Chicago Atlantic BDC (LIEN) lifts investment income to $30.7M, NAV at $13.26
Chicago Atlantic BDC, Inc. reported total assets of $343.96 million and net assets of $302.49 million as of June 30, 2026, implying a net asset value (NAV) of $13.26 per share, slightly below $13.30 at year-end 2025.
For the six months ended June 30, 2026, total investment income rose to $30.67 million from $25.00 million a year earlier, driving net investment income of $17.62 million, up from $15.31 million. Expenses also increased, including interest expense of $2.03 million versus $0.45 million, and total expenses of $13.06 million versus $11.46 million. After $3.02 million of net unrealized depreciation on investments, the net increase in net assets from operations was $14.60 million, down from $16.20 million.
The company generated $12.14 million of net cash from operating activities compared with a use of cash in the prior-year period, while maintaining $27.0 million outstanding on its revolving credit facility. The portfolio is concentrated in first lien senior secured loans and senior secured notes, heavily weighted to cannabis borrowers with all-in rates generally in the low-to-high teens. Management also discusses a pending merger with Chicago Atlantic Real Estate Finance, Inc. and related shareholder, regulatory and integration risks.
Positive
- Total investment income for the first half of 2026 increased to $30.67 million from $25.00 million in the prior-year period, supporting higher net investment income.
- Net investment income rose to $17.62 million for the six months ended June 30, 2026, compared with $15.31 million a year earlier, indicating stronger earnings from the debt portfolio.
- Operating cash flow improved to a positive $12.14 million for the first half of 2026, compared with a $5.31 million outflow in the prior-year period.
Negative
- The company recorded $3.02 million of net unrealized depreciation on investments in the first half of 2026, contributing to lower growth in net assets.
- Net increase in net assets from operations declined to $14.60 million for the six months ended June 30, 2026, from $16.20 million in the prior-year period.
- Interest expense rose to $2.03 million in the first half of 2026 from $0.45 million a year earlier, reflecting higher financing costs on the revolving credit facility.
Filing Explained
At June 30, 2026, disclosed cash was $925,534 against $27 million of revolving debt; future shelf issuance remains a stated possibility.
This Form 10-Q is the unaudited quarterly report covering
The company says its shelf registration statement is not yet effective and identifies the potential dilutive effect of future securities issuances. A shelf registration provides capacity to sell registered securities in the future; it is not itself a sale, while issuing additional shares would reduce an existing holder’s percentage ownership absent offsetting changes.
Reported cash was
The specific follow-up is the shelf-registration line in this report: later filings would establish whether the contemplated securities capacity becomes an offering or issuance.
Key Figures
Key Terms
first lien senior secured financial
payment-in-kind (PIK) financial
business development company regulatory
Net asset value per share financial
expense limitation agreement financial
senior secured note financial
Earnings Snapshot
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
How did Chicago Atlantic BDC, Inc. (LIEN) perform financially in the first half of 2026?
What is Chicago Atlantic BDC, Inc.’s (LIEN) net asset value per share as of June 30, 2026?
How leveraged is Chicago Atlantic BDC, Inc. (LIEN) at June 30, 2026?
What were Chicago Atlantic BDC, Inc.’s (LIEN) operating cash flows in the first half of 2026?
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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the Quarterly Period Ended
OR
Commission file number:
(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Trading Symbol(s) |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Large accelerated filer |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
As of August 11, 2026, the registrant had
Table of Contents
CHICAGO ATLANTIC BDC, INC.
FORM 10-Q
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TABLE OF CONTENTS |
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PAGE NO. |
PART I |
FINANCIAL INFORMATION |
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Item 1 |
Financial Statements (unaudited) |
3 |
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Statements of Assets and Liabilities |
3 |
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Statements of Operations |
4 |
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Statements of Changes in Net Assets |
5 |
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Statements of Cash Flows |
7 |
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Schedule of Investments |
8 |
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Notes to Financial Statements |
15 |
Item 2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
38 |
Item 3 |
Quantitative and Qualitative Disclosures About Market Risk |
54 |
Item 4 |
Controls and Procedures |
55 |
PART II |
OTHER INFORMATION |
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Item 1 |
Legal Proceedings |
56 |
Item 1A |
Risk Factors |
56 |
Item 2 |
Unregistered Sales of Equity Securities and Use of Proceeds |
61 |
Item 3 |
Defaults Upon Senior Securities |
61 |
Item 4 |
Mine Safety Disclosures |
61 |
Item 5 |
Other Information |
61 |
Item 6 |
Exhibits |
62 |
SIGNATURES |
63 |
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Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Except where the context suggests otherwise, the terms “we,” “us,” “our,” “the Company,” and “LIEN” refer to Chicago Atlantic BDC, Inc. In addition, the terms “Adviser,” “investment adviser” and “administrator” refer to Chicago Atlantic BDC Advisers, LLC, our external investment adviser and administrator.
Some of the statements in this quarterly report on Form 10-Q constitute forward-looking statements because they relate to future events or our future performance or financial condition. The forward-looking statements contained in this quarterly report on Form 10-Q may include statements as to:
In addition, words such as “anticipate,” “believe,” “expect,” “seek,” “plan,” “should,” “estimate,” “project” and “intend” indicate forward-looking statements, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2025 and elsewhere in this quarterly report on Form 10-Q. Other factors that could cause actual results to differ materially include:
1
Table of Contents
We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. The forward-looking statements contained in this quarterly report on Form 10-Q are excluded from the safe harbor protection provided by Section 21E of the Securities Exchange Act of 1934, as amended.
2
Table of Contents
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Chicago Atlantic BDC, Inc.
Statements of Assets and Liabilities
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June 30, 2026 |
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December 31, 2025 |
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ASSETS |
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Investments at fair value: |
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Cash |
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Total assets |
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LIABILITIES |
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Revolving line of credit |
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Distributions payable |
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Total liabilities |
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Commitments and contingencies (Note 7) |
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NET ASSETS |
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Total net assets |
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NET ASSET VALUE PER SHARE |
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See notes to financial statements.
3
Table of Contents
Chicago Atlantic BDC, Inc.
Statements of Operations
(Unaudited)
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For the Three Months Ended |
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For the Six Months Ended |
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June 30, 2026 |
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June 30, 2025 |
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June 30, 2026 |
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June 30, 2025 |
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INVESTMENT INCOME |
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Interest income |
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Fee income |
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Total investment income from non-controlled/non-affiliate investments |
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Non-controlled affiliate investment income |
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Interest income |
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Fee income |
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Total investment income from non-controlled affiliate investments |
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Total investment income |
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EXPENSES |
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Income-based incentive fees |
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Management fee |
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General and administrative expenses |
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Interest expense |
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Professional fees |
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Audit expense |
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Other expenses |
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Sub-administrator fees |
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Legal expenses |
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Excise tax expense |
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Capital gains incentive fees |
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Total expenses |
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Waiver of general and administrative expense (Note 6) |
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Expense limitation agreement (Note 6) |
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Net expenses |
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NET INVESTMENT INCOME (LOSS) |
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NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS |
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Non-controlled non-affiliate investments |
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( |
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( |
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Non-controlled affiliate investments |
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( |
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Net change in unrealized appreciation (depreciation) on investments |
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( |
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Net realized and unrealized gains (losses) |
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( |
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NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
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$ |
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$ |
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$ |
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$ |
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NET INVESTMENT INCOME (LOSS) PER SHARE - BASIC AND DILUTED |
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$ |
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$ |
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$ |
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$ |
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NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE - BASIC AND DILUTED |
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$ |
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$ |
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$ |
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$ |
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WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED |
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See notes to financial statements.
4
Table of Contents
Chicago Atlantic BDC, Inc.
Statements of Changes in Net Assets
(Unaudited)
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Common Stock |
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Shares |
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Par Value |
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Additional |
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Distributable |
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Total |
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Balance, March 31, 2026 |
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$ |
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$ |
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$ |
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$ |
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Net increase (decrease) in net assets resulting from operations |
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Net investment income (loss) |
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- |
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- |
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- |
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Net change in unrealized appreciation (depreciation) from investments |
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- |
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- |
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- |
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( |
) |
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( |
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Total net increase (decrease) in net assets resulting from operations |
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- |
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- |
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- |
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Distributions to stockholders from: |
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Investment income-net |
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- |
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- |
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- |
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( |
) |
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( |
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Total increase (decrease) in net assets |
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- |
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- |
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- |
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( |
) |
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( |
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Effect of permanent adjustments |
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- |
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- |
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- |
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- |
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Balance, June 30, 2026 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Common Stock |
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Shares |
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Par Value |
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Additional |
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Distributable |
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Total |
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Balance, March 31, 2025 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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Net increase (decrease) in net assets resulting from operations |
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Net investment income (loss) |
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- |
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- |
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- |
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Net change in unrealized appreciation (depreciation) from investments |
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- |
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- |
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- |
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Total net increase (decrease) in net assets resulting from operations |
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- |
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- |
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- |
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Distributions to stockholders from: |
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Investment income-net |
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- |
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- |
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- |
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( |
) |
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( |
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Reinvestment of stockholder distributions |
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- |
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- |
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Total increase (decrease) in net assets |
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- |
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Effect of permanent adjustments |
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- |
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- |
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- |
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- |
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- |
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Balance, June 30, 2025 |
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$ |
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$ |
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$ |
( |
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$ |
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See notes to financial statements.
5
Table of Contents
Chicago Atlantic BDC, Inc.
Statements of Changes in Net Assets
(Unaudited)
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Common Stock |
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Shares |
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Par Value |
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Additional |
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Distributable |
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Total |
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Balance, December 31, 2025 |
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$ |
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$ |
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$ |
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$ |
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Net increase (decrease) in net assets resulting from operations |
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Net investment income (loss) |
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- |
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- |
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Net change in unrealized appreciation (depreciation) from investments |
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- |
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- |
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- |
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( |
) |
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( |
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Total net increase (decrease) in net assets resulting from operations |
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- |
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- |
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Distributions to stockholders from: |
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Investment income-net |
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- |
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- |
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- |
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( |
) |
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( |
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Total increase (decrease) in net assets |
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- |
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- |
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- |
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( |
) |
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( |
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Effect of permanent adjustments |
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- |
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- |
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( |
) |
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- |
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Balance, June 30, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock |
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Shares |
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Par Value |
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Additional |
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Distributable |
|
|
Total |
|
|||||
Balance, December 31, 2024 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net increase (decrease) in net assets resulting from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net investment income (loss) |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Net change in unrealized appreciation (depreciation) from investments |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Total net increase (decrease) in net assets resulting from operations |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Distributions to stockholders from: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investment income-net |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
Capital transactions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Reinvestment of stockholder distributions |
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
Total net increase (decrease) in net assets from capital transactions |
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|||
Total increase (decrease) in net assets |
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
||||
Effect of permanent adjustments |
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
|
|
|
- |
|
|
Balance, June 30, 2025 |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
See notes to financial statements.
6
Table of Contents
Chicago Atlantic BDC, Inc.
Statements of Cash Flows
(Unaudited)
|
|
For the Six Months Ended |
|
|||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||
Cash flows from operating activities |
|
|
|
|
|
|
||
Net increase (decrease) in net assets resulting from operations |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net increase (decrease) in net assets resulting from |
|
|
|
|
|
|
||
Net change in unrealized (appreciation) depreciation from investments |
|
|
|
|
|
( |
) |
|
Net (accretion of discounts) and amortization of premiums |
|
|
( |
) |
|
|
( |
) |
Purchase of investments |
|
|
( |
) |
|
|
( |
) |
PIK interest capitalized |
|
|
( |
) |
|
|
( |
) |
Proceeds from sales of investments and principal repayments |
|
|
|
|
|
|
||
Amortization of deferred financing costs |
|
|
|
|
|
|
||
(Increase) Decrease in operating assets: |
|
|
|
|
|
|
||
Interest receivable |
|
|
( |
) |
|
|
|
|
Due from affiliates |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
Receivable for investment sold |
|
|
|
|
|
|
||
Increase (Decrease) in operating liabilities: |
|
|
|
|
|
|
||
Income-based incentive fees payable |
|
|
( |
) |
|
|
( |
) |
Management fee payable |
|
|
|
|
|
|
||
Capital gains incentive fees payable |
|
|
( |
) |
|
|
|
|
Professional fees payable |
|
|
( |
) |
|
|
|
|
Transaction fees payable related to the Loan Portfolio Acquisition |
|
|
|
|
|
( |
) |
|
Other payables |
|
|
|
|
|
|
||
Due to affiliates |
|
|
|
|
|
( |
) |
|
Excise tax payable |
|
|
( |
) |
|
|
( |
) |
Unearned interest income |
|
|
( |
) |
|
|
|
|
Payable for investments purchased |
|
|
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
||
Cash flows from financing activities |
|
|
|
|
|
|
||
Offering costs paid |
|
|
( |
) |
|
|
( |
) |
Distributions paid |
|
|
( |
) |
|
|
( |
) |
Financing costs paid |
|
|
( |
) |
|
|
( |
) |
Proceeds from borrowings on revolving line of credit |
|
|
|
|
|
|
||
Principal payments under revolving line of credit |
|
|
( |
) |
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
||
Net increase (decrease) in cash and cash equivalents |
|
|
( |
) |
|
|
( |
) |
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental disclosures |
|
|
|
|
|
|
||
Excise taxes paid |
|
$ |
|
|
$ |
|
||
Interest expense paid |
|
$ |
|
|
$ |
|
||
Reinvestment of dividend distribution |
|
$ |
|
|
$ |
|
||
Non-cash operating, financing and investing activity |
|
|
|
|
|
|
||
Accrual for deferred financing costs (Note 2) |
|
$ |
|
|
$ |
|
||
See notes to financial statements.
