 and December 31, 2023.
Previous wording
The Company was formed January 25, 2021, the effective date of our registration statement was February 3, 2022, and our investment activity commenced on May 26, 2022. During the year ended March 31, 2022, the primary activities of the Company were offering and organizational in nature. See the Company's annual report on Form 10-K for the fiscal year ended March 31, 2022 for details. Therefore, the following discussion and analysis of our results of operations encompasses our results for the year ended December 31, 2023 and the nine months ended December 31, 2022.
Current wording
The following discussion and analysis of our results of operations encompasses our results for the years ended December 31, 2024 and December 31, 2023.
Previous wording
The following table sets forth the components of investment income for the year ended December 31, 2023 and the nine months ended December 31, 2022.
Current wording
The following table sets forth the components of investment income for the years ended December 31, 2024 and December 31, 2023.
Previous wording
The increase in operating expenses is primarily due to the timing of deployment of capital, fees paid to the Adviser, and transaction expenses incurred in 2023 relating to the Loan Portfolio Acquisition. See “Note 13 –Subsequent Events” in the notes to the financial statements included with this annual report on Form 10-K for further information regarding the Loan Portfolio Acquisition Agreement and the Loan Portfolio Acquisition.
Current wording
See “Note 13 – Loan Portfolio Acquisition” in the notes to the financial statements included with this annual report on Form 10-K for further information regarding the Loan Portfolio Acquisition.
Previous wording
Net investment income was approximately $6.6 million for the year ended December 31, 2023, as compared to approximately $2.2 million for the nine months ended December 31, 2022. The fluctuation in net investment income is attributable to the Company's increase in debt investments and ramping up of operations. The Company saw a net increase of $3.0 million in the amortized cost of its investment portfolio from December 31, 2022 to December 31, 2023. Furthermore, $25.9 million of $50.4 million investments purchased during the nine months ended December 31, 2022 were made in the last three months of the period. Consequently, the majority of the recurring interest income from these investments was not received until the end of the nine month period ended December 31, 2022. Additionally, the increase in operating expenses for the year ended December 31, 2023 of $3.5 million reflects the Company’s transition to a full year of scaled operations, as operating expenses for the nine months ended December 31, 2022 only captured a partial fiscal year of the Company’s operations during its scale-up phase.
Current wording
Net investment income was approximately $9.5 million for the year ended December 31, 2024, as compared to approximately $6.6 million for the year ended December 31, 2023. The fluctuation in net investment income is attributable to the increase in complexity, portfolio size and growth of the Company following the close of the Loan Portfolio Acquisition. The Company saw a net increase of $220.9 million in the amortized cost of its investment portfolio from December 31, 2023 to December 31, 2024.
Previous wording
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a financial instrument and the amortized cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period. There was $210,767 net realized loss from the sale of an investment during the year ended December 31, 2023. There were no net realized gains (losses) from the sales, repayments, or exits of investments during the nine months ended December 31, 2022.
Current wording
Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a financial instrument and the amortized cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period. There were $74,483 net realized losses from the sales, repayments, or exits of investments during the year ended December 31, 2024. There was $210,767 net realized loss from the sale of an investment during the year ended December 31, 2023.
Previous wording
Net change in unrealized appreciation (depreciation) from investments for theyear ended December 31, 2023 and thenine months ended December 31, 2022 is comprised of the following:
Current wording
Net change in unrealized appreciation (depreciation) from investments for theyears ended December 31, 2024 and December 31, 2023 is comprised of the following:
Previous wording
The following table details net change in unrealized appreciation (depreciation) for our portfolio for theyear ended December 31, 2023 and thenine months ended December 31, 2022:
Current wording
The following table details net change in unrealized appreciation (depreciation) for our portfolio for theyears ended December 31, 2024 and December 31, 2023:
Previous wording
Our primary use of funds will be investments in portfolio companies, dividend payments to holders of our common stock who opt out of the DRIP, and the payment of operating expenses. As of December 31, 2023 and December 31, 2022, we had cash resources of approximately $32.6 million and $35.1 million and no indebtedness.
Current wording
Our primary use of funds will be investments in portfolio companies, dividend payments to holders of our common stock who opt out of the DRIP, and the payment of operating expenses. As of December 31, 2024 and December 31, 2023, we had cash resources of approximately $23.9 million and $32.6 million and no indebtedness.
Previous wording
We will have certain commitments pursuant to our Investment Advisory Agreement that we have entered into with SSC. We have agreed to pay a fee for investment advisory services consisting of two components: a base management fee and an incentive fee. Payments under the Investment Advisory Agreement will be equal to (1) a percentage of the value of our average gross assets and (2) a two-part incentive fee. See “Item 1. Business—Investment Advisory Agreement.” We have also entered into a contract with SSC to serve as our administrator. Payments under the Administration Agreement will bereimbursements to SSC for the costs and expenses incurred by SSC in performing its obligations, including but not limited to maintaining and keeping all books and records and providing personnel and facilities. This includes costs and expenses incurred by SSC in connection with the delegation of its obligations to a sub-administrator. The Company is not responsible for the compensation of SSC’s employees and overhead expenses. See “Item 1. Business—Administration Agreement.”
