Chicago Atlantic Real Estate Finance, Inc.: Form 10-Q for the period ended Mar 31, 2026

FORWARD-LOOKING STATEMENTS

Some of the statements contained in this quarterly report constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and we intend such statements to be covered by the safe harbor provisions contained therein. Forward-looking statements relate to future events or the future performance or financial condition of Chicago Atlantic Real Estate Finance, Inc. (the “Company,” “we,” “us,” and “our”). The information contained in this section should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this quarterly report on Form 10-Q. This description contains forward-looking statements that involve risks and uncertainties. Actual results could differ significantly from the results discussed in the forward-looking statements due to the factors set forth in this quarterly report and in “Risk Factors” in our annual report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) and in Part II, Item 1A of this quarterly report on Form 10-Q, as such risks may by updated, amended, or superseded from time to time by subsequent reports we file with the SEC. The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:

• our future and projected operating results;
• the ability of our Manager to locate suitable loan opportunities for us, monitor and actively manage our loan portfolio, and implement our investment strategy;
• the allocation of loan opportunities to us by our Manager and its affiliates;
• the impact of inflation on our operating results;
• actions and initiatives of the federal or state governments and changes to government policies related to cannabis and the execution and impact of these actions, initiatives, and policies, including the fact that cannabis remains illegal under federal law;
• the estimated growth in and evolving market dynamics of the cannabis market;
• the demand for cannabis cultivation and processing facilities;
• shifts in public opinion regarding cannabis;
• the state of the U.S. economy generally or in specific geographic regions;
• economic trends and economic recoveries;
• the amount and timing of our cash flows, if any, from our loans;
• our ability to obtain and maintain financing arrangements;
• our expected leverage;
• changes in the values of our loans;
• our expected investment and underwriting process;
• rates of default or decreased recovery rates on our loans;
• the degree to which any interest rate or other hedging strategies may or may not protect us from interest rate volatility;
• changes in interest rates and impacts of such changes on our results of operations, cash flows, and the value of our loans;
• interest rate mismatches between our loans and our borrowings used to fund such loans;
• the departure of any of the executive officers or key personnel supporting and assisting us from our Manager or its affiliates;
• impact of and changes in governmental regulations, tax law and rates, accounting guidance, and similar matters;
• our ability to maintain our exclusion or exemption from registration under the Investment Company Act;
• our ability to qualify and maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes;
• estimates relating to our ability to make distributions to our stockholders in the future;
• our understanding of our competition;
• market trends in our industry, interest rates, real estate values, the securities markets or the general economy; and
• any of the other risks, uncertainties and other factors we identify in our annual report on Form 10-K or this quarterly report on Form 10-Q.

Available Information

We routinely post important information for investors on our website, www.chicagoatlantic.com (http://www.chicagoatlantic.com). We intend to use this webpage as a means of disclosing material information, for complying with our disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis. We encourage investors, analysts, the media, and others interested in us to monitor the Investments section of our website, in addition to following our press releases, SEC filings, public conference calls, presentations, webcasts and other information we post from time to time on our website. To sign-up for email-notifications, please visit “Contact” section of our website under “Join Our Mailing List” and enter the required information to enable notifications.

Overview

We were formed in March 2021 as a Maryland corporation and are structured as an externally managed mortgage real estate investment trust (“REIT”). We completed our initial public offering ("IPO") in December 2021 and have elected to be taxed as a REIT for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2021. Our primary investment objective is to provide attractive, risk-adjusted returns for stockholders over time primarily through consistent current income dividends and other distributions and secondarily through capital appreciation. We intend to achieve this objective by originating, structuring and investing in first mortgage loans and alternative structured financings secured by commercial real estate properties. Our current portfolio is comprised primarily of senior loans to state-licensed operators in the cannabis industry, secured by real estate, equipment, receivables, licenses or other assets of the borrowers to the extent permitted by applicable laws and regulations governing such borrowers. We aim to maintain a diversified portfolio across jurisdictions and verticals, including cultivators, processors, dispensaries, and other businesses ancillary thereto.

Our loans to portfolio companies operating in the cannabis industry may include companies that we determine, based on our due diligence, are licensed in and in compliance 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 will not own any warrants or other forms of equity in any of our portfolio companies involved in the cannabis industry, unless the portfolio companies are listed on a national securities exchange, such as the New York Stock Exchange ("NYSE") or NASDAQ, and such ownership is permitted by applicable U.S. federal laws and regulations, including those applicable to NYSE or NASDAQ issuers, as the case may be.

We believe that cannabis operators’ limited access to traditional bank and non-bank financing has provided attractive opportunities for us to make loans to companies that exhibit strong fundamentals but require more customized financing structures and loan products than regulated financial institutions can provide in the current regulatory environment. We believe that continued state-level legalization of cannabis for medical and adult use creates an increased loan demand by companies operating in the cannabis industry and property owners leasing to cannabis tenants. Furthermore, we believe we are differentiated from our competitors because we seek to target operators and facilities that exhibit lower-risk characteristics on a relative basis, which we believe include generally limiting exposure to ground-up construction, lending to cannabis operators with operational and/or profitable facilities, diversification of geographies and distribution channels, among other factors. Additionally, the Manager seeks to invest in transactions that tend to be attractively priced and have stronger than normal covenants and amortization due to complexity of the industry and in cannabis companies that it believes have some or all of the following characteristics:

• Growth or earnings before interest, income taxes, depreciation and amortization ("EBITDA") positive entities
• Companies that require capital but do not want to dilute their equity
• Companies that demonstrate strong cash flow performance with low leverage profiles
• Low debt to enterprise value ratios

Our loans are generally secured by real estate and, when lending to owner-operators in the cannabis industry, other collateral, such as equipment, receivables, intellectual property, licenses or other assets of the borrowers to the extent permitted by applicable laws and regulations governing such borrowers. We also seek personal or corporate guarantees for additional credit protection on our loans.