7
Table of Contents
CHICAGO ATLANTIC BDC, INC.
Schedule of Investments
June 30, 2026
(Unaudited)
(In thousands)
Portfolio Company |
|
Facility |
|
All in |
|
|
Benchmark (3) |
|
Spread |
|
|
PIK |
|
|
Floor |
|
|
Initial |
|
Maturity |
|
Par (2) |
|
|
Amortized Cost(15) |
|
|
Fair |
|
|
% of |
|
Footnotes |
|||||||
Investments at Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)(5)(16) |
|||||||
US Corporate Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Administrative and Support and Waste Management and Remediation Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Hugo Technologies, Inc. |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Total Administrative and Support and Waste Management and Remediation Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Aeriz Holdings Corp |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
BeLeaf Medical, LLC |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Cresco Labs, LLC |
|
Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Dreamfields Brands, Inc. (d/b/a Jeeter) |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Flowery - Bill's Nursery, Inc. |
|
Delayed Draw Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(12) |
||||||||||
FLUENT Corp. |
|
Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(12) |
||||||||||
FLUENT Corp. |
|
Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(12) |
||||||||||
Illicit - S1 Enterprises, Inc. |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Kaleafa, Inc. |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Kapple Holdings LLC (d/b/a Cannabis & Glass) |
|
Delayed Draw Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Nova Farms, LLC |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Oasis - AZ GOAT AZ LLC |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Shangri-La Columbia, LLC |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10)(18) |
||||||||||
Silver Therapeutics, Inc. |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Subsero Holdings - Illinois, Inc |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
TheraTrue, Inc. |
|
Delayed Draw Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Verano Holdings Corp. |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Verano Holdings Corp. |
|
Revolver |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Wellgreens 2.0, LLC |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11)(19) |
||||||||||
Northwest Commonwealth, LLC (d/b/a WYLD) |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Total Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Educational Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Energize Holdings, Inc. (d/b/a Exos) |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(13) |
||||||||||
Total Educational Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Engage3 Holdings, Inc. |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Protect Animals With Satellites LLC (d/b/a Halo Collar) |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Protect Animals With Satellites LLC (d/b/a Halo Collar) |
|
Incremental Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Total Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Action Target, Inc. |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Ocular Science, Inc. |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Round 2 Holdings, LLC |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Total Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Public Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Youth Opportunity Investments, LLC |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Total Public Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Real Estate and Rental |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Workbox Holdings, Inc. |
|
Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Total Real Estate and Rental and Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
8
Table of Contents
CHICAGO ATLANTIC BDC, INC.
Schedule of Investments
June 30, 2026
(Unaudited)
(In thousands)
Portfolio Company |
|
Facility |
|
All in |
|
|
Benchmark (3) |
|
Spread |
|
|
PIK |
|
|
Floor |
|
|
Initial |
|
Maturity |
|
Par (2) |
|
|
Amortized Cost(15) |
|
|
Fair |
|
|
% of |
|
Footnotes |
|||||||
Retail Trade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Aura Home, Inc |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Aura Home, Inc |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Portofino Labs, Inc. (d/b/a Because Market) |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Retail Trade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total First Lien Senior Secured U.S. Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Senior Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Ascend Wellness Holdings, Inc. |
|
Senior Secured Note |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Total Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Finance and Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
RTCP, LLC |
|
Senior Secured Note |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(13) |
||||||||||
West Creek Financial Holdings, Inc. (d/b/a Koalafi) |
|
Series A Senior Note |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(12) |
||||||||||
Total Finance and Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Senior Secured U.S. Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Second Lien Senior Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Remedy - Maryland Wellness, LLC |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Total Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Second Lien Senior Secured U.S. Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total U.S. Corporate Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
First Lien Senior Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Canopy Growth Corporation |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(8)(14) |
||||||||||
TerrAscend Corporation |
|
Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(8)(14) |
||||||||||
Total Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Tulip.io Inc. |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(8)(14) |
||||||||||
Total Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total First Lien Senior Secured Canadian Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Canadian Corporate Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
9
Table of Contents
CHICAGO ATLANTIC BDC, INC.
Schedule of Investments
June 30, 2026
(Unaudited)
(In thousands)
Portfolio Company |
|
|
|
Class Series |
|
Initial |
|
Shares |
|
|
Cost |
|
|
Fair Value |
|
|
% of |
|
Footnotes |
|||
U.S. Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
|||
Real Estate and Rental and Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Workbox Holdings, Inc. |
|
|
|
A-1 Preferred |
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
|||||
Total Real Estate and Rental and Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total U.S. Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
|||
Educational Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Energize Holdings, Inc. (d/b/a Exos) |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(13) |
|||||
Total Educational Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
AI Software, LLC (d/b/a Capacity) |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
|||||
Engage3 Holdings, Inc. |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
|||||
Total Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Ocular Science, Inc. |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
|||||
Round 2 Holdings, LLC |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
|||||
Total Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Real Estate and Rental and Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Workbox Holdings, Inc. |
|
|
|
A-3 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
|||||
Workbox Holdings, Inc. |
|
|
|
A-4 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
|||||
Total Real Estate and Rental and Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retail Trade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Portofino Labs, Inc. (d/b/a Because Market) |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
|||||
Total Retail Trade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total U.S. Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canadian Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
|||
Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Canopy Growth Corporation |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(8)(14) |
|||||
Total Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Canadian Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
TOTAL INVESTMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Footnote Legend
10
Table of Contents
F - Fixed
P - Prime
PIK - Payment-In-Kind
S - SOFR
See notes to financial statements.
11
Table of Contents
CHICAGO ATLANTIC BDC, INC.
Schedule of Investments
December 31, 2025
(In thousands)
Portfolio Company |
|
Facility |
|
All in |
|
|
Benchmark (3) |
|
Spread |
|
|
PIK |
|
|
Floor |
|
|
Initial |
|
Maturity |
|
Par (2) |
|
|
Amortized |
|
|
Fair |
|
|
% of |
|
Footnotes |
|||||||
Investments at Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)(5)(16)(17) |
|||||||
US Corporate Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Administrative and Support and Waste Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Hugo Technologies, Inc. |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Total Administrative and Support and Waste Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Aeriz Holdings Corp |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Archos Capital Group, LLC |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
BeLeaf Medical, LLC |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
CO Acquisition Vehicle, LLC |
|
Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Cresco Labs, LLC |
|
Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Dreamfields Brands, Inc. (d/b/a Jeeter) |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Elevation Cannabis, LLC |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Flowery - Bill's Nursery, Inc. |
|
Delayed Draw Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(12) |
||||||||||
FLUENT Corp. |
|
Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(12) |
||||||||||
HA-MD, LLC |
|
Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(12) |
||||||||||
Illicit - S1 Enterprises, Inc. |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Kaleafa, Inc. |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Kapple Holdings LLC (Cannabis & Glass) |
|
Delayed Draw Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Nova Farms, LLC |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Oasis - AZ GOAT AZ LLC |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Shangri-La Columbia, LLC |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10)(18) |
||||||||||
Silver Therapeutics, Inc. |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Subsero Holdings - Illinois, Inc |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
TerrAscend Corporation |
|
Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(14) |
||||||||||
TheraTrue, Inc. |
|
Delayed Draw Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Verano Holdings Corp. |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Verano Holdings Corp. |
|
Revolver |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Wellgreens 2.0, LLC |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11)(19) |
||||||||||
Total Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Educational Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Energize Holdings, Inc. (d/b/a Exos) |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(13) |
||||||||||
Total Educational Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
AI Software, LLC (d/b/a Capacity) |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Engage3 Holdings, Inc. |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Protect Animals With Satellites LLC (Halo Collar) |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Protect Animals With Satellites LLC (Halo Collar) |
|
Incremental Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Total Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Action Target, Inc. |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Ocular Science, Inc. |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
||||||||||
Total Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Public Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Youth Opportunity Investments, LLC |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Total Public Administration |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Real Estate and Rental and Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Workbox Holdings, Inc. |
|
Term Loan |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
||||||||||
Total Real Estate and Rental and Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Retail Trade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Aura Home, Inc |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Aura Home, Inc |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Portofino Labs, Inc. (d/b/a Because Market) |
|
Term Loan |
|
|
% |
|
S |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Retail Trade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total First Lien Senior Secured U.S. Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
12
Table of Contents
CHICAGO ATLANTIC BDC, INC.
Schedule of Investments
December 31, 2025
(In thousands)
Portfolio Company |
|
Facility |
|
All in |
|
|
Benchmark (3) |
|
Spread |
|
|
PIK |
|
|
Floor |
|
|
Initial |
|
Maturity |
|
Par (2) |
|
|
Amortized Cost(15) |
|
|
Fair |
|
|
% of |
|
Footnotes |
|||||||
Senior Secured U.S. Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Ascend Wellness Holdings Inc. |
|
Senior Secured Note |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Curaleaf Holdings, Inc. |
|
Senior Secured Note |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9)(14) |
||||||||||
Total Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Finance and Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
RTCP, LLC |
|
Senior Secured Note |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(13) |
||||||||||
West Creek Financial Holdings, Inc. (d/b/a Koalafi) |
|
Series A Senior Note |
|
|
% |
|
F |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(12) |
||||||||||
Total Finance and Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Senior Secured U.S. Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Second Lien Senior Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Remedy - Maryland Wellness, LLC |
|
Delayed Draw Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(9) |
||||||||||
Total Cannabis |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Second Lien Senior |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total U.S. Corporate Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
First Lien Senior Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Tulip.io Inc. |
|
Term Loan |
|
|
% |
|
P |
|
|
% |
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(8)(14) |
||||||||||
Total Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total First Lien Senior |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Canadian Corporate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Portfolio Company |
|
|
|
Class Series |
|
Initial |
|
Shares |
|
|
Cost |
|
|
Fair Value |
|
|
% of |
|
Footnotes |
|||
U.S. Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
|||
Real Estate and Rental and Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Workbox Holdings, Inc. |
|
|
|
A-1 Preferred |
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
|||||
Total Real Estate and Rental and Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total U.S. Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U .S. Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
|||
Educational Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Energize Holdings, Inc. (d/b/a Exos) |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(13) |
|||||
Total Educational Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
AI Software, LLC (d/b/a Capacity) |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
|||||
Engage3 Holdings, Inc. |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
|||||
Total Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Ocular Science, Inc. |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
|||||
Total Manufacturing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Real Estate and Rental and Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Workbox Holdings, Inc. |
|
|
|
A-3 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
|||||
Workbox Holdings, Inc. |
|
|
|
A-4 Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(10) |
|||||
Total Real Estate and Rental and Leasing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Retail Trade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Portofino Labs, Inc. (d/b/a Because Market) |
|
|
|
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
(11) |
|||||
Total Retail Trade |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total U.S. Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canadian Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) |
|||
Information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Tulip.io Inc. |
|
|
|
Warrants |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
(8)(14) |
|||
Total Information |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total Canadian Warrants |
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
||
Total Equity Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
TOTAL INVESTMENTS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Footnote Legend
13
Table of Contents
F - Fixed
P - Prime
PIK - Payment-In-Kind
S - SOFR
See notes to financial statements.
14
Table of Contents
CHICAGO ATLANTIC BDC, INC.
Notes to Financial Statements
(Unaudited)
NOTE 1 — ORGANIZATION
Chicago Atlantic BDC, Inc. (an emerging growth company) (the “Company”, “we” or “our”) was formed on January 25, 2021 as a Maryland corporation structured as an externally managed, closed-end, non-diversified management investment company. The Company has elected to be regulated as a business development company (“BDC”), under the Investment Company Act of 1940, as amended (“1940 Act”). In addition, for U.S. federal income tax purposes the Company adopted an initial tax year end of December 31, 2021, and was taxed as a corporation for the tax period ended December 31, 2021. The Company adopted the tax year end of March 31 and elected to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) for the tax period January 1, 2022 through March 31, 2022, and has maintained (and intends to continue to maintain) such election in subsequent taxable years. However, there is no guarantee that the Company will qualify to make such an election for any taxable year.
The Company is managed by Chicago Atlantic BDC Advisers, LLC (the “Adviser”), a registered investment adviser under the Investment Advisers Act of 1940 with the Securities and Exchange Commission (“SEC”). The Adviser has engaged SS&C Technologies, Inc. and ALPS Fund Services, Inc. (“SS&C”), as sub-administrator, to perform administrative services necessary for the Company's operations.
The Company is 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 the Company focuses on investments in the cannabis industry, the Company may also invest in growth and technology companies, esoteric and asset-based lending opportunities, and liquidity solutions opportunities.
The Company’s investment objective is to maximize risk-adjusted returns on equity for its shareholders. The Company seeks to capitalize on, among other things, what it believes to be nascent cannabis industry growth, and drive return on equity by generating current income from its debt investments and capital appreciation from its equity and equity-related investments. The Company intends to achieve its investment objective by investing primarily in secured debt, unsecured debt, equity warrants and direct equity investments in privately held businesses. The Company intends that its 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
On October 1, 2024, the Company completed its previously announced acquisition of a portfolio of loans (the “Loan Portfolio”) from Chicago Atlantic Loan Portfolio, LLC ("CALP") 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
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 was created to combine and jointly operate the Adviser’s, and a portion of Chicago Atlantic’s, investment management businesses (the “Joint Venture”).