Current wording
We have certain commitments pursuant to our Investment Advisory Agreement that we have entered into with the Adviser. We have agreed to pay a fee for investment advisory services consisting of two components: a base management fee and an incentive fee. Payments under the Investment Advisory Agreement will be equal to (1) a percentage of the value of our average gross assets and (2) a two-part incentive fee. See “Item 1. Business—Investment Advisory Agreement.” We have also entered into a contract with the Adviser to serve as our administrator. Payments under the Administration Agreement will bereimbursements to the Adviser for the costs and expenses incurred by the Adviser in performing its obligations, including but not limited to maintaining and keeping all books and records and providing personnel and facilities. This includes costs and expenses incurred by the Adviser in connection with the delegation of its obligations to a sub-administrator. The Company is not responsible for the compensation of the Adviser’s employees and overhead expenses. See “Item 1. Business—Administration Agreement.”
Previous wording
On February 20, 2024, we announced that our Board of Directors unanimously approved an expansion of our investment strategy to permit investments in companies outside of the cannabis and health and wellness sectors that otherwise meet our investment criteria. The investment strategy change is expected to become effective on or about April 22, 2024.
Current wording
On February 20, 2024, the Company announced that the Board unanimously approved an expansion of the Company’s investment strategy to permit investments in companies outside of the cannabis and health and wellness sectors that otherwise meet the Company’s investment criteria. The investment strategy change became effective on April 22, 2024.
Previous wording
On February 18, 2024, we entered into a definitive Purchase Agreement (the “Loan Portfolio Acquisition Agreement”) with Chicago Atlantic Loan Portfolio, LLC (“CALP”), pursuant to which we would purchase all or substantially all of the portfolio investments held by CALP (the “Loan Portfolio”) in exchange for newly issued shares of our common stock with a net asset value equal to the value of the Loan Portfolio, each determined shortly before closing (the “Loan Portfolio Consideration”), subject to certain customary closing conditions (the “Loan Portfolio Acquisition”). Our Board of Directors, including all our independent directors, upon the recommendation of a special committee composed solely of our independent directors (the “Special Committee”), has approved the Loan Portfolio Acquisition Agreement and the transactions contemplated thereby. Our current officers would continue to be a part of our management team following the Loan Portfolio Acquisition. Assuming satisfaction of the conditions to the transaction, the Loan Portfolio Acquisition is expected to close in mid-2024. See “Note 13 –Subsequent Events” in the notes to the financial statements included with this annual report on Form 10-K for further information regarding the Loan Portfolio Acquisition Agreement and the Loan Portfolio Acquisition.
Current wording
On October 1, 2024, the Company completed its previously announced acquisition from Chicago Atlantic Loan Portfolio, LLC (“CALP”) of a portfolio of loans (the “Loan Portfolio”) in exchange for newly issued shares of the Company’s common stock (the “Loan Portfolio Acquisition”), pursuant to the Purchase Agreement, dated as of February 18, 2024, between the Company and CALP (the “Loan Portfolio Acquisition Agreement”). In accordance with the terms of the Loan Portfolio Acquisition Agreement, at the effective time of the Loan Portfolio Acquisition, the Company issued 16,605,372 shares of its common stock to CALP in exchange for the Loan Portfolio, which was determined by the Company to have a fair value of $219,621,125 as of September 28, 2024. See “Note 13 – Loan Portfolio Acquisition” in the notes to the financial statements included with this annual report on Form 10-K for further information regarding the Loan Portfolio Acquisition.
Previous wording
On February 20, 2024, SSC announced that it entered into a definitive agreement with Chicago Atlantic BDC Holdings, LLC (together with its affiliates, “Chicago Atlantic”), the investment adviser of CALP, pursuant to which a joint venture between Chicago Atlantic and SSC would be created to combine and jointly operate SSC’s, and a portion of Chicago Atlantic’s, investment management businesses, subject to certain customary closing conditions (the “Joint Venture”). The Joint Venture would cause the automatic termination of our existing investment advisory agreement with SSC. As a result, our Board of Directors unanimously approved, upon the recommendation of the Special Committee, a new investment advisory agreement with SSC to take effect upon closing of the Joint Venture, subject to Company stockholder approval. The new investment advisory agreement is identical, in all material respects, to the current investment advisory agreement. Upon the effectiveness of the new investment advisory agreement, the Company would be renamed Chicago Atlantic BDC, Inc. and SSC would be renamed Chicago Atlantic BDC Advisers, LLC.
Current wording
On October 1, 2024, the Adviser and Chicago Atlantic BDC Holdings, LLC (together with its affiliates, “Chicago Atlantic”), the investment adviser of CALP, consummated a previously announced transaction pursuant to which a joint venture between Chicago Atlantic and the Adviser has been created to combine and jointly operate the Adviser’s, and a portion of Chicago Atlantic’s, investment management businesses (the “Joint Venture”). As the Joint Venture caused the automatic termination of the prior investment advisory agreement between the Company and the Adviser (the “Prior Investment Advisory Agreement”), a new investment advisory agreement between the Company and the Adviser (the “New Investment Advisory Agreement”), which was approved by the Board, upon the recommendation of its special committee, and the Company’s stockholders, took effect upon the closing of the Joint Venture. The New Investment Advisory Agreement has the same base management and incentive fee as, and otherwise does not materially differ from, the Prior Investment Advisory Agreement.