Generally, the loans we invest in have a complete set of financial maintenance covenants, which are used to proactively address materially adverse changes in a portfolio company’s financial performance. However, we occasionally invest in “covenant-lite” loans. We use the term “covenant-lite” to refer generally to loans that do not have a complete set of financial maintenance covenants. Generally, “covenant-lite” loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition. Accordingly, to the extent we invest in “covenant-lite” loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with a complete set of financial maintenance covenants.

We may also invest in companies or properties that are not related to the cannabis industry that provide return characteristics consistent with our investment objective. From time to time, we may also invest in mezzanine loans, preferred equity or other forms of joint venture equity to the extent consistent with our exemption from registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”) and maintaining our qualification as a REIT. We may enter into credit agreements with borrowers that permit them to incur debt that ranks equally with, or senior to, the loans we extend to such companies under such credit agreements. There is no assurance that we will achieve our investment objective.

Revenues

We generate revenue primarily in the form of interest income on loans which is generally payable monthly. The principal amount of our loans and any accrued but unpaid interest thereon generally become due at the applicable maturity date. In some cases, our interest income includes a paid-in-kind (“PIK”) component for a portion of the total interest. The PIK interest, computed at the contractual rate specified in each applicable loan agreement, is accrued in accordance with the terms of such loan agreement and capitalized to the principal balance of the loan and recorded as interest income. The PIK interest added to the principal balance is typically amortized and paid in accordance with the applicable loan agreement. In cases where the loans do not amortize, the PIK interest is collected upon repayment of the outstanding principal. We also generate revenue from original issue discounts (“OID”), which is also recognized as interest income from loans over the initial term of the applicable loans. Delayed draw loans may earn interest or unused fees on the undrawn portion of the loan, which is recognized as interest income in the period earned. Other fees, including prepayment fees and exit fees, are also recognized as interest income when received. Any such fees will be generated in connection with our loans and recognized as earned in accordance with generally accepted accounting principles (“GAAP”).

The following table sets forth the components of interest and fee income for the three months ended March 31, 2026 and 2025:

1Other fee income includes prepayment fees, make-whole fees, and exit/success fees which are included in interest income on the Consolidated Statements of Operations.

Our loans bear interest rates that are either fixed or determined periodically on the basis of U.S. Prime Rate (“Prime”) or Secured Overnight Financing Rate (“SOFR”) plus a premium. Loans which bear interest on either Prime or SOFR are collectively referred to as "Floating-rate loans". The below table summarizes changes in Prime and SOFR since January 1, 2025:

Prime Rate

(1) Rate obtained from the Wall Street Journal’s “Bonds, Rates & Yields” table.

SOFR Rate

(1) Rate obtained from the Federal Reserve Bank of New York's "Secured Overnight Financing Rate Data" table

The below table summarizes the gross interest income derived from fixed and floating-rate loans during the three months ended March 31, 2026 and 2025 based on portfolio composition as of the quarter end date.

For the three months ended March 31, 2026

For the three months ended March 31, 2025

Expenses

Our primary operating expenses are the payment of Base Management Fees and Incentive Compensation under our Management Agreement with our Manager and the allocable portion of overhead and other expenses paid or incurred on our behalf, including reimbursing our Manager for a certain portion of the compensation of certain personnel of our Manager who assist in the management of our affairs, excepting only those expenses that are specifically the responsibility of our Manager pursuant to our Management Agreement. We bear all other costs and expenses of our operations and transactions, including (without limitation) fees and expenses relating to:

• organizational and offering expenses;
• quarterly valuation expenses;
• fees payable to third parties relating to, or associated with, making loans and valuing loans (including third-party valuation firms);
• fees and expenses associated with investor relations and marketing efforts (including attendance at investment conferences and similar events);
• accounting and loan servicing fees from our third party fund administrator;
• audit and tax compliance fees and expenses from our independent registered public accounting firm;
• federal and state registration fees;
• any exchange listing fees;
• federal, state and local taxes;
• independent directors’ fees and expenses;
• brokerage commissions;
• costs of proxy statements, stockholders’ reports and notices; and
• costs of preparing government filings, including periodic and current reports with the SEC.

Income Taxes

We are a Maryland corporation that elected to be taxed as a REIT under the Code, commencing with the taxable period ended December 31, 2021. We believe that we qualify as a REIT and that our method of operation will enable us to continue to qualify as a REIT. However, no assurances can be given that our beliefs or expectations will be fulfilled, since qualification as a REIT depends on us satisfying numerous asset, income and distribution tests which depends, in part, on our operating results.

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, 2026, we did not incur excise tax expense.

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 740 - Income Taxes (“ASC 740”), prescribes a recognition threshold and measurement attribute for the consolidated financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have analyzed our various federal and state filing positions and believe that our income tax filing positions and deductions are documented and supported as of March 31, 2026 and 2025. Based on our evaluation, there is no reserve for any uncertain income tax positions. Accrued interest and penalties, if any, are included within other liabilities in the consolidated balance sheets.