In connection with the Loan Portfolio Acquisition and the Joint Venture, the Company was renamed “Chicago Atlantic BDC, Inc.,” and its ticker symbol was changed to “LIEN,” and the Adviser was 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.
On June 17, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Chicago Atlantic Real Estate Finance, Inc., a Maryland corporation (“REFI”) and, solely for the limited purposes set forth therein, the Adviser and Chicago Atlantic REIT Manager, LLC ("REFI Manager"), investment manager to REFI. The Merger Agreement provides that, subject to the conditions set forth in the Merger Agreement, REFI will merge with and into the Company, with the Company continuing as the surviving company (the "Merger"). See “Note 14. Proposed Merger with Chicago Atlantic Real Estate Finance, Inc.” for additional discussion of the Merger.
15
Table of Contents
NOTE 2 — SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company is an investment company following the accounting and reporting requirements set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 946, Financial Services—Investment Companies ("ASC 946") and Articles 6 and 12 of Regulation S-X. The financial statements reflect all adjustments and reclassification that, in the opinion of management, are necessary for the fair statement of results of operations and financial condition as of and for the periods presented. The current period’s results of operations are not necessarily indicative of results that may be achieved for the full fiscal year.
Consolidation
As provided under ASC 946, the Company will not consolidate its investment in a portfolio company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. An investment company’s interests in portfolio companies that are not investment companies are measured at fair value in accordance with ASC 946.
Use of Estimates
The preparation of the financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions affecting reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income, expenses, and gains and losses during the reported period. These estimates are based on the information that is currently available to the Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions and conditions.
Cash and Cash Equivalents
Cash and cash equivalents consists of funds deposited with financial institutions and short-term (maturity of 90 days or less) liquid investments and money market funds. Funds held in money market funds are considered Level 1 in the fair value hierarchy in accordance with ASC 820, Fair Value Measurement ("ASC 820"). Cash held in demand deposit accounts may exceed the Federal Deposit Insurance Corporation (“FDIC”) insured limit. The Company has not incurred any losses on these accounts, and the credit risk exposure is mitigated by the financial strength of the banking institution where the accounts are held. As of June 30, 2026 and December 31, 2025, cash consisted of $
Investment Transactions
Investment transactions are recorded on the trade date. Realized gains or losses are recognized as the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments written off during the period, net of recoveries. Current-period changes in the fair value of investments are reflected as a component of the net change in unrealized appreciation (depreciation) from investments on the Statements of Operations. The net change in unrealized appreciation (depreciation) primarily reflects the change in fair value of investments as of the last business day of the reporting period, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.
Investments traded but not yet settled, if any, are reported in payable for investments purchased and receivable for investments sold on the Statements of Assets and Liabilities.
Investment Valuation
The Company’s investments are recorded at their fair value on the Statements of Assets and Liabilities.
Investments for which market quotations are readily available will typically be valued at the bid price of those market quotations. To validate market quotations, the Adviser utilizes a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by the Adviser, as the Company’s valuation designee (the “Valuation Designee”), based on inputs that may include valuations, or ranges of valuations, provided by independent third-party valuation firm(s) engaged by the Adviser. Generally, the valuation approach used for debt investments is the income approach. The approach derives a value based on either determining the present value of a projected level of cash flow, including a terminal value, or by the capitalization of a normalized measure of future cash flow. The discounted cash flow (“DCF”) method, one of the methodologies
16
Table of Contents
under the income approach, involves estimating future cash flows under various scenarios and discounting them to the measurement date. The discount rate represents a return required by a market participant in order to make an investment in the subject company.
Alternatively, the market approach or asset approach may be used. The market approach is a way of determining a value indication by using one or more methods that compare the portfolio company to similar businesses. Value indicators are applied to relevant financial information of the entity being valued to estimate its fair value. There are two methodologies to consider under the market approach: the guideline public company method (“GPC”) and the controlling transaction method (“CTM”). The GPC method is based on the premise that the pricing multiples of comparable publicly traded companies can be used as a tool to value privately held companies. The publicly traded companies’ ratios and business enterprise value provide guidance in the valuation process. Considerations of factors such as size, growth, profitability and return on investment are also analyzed and compared to the subject business. The CTM is based on the same premise as the GPC. Guideline transactions include change-of-control transactions involving public or private businesses for companies engaged in similar lines of business or with similar economic characteristics. The valuation considers the price at which the merger or acquisition took place to other factors in order to create a pricing multiple that can be used to determine an estimate of value for the subject company.
The asset approach provides an indication of the portfolio company’s value by developing a valuation-based balance sheet. This approach requires adjusting the historical assets and liabilities listed on the U.S. GAAP-based balance sheet to estimated fair values. The excess of assets over liabilities represents the tangible value of the business enterprise. The asset approach does not consider the relevant earnings capacity of a going concern business.
Pursuant to Rule 2a-5 under the 1940 Act, the Board of Directors of the Company (the "Board") designated the Adviser as the Valuation Designee to perform the fair value determinations for the Company, subject to the oversight of the Board and certain Board reporting and other requirements.
As part of the valuation process, the Adviser takes into account relevant factors in determining the fair value of our investments, including: the estimated enterprise value of a portfolio company (i.e., the total fair value of the portfolio company’s debt and equity), the nature and realizable value of any collateral, the portfolio company’s ability to make payments based on its earnings and cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company’s securities to any similar publicly traded securities, and overall changes in the interest rate environment and the credit markets. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Adviser considers whether the pricing indicated by the external event corroborates its valuation.
The Adviser undertakes a multi-step valuation process, which includes, among other procedures, the following:
The Adviser conducts this valuation process on a quarterly basis.
The Adviser applies ASC 820, which establishes a framework for measuring fair value in accordance with U.S. GAAP and required disclosures of fair value measurements. ASC 820 determines fair value is the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Adviser considers the principal market to be the market that has the greatest volume and level of activity. The Adviser applies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in determination of fair value. In accordance with ASC 820, these levels are summarized below:
17
Table of Contents
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If we were required to liquidate a portfolio investment in a forced or liquidation sale, the Company could realize amounts that are different from the amounts presented and such differences could be material. In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected previously.
Preferred Stock and Warrants
The Company may be issued preferred stock or warrants by portfolio companies as yield enhancements in connection with a related debt investment. Preferred stock or warrants are recorded as assets at fair value on the grant date. The Adviser determines the cost basis of these equity investments received based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and equity received.
The Adviser generally utilizes the market approach to estimate the fair value of preferred stock as of the measurement date. As part of its application of the market approach, the Company estimates the enterprise value of a portfolio company utilizing customary pricing multiples, which may include EBITDA multiples, revenue multiples or asset multiples, based on the development stage of the underlying issuers, that are assessed to be indicative of fair value of the respective portfolio company.
Depending on the facts and circumstances, the Adviser generally utilizes the market approach or a Black-Scholes pricing model to estimate the fair value of warrants as of the measurement date. As part of its application of the market approach, the Adviser estimates the enterprise value of a portfolio company utilizing customary pricing multiples, which may include EBITDA multiples, revenue multiples or asset multiples, based on the development stage of the underlying issuers, that are assessed to be indicative of fair value of the respective portfolio company. When appropriate the Black-Scholes pricing model is used to estimate the fair value of warrants for accounting purposes. This model requires the use of highly subjective inputs including expected volatility and expected life, in addition to variables for the valuation of equity positions in private companies. Significant changes in any of these unobservable inputs may result in a significantly higher or lower fair value estimate.
Earnings per share
Basic earnings per share is computed by dividing net increase (decrease) in net assets resulting from operations by the weighted-average number of common shares outstanding for the period. Other potentially dilutive common shares, and the related impact to earnings are considered when calculating earnings per share on a diluted basis using the treasury stock method.
Revenue Recognition
Interest Income
Interest income is recorded on an accrual basis and includes accretion and amortization of discounts or premiums, respectively. Discounts and premiums to par value on securities purchased are accreted and amortized, respectively, into interest income over the contractual life of the respective security using the effective yield method. The amortized cost of investments includes the original cost adjusted for the accretion and amortization of discounts and premiums, respectively. Upon prepayment of a loan or debt security, any prepayment premiums and unamortized discounts or premiums are recorded as interest income.
Certain investments may have contractual payment-in-kind ("PIK") interest or dividends. PIK interest or dividends represents accrued interest or dividends that is added to the principal amount of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity.
Dividend Income
Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded portfolio companies.
18
Table of Contents
Fee Income
All transaction fees earned in connection with our investments are recognized as fee income and are generally non-recurring. Such fees typically include fees for services, including administrative, structuring (including with respect to amendments) and advisory services, provided to portfolio companies. We recognize income from fees for providing such structuring and advisory services when the services are rendered or the transactions are completed, and payment is received (generally immediately).
Non-Accrual Policy
When a debt security becomes 90 days or more past due, or if management otherwise does not expect that principal, interest, and other obligations due will be collected in full, the Company will generally place the debt security on non-accrual status and cease recognizing interest income on that debt security until all principal and interest due has been paid or the Company believes the borrower has demonstrated the ability to repay its current and future contractual obligations. Any interest receivable is reversed from income in the period that a loan is placed on non-accrual status. However, the Company may make exceptions to this policy if the investment has sufficient collateral value and is in the process of collection. If PIK interest or dividends are not expected to be realized by the Company, the investment generating PIK interest or dividends will be placed on non-accrual status. When an investment with PIK is placed on non-accrual status, the accrued, uncapitalized interest or dividends are generally reversed through interest or dividend income, respectively. As of June 30, 2026 and December 31, 2025, there were
Unearned Revenue
The Company utilizes interest reserves on certain loans which are applied to future interest payments. Such reserves are established at the time of loan origination. The interest reserve is recorded as a liability as it represents unearned interest revenue. The interest reserve is relieved when the interest on the loan is earned, and interest income is recorded in the period when the interest is earned in accordance with the credit agreement. The interest payment is deducted from the interest reserve deposit balance on the date when the interest payment is due.
The decision to establish an interest reserve is made during the underwriting process and considers the creditworthiness and expertise of the borrower, and the debt coverage provided by the pledged collateral. It is the Company’s policy to recognize income for this interest component as long as the subject loan is performing as originally projected and if there has been no deterioration in the financial condition of the borrower. The Company’s standard accounting policies for interest income recognition are applied to all loans, including those with interest reserves. As of June 30, 2026 and December 31, 2025, the Company recorded $
Income Taxes
The Company adopted an initial tax year end of December 31, 2021 and was taxed as a corporation for U.S. federal income tax purposes for the tax period ended December 31, 2021. The Company adopted the tax year end of March 31 and elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code for the tax period January 1, 2022 through March 31, 2022 and in subsequent years. The Company intends to maintain such election in the current and future taxable years. To maintain its tax treatment as a RIC, the Company must meet specified source-of-income and asset diversification requirements and timely distribute to its stockholders for each taxable year at least
For the three months ended June 30, 2026 and 2025 the Company accrued $
During the year ended December 31, 2025, the Company determined that it had overpaid its estimated federal excise tax liability for the prior fiscal year by $
19
Table of Contents
The Company evaluates tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority in accordance with ASC Topic 740, Income Taxes (“ASC 740”). Tax benefits of positions not deemed to meet the more-likely-than-not threshold, or uncertain tax positions, would be recorded as tax expense in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits in income tax expense.
Based on the analysis of the Company’s tax position, the Company had
Distributions
Distributions to common stockholders are recorded on the record date. The amount of taxable income to be paid out as a distribution is determined by our Board on a quarterly basis and is generally based upon the future taxable income estimated by management. Capital gains, if any, are distributed at least annually, although the Company may decide to retain all or some of those capital gains for investment and pay U.S. federal income tax at corporate rates on those retained amounts. If the Company chooses to do so, this generally will increase expenses and reduce the amount available to be distributed to stockholders. Our distributions may exceed our earnings, and therefore, portions of the distributions that we make may be a return of the money originally invested and represent a return of capital distribution to shareholders for tax purposes.
Offering Costs
These costs consist primarily of legal fees and other costs incurred in connection with issuances of the Company’s common stock, including the preparation of the Company’s registration statement, registration fees, transfer agent expenses, and other expenses relating to the offering. Offering costs are capitalized as deferred offering costs and, if any, are included in prepaid expenses and other assets on the Statements of Assets and Liabilities. As of June 30, 2026 and December 31, 2025, deferred offering costs were $
Deferred offering costs are charged to capital upon issuance of the Company's shares. For the three and six months ended June 30, 2026, and 2025,
Deferred Financing Costs
Transaction Costs Related to the Proposed Merger
Direct costs incurred in connection with the Merger described in Note 14, including advisory, legal, accounting and financial printing fees, are capitalized as deferred charges within prepaid expenses and other assets on the Statements of Assets and Liabilities. Because the Company expects to account for the Merger as an asset acquisition under ASC 805-50, such costs will be included in the total accumulated cost of the acquired assets upon consummation of the Merger as a purchase price premium. Capitalized transaction costs are assessed for recoverability at each reporting date and are charged to expense in the period in which consummation of the Merger is no longer considered probable. Costs that are not direct costs of the transaction, including integration costs are expensed as incurred. Costs incurred directly in connection with the issuance of common stock as Merger consideration are deferred and will be netted against additional paid-in-capital upon the closing of the Merger.
New Accounting Standards
In November 2024, the FASB issued ASU No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). ASU No. 2024-03 requires disaggregated disclosure of certain costs and expenses, including purchase of inventory, employee compensation, depreciation, amortization and depletion, within relevant income statement captions. ASU 2024-03 is effective for annual years beginning after December 15, 2026, and interim periods beginning after December
20
Table of Contents
15, 2027. Early adoption and retrospective application are permitted. The Company is currently evaluating the impact of adopting ASU No. 2024-03.
NOTE 3 — INVESTMENTS
The Company’s investments in portfolio companies are primarily in the form of debt investments, but may include equity warrants received in connection with debt investments, equity investments and derivative investments.
In the tables presented below for the Company’s debt investments, the amortized cost represents the original cost adjusted for any accretion of discounts, amortization of premiums and PIK interest or dividends.
The following tables summarize the composition of the Company’s portfolio investments by investment type as of June 30, 2026 and December 31, 2025.
|
|
As of June 30, 2026 |
|
|||||||||||||||||||||
Investment Type |
|
Principal |
|
|
Percentage |
|
|
Amortized |
|
|
Percentage at |
|
|
Fair |
|
|
Percentage |
|
||||||
First Lien Senior Secured Loans |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
Senior Secured Notes |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Warrants |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Second Lien Senior Secured Loans |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Preferred Stock |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
|
|
As of December 31, 2025 |
|
|||||||||||||||||||||
Investment Type |
|
Principal |
|
|
Percentage |
|
|
Amortized |
|
|
Percentage |
|
|
Fair |
|
|
Percentage at |
|
||||||
First Lien Senior Secured Loans |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
Senior Secured Notes |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Second Lien Senior Secured Loans |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Warrants |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Preferred Stock |
|
|
|
|
|
% |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||
The following tables summarize the composition of the Company’s debt portfolio based on rate characteristics as of June 30, 2026 and December 31, 2025.
|
|
As of June 30, 2026 |
||||||||||||
Rate Type |
|
Principal |
|
|
Amortized |
|
|
Fair |
|
|
Time to |
|||
Fixed-rate debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Floating-rate debt (SOFR) |
|
|
|
|
|
|
|
|
|
|
||||
Floating-rate debt (PRIME) |
|
|
|
|
|
|
|
|
|
|
||||
Total Debt Instruments |
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
|
|
As of December 31, 2025 |
||||||||||||
Rate Type |
|
Principal |
|
|
Amortized |
|
|
Fair |
|
|
Time to |
|||
Fixed-rate debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
Floating-rate debt (SOFR) |
|
|
|
|
|
|
|
|
|
|
||||
Floating-rate debt (PRIME) |
|
|
|
|
|
|
|
|
|
|
||||
Total Debt Instruments |
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
21
Table of Contents
The Company’s portfolio investments are primarily in companies conducting business in or supporting the cannabis industry. The Company uses the North American Industry Classification System ("NAICS") for classifying the industry groupings of its portfolio companies, excluding any portfolio company operating in the cannabis industry.
|
|
As of June 30, 2026 |
|
|||||||||||||
Industry |
|
Amortized |
|
|
Percentage at |
|
|
Fair |
|
|
Percentage at |
|
||||
Cannabis |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Finance and Insurance |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Information |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Manufacturing |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Public Administration |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Retail Trade |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Educational Services |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Real Estate and Rental and Leasing |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Administrative and Support and Waste Management and Remediation Services |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
|
|
As of December 31, 2025 |
|
|||||||||||||
Industry |
|
Amortized |
|
|
Percentage at |
|
|
Fair |
|
|
Percentage at |
|
||||
Cannabis |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Finance and Insurance |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Information |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Public Administration |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Retail Trade |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Manufacturing |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Educational Services |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Administrative and Support and Waste Management and Remediation Services |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Real Estate and Rental and Leasing |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
The geographic composition is determined by the location of the principal place of business of each portfolio company. Geographic regions are defined as: West, for the states of WA, OR, ID, MT, WY, CO, AK, HI, UT, NV and CA; Midwest, for the states of ND, SD, NE, KS, MO, IA, MN, WI, MI, IL, IN and OH; Northeast, for the states of PA, NJ, NY, CT, RI, MA, VT, NH and ME; Southeast, for the states of AR, LA, MS, TN, KY, AL, FL, GA, SC, NC, VA, DE, WV and MD; and Southwest, for the states of AZ, NM, TX and OK.
The following tables summarize the composition of the Company’s portfolio investments by geographic region as of June 30, 2026 and December 31, 2025.
|
|
As of June 30, 2026 |
|
|||||||||||||
Geographic Region |
|
Amortized |
|
|
Percentage at |
|
|
Fair |
|
|
Percentage at |
|
||||
United States: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Midwest |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
West |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Northeast |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Southeast |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Southwest |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
International: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canada |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
22
Table of Contents
|
|
As of December 31, 2025 |
|
|||||||||||||
Geographic Region |
|
Amortized |
|
|
Percentage at |
|
|
Fair |
|
|
Percentage at |
|
||||
United States: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Midwest |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Northeast |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
West |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Southeast |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Southwest |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
International: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canada |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Certain Risk Factors
In the ordinary course of business, the Company manages a variety of risks including market risk, concentration risk, credit risk, liquidity risk, interest rate risk, prepayment risk, risks associated with financial, economic and other global market developments and disruptions, including those arising from war, terrorism, market manipulation, government interventions, government defaults and shutdowns, political changes or diplomatic developments, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics) and natural/environmental disasters, which can all negatively impact the securities markets generally. These events can also impair the technology and other operational systems upon which the Company’s service providers rely and could otherwise disrupt the Company’s service providers’ ability to fulfill their obligations to the Company. The Company identifies, measures and monitors risk through various control mechanisms, including trading limits and diversifying exposures and activities across a variety of instruments, markets and counterparties.
Market risk is the risk of potential adverse changes to the value of financial instruments because of changes in market conditions, including as a result of changes in the credit quality of a particular issuer, credit spreads, interest rates, and other movements and volatility in security prices or commodities. In particular, the Company may invest in issuers that are experiencing or have experienced financial or business difficulties (including difficulties resulting from the initiation or prospect of significant litigation or bankruptcy proceedings), which involves significant risks. The Company manages its exposure to market risk through the use of risk management strategies and various analytical monitoring techniques.
Concentration risk includes the risk that the Company’s focus on investments in cannabis companies may subject the Company to greater price volatility and risk of loss as a result of adverse economic, business or other developments affecting cannabis companies than funds investing in a broader range of industries or sectors. At times, the performance of investments in cannabis companies will lag the performance of other industries or sectors or the broader market as a whole. Investing in portfolio companies involved in the cannabis industry subjects us to the following risks:
23
Table of Contents
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 commenced additional hearings in June 2026 to consider related regulatory considerations for adult-use cannabis, and further rulemaking, interpretive guidance, or enforcement policy statements may be issued thereafter. Closing briefs and
in-person hearings, if any, are expected to occur in August 2026. 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
24
Table of Contents
initiated additional administrative proceedings, including the June 2026 DEA hearing, the outcome, timing, and scope of any further actions remain uncertain.
Concentration and Other Credit Risk
As of June 30, 2026 and December 31, 2025, we had
Any of the foregoing could have an adverse impact on our and our portfolio companies’ businesses, financial condition and results of operations.
Credit risk is the risk that a decline in the credit quality of an investment could cause the Company to lose money. The Company could lose money if the issuer or guarantor of a portfolio security fails to make timely payment or otherwise honor its obligations. Fixed income securities rated below investment grade (high-yield bonds) involve greater risks of default or downgrade and are generally more volatile than investment grade securities. Below investment grade securities involve greater risk of price declines than investment grade securities due to actual or perceived changes in an issuer’s creditworthiness. In addition, issuers of below investment grade securities may be more susceptible than other issuers to economic downturns. Such securities are subject to the risk that the issuer may not be able to pay interest or dividends and ultimately to repay principal upon maturity. Discontinuation of these payments could substantially adversely affect the market value of the security.
The Company’s investments may, at any time, include securities and other financial instruments or obligations that are illiquid or thinly traded, making purchase or sale of such securities and financial instruments at desired prices or in desired quantities difficult. Furthermore, the sale of any such investments may be possible only at substantial discounts, and it may be extremely difficult to value any such investments accurately.
Interest rate risk refers to the change in earnings that may result from changes in the level of interest rates. To the extent that the Company borrows money to make investments, including under its credit facility, net investment income (loss) will be affected by the difference between the rate at which the Company borrows funds and the rate at which the Company invests these funds. In periods of rising interest rates, the Company’s cost of borrowing funds would increase, which may reduce net investment income (loss). As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on net investment income (loss).
Prepayment risk is the risk that a loan in the Company’s portfolio will prepay due to the existence of favorable financing market conditions that allow the portfolio company the ability to replace existing financing with less expensive capital. As market conditions change, prepayment may be possible for each portfolio company. In some cases, the prepayment of a loan may reduce the Company’s achievable yield if the capital returned cannot be invested in transactions with equal or greater expected yields, which could have a material adverse effect on our business, financial condition and results of operations.
NOTE 4 — FAIR VALUE OF FINANCIAL INSTRUMENTS
ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. The Company accounts for its investments at fair value. As of June 30, 2026 and December 31, 2025, the Company’s portfolio investments consisted primarily of investments in senior secured loans and secured notes. The fair value amounts have been measured as of the reporting date and have not been reevaluated or updated for purposes of these financial statements subsequent to that date. As such, the fair values of these financial instruments subsequent to the reporting date may be different than amounts reported.
The fair value determination of each portfolio investment categorized as Level 3 required the use of one or more unobservable inputs.
The use of significant unobservable inputs creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement of the Company’s debt investments may vary and may include debt investments’ yield (i.e. discount rate). The significant unobservable inputs used in the fair value measurement of the Company’s equity and warrant investments may vary and may include EBITDA multiples, revenue multiples and asset multiples.
The Company’s investments measured at fair value by investment type on a recurring basis as of June 30, 2026 and December 31, 2025 were as follows:
25
Table of Contents
|
|
Fair Value Measurements at June 30, 2026 Using |
|
|||||||||||||
Investment Type |
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
|
Total |
|
||||
First Lien Senior Secured Loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Senior Secured Notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Second Lien Senior Secured Loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
Fair Value Measurements at December 31, 2025 Using |
|
|||||||||||||
Investment Type |
|
Quoted Prices in |
|
|
Significant |
|
|
Significant |
|
|
Total |
|
||||
First Lien Senior Secured Loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Senior Secured Notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Second Lien Senior Secured Loans |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Preferred Stock |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The following tables provide a summary of the significant unobservable inputs used to fair value the Level 3 portfolio investments as of June 30, 2026 and December 31, 2025. The methodology for the determination of the fair value of the Company’s investments is discussed in “Note 2 – Significant Accounting Policies”. Discount rate ranges are shown as spread over the U.S. Prime Rate ("PRIME"), Secured Overnight Financing Rate ("SOFR") and/or U.S. Treasury Rates, as applicable, for senior secured first lien term loans, as of June 30, 2026 and December 31, 2025.
Investment Type |
|
Fair Value as of |
|
|
Valuation |
|
Unobservable Input |
|
Range |
|
Weighted |
|
||
First Lien Senior Secured Loans |
|
$ |
|
|
Discounted Cash Flow |
|
Discount Rate |
|
|
|
% |
|||
Senior Secured Notes |
|
|
|
|
Discounted Cash Flow |
|
Discount Rate |
|
|
|
% |
|||
Warrants |
|
|
|
|
Option Pricing Model |
|
Volatility Factor |
|
|
|
% |
|||
Second Lien Senior Secured Loans |
|
|
|
|
Discounted Cash Flow |
|
Discount Rate |
|
|
|
% |
|||
Preferred Stock |
|
|
|
|
Market Approach |
|
Current Value |
|
|
|
||||
Total |
|
$ |
|
|
|
|
|
|
|
|
|
|
||
Investment Type |
|
Fair Value as of |
|
|
Valuation |
|
Unobservable Input |
|
Range |
|
Weighted |
|
||
First Lien Senior Secured Loans |
|
$ |
|
|
Discounted Cash Flow |
|
Discount Rate |
|
|
|
% |
|||
First Lien Senior Secured Loans |
|
|
|
|
Recent Transaction |
|
N/A |
|
N/A |
|
N/A |
|
||
Senior Secured Notes |
|
|
|
|
Discounted Cash Flow |
|
Discount Rate |
|
|
|
% |
|||
Second Lien Senior Secured Loans |
|
|
|
|
Discounted Cash Flow |
|
Discount Rate |
|
|
|
% |
|||
Warrants |
|
|
|
|
Enterprise Value |
|
Revenue Multiple |
|
|
|
||||
Preferred Stock |
|
|
|
|
Market Approach |
|
Current Value |
|
|
|
||||
Warrants |
|
|
|
|
Option Pricing Model |
|
Volatility Factor |
|
|
|
% |
|||
Total |
|
$ |
|
|
|
|
|
|
|
|
|
|
||
(1)
Significant increases (decreases) in discount rate in isolation would result in a significantly lower (higher) fair value assessment. Significant increases (decreases) in volatility in isolation would result in a significantly lower (higher) fair value assessment.