Portfolio Composition and Investment Activity

Portfolio Overview

As of March 31, 2026 our loan portfolio included 29 loans held for investment, with $413.6 million in principal outstanding, and approximately $4.5 million in unfunded commitments under delayed draw term loan facilities. Our loans are generally classified as held for investment and carried at amortized cost on the consolidated balance sheets. Such loans are generally secured by real estate, equipment, licenses, intellectual property and other assets of the borrowers to the extent permitted by the applicable laws and the regulations governing such borrowers. The below table summarizes the total outstanding principal and carrying value, net of current expected credit loss reserves as of March 31, 2026 and December 31, 2025:

28

(1) Weighted average remaining life is calculated based on the carrying value of the loans as of March 31, 2026 and December 31, 2025, respectively.

As of March 31, 2026 and December 31, 2025, our loan portfolio had a weighted-average yield-to-maturity internal rate of return (“YTM IRR”) of 15.8% and 16.3%, 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 or amendment fees, which are not included in our YTM IRR calculations, but may increase YTM IRR if such extension options are exercised by borrowers.

Our loans bear interest rates that are either fixed or determined periodically on the basis of Prime or SOFR plus a premium. Loans which bear interest on either Prime or SOFR are collectively referred to as "Floating-rate loans". The below table summarizes our portfolio of loans held for investment by rate type as of March 31, 2026 and December 31, 2025:

Our floating-rate loans typically include a Prime or SOFR interest rate floor that is generally set at the prevailing Prime or SOFR rate, as applicable, on the date of origination. As of March 31, 2026 and December 31, 2025 none of our loans were subject to an interest rate ceiling. We typically include an interest rate floor with our floating rate loans in order to provide us with protection against decreases in interest rates. As of March 31, 2026 and December 31, 2025, 64.8% and 58.2% of our loans were subject to an interest rate floor. As of March 31, 2026 and December 31, 2025, our portfolio had the following interest rate floors:

29

The following tables present changes in loans held for investment at carrying value as of and for the three months ended March 31, 2026 and 2025:

Portfolio Asset Quality

Our Manager uses an ongoing investment risk rating system to characterize and monitor our outstanding loans. The Manager's investment committee, with input from the portfolio management team, assesses the risk factors of each loan, and assigns a risk rating based on a variety of factors, including, without limitation, payment history, real estate collateral coverage, property type, geographic and local market dynamics, financial performance, enterprise value of the portfolio company, loan structure and exit strategy, and project sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows:

The risk ratings are primarily determined based on current and historical performance metrics specific to each portfolio company, as well as consideration of future economic conditions and each borrower’s estimated ability to meet debt service requirements. The risk ratings shown in the following table as of March 31, 2026 and December 31, 2025 consider borrower specific credit history and performance and reflect a quarterly re-evaluation of overall current macroeconomic conditions affecting the Company’s borrowers, specifically those designated as held for investment. The below table presents the categorization of our loan portfolio on the above rating scale, at carrying value as of March 31, 2026 and December 31, 2025:

Developments During the First Quarter of 2026

Updates to Our Loan Portfolio during the First Quarter of 2026

During the period from January 1, 2026 through March 31, 2026, we advanced approximately $52.8 million of principal to new and existing borrowers under delayed draw and revolving loan facilities. Additionally, we received approximately $51.6 million of repayments, comprised of $3.4 million in schedule amortization payments, $4.4 million in partial prepayments and $43.8 from full repayments. A brief description of certain investment activities are described below:

In January 2026, the Company and other co-lenders party thereto, entered into an amendment to Loan #42 which increased the Company's aggregate commitment from $33.3 million to $53.3 million. In March 2026, the Company advanced $33.3 million, on Loan #42, leaving a remaining unfunded commitment of $0 as of March 12, 2026.

In January 2026, the Company received a full repayment of Loan #27 amounting to approximately $17.3 million, of which $17.2 million and $0.1 million related to principal repayment and accrued interest, respectively.

In February 2026, the Company received an early partial repayment of Loan #30 amounting to approximately $4.5 million, of which $4.4 million and $0.1 million related to principal repayment and prepayment fee, respectively.

In March 2026, the Company received a full repayment of Loan #1 amounting to approximately $15.8 million, of which $15.7 million and $0.1 million related to principal repayment and accrued interest, respectively.

Subsequent Updates to Our Loan Portfolio during the Second Quarter of 2026

During the period from April 1, 2026 through May 7, 2026, we advanced approximately $15.9 million of principal to new and existing borrowers under delayed draw and revolving loan facilities, inclusive of $13.1 million to related parties. Additionally, we received approximately $13.4 million of repayments, comprised of $0.9 million in schedule amortization payments and $12.5 from full repayments. A brief description of certain investment activities are described below:

In April 2026, the Company received a full repayment of Loan #6 amounting to approximately $3.2 million, all of which related to the outstanding principal balance.

In April 2026, the Company received a full repayment of Loan #30 amounting to approximately $9.4 million, of which $9.3 million and $0.1 million related to principal repayment and accrued interest, respectively.

In April 2026, Loan #36 was amended, which decreased the cash interest rate from 13.75% to 0% and increased the PIK rate from 0% to 21.25%.

Dividends Declared Per Share

During the three months ended March 31, 2026, we declared an ordinary cash dividend of $0.47 per share of our common stock, relating to the first quarter of 2026, which was paid on April 15, 2026 to stockholders of record as of the close of business on March 31, 2026. The total amount of the cash dividend payment was approximately $9.9 million.

The payment of this dividend is not indicative of our ability to pay such dividends in the future.

Factors Impacting our Operating Results

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

Market Conditions

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

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. While we intend to continue capitalizing on these opportunities and growing the size of our portfolio, we are aware that the competition for the capital we provide is increasing.

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

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

While we believe the principal amounts of our loans are generally adequately protected by underlying collateral value, there is a risk that we will not realize the entire principal value of certain loans, particularly those not fully collateralized by real estate. In order to mitigate that risk, our loans are generally collateralized by other assets, 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, 2026, 61.0% of our portfolio is fully secured by real estate, and 2.4% has no real estate collateral. Our portfolio on average had real estate collateral coverage of 1.2x as of March 31, 2026. Our loans are generally secured by equity pledges of the borrower and all asset liens and our portfolio had a weighted average loan to enterprise value ratio of 43.7%. As of March 31, 2025, 50.0% of our portfolio was fully secured by real estate and 1.6% had no real estate collateral. Our portfolio on average had real estate collateral coverage of 1.1x as of March 31, 2025, and a weighted average loan to enterprise value ratio of 47.5%.

Federal Action on Medical Cannabis Rescheduling

On April 23, 2026, the U.S. Department of Justice (“DOJ”), acting through the Drug Enforcement Administration (“DEA”), issued an order to reclassify certain cannabis products under the CSA from Schedule I to Schedule III. The order applies to (i) cannabis-derived products approved by the U.S. Food and Drug Administration and (ii) cannabis produced and distributed in compliance with state-licensed medical cannabis programs, subject to applicable federal enforcement parameters. The order does not extend to cannabis produced or distributed outside such frameworks, including products intended for adult-use markets, which remain classified as Schedule I controlled substances under current federal law.

The April 2026 order represents a significant shift in federal policy and is expected to be followed by additional administrative proceedings. The DEA has scheduled a hearing for June 29, 2026 to consider related regulatory considerations for adult-use cannabis, and further rulemaking, interpretive guidance, or enforcement policy statements may be issued thereafter. As a result, the scope, implementation, and practical effects of the rescheduling action remain subject to ongoing administrative review and uncertainty.

The rescheduling of qualifying medical cannabis activities may affect the financial and operating profile of the borrowers within our portfolio. In particular, to the extent such activities are no longer subject to the limitations of Section 280E of the Code, affected operators may experience improved after-tax cash flows and liquidity. However, many of our borrowers operate integrated businesses that include both medical and adult-use cannabis activities, and it is unclear how the rescheduling will be applied in practice to such operations. Accordingly, any potential benefit from changes to Section 280E may be partial, delayed, or subject to further regulatory clarification.

In addition, the differentiated federal treatment of medical and adult-use cannabis may introduce operational and compliance complexities for our borrowers. These may include the need to segment operations, maintain separate reporting and controls, and adapt to evolving federal and state regulatory expectations. The extent to which federal agencies will enforce distinctions between qualifying medical cannabis activities and non-qualifying activities remains uncertain and may vary over time.

The April 2026 action may also influence the availability of capital to the cannabis industry. To the extent rescheduling reduces perceived regulatory risk for certain market participants, it may facilitate increased participation by financial institutions and other capital providers, particularly with respect to operators focused on medical cannabis. Increased competition could result in compression of lending spreads, changes in transaction structures, and reduced origination opportunities for our platform. At the same time, continued federal prohibition of adult-use cannabis may limit the extent of such effects across the broader industry.

As of the date of this Quarterly Report, no final regulatory framework has been established with respect to cannabis rescheduling beyond the April 2026 order, and no formal action has been taken to reclassify or de-schedule adult-use cannabis. While federal authorities have initiated additional administrative proceedings, including the June 2026 DEA hearing, the outcome, timing, and scope of any further actions remain uncertain.

Results of Operations

Comparison of the three months ended March 31, 2026 and 2025

• Interest income increased by approximately $0.1 million during the quarter ended March 31, 2026, compared to the quarter ended March 31, 2025. The increase was driven primarily by an increase of $0.8 million in exit/success fees associated with the full repayments of three loans during the period. Interest income from acceleration of original issue discounts and other upfront fees generated approximately $0.7 million and $0.4 million of gross interest income during the three months ended March 31, 2026 and 2025, respectively. Additionally, the weighted average YTM IRR on our portfolio decreased from 16.9% at March 31, 2025 to 15.8% at March 31, 2026, as a result of certain re-pricing amendments relating to de-risking of our portfolio and the impact of the 75 basis point prime rate decline on our floating rate portfolio during the comparative periods.
• Interest expense remained consistent over the comparative period. This decrease is driven primarily by a decrease in unused fees and the amortization of debt issuance costs in the amount of $43 thousand, which was partially offset by an increase in the weighted average outstanding balance on the Revolving Loan, which was approximately $48.0 million and $41.6 million, as of March 31, 2026 and 2025, respectively.
• 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, 2026 and 2025. The origination fee offsets in the three months ended March 31, 2026 was $0, compared to approximately $4 thousand for the three months ended March 31, 2025. Incentive fees were approximately $0.5 million for the three months ended March 31, 2026 and 2025.
• General and administrative expenses and professional fees decreased by approximately $60 thousand for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. 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 $1.0 million for the three months ended March 31, 2026, compared to approximately $1.1 million for the three months ended March 31, 2025.
• Stock based compensation expense increased slightly by approximately $0.2 million for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025. The increase over the comparative period is driven by the incremental expense recognized on the 187,157 of restricted stock awards granted during 2025, which had not been granted as of March 31, 2025.
• The year over year increase in the CECL reserve results from a combination of changes in portfolio composition driven by new originations and repayments, as well as portfolio company specific events and credit quality changes that impacted expected loss estimates. The key drivers of the change in the CECL reserve during the comparative period are outlined below:
• During the three months ended March 31, 2026, the Company recorded reserves on new originations of approximately $0.6 million, which were offset by $0.1 million of reserves which existed at March 31, 2025 and were reversed as a result of full loan repayments. The net effect of new originations and full repayments on the CECL reserve was approximately a $0.5 million increase.
• The CECL reserve relating to loans with a risk rating of "2" and "3" was $2.9 million or 0.7% of outstanding principal as of March 31, 2026 and $2.2 million or 0.6% of outstanding principal as of March 31, 2025. Management notes that loans risk rated "2" and "3" are generally deemed to be performing loans and generally carry similar CECL reserves,
• The CECL reserve for loans included in risk rating "4" was $4.7 million or 1.15% of outstanding principal as of March 31, 2026 and $1.1 million or 0.3% of outstanding principal as of March 31, 2025. Loans that are risk rated "4"are high risk for potential loss and require regular monitoring.
• Loans remaining on non-accrual for the three months ended March 31, 2026, specifically Loan #4 and Loan #34, resulted in a $2.5 million increase to the CECL reserve compared to March 31, 2025. When the loans were placed on non-accrual status in December 2025, an aggregate of $0.9 million of accrued interest receivable was reversed. The non-performing nature of these loans as of March 31, 2026 is a key input to the Company's CECL analysis.
• Loan #9(a)(b), which was placed on non-accrual in May 2023, were restructured during 2025. The Company made incremental advances to fund accretive acquisitions which management expects to result in improved operating performance. As a result of the borrowers acquisitions, the estimated LTV ratio decreased by approximately 19% year over year. Additionally, in December 2025 the Company collected all past due unpaid interest and the borrower was brought to current. Management restored Loan #9 to accrual status as of March 31, 2026. The borrower demonstrated sustained ability to meet debt service obligations for a minimum of 60 days.
• Loan #36 CECL reserve increased $2.6 million during the three months ended March 31, 2026. LTV increased to 96.4% as of March 31, 2026 from 65.3% as of December 31, 2025 and payments were delayed during the three months ended March 31, 2026. The Company collected all past due interest in early April 2026 and Management kept Loan #36 on accrual status as of March 31, 2026.