26
Table of Contents
The following tables provide a summary of changes in the fair value of the Company’s Level 3 portfolio investments for the six months ended June 30, 2026 and 2025:
|
|
First Lien |
|
|
Senior |
|
|
Second Lien Senior Secured Loans |
|
|
Preferred |
|
|
Warrants |
|
|
Total |
|
||||||
Fair Value as of December 31, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
Purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Accretion of discount and fees (amortization of premium), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PIK interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Proceeds from sales of investments and principal repayments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
||
Net realized gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net change in unrealized appreciation (depreciation) on investments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Balance as of June 30, 2026 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net change in unrealized appreciation/depreciation on |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
First Lien |
|
|
Senior |
|
|
Preferred |
|
|
Warrants |
|
|
Total |
|
|||||
Fair Value as of December 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Purchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Accretion of discount and fees (amortization of premium), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
PIK interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Proceeds from sales of investments and principal repayments |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||
Net realized gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Balance as of June 30, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net change in unrealized appreciation/depreciation on |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
NOTE 5 – DEBT
Revolving Line of Credit
On February 11, 2025, the Company entered into a senior secured revolving credit agreement (the “Credit Agreement”, or the "Revolving Line of Credit") by and 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.
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 $
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.
27
Table of Contents
Borrowings under the Credit Agreement bear interest at the annual rate of
The Company incurred $
As of June 30, 2026, the Company had $
The fair value of the Revolving Line of Credit is equal to its carrying value because the revolver is a floating rate facility that reprices to a market rate frequently. The fair value is categorized as Level 2 under ASC 820.
The following table presents the components of interest expense for the following periods:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||||
Commitment fee |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
||||
Amortization of deferred financing costs |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total interest expense |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
||||
Average interest rate |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||
Average daily borrowings |
|
$ |
|
|
$ |
|
|
$ |
|
|
|
|
||||
Senior Securities
Information about our senior securities is shown in the following table as of June 30, 2026 (in thousands except for per unit data).
Class and Period |
|
Total Amount Outstanding Exclusive of Treasury Securities(1) |
|
|
Asset Coverage Per Unit(2) |
|
|
Involuntary Liquidating Preference Per Unit(3) |
|
|
Average Market Value Per Unit(4) |
|||
Revolving Credit Facility |
|
|
|
|
|
|
|
|
|
|
|
|||
June 30, 2026 |
|
$ |
|
|
$ |
|
|
|
- |
|
|
N/A |
||
March 31, 2026 |
|
$ |
|
|
$ |
|
|
|
- |
|
|
N/A |
||
December 31, 2025 |
|
$ |
|
|
$ |
|
|
|
- |
|
|
N/A |
||
(1) Total amount of each class of senior securities outstanding at the end of the period presented.
(2) Asset coverage per unit is the ratio of the carrying value of our total assets, less all liabilities excluding indebtedness represented by senior securities in this table, to the aggregate amount of senior securities representing indebtedness. Asset coverage per unit is expressed in terms of dollar amounts per $
(3) The amount to which such class of senior security would be entitled upon our involuntary liquidation in preference to any security junior to it. The “-” in this column indicates information that the SEC expressly does not require to be disclosed for certain types of senior securities.
(4) Not applicable because the senior securities are not registered for public trading.
NOTE 6 — RELATED PARTY TRANSACTIONS
Investment Advisory Agreement
Pursuant to the investment advisory agreement between the Company and the Adviser (the “Investment Advisory Agreement”), fees payable to the Adviser are equal to (a) a base management fee of
28
Table of Contents
of the
The incentive fee consists of two parts. The first part is calculated and payable
The management fee is payable quarterly in arrears. For the three months ended June 30, 2026 and 2025, the Company incurred management fee expenses of $
For the three months ended June 30, 2026 and 2025, the Company incurred income-based incentive fee expenses of $
For the three months ended June 30, 2026 and 2025, the Company incurred capital gains incentive fee expenses of $
Transactions with Affiliates
As defined in the Investment Company Act, an investment is deemed to be a “controlled affiliated person” of the Company because the Company owns, either directly or indirectly, 25% or more of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company. As defined in the Investment Company Act an investment is deemed to be an “affiliated person” of the Company because the Company owns, either directly or indirectly, 5% or more of the portfolio company’s outstanding voting securities.
The table below presents the Company’s affiliated investments:
|
|
Beginning |
|
|
Gross |
|
|
Gross |
|
|
Net Realized |
|
|
Net Change in |
|
|
Ending |
|
|
Interest, PIK and |
|
|||||||
For the Six months ended June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Non-controlled affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
CO Acquisition Vehicle LLC |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total non-controlled affiliates |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
- |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
(1) Gross additions may include increases in the cost basis of investments resulting from new portfolio investments, PIK, the accretion of discounts, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
(2) Gross reductions may include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
On February 26, 2026 the borrower, CO Acquisition Vehicle LLC (“COAV”), was acquired by an affiliate of the Company as part of an asset acquisition of cannabis assets. An officer and board member of the acquirer’s parent company is also a beneficial owner of the Adviser, but does not currently participate in the investment decisions related to COAV. The Company does not control COAV, and the terms of the Company's investment were not modified in connection with the acquisition.
Expense Limitation Agreement
On October 1, 2024, the Company and the Adviser entered into an expense limitation agreement (the “Expense Limitation Agreement”) pursuant to which the Adviser 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
29
Table of Contents
On February 14, 2025, the Board approved a clarification, as proposed by the Company and the Adviser, of the Expense Limitation Agreement, that any 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
The Expense Limitation Agreement expired in accordance with its terms on September 30, 2025 and was not renewed.
For the three months ended June 30, 2026 and 2025, $
Administration Agreement
Pursuant to the administration agreement between the Company and the Adviser (the “Administration Agreement”), the Company is to reimburse 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 SS&C, the sub-administrator. The Company is generally not responsible for the compensation of the Adviser’s employees or any overhead expenses. However, the Company may reimburse the Adviser for an allocable portion of the compensation paid by the Adviser to its Chief Compliance Officer ("CCO") and Chief Financial Officer ("CFO") and their respective staffs (based on a percentage of time such individuals devote, on an estimated basis, to our business affairs).
License Agreement
The Company has also entered into a 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 this 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.
Related Party Fees & Expenses
The following table summarizes the related parties fees and expenses incurred by the Company for the three and six months ended June 30, 2026 and 2025.
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||||
Affiliate Payments |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income-based incentive fees |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Management fee |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Capital gains incentive fees |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total management and incentive fees earned |
|
|
|
|
|
|
|
|
|
|
|
|
||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Expense limitation agreement |
|
|
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
General and administrative expenses waiver |
|
|
|
|
|
|
|
|
- |
|
|
|
( |
) |
||
General and administrative expenses reimbursable to the Adviser |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total affiliate payments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General administrative expenses reimbursable to the Adviser are included in due to affiliates on the accompanying Statements of Assets and Liabilities as of June 30, 2026 and December 31, 2025. Due to affiliates as of June 30, 2026 was $
The Adviser voluntarily and irrevocably waived approximately $
Affiliated Loan Administrative and Collateral Agents
Chicago Atlantic Admin, LLC and Chicago Atlantic Financial Services, LLC (the “Loan Administrators”), serve as loan administrators and collateral agents for certain loans within the Company’s investment portfolio. Among other customary responsibilities as described
30
Table of Contents
in each respective loan document, the Loan Administrators are responsible for: (a) the collection of interest, loan fees, and principal payments from portfolio companies, and (b) the subsequent disbursement of the allocable portion of such collections to the lender(s), including the Company. The Loan Administrators are wholly-owned subsidiaries of Chicago Atlantic Group, LP.
The Loan Administrators allocated fees to the Company, recorded as fee income, amounting to $
The Loan Administrators allocated PIK to the Company, recorded as PIK income, amounting to $
Interest and principal payments from our portfolio companies which were received by the Loan Administrators prior to June 30, 2026, but which were not remitted to the Company until after June 30, 2026, are included in due from affiliates on the Statements of Assets and Liabilities. As of June 30, 2026, the due from affiliates balance of $
Interest and principal payments from our portfolio companies which were received by the Loan Administrators prior to December 31, 2025, but which were not remitted to the Company until after December 31, 2025, are included in due from affiliates on the Statements of Assets and Liabilities. As of December 31, 2025, the due from affiliates balance of $
Co-Investments
From time to time, the Company may co-invest with other investment vehicles managed by its affiliates, in accordance with the Company’s co-investment exemptive order and the Adviser’s co-investment allocation policies. The Company is not obligated to provide, nor has it provided, any financial support to the other managed investment vehicles. As such, the Company’s risk is limited to the carrying value of its investment in any such co-investment. As of June 30, 2026 and December 31, 2025, $
Other Related Party Transactions
The Adviser was the seed investor of the Company and provided initial funding to the Company by purchasing approximately
As of June 30, 2026, the Adviser and its affiliates held approximately
During the six months ended June 30, 2026 and 2025, the Adviser and certain related parties received dividend distributions from the Company relating to their shares held. Refer to “Note 8 – Common Stock” for further details on the Company’s distributions declared.
Proposed Affiliated Merger
On June 17, 2026, the Company entered into the Merger Agreement with REFI and, for the limited purposes set forth therein, the Adviser and REFI Manager. REFI and the Company are affiliated because they are advised by affiliated entities within the Chicago Atlantic platform, and following the Merger the Adviser will serve as investment adviser to the combined company. Because the Merger is a
31
Table of Contents
transaction between affiliated entities, it is subject to Rule 17a-8 under the 1940 Act and was negotiated and approved by special committees of the boards of directors of each company comprised solely of independent directors. The Board determined that the Company’s existing stockholders will not suffer dilution as a result of the Merger. Refer to Note 14 "Proposed Merger with Chicago Atlantic Real Estate Finance, Inc." for further details on the Merger.
Pursuant to the merger agreement, transaction costs incurred in connection with the Merger generally will be shared equally between the Company and REFI, except for specified SEC and printing and mailing costs. For the three and six months ended June 30, 2026, the Company's allocable share of transaction costs relating to the Merger was approximately $
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Off-Balance Sheet Arrangements
The Company’s commitments and contingencies include unfunded commitments to extend credit, typically in the form of delayed draw term loans to the Company’s portfolio companies. A portion of these unfunded contractual commitments are generally dependent upon the portfolio company reaching certain milestones before the debt commitment becomes available. Furthermore, the Company’s credit agreements with its portfolio companies generally contain customary lending provisions that allow the Company relief from funding obligations for previously made commitments in instances where the underlying portfolio company experiences materially adverse events that affect the financial condition or business outlook of the company. Since a portion of these commitments may expire without being drawn, unfunded contractual commitments do not necessarily represent future cash requirements. As such, the Company’s disclosure of unfunded contractual commitments includes only those commitments that are available at the request of the portfolio company and are unencumbered by milestones or additional lending provisions.
|
|
As of |
|
|
As of |
|
||
Unfunded delayed draw loan commitments |
|
$ |
|
|
$ |
|
||
Undrawn revolver commitments |
|
|
|
|
|
|
||
Total unfunded commitments |
|
$ |
|
|
$ |
|
||
The Company did not have any other off-balance sheet commitments or liabilities as of June 30, 2026 or December 31, 2025. The Company will fund its unfunded commitments, if any, from the same sources it uses to fund its investment commitments that are funded at the time they are made (which are typically through existing cash and Revolving Line of Credit) and maintains adequate liquidity to fund its unfunded commitments through these sources.
Legal Proceedings
The Company may, from time to time, be involved in litigation arising out of its operations in the normal course of business or otherwise. Furthermore, third parties may try to seek to impose liability on the Company in connection with the activities of its portfolio companies. As of June 30, 2026, there were no material legal matters or material litigation pending of which the Company is aware.
NOTE 8 — COMMON STOCK
As of June 30, 2026,
Loan Portfolio Acquisition
On October 1, 2024, the Company completed its previously announced Loan Portfolio Acquisition, pursuant to 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
32
Table of Contents
Distributions
The following table summarizes distributions declared by the Company during the six months ended June 30, 2026:
Declaration Date |
|
Type |
|
Record Date |
|
Payment Date |
|
Per Share Amount |
|
|
Dividends Paid |
|
||
|
|
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
$ |
|
|
$ |
|
||||||
The following table summarizes distributions declared by the Company during the six months ended June 30, 2025:
Declaration Date |
|
Type |
|
Record Date |
|
Payment Date |
|
Per Share Amount |
|
|
Dividends Paid |
|
||
|
|
|
|
$ |
|
|
$ |
|
||||||
|
|
|
|
$ |
|
|
$ |
|
||||||
Dividend Reinvestment Plan
Prior to December 31, 2025, the Company operated an “opt out” Dividend Reinvestment Plan (“DRIP”) for its stockholders. As a result, if the Company declared a dividend, then stockholders’ cash distributions were automatically reinvested in additional shares of the Company’s common stock, unless they specifically chose to “opt out” of the DRIP so as to receive cash distributions. Stockholders who received distributions in the form of shares of the Company’s common stock generally were subject to the same U.S. federal income tax consequences as were stockholders who elected to receive their distributions in cash. On November 26, 2025, in accordance with the terms of the DRIP and by unanimous written consent of the Company’s Board, the DRIP was terminated with an effective date of December 31, 2025. Following the termination of the DRIP, all cash dividends or distributions on the Company’s common stock with a record date for payment after December 31, 2025 will be paid in cash rather than in shares of the Company’s common stock.
During the six months ended June 30, 2026, the Company issued no shares of common stock under the DRIP.
During the six months ended June 30, 2025, the Company issued the following shares of common stock under the DRIP:
Declaration Date |
|
Type |
|
Record Date |
|
Payment Date |
|
Shares |
|
|
|
|
|
|
|
|
|||||
NOTE 9 — INDEMNIFICATION
Under the Company’s organizational documents, the Company’s officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Company. In addition, in the normal course of business the Company enters into contracts that contain a variety of representations which provide general indemnifications. The Company’s maximum exposure under these agreements cannot be known; however, the Company expects any risk of loss to be remote.