Non-GAAP Measures and Key Financial Measures and Indicators

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

Distributable Earnings and Adjusted Distributable Earnings

In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use Distributable Earnings and Adjusted Distributable Earnings to evaluate our performance. 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).

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

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

The following table provides a reconciliation of GAAP net income to Distributable Earnings and Adjusted Distributable Earnings (in thousands, except per share data):

Book Value Per Share

The book value per share of our common stock as of March 31, 2026 and December 31, 2025 was approximately $14.39 and $14.60, respectively.

Liquidity and Capital Resources

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

Our primary sources of cash generally consist of unused borrowing capacity under our 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.

As of March 31, 2026 and December 31, 2025, all of our cash was unrestricted and totaled approximately $27.9 million and $14.9 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.

Capital Markets

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 on Form S-3 became effective on January 19, 2023 (the "Previous Registration Statement"), 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. We filed a replacement Shelf Registration Statement on Form S-3 on January 16, 2026 (the “New Registration Statement), which extends the effectiveness period of the Previous Registration Statement 180 days or until the effectiveness of the New Registration Statement, whichever comes first. 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.

During the quarter ended March 31, 2025, the Company sold an aggregate of 64,557 shares of the Company’s common stock under the Sales Agreement at a weighted average price of $16.01 per share, generating net proceeds of approximately $1.0 million.

During the quarter ended March 31, 2026, the Company sold 0 shares of the Company’s common stock under the Sales Agreement.

Credit Facility

As of March 31, 2026 and December 31, 2025, unamortized debt issuance costs related to the Revolving Loan, including all amendments and amendments and restatements thereto, as applicable, of $221,958 and $246,620, respectively, are recorded in other receivables and assets, net on the consolidated balance sheets.

As of and for the three months ended March 31, 2026, the Company had net repayments of $18.0 million against the Revolving Loan. As of March 31, 2026, the Company had $43.0 million available and $67.1 million outstanding under the Revolving Loan (Note 6 of Part 1, Item 1 - Financial Information).

Notes Payable

On October 18, 2024 (the "Closing Date"), 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 senior unsecured notes (the "Unsecured Notes"). The Unsecured Notes have a contractual four year term maturing on October 18, 2028 and bear a fixed interest rate of 9.00% per annum. The Company may prepay the Unsecured Notes at any time without penalty following the second anniversary of the Closing Date. A prepayment penalty of 3.00% and 2.00% would be due and payable in the event of prepayment prior to the first and second anniversary of the Closing Date, respectively.

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.

The Unsecured Notes provide for certain affirmative covenants, including requiring us to deliver certain financial information and any notices of default, and conducting business in the normal course. Additionally, the Company must comply with certain financial and non-financial covenants including but not limited to: (1) minimum stockholders' equity of $200.0 million, (2) maximum aggregate indebtedness of $225.0 million, subject to increase from time to time based upon ratable increases in stockholders' equity, and (3) maintenance of a credit rating. As of March 31, 2026, the Company is in compliance with all financial covenants with respect to the Unsecured Notes.

Cash Flows

The following table sets forth changes in cash and cash equivalents for the three months ended March 31, 2026 and 2025, respectively:

Net Cash Provided by Operating Activities

For the three months ended March 31, 2026 and 2025, we reported “Net cash provided by operating activities” of approximately $3.2 million and $7.6 million, respectively. Net cash provided by operating activities decreased approximately $4.5 million, primarily attributable to an increase in other receivables and assets of $1.8 million, a decrease in interest payable of approximately $1.3 million, a decrease in related party net payable of approximately $1.3 million related to timely collections of interest income, an increase in interest receivable of $0.8 million consisting of certain 'past due' amounts, a decrease in management and incentive fees payable of approximately $0.3 million and a decrease in net income over the comparable period of approximately $5.2 million. These changes were offset by a provision for current expected credit losses of $3.8 million during the first quarter of 2026 compared to a benefit of $1.1 million during the first quarter of 2025. Further, there was a decrease in the interest reserve for applied interest payments of approximately $0.8 million, an increase in stock based compensation of approximately $0.2 million, a $0.2 million unrealized loss on investments, and a decrease over the comparable period.

Net Cash Provided by Investing Activities

For the three months ended March 31, 2026 and 2025, we reported “Net cash provided by investing activities” of approximately $1.7 million and $5.5 million, respectively.

For the three months ended March 31, 2026 cash outflows primarily related to $49.8 million used for the origination and funding of loans held for investment, partially offset by $51.6 million of cash received from the principal repayment of loans held for investment.

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.

Net Cash Provided by/(used in) Financing Activities

For the three months ended March 31, 2026 and 2025, we reported “Net cash provided by/(used in) financing activities” of approximately $8.0 million and ($29.7) million, respectively.

For the three months ended March 31, 2026, cash inflows of approximately $17.9 million in net draws on our Revolving Loan, $9.9 million in dividends paid and approximately $30 thousand in debt issuance costs.

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.

Leverage Policies

Although we are not required to maintain any particular leverage ratio, we expect to employ prudent amounts of leverage and, when appropriate, to use debt as a means of providing additional funds for the acquisition of loans, to refinance existing debt or for general corporate purposes. Leverage is primarily used to provide capital for forward commitments until additional equity is raised or additional medium- to long-term financing is arranged. This policy is subject to change by management and our Board.

Dividends

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

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

The following table summarizes the Company’s dividends declared during the three months ended March 31, 2026 and 2025, respectively.

CECL Reserve

We record a current expected credit loss reserve ("CECL Reserve") for our loans held for investment. The CECL Reserve is deducted from the gross carrying amount of the assets to present the net carrying value of the amounts expected to be collected on such assets. The Company estimates its CECL Reserve using among other inputs, third-party valuations, and a third-party probability-weighted model that considers the likelihood of default and expected loss given default for each individual loan based on the risk profile for approximately three years after which we immediately revert to use of historical loss data.

We consider historical loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. We consider multiple datapoints and methodologies that may include likelihood of default and expected loss given default for each individual loans, valuations derived from discounted cash flows (“DCF”), and other inputs including the risk rating of the loan, how recently the loan was originated compared to the measurement date, and expected prepayment, if applicable. The measurement of expected credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as unfunded loan commitments.

We evaluate our loans on a collective (pool) basis by aggregating on the basis of similar risk characteristics as explained above. We make the judgment that loans to cannabis-related borrowers that are fully collateralized by real estate exhibit similar risk characteristics and are evaluated as a pool. Further, loans that have no real estate collateral, but are secured by other forms of collateral, including equity pledges of the borrower, and otherwise have similar characteristics as those collateralized by real estate are evaluated as a pool. All other loans are analyzed individually, either because they operate in a different industry, may have a different risk profile, or have maturities that extend beyond the forecast horizon for which we are able to derive reasonable and supportable forecasts.

Estimating the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of our loan portfolio, and (iv) our current and future view of the macroeconomic environment. From time to time, we may consider loan-specific qualitative factors on certain loans to estimate our CECL Reserve, which may include (i) whether cash from the borrower’s operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and (iii) the liquidation value of collateral. For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we may elect to apply a practical expedient, in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a CECL Reserve.

To estimate the historic loan losses relevant to the Company’s portfolio, the Company evaluates its historical loan performance, which includes zero realized loan losses since the inception of its operations. Additionally, the Company analyzed its repayment history, noting it has limited portfolio turnover from the date of our initial public offering. However, the Company’s Sponsor and its affiliates have had operations for the past three fiscal periods and have made investments in similar loans that have similar characteristics including interest rate, collateral coverage, guarantees, and prepayment/make whole provisions, which fall into the pools identified above. Given the similarity of the structuring of the credit agreements for the loans in the Company’s portfolio to the loans originated by its Sponsor, management considered it appropriate to consider the past repayment history of loans originated by the Sponsor and its affiliates in determining the extent to which a CECL Reserve shall be recorded.

In addition, the Company reviews each loan on a quarterly basis and evaluates the borrower’s ability to pay the monthly interest and principal, if required, as well as the loan-to-value (LTV) ratio. When evaluating qualitative factors that may indicate the need for a CECL Reserve, the Company forecasts losses considering a variety of factors. In considering the potential current expected credit loss, the Manager primarily considers significant inputs to the Company’s forecasting methods, which include (i) key loan-specific inputs such as the value of the real estate collateral, liens on equity (including the equity in the entity that holds the state-issued license to cultivate, process, distribute, or retail cannabis), presence of personal or corporate guarantees, among other credit enhancements, LTV ratio, rate type (fixed or floating) and IRR, loan-term, geographic location, and expected timing and amount of future loan fundings, (ii) performance against the underwritten business plan and the Company’s internal loan risk rating, and (iii) a macro-economic forecast. Estimating the enterprise value of our borrowers in order to calculate LTV ratios is often a significant estimate. The Manager utilizes a third-party valuation appraiser to assist with the Company’s valuation process primarily using comparable transactions to estimate enterprise value of its portfolio companies and supplement such analysis with a multiple-based approach to enterprise value to revenue multiples of publicly-traded comparable companies obtained from sources such as Bloomberg and/or S&P Capital IQ as of December 31, 2025, to which the Manager may apply a private company discount based on the Company’s current borrower profile. These estimates may change in future periods based on available future macro-economic data and might result in a material change in the Company’s future estimates of expected credit losses for its loan portfolio.