In the normal course of business, the Company enters into contracts that provide a variety of representations and warranties, and general indemnifications. Such contracts include those with certain service providers, brokers and trading counterparties. Any exposure to the Company under these arrangements is unknown as it would involve future claims that may be made against the Company; however, based on the Company’s experience, the risk of loss is remote and no such claims are expected to occur. As such, the Company has not accrued any liability in connection with such indemnifications.
NOTE 10 — EARNINGS PER SHARE
The following table sets forth the computation of the weighted average basic and diluted net increase (decrease) in net assets per share resulting from operations for the three and six months ended June 30, 2026 and 2025:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||||
Net increase (decrease) in net assets resulting from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Weighted Average Shares Outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net increase (decrease) in net assets resulting from operations per share - basic and diluted |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
33
Table of Contents
NOTE 11 — INCOME TAXES
The Company adopted a tax year end of March 31 and elected to be treated as a RIC for U.S. federal income tax purposes under Subchapter M of the Code. However, there is no guarantee that the Company will qualify to maintain its RIC status for any taxable year. As a RIC, the Company generally will not pay corporate-level income tax if it distributes to stockholders at least
The amounts and sources of distributions reported are only estimates and are not being provided for U.S. federal income tax reporting purposes. The timing and character of distributions for U.S. federal income tax purposes will be determined in accordance with the U.S. federal tax rules which may differ from U.S. GAAP. The final determination of the source of all distributions in 2026 will be made after the tax year-end and the amounts represented may be materially different from the amounts disclosed in the final Form 1099-DIV notice. The actual amounts and sources of the amounts for tax reporting purposes will depend upon the Company’s investment performance and may be subject to change based on tax regulations.
Because federal income tax regulations differ from U.S. GAAP, distributions in accordance with tax regulations may differ from net investment income (loss) and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary in nature. Permanent differences are reclassified among the capital accounts in the financial statements to reflect their appropriate tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized in different periods for book and tax purposes. The Company had not recorded a liability for any uncertain tax positions pursuant to the provisions of ASC 740 as of June 30, 2026 and December 31, 2025.
In the normal course of business, the Company is subject to examination by federal and certain state and local tax regulators.
For tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. Funds are permitted to carry forward capital losses for an indefinite period, and such losses will retain their character as either short-term or long-term capital losses. As of March 31, 2026, the Company’s most recent tax year end, the Company had a net short-term capital loss carryforward of $
The Company’s taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each year. Therefore, the final taxable income earned in each year and carried forward for distribution in the following year may be different than this estimate.
For the tax years ended March 31, 2026 and March 31, 2025, the Company reclassified for book purposes amounts arising from permanent book to tax differences primarily related to non-deductible excise tax paid.
|
|
March 31, 2026 |
|
|
March 31, 2025 |
|
||
Increase (decrease) in additional paid in capital |
|
$ |
( |
) |
|
$ |
( |
) |
Increase (decrease) in distributable earnings (accumulated loss) |
|
|
|
|
|
|
||
For income tax purposes, distributions paid to shareholders are reported as ordinary income, return of capital, long-term capital gains, or a combination thereof. The tax character of distributions paid for the three months ended June 30, 2026, and tax year ended March 31, 2026, were as follows:
|
|
For the tax period from April 1, 2026 |
|
|
For the tax year from April 1, 2025 |
|
||
Ordinary income |
|
$ |
|
|
$ |
|
||
Long-term Capital Gain |
|
|
|
|
|
|
||
Return of Capital |
|
|
|
|
|
|
||
Total Distributions |
|
$ |
|
|
$ |
|
||
34
Table of Contents
As of March 31, 2026 and March 31, 2025, the components of distributable earnings on a tax basis detailed below differ from the amounts reflected in the Company’s Statements of Assets and Liabilities by temporary book or tax differences primarily arising from the tax treatment of organizational costs, the tax treatment of transaction expenses related to the Loan Portfolio Acquisition, and distributions payable.
|
|
March 31, 2026 |
|
|
March 31, 2025 |
|
||
Undistributed ordinary income |
|
$ |
|
|
|
|
||
Net unrealized appreciation (depreciation) on investments |
|
|
( |
) |
|
|
( |
) |
Capital Gain/(Loss) Carry Forwards |
|
|
( |
) |
|
|
( |
) |
Other temporary differences |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
( |
) |
|
The following table sets forth the tax cost basis and the estimated aggregate gross unrealized appreciation and depreciation from investments and cash equivalents for federal income tax purposes as of June 30, 2026 and March 31, 2026:
|
|
June 30, 2026 |
|
|
March 31, 2026 |
|
||
Tax cost of investments and cash equivalents |
|
|
|
|
$ |
|
||
Unrealized appreciation |
|
|
|
|
|
|
||
Unrealized depreciation |
|
|
( |
) |
|
|
( |
) |
Net unrealized appreciation (depreciation) from investments and cash equivalents |
|
|
( |
) |
|
$ |
( |
) |
NOTE 12 — FINANCIAL HIGHLIGHTS
The following presents financial highlights for the six months ended June 30, 2026 and 2025:
|
|
For the Six Months Ended |
|
|
|||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
||
Per share data: |
|
|
|
|
|
|
|
||
Net asset value at beginning of period |
|
$ |
|
|
$ |
|
|
||
Net investment income (loss) (1) |
|
|
|
|
|
|
|
||
Net realized and unrealized gains/(losses) on investments (1) |
|
|
( |
) |
|
|
|
|
|
Net increase/(decrease) in net assets resulting from operations (1) |
|
|
|
|
|
|
|
||
Distributions from net investment income (loss) (2) |
|
|
( |
) |
|
|
( |
) |
|
Net asset value at end of period |
|
$ |
|
|
$ |
|
|
||
Net assets at end of period |
|
$ |
|
|
$ |
|
|
||
Shares outstanding at end of period |
|
|
|
|
|
|
|
||
Weighted average net assets |
|
$ |
|
|
$ |
|
|
||
|
|
|
|
|
|
|
|
||
Per share market value at end of period |
|
$ |
|
|
$ |
|
|
||
Total return based on market value |
|
|
% |
(3) |
|
( |
)% |
(4) |
|
Total return based on net asset value |
|
|
% |
(3) |
|
% |
(4) |
||
|
|
|
|
|
|
|
|
||
Ratio/Supplemental data: |
|
|
|
|
|
|
|
||
Ratio of net investment income (loss) to average net assets (5) |
|
|
% |
|
|
% |
|
||
Ratio of expenses to average net assets (5) |
|
|
% |
|
|
% |
|
||
Ratio of waived expenses to average net assets(5) |
|
|
% |
|
|
( |
)% |
|
|
Ratio of net expenses to average net assets(5) |
|
|
% |
|
|
% |
|
||
Portfolio turnover (5) |
|
|
% |
|
|
% |
|
||
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NOTE 13 — SEGMENT REPORTING
The Company uses the management approach to determine reportable operating segments. The Company operates through a single operating and reporting segment with an investment objective of maximizing risk-adjusted returns on equity for its shareholders. The management approach considers the internal organization and reporting used by the Company’s Chief Executive Officer, Principal Financial Officer, and Co-Chief Investment Officers, which comprise the chief operating decision maker (“CODM”) for making decisions, allocating resources and assessing performance.
As the Company’s operations comprise of a single reporting segment, the segment assets are reflected on the accompanying Statements of Assets and Liabilities as “total assets” and the significant segment expenses are listed on the accompanying Statements of Operations.
NOTE 14 — PROPOSED MERGER WITH CHICAGO ATLANTIC REAL ESTATE FINANCE, INC.
On
At the effective time of the Merger (the “Merger Effective Time”), each outstanding share of REFI common stock (other than shares owned by the Company or its consolidated subsidiaries) will be converted into the right to receive a number of shares of the Company’s common stock equal to the Exchange Ratio (as defined below), plus any cash (without interest) in lieu of fractional shares in connection with the closing of the Merger.
Under the terms of the Merger Agreement, the “Exchange Ratio” equals the ratio (rounded to the fourth decimal place) of REFI’s adjusted book value per share (the “Closing REFI NAV”) to the the net asset value per share of the Company’s common stock (the “Closing LIEN NAV”) subject to adjustment as set forth in the Merger Agreement. Each of the Closing REFI NAV and the Closing LIEN NAV is calculated in good faith as of a single date mutually agreed by the parties that is no earlier than 48 hours (excluding Sundays and holidays) prior to the Merger Effective Time, based on the valuation principles, assumptions and methodologies, and giving effect to the categories of adjustments, set forth in Exhibit A to the Merger Agreement. Each calculation is required to be approved by the applicable board of directors, including its special committee, and certified in writing by the applicable adviser or manager,
Based on the respective net asset values of the Company and REFI as of March 31, 2026, as disclosed in the joint press release issued by the Company and REFI on June 18, 2026, former REFI stockholders would be expected to own approximately
The Merger Agreement was approved by the Board upon the unanimous recommendation of a special committee of the Board comprised solely of independent directors (the “LIEN Special Committee”), which received a fairness opinion from Keefe, Bruyette & Woods, Inc., which served as financial advisor to the LIEN Special Committee.
Consummation of the Merger is subject to customary closing conditions, including, among others, (i) requisite approvals by the Company’s and REFI’s stockholders, , including in each case the separate approval of the Merger Agreement by a majority of the shares voted by stockholders unaffiliated with the Company, the Adviser, REFI and REFI Manager, and including REFI stockholder approval of the BDC Election and of a new investment advisory agreement between REFI and the Adviser, (ii) approvals by the board of directors of REFI required under Rule 17a-8 of the 1940 Act, (iii) effectiveness of the Company’s registration statement on Form N-14 (which contains a joint proxy statement/prospectus) for the Company’s common stock to be issued as consideration in the Merger, (iv) Nasdaq listing authorization for the shares of the Company’s common stock to be issued as consideration in the Merger, (v) subject to certain exceptions, the accuracy of the representations and warranties and compliance with the covenants of each party to the Merger Agreement, (vi) the absence of a material adverse effect in respect of the parties, (vii) receipt of required regulatory approvals, (viii) receipt of customary legal opinions to the effect that the Merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Code by the parties and (ix) completion of the closing net asset value determinations.
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Concurrently with the execution of the Merger Agreement, certain stockholders of the Company and REFI entered into Voting and Support Agreements covering approximately
The Merger Agreement may be terminated under specified circumstances, including if the Merger has not been consummated by June 30, 2027, and does not provide for a termination fee.
Except for specified SEC and printing and mailing costs, fees and expenses incurred in connection with the Merger generally will be shared equally between the Company and REFI, with REFI Manager paying $
The Merger Agreement also provides that, prior to the Merger Effective Time, the Board will consider in good faith the adoption of a share repurchase program of up to $
The Merger had not closed as of June 30, 2026 and, accordingly, no amounts related to the Merger are reflected in the accompanying financial statements. However, pre-close transaction costs of $
The foregoing summary description of the Merger Agreement and the transactions contemplated thereby is subject to and qualified in its entirety by reference to the Merger Agreement, a copy of which was filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 18, 2026 and is incorporated herein by reference. Schedules and exhibits to the Merger Agreement, including the exhibit setting out the valuation principles and categories of adjustments used to determine the Closing REFI NAV and the Closing LIEN NAV, were omitted from that filing pursuant to Item 601(a)(5) of Regulation S-K.
NOTE 15 — SUBSEQUENT EVENTS
The Company has evaluated subsequent events through August 12, 2026, the date the financial statements were issued, and has identified the following events requiring disclosure.
On July 9, 2026, REFI issued
On July 31, 2026, the Company filed a registration statement on Form N-14 with the SEC containing a preliminary joint proxy statement/prospectus relating to the Merger. The registration statement had not been declared effective as of the date of this Quarterly Report.
On August 10, 2026 the Board approved a cash dividend of $
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CHICAGO ATLANTIC BDC, INC.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with the financial statements and the related notes that are included in Item 1 of Part I of this quarterly report on Form 10-Q. 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” in our annual report on Form 10-K for the fiscal year ended December 31, 2025 and elsewhere in this quarterly report on Form 10-Q. Please also see the section entitled “Special Note Regarding Forward-Looking Statements.”
Overview
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 regulated as a business development company ("BDC") under the Investment Company Act of 1940 (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 regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code (the "Code"), commencing with our taxable year ended March 31, 2022.
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.
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. 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.
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 may 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.
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.
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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 $1.1 billion of potential investments in varying stages of underwriting.
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.
Cannabis
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 Chicago Atlantic BDC Advisers, LLC (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 cannabidiol (“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.
The Adviser seeks to invest in cannabis companies that it believes have some or all of the following characteristics:
Growth & Technology
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.
The Adviser seeks to invest in growth and technology focused companies that it believes have some or all of the following characteristics:
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Esoteric & Asset-Based Lending
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.
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:
Liquidity Solutions
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.
The Adviser seeks to invest in liquidity solutions opportunities that it believes have some or all of the following characteristics:
None of our investment policies are fundamental, and thus may be changed without stockholder approval.
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.
Recent Developments
Proposed Merger with Chicago Atlantic Real Estate Finance, Inc.