Regarding real estate collateral, we generally cannot take the position of mortgagee-in-possession as long as the property is used by a cannabis operator, but we can request that the court appoint a receiver to manage and operate the subject real property until the foreclosure proceedings are completed. Additionally, while we cannot foreclose under state Uniform Commercial Code (“UCC”) and take title or sell equity in a licensed cannabis business, a potential purchaser of a delinquent or defaulted loan could.

In order to estimate the future expected loan losses relevant to our portfolio, we utilize historical market loan loss data obtained from a third-party database for commercial real estate loans, which we believe is a reasonably comparable and available data set to use as an input for our type of loans. We expect this dataset to be representative for future credit losses whilst considering that the cannabis industry is maturing, and consumer adoption, demand for production, and retail capacity are increasing akin to commercial real estate over time. For periods beyond the reasonable and supportable forecast period, we revert back to historical loss data.

All of the above assumptions, although made with the most available information at the time of the estimate, are subjective and actual activity may not follow the estimated schedule. These assumptions impact the future balances that the loss rate will be applied to and as such impact our CECL Reserve. As we acquire new loans and our Manager monitors loan and borrower performance, these estimates will be revised each period.

Accounting Policies and Estimates

As of March 31, 2026, there were no significant changes in the application of our accounting policies or estimates from those presented in our annual report on Form 10-K. Refer to Note 2 to our consolidated financial statements for the three months ended March 31, 2026, titled “Significant Accounting Policies” for information on recent accounting pronouncements.

Uncertainty with respect to the economic effects of political tensions in the United States and around the world have introduced significant volatility in the financial markets, and the effect of the volatility could materially impact our market risks, including those listed below. We are subject to certain financial market risks, including valuation risk, interest rate risk and credit risk.

Valuation Risk

The Company’s results of operations and financial condition are subject to valuation risk related to its real estate–related investments, including mortgage loans, real estate owned, if any, and other financial assets measured at fair value or evaluated for impairment or credit loss. The valuation of these assets involves the use of significant judgments, estimates, and assumptions, many of which are inherently subjective and may be impacted by changes in market conditions.

We generally hold our investments as long-term loans classified as held for investment; however, we may occasionally classify some of our loans as held for sale. We may carry our loans at fair value or carrying value in our consolidated balance sheet. As of both March 31, 2026 and December 31, 2025 none of our loans were carried at fair value within loans held at fair value in our consolidated balance sheets, respectively, with changes in fair value recorded through earnings. We evaluate our loans on a quarterly basis and fair value is determined by our Manager's Investment Committee. We use an independent third-party valuation firm to provide input in the valuation of all of our unquoted investments, which we consider along with other various subjective and objective factors in making our evaluations.

Warrants are recorded at fair value on the consolidated balance sheets and unrealized gains and losses are included within the line item, change in unrealized loss on investment, in the consolidated statements of income. As of March 31, 2026, we carried $1.1 million of warrants at fair value which are included within the line item other receivables and assets, net, in our consolidated balance sheet.

Valuations of real estate collateral are generally based on third-party appraisals, broker price opinions, or other valuation techniques that rely on assumptions regarding future cash flows, capitalization rates, discount rates, comparable sales, market absorption, and prevailing economic conditions. Appraisals and similar valuation metrics may not reflect current market conditions, particularly during periods of market volatility, reduced transaction activity, or declining property values. Actual realized values may differ materially from appraised or estimated values.

In addition, with respect to the Company's loans held for investment, which are carried at amortized costs, the Manager applies judgment in estimating expected credit losses under its CECL valuation methodology. The determination of CECL reserves requires management to make assumptions regarding borrower performance, collateral values, historical loss experience, current conditions, and reasonable and supportable forecasts of future economic conditions. Changes in these assumptions, including adverse changes in real estate values, interest rates, occupancy levels, or macroeconomic conditions, could result in material increases in the Company’s allowance for credit losses.

The Company reviews valuation methodologies, assumptions, and key inputs on an ongoing basis and may adjust valuations or credit loss estimates as market conditions evolve. However, there can be no assurance that such estimates will accurately reflect the prices at which assets could ultimately be sold or the actual credit losses that may be realized. As a result, changes in valuations or CECL assumptions could have a material adverse effect on the Company’s financial condition, results of operations, and liquidity.

Interest Rate Risk

Changes in Market Interest Rates and Effect on Net Interest Income

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

Our operating results depend in large part on differences between the income earned on our assets and our cost of borrowing. The cost of our borrowings is generally based on prevailing market interest rates. During periods of rising interest rates, our borrowing costs generally increase. To the extent we fund fixed-rate investments with floating-rate borrowings, rising rates could reduce our net interest spread and net interest margin. For floating-rate investments, changes in yields may lag increases in borrowing costs due to interest rate floors, timing of rate resets, or differences in spreads, which could also adversely affect our 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.

As of March 31, 2026, we had 15 floating-rate loans, representing approximately 64.8% of our loan portfolio based on aggregate outstanding principal balances. The remaining 35.2% is represented by fixed rate loans. As of March 31, 2025, 59.3% and 40.7% of outstanding principal was represented by floating rate loans and fixed rate loans, respectively. Our loans generally have a rate floor established at the prevailing benchmark rate, as applicable, at the time of origination. Refer to Note 3 for rate floor by loan.