On June 17, 2026, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Chicago Atlantic Real Estate Finance, Inc. (“REFI”) and, for the limited purposes described therein, the Adviser and Chicago Atlantic REIT Manager, LLC (the “REFI Manager”), pursuant to which REFI will elect to be regulated as a business development company and merge with and into the Company, with the Company continuing as the surviving company (the “Merger”) and continuing to trade on Nasdaq under the symbol “LIEN.” REFI’s stockholders will receive shares of our common stock based on the Exchange Ratio. The “Exchange Ratio” equals the net asset value per share of REFI common stock (the “Closing REFI NAV”) divided by the net asset value per share of the Company’s common stock (the “Closing LIEN NAV”) (rounded to the fourth decimal place), in each case calculated in good faith as of a date no earlier than 48 hours (excluding Sundays and holidays) prior to the effective time of the Merger (the “Merger Effective
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Time”). The Merger, which is subject to stockholder approvals, regulatory approvals, effectiveness of a Form N-14 registration statement and other customary conditions, is expected to close in the fourth quarter of 2026. See Note 14 to the financial statements.
Shelf Registration Statement
On May 11, 2026, the Company filed a registration statement on Form N-2 (the “Shelf Registration Statement”) with the U.S. Securities and Exchange Commission registering the offering, from time to time on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, of up to $500,000,000 in aggregate amount of the Company’s common stock, preferred stock, subscription rights, warrants, debt securities, and units comprising any combination of the foregoing. The specific terms of any offering will be established in one or more prospectus supplements at the time of the offering. As of the date of this Quarterly Report on Form 10-Q, the Shelf Registration Statement had not been declared effective.
Revenues
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.
Our investment portfolio consists of fixed and floating rate loans, and our revolving credit facility also bears interest at a floating rate, when drawn. Macro trends in base interest rates like PRIME or SOFR may affect our net investment income (loss) over the long term.
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.
Dividend income on equity investments, if applicable, will be recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded companies.
Our portfolio activity may also reflect proceeds from sales of investments. We will recognize realized gains or losses on sales of investments based on the difference between the net proceeds from the disposition and the amortized cost basis of the investment, without regard to unrealized gains or losses previously recognized. We will record current-period changes in fair value of investments that are measured at fair value as a component of the net change in unrealized gains (losses) on investments on the Statements of Operations.
Expenses
Our primary operating expenses are a base management fee and any incentive fees under the investment advisory agreement between the Company and the Adviser (the "Investment Advisory Agreement"). Our base management fee and any incentive fees compensate our Adviser for its work in identifying, evaluating, negotiating, executing, monitoring, servicing and realizing our investments. See “Item 1. Business—Investment Advisory Agreement.”
Except as specifically provided below, all investment professionals and staff of the Adviser, when and to the extent engaged in providing investment advisory and management services to us, the base compensation, bonus and benefits, and the routine overhead expenses of such personnel allocable to such services, are provided and paid for by the Adviser. We may bear our allocable portion of the compensation paid by the Adviser (or its affiliates) to our Chief Financial Officer ("CFO") and Chief Compliance Officer ("CCO") and their respective staffs (based on a percentage of time such individuals devote, on an estimated basis, to our business affairs). We may bear any other expenses of our operations and transactions, including (without limitation) fees and expenses relating to:
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We expect, but cannot ensure, that our general and administrative expenses will increase in dollar terms during periods of asset growth, but will decline as a percentage of total assets during such periods.
Portfolio Composition and Investment Activity
Portfolio Composition
As of June 30, 2026, our investment portfolio had an aggregate fair value of approximately $334.8 million and was comprised of approximately $299.3 million in first lien, senior secured loans, approximately $30.9 million in senior secured notes, approximately $1.4 million in second lien, senior secured loans, and approximately $3.2 million in equity securities across thirty-seven portfolio companies. As of December 31, 2025, our investment portfolio had an aggregate fair value of approximately $333.3 million and was
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comprised of approximately $292.7 million in first lien, senior secured loans, approximately $37.5 million in senior secured notes, approximately $1.4 million in second lien, senior secured loans, and approximately $1.7 million in equity securities across thirty-nine portfolio companies.
A summary of the composition of our investment portfolio at amortized cost and fair value as a percentage of total investments as of June 30, 2026 and December 31, 2025 are shown in the following tables.
|
|
As of June 30, 2026 |
|
|||||
Investment Type |
|
Amortized Cost |
|
|
Fair Value |
|
||
First Lien Senior Secured Loans |
|
|
89.4 |
% |
|
|
89.5 |
% |
Senior Secured Notes |
|
|
9.2 |
% |
|
|
9.2 |
% |
Warrants |
|
|
0.9 |
% |
|
|
0.8 |
% |
Second Lien Senior Secured Loans |
|
|
0.4 |
% |
|
|
0.4 |
% |
Preferred Stock |
|
|
0.1 |
% |
|
|
0.1 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
As of December 31, 2025 |
|
|||||
Investment Type |
|
Amortized Cost |
|
|
Fair Value |
|
||
First Lien Senior Secured Loans |
|
|
87.9 |
% |
|
|
87.8 |
% |
Senior Secured Notes |
|
|
11.1 |
% |
|
|
11.2 |
% |
Second Lien Senior Secured Loans |
|
|
0.4 |
% |
|
|
0.4 |
% |
Warrants |
|
|
0.4 |
% |
|
|
0.4 |
% |
Preferred Stock |
|
|
0.2 |
% |
|
|
0.2 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
The following tables show the composition of our investment portfolio by geographic region of the United States at amortized cost and fair value as a percentage of total investments as of June 30, 2026 and December 31, 2025. The geographic composition is determined by the location of the headquarters of the portfolio company.
Geographic regions are defined as: West, for the states of WA, OR, ID, MT, WY, CO, AK, HI, UT, NV and CA; Midwest, for the states of ND, SD, NE, KS, MO, IA, MN, WI, MI, IL, IN and OH; Northeast, for the states of PA, NJ, NY, CT, RI, MA, VT, NH and ME; Southeast, for the states of AR, LA, MS, TN, KY, AL, FL, GA, SC, NC, VA, DE, WV and MD; and Southwest, for the states of AZ, NM, TX and OK.
|
|
As of June 30, 2026 |
|
|||||
Geographic Region |
|
Amortized Cost |
|
|
Fair Value |
|
||
United States: |
|
|
|
|
|
|
||
Midwest |
|
|
41.2 |
% |
|
|
41.3 |
% |
West |
|
|
23.4 |
% |
|
|
23.2 |
% |
Northeast |
|
|
12.7 |
% |
|
|
12.6 |
% |
Southeast |
|
|
8.4 |
% |
|
|
8.7 |
% |
Southwest |
|
|
8.0 |
% |
|
|
8.0 |
% |
International: |
|
|
|
|
|
|
||
Canada |
|
|
6.3 |
% |
|
|
6.2 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
As of December 31, 2025 |
|
|||||
Geographic Region |
|
Amortized Cost |
|
|
Fair Value |
|
||
United States: |
|
|
|
|
|
|
||
Midwest |
|
|
41.6 |
% |
|
|
41.7 |
% |
Northeast |
|
|
20.1 |
% |
|
|
20.2 |
% |
West |
|
|
19.7 |
% |
|
|
19.6 |
% |
Southeast |
|
|
8.7 |
% |
|
|
8.6 |
% |
Southwest |
|
|
8.1 |
% |
|
|
8.1 |
% |
International: |
|
|
|
|
|
|
||
Canada |
|
|
1.8 |
% |
|
|
1.8 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
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The tables below present the industry composition of our investment portfolio at amortized cost and fair value as a percentage of total investments as of June 30, 2026 and December 31, 2025.
|
|
As of June 30, 2026 |
|
|||||
Industry(1) |
|
Amortized Cost |
|
|
Fair Value |
|
||
Cannabis |
|
|
73.8 |
% |
|
|
73.6 |
% |
Finance and Insurance |
|
|
8.2 |
% |
|
|
8.2 |
% |
Information |
|
|
4.5 |
% |
|
|
4.5 |
% |
Manufacturing |
|
|
4.4 |
% |
|
|
4.4 |
% |
Public Administration |
|
|
3.3 |
% |
|
|
3.3 |
% |
Retail Trade |
|
|
2.6 |
% |
|
|
2.6 |
% |
Educational Services |
|
|
1.5 |
% |
|
|
1.5 |
% |
Real Estate and Rental and Leasing |
|
|
0.9 |
% |
|
|
1.0 |
% |
Administrative and Support and Waste Management and Remediation Services |
|
|
0.8 |
% |
|
|
0.9 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
|
|
As of December 31, 2025 |
|
|||||
Industry(1) |
|
Amortized Cost |
|
|
Fair Value |
|
||
Cannabis |
|
|
74.8 |
% |
|
|
74.7 |
% |
Finance and Insurance |
|
|
7.7 |
% |
|
|
7.7 |
% |
Information |
|
|
5.9 |
% |
|
|
6.0 |
% |
Public Administration |
|
|
3.4 |
% |
|
|
3.5 |
% |
Retail Trade |
|
|
2.7 |
% |
|
|
2.7 |
% |
Manufacturing |
|
|
2.2 |
% |
|
|
2.2 |
% |
Educational Services |
|
|
1.5 |
% |
|
|
1.5 |
% |
Administrative and Support and Waste Management and Remediation Services |
|
|
0.9 |
% |
|
|
0.9 |
% |
Real Estate and Rental and Leasing |
|
|
0.9 |
% |
|
|
0.8 |
% |
Total |
|
|
100.0 |
% |
|
|
100.0 |
% |
(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.
Concentrations of Credit Risk
Credit risk is the risk of default or non-performance by portfolio companies, equivalent to the investment’s carrying amount. Industry and sector concentrations will vary from period to period based on portfolio activity.
As of June 30, 2026 and December 31, 2025, we had three portfolio companies that represented 35.1% and 31.8% respectively, of our investments, at fair value. As of June 30, 2026 and December 31, 2025, our largest portfolio company represented 19.2% and 15.7%, respectively, of our investments, at fair value.
Investment Activity
The following table provides a summary of the changes in the investment portfolio for the six months ended June 30, 2026 and 2025:
|
For the Six Months Ended |
|
|||||
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||
Beginning Portfolio, at fair value |
$ |
333,311,787 |
|
|
$ |
275,241,398 |
|
Purchases |
|
95,406,486 |
|
|
|
59,050,605 |
|
Accretion of discount and fees (amortization of premium), net |
|
1,947,081 |
|
|
|
1,216,102 |
|
PIK interest |
|
2,740,969 |
|
|
|
1,045,967 |
|
Proceeds from sales of investments and principal repayments |
|
(95,556,317 |
) |
|
|
(29,940,662 |
) |
Net realized gain (loss) on investments |
|
- |
|
|
|
- |
|
Net change in unrealized appreciation (depreciation) on investments |
|
(3,016,014 |
) |
|
|
885,594 |
|
Ending Portfolio, at fair value |
$ |
334,833,992 |
|
|
$ |
307,499,004 |
|
44
Table of Contents
Portfolio Asset Quality
Our portfolio management team uses an ongoing investment risk rating system to characterize and monitor our outstanding loans. Our portfolio management team monitors and, when appropriate, recommends changes to the investment risk ratings. Our Adviser’s valuation committee reviews the recommendations and/or changes to the investment risk ratings, which are submitted on a quarterly basis to the Company's Board of Directors (the "Board") and the Audit Committee of the Board.
Investment |
|
Summary Description |
Grade 1 |
|
Investments rated 1 involve the least amount of risk to our initial cost basis. The borrower is performing above expectations, and the trends and risk factors for this investment since origination or acquisition are generally favorable. Full return of principal, interest and dividend income is expected. |
Grade 2 |
|
Investment is performing in-line with expectations. Investments rated 2 involve an acceptable level of risk that is similar to the risk at the time of origination or acquisition. Risk factors remain neutral or favorable compared with initial underwriting. All investments or acquired investments in new portfolio companies are initially assessed a rating of 2. |
Grade 3 |
|
Investments rated 3 involve a borrower performing below expectations and indicates that the loan’s risk has increased somewhat since origination or acquisition. Capital impairment or payment delinquency is not anticipated. The investment may also be out of compliance with certain financial covenants. |
Grade 4 |
|
Investments rated 4 involve a borrower performing materially below expectations and indicates that the loan’s risk has increased materially since origination or acquisition. In addition to the borrower being generally out of compliance with debt covenants, loan payments may be past due (but generally not more than 120 days past due). Delinquency of interest and / or dividend payments is anticipated. No loss of principal is anticipated. |
Grade 5 |
|
Investments rated 5 involve a borrower performing substantially below expectations and indicates that the loan’s risk has increased substantially since origination or acquisition. It is anticipated that the Company will not recoup its initial cost and may realize a loss upon exit. Most or all of the debt covenants are out of compliance and payments are substantially delinquent. Loans rated 5 are not anticipated to be repaid in full and we will reduce the fair market value of the loan to the amount we anticipate will be recovered. |
The following tables show the distribution of our loan investments on the 1 to 5 investment risk rating scale at fair value as of June 30, 2026 and December 31, 2025:
|
|
As of June 30, 2026 |
|
|||||
Investment Performance Risk Rating |
|
Investments |
|
|
Percentage |
|
||
1 |
|
$ |
- |
|
|
|
0.0 |
% |
2 |
|
|
319,371,061 |
|
|
|
95.4 |
% |
3 |
|
|
15,462,931 |
|
|
|
4.6 |
% |
4 |
|
|
- |
|
|
|
0.0 |
% |
5 |
|
|
- |
|
|
|
0.0 |
% |
Total |
|
$ |
334,833,992 |
|
|
|
100.0 |
% |
|
|
As of December 31, 2025 |
|
|||||
Investment Performance Risk Rating |
|
Investments |
|
|
Percentage |
|
||
1 |
|
$ |
- |
|
|
|
0.0 |
% |
2 |
|
|
327,611,910 |
|
|
|
98.3 |
% |
3 |
|
|
5,699,877 |
|
|
|
1.7 |
% |
4 |
|
|
- |
|
|
|
0.0 |
% |
5 |
|
|
- |
|
|
|
0.0 |
% |
Total |
|
$ |
333,311,787 |
|
|
|
100.0 |
% |
Debt Investments on Non-Accrual Status
As of June 30, 2026 and December 31, 2025, there were no loans in our portfolio placed on non-accrual status.