In addition, our Revolving Loan is exposed to similar interest rate risk. Our Revolving Loan bears interest at the greater of (1) the Prime Rate plus the applicable margin and (2) 3.25%. As of March 31, 2026, we had an outstanding balance of $67.1 million under the Revolving Loan, and an additional $43.0 million of availability which incurs an unused fee of 25 basis points. An increase in the Prime Rate is expected to result in an increase in interest expenses and therefore a decrease in net income.

Based on our Consolidated Statement of Operations for the period ended March 31, 2026, the following table shows the estimated annualized impact on net income resulting from hypothetical benchmark rate changes on our floating-rate portfolio (considering interest rate floors, as applicable). Management estimates reflect the characteristics of its loan portfolio as of March 31, 2026 and exclude assumptions relating to unscheduled prepayments, deployment of unfunded commitments or new originations.

Based on our Consolidated Statement of Operations for the year ended March 31, 2025, the following table shows the estimated annualized impact on net income resulting from hypothetical benchmark rate changes on our floating-rate portfolio (considering interest rate floors, as applicable).

Interest Rate Floor and Cap Risk

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

Interest Rate Mismatch Risk

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

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

Credit Risk

We are subject to varying degrees of credit risk in connection with our loans and interest receivable, which include credit risk on our commercial real estate loans and other targeted types of loans. Our Manager will seek to manage credit risk by performing deep credit fundamental analysis of potential assets and through the use of non-recourse financing, when and where available and appropriate. Credit risk will also be addressed through our Manager’s on-going review, and loans will be monitored for variance from expected prepayments, defaults, severities, losses and cash flow on a quarterly basis. Nevertheless, unanticipated credit losses could occur that could adversely impact our operating results. For additional information regarding the credit risk associated with our loans and interest receivables, see “Risk Factors- Loans to relatively new and/or small companies and companies operating in the cannabis industry generally involve significant risks” in our Annual Report on Form 10-K for the year ended December 31, 2025.

Our Manager or affiliates of our Manager generally originate all of our loans and intend to continue to originate our loans, but we may also acquire loans from time to time. Our Investment Guidelines are not subject to any limits or proportions with respect to the mix of target investments that we make or that we may in the future acquire other than as necessary to maintain our exemption from registration under the Investment Company Act and our qualification as a REIT. Our investment decisions will depend on prevailing market conditions and may change over time in response to opportunities available in different interest rate, economic and credit environments. As a result, we cannot predict the percentage of our capital that will be invested in any individual target investment at any given time.

Concentration

Our loan portfolio as of March 31, 2026 and December 31, 2025, was concentrated with the top three borrowers representing approximately 33.2% and 26.9% of principal outstanding, respectively. As of and for the three months ended March 31, 2026 and 2025, the top three borrowers represented approximately 24.4% and 24.3% of the total interest income, respectively. The largest loan represented approximately 12.9% and 11.5% of principal outstanding as of March 31, 2026 and December 31, 2025, respectively.

As of March 31, 2026 and December 31, 2025, our borrowers have operations in the jurisdiction noted within the table below based on real estate collateral location or principal place of business:

* Represents less than 1%

(1) The principal balance of the loans not secured by real estate collateral are included in the jurisdiction representing the principal place of business.

(2) Represents Connecticut, Washington, New Jersey, and Canada

Real Estate Risk

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

Market Conditions

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

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. While we intend to continue capitalizing on these opportunities and growing the size of our portfolio, we are aware that the competition for the capital we provide is increasing.

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

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

While we believe the principal amounts of our loans are generally adequately protected by underlying collateral value, there is a risk that we will not realize the entire principal value of certain loans, particularly those not fully collateralized by real estate. In order to mitigate that risk, our loans are generally collateralized by other assets, 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, 2026, 39% of our portfolio is fully secured by real estate. Our portfolio on average had real estate collateral coverage of 1.2x as of March 31, 2026, and all of our loans are secured by equity pledges of the borrower entities and all asset liens. As of March 31, 2025, 50% of our portfolio was fully secured by real estate. Our portfolio on average had real estate collateral coverage of 1.1x as of March 31, 2025 and all of our loans were secured by equity pledges of the borrower and all asset liens.

Risk Management

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

• we manage our portfolio through an interactive process with our Manager and service our self-originated loans through our Manager’s servicer;
• we invest in a mix of floating-rate and fixed-rate loans to mitigate the interest rate risk associated with the financing of our portfolio;
• we actively employ portfolio-wide and asset-specific risk measurement and management processes in our daily operations, including utilizing our Manager’s risk management tools such as software and services licensed or purchased from third-parties and proprietary analytical methods developed by our Manager; and
• we seek to manage credit risk through our due diligence process prior to origination or acquisition and through the use of non-recourse financing, when and where available and appropriate. In addition, with respect to any particular target investment, prior to origination or acquisition our Manager’s investment team evaluates, among other things, relative valuation, comparable company analysis, supply and demand trends, shape-of-yield curves, delinquency and default rates, recovery of various sectors and vintage of collateral.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the forms and rules of the SEC and that such information is accumulated and communicated to management, including the Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

In connection with the preparation of this quarterly report on Form 10-Q, our management, including the Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2026. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2026 to ensure that (a) information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the forms and rules of the SEC and (b) such information is accumulated and communicated to management, including the Principal Executive Officer and Principal Financial Officer, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

Except as discussed in the preceding paragraph, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2026 that have materially affected, or that are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition and/or results of operations. Except to the extent updated below or to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors, there have been no material changes to the risk factors described in the “Risk Factors” sections in our Annual Report on Form 10-K for the year ended December 31, 2025. The risks described in our Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or results of operations.