45
Table of Contents
Debt
Revolving Line of Credit
On February 11, 2025, the Company entered into a senior secured revolving credit agreement (the “Credit Agreement”, the "Revolving Line of Credit") by and 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.
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. The Credit Agreement also provides for the issuance of letters of credit in an aggregate face amount of up to $5,000,000.
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.
As of June 30, 2026, the Company had $27,000,000 in outstanding borrowings and $73,000,000 available under the Revolving Line of Credit. The Revolving Line of Credit is secured by all of the Company's assets pledged as collateral.
Results of Operations
The following discussion and analysis of our results of operations encompasses our results for the three and six months ended June 30, 2026 and 2025.
The fair value of the Company’s investment portfolio grew from $307.5 million as of June 30, 2025, to $334.8 million as of June 30, 2026. The 9% growth in the fair value of our investment portfolio resulting from originations is the main driver for the changes in investment income, operating expenses, net investment income and change in unrealized appreciation (depreciation) for the three and six months ended June 30, 2026 compared to the three and six months ended June 30, 2025.
Investment Income
The following table sets forth the components of investment income for the three and six months ended June 30, 2026 and 2025:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||||
Stated interest income |
|
$ |
11,668,809 |
|
|
$ |
10,616,576 |
|
|
$ |
23,479,451 |
|
|
$ |
20,799,750 |
|
Accretion of discount and fees (amortization of premium), net |
|
|
553,421 |
|
|
|
693,195 |
|
|
|
1,947,081 |
|
|
|
1,216,102 |
|
PIK |
|
|
1,066,491 |
|
|
|
596,295 |
|
|
|
2,445,605 |
|
|
|
1,169,670 |
|
Total interest income |
|
|
13,288,721 |
|
|
|
11,906,066 |
|
|
|
27,872,137 |
|
|
|
23,185,522 |
|
Fee income |
|
|
681,911 |
|
|
|
1,173,972 |
|
|
|
2,801,268 |
|
|
|
1,817,518 |
|
Total investment income |
|
$ |
13,970,632 |
|
|
$ |
13,080,038 |
|
|
$ |
30,673,405 |
|
|
$ |
25,003,040 |
|
We generate revenues primarily in the form of investment income from the investments we hold, generally in the form of interest income from our debt securities. We also generate revenues in the form of investment income from cash we hold, generally in the form of interest income from our cash deposits held by our custodian. Stated interest income represents interest income recognized as earned in accordance with the contractual terms of the loan agreement. Stated interest income from original issue discount (“OID”) and market discount represent the accretion into interest income over the term of the loan as a yield enhancement. Interest income from payment-in-kind (“PIK”) represents contractually deferred interest added to the loan balance recorded on an accrual basis to the extent such amounts are expected to be collected.
The Company also recognizes certain fees as one-time fee income, including, but not limited to, structuring fees.
For the three months ended June 30, 2026 and 2025, total investment income was approximately $14.0 million and $13.1 million, respectively, which was attributable to approximately $0.7 million and $1.2 million of fee income related to commitment fees, success fees, amendment fees and administrative fees and approximately $13.3 million and $11.9 million of interest income, respectively. For the six months ended June 30, 2026 and 2025, total investment income was approximately $30.7 million and $25.0 million, which was attributable to approximately, $2.8 million and $1.8 million of fee income related to commitment fees, success fees, amendment fees and administrative fees and approximately $27.9 million and $23.2 million of interest income, respectively. Approximately $0.5 million
46
Table of Contents
and $1.1 million of prepayment premiums were included in interest income for the three and six months ended June 30, 2026, respectively. There were no prepayment premiums included in interest income for the three and six months ended June 30, 2025.
Operating Expenses
Our operating expenses for the six months ended June 30, 2026 and 2025 are presented below:
|
|
For the Six Months Ended |
|
|
|
|
|
|
||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
$ Change |
|
|
% Change |
|||
Income-based incentive fees |
|
$ |
4,378,192 |
|
|
$ |
3,884,914 |
|
|
$ |
493,278 |
|
|
12.7% |
Management fee |
|
|
3,084,381 |
|
|
|
2,606,206 |
|
|
|
478,175 |
|
|
18.3% |
General and administrative expenses |
|
|
2,355,536 |
|
|
|
2,341,260 |
|
|
|
14,276 |
|
|
0.6% |
Interest expense |
|
|
2,025,481 |
|
|
|
446,641 |
|
|
|
1,578,840 |
|
|
353.5% |
Professional fees |
|
|
408,482 |
|
|
|
491,586 |
|
|
|
(83,104 |
) |
|
-16.9% |
Audit expense |
|
|
307,500 |
|
|
|
343,752 |
|
|
|
(36,252 |
) |
|
-10.5% |
Other expenses |
|
|
291,215 |
|
|
|
314,139 |
|
|
|
(22,924 |
) |
|
-7.3% |
Sub-administrator fees |
|
|
249,176 |
|
|
|
286,590 |
|
|
|
(37,414 |
) |
|
-13.1% |
Legal expenses |
|
|
118,704 |
|
|
|
564,065 |
|
|
|
(445,361 |
) |
|
-79.0% |
Excise tax expense |
|
|
2,730 |
|
|
|
- |
|
|
|
2,730 |
|
|
0.0% |
Capital gains incentive fees |
|
|
(163,473 |
) |
|
|
177,119 |
|
|
|
(340,592 |
) |
|
-192.3% |
Total operating expenses |
|
|
13,057,924 |
|
|
|
11,456,272 |
|
|
|
1,601,652 |
|
|
14.0% |
Waiver of General and administrative expense (Note 6) |
|
|
- |
|
|
|
(658,477 |
) |
|
|
658,477 |
|
|
-100.0% |
Expense limitation agreement (Note 6) |
|
|
- |
|
|
|
(1,107,783 |
) |
|
|
1,107,783 |
|
|
-100.0% |
Net operating expenses |
|
$ |
13,057,924 |
|
|
$ |
9,690,012 |
|
|
$ |
3,367,912 |
|
|
34.8% |
Net Realized Gains and Losses
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 no net realized gains or losses from investments during the three and six months ended June 30, 2026 and 2025.
Net Change in Unrealized Appreciation (Depreciation) from Investments
Net change in unrealized appreciation (depreciation) from investments primarily reflects the net change in the fair value as of the last business day of the reporting period, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period. We record current-period changes in fair value of investments that are measured at fair value as a component of the net change in unrealized appreciation (depreciation) on investments on the Statements of Operations.
Net change in unrealized appreciation (depreciation) from investments for the three and six months ended June 30, 2026 and 2025 is comprised of the following:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||||
Gross unrealized appreciation |
|
$ |
1,205,671 |
|
|
$ |
1,428,075 |
|
|
$ |
1,588,165 |
|
|
$ |
1,553,712 |
|
Gross unrealized depreciation |
|
|
(2,794,785 |
) |
|
|
(508,417 |
) |
|
|
(4,604,179 |
) |
|
|
(668,118 |
) |
Total net change in unrealized appreciation (depreciation) from investments |
|
$ |
(1,589,114 |
) |
|
$ |
919,658 |
|
|
$ |
(3,016,014 |
) |
|
$ |
885,594 |
|
47
Table of Contents
The following table details net change in unrealized appreciation (depreciation) for our portfolio for the three and six months ended June 30, 2026 and 2025:
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||||
Aeriz Holdings Corp |
|
$ |
- |
|
|
$ |
121,039 |
|
|
$ |
- |
|
|
$ |
53,418 |
|
Aeriz Holdings Corp (Maturity: 6/30/2028) |
|
|
(143,846 |
) |
|
|
- |
|
|
|
(431,537 |
) |
|
|
- |
|
AI Software, LLC (d/b/a Capacity) |
|
|
- |
|
|
|
- |
|
|
|
(425,453 |
) |
|
|
- |
|
AI Software, LLC (d/b/a Capacity) - Warrants |
|
|
(500 |
) |
|
|
- |
|
|
|
(52,000 |
) |
|
|
- |
|
Archos Capital Group, LLC |
|
|
- |
|
|
|
255 |
|
|
|
(1 |
) |
|
|
255 |
|
Ascend Wellness Holdings Inc. |
|
|
(44,157 |
) |
|
|
58,604 |
|
|
|
(105,714 |
) |
|
|
84,425 |
|
Aura Home, Inc |
|
|
(99,750 |
) |
|
|
(63,591 |
) |
|
|
(83,125 |
) |
|
|
22,707 |
|
Aura Home, Inc - Term D |
|
|
(15,568 |
) |
|
|
- |
|
|
|
(12,973 |
) |
|
|
- |
|
BeLeaf Medical, LLC |
|
|
(58,017 |
) |
|
|
- |
|
|
|
(195,393 |
) |
|
|
- |
|
Canopy Growth Corporation |
|
|
30,910 |
|
|
|
- |
|
|
|
30,910 |
|
|
|
- |
|
Canopy Growth Corporation - Warrants |
|
|
(149,500 |
) |
|
|
- |
|
|
|
(430,000 |
) |
|
|
- |
|
CO Acquisition Vehicle LLC |
|
|
(1,060,170 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Cresco Labs, LLC |
|
|
(52,451 |
) |
|
|
- |
|
|
|
(179,737 |
) |
|
|
- |
|
Curaleaf Holdings, Inc. |
|
|
- |
|
|
|
207,714 |
|
|
|
(278,212 |
) |
|
|
211,587 |
|
Deep Roots Harvest, Inc. |
|
|
- |
|
|
|
797,813 |
|
|
|
- |
|
|
|
822,813 |
|
Dreamfields Brands, Inc. (d/b/a Jeeter) |
|
|
(161,608 |
) |
|
|
(20,800 |
) |
|
|
(481,909 |
) |
|
|
(36,720 |
) |
Elevation Cannabis, LLC |
|
|
(74,884 |
) |
|
|
2,663 |
|
|
|
(96,433 |
) |
|
|
(112,185 |
) |
Energize Holdings, Inc. (d/b/a Exos) |
|
|
(27,218 |
) |
|
|
- |
|
|
|
(70,489 |
) |
|
|
- |
|
Energize Holdings, Inc. (d/b/a Exos) - Warrants |
|
|
(9,500 |
) |
|
|
- |
|
|
|
(23,603 |
) |
|
|
- |
|
Engage3 Holdings, Inc. |
|
|
(20,535 |
) |
|
|
- |
|
|
|
(71,216 |
) |
|
|
- |
|
Engage3 Holdings, Inc. - Warrants |
|
|
(9,000 |
) |
|
|
- |
|
|
|
(34,000 |
) |
|
|
- |
|
Flowery - Bill's Nursery, Inc. |
|
|
(629 |
) |
|
|
(17,934 |
) |
|
|
(72,405 |
) |
|
|
(33,580 |
) |
Fluent Corp. (f/k/a Consortium) |
|
|
160,914 |
|
|
|
(11,661 |
) |
|
|
236,230 |
|
|
|
1,449 |
|
FLUENT Corp. (f/k/a Consortium) - Bridge Loan |
|
|
551,932 |
|
|
|
- |
|
|
|
551,932 |
|
|
|
- |
|
HA-MD, LLC |
|
|
(374 |
) |
|
|
(831 |
) |
|
|
(920 |
) |
|
|
(1,453 |
) |
Hartford Gold Group, LLC: (Maturity: 1/6/2027) |
|
|
- |
|
|
|
(72,170 |
) |
|
|
- |
|
|
|
(30,004 |
) |
Hartford Gold Group, LLC: (Maturity: 12/17/2025) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(12,063 |
) |
Hugo Technologies Inc. |
|
|
14,688 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Illicit - S1 Enterprises, Inc. |
|
|
114,007 |
|
|
|
- |
|
|
|
22,734 |
|
|
|
- |
|
Kaleafa, Inc. |
|
|
- |
|
|
|
(431 |
) |
|
|
(27,409 |
) |
|
|
28,319 |
|
Kapple Holdings LLC (Cannabis & Glass) |
|
|
(34,797 |
) |
|
|
18,489 |
|
|
|
(64,756 |
) |
|
|
18,440 |
|
Minden Holdings, LLC |
|
|
- |
|
|
|
(1,896 |
) |
|
|
- |
|
|
|
(2,450 |
) |
Northwest Commonwealth, LLC (d/b/a WYLD) |
|
|
(116,198 |
) |
|
|
- |
|
|
|
(116,198 |
) |
|
|
- |
|
Nova Farms, LLC |
|
|
(36,186 |
) |
|
|
(83,199 |
) |
|
|
(146,451 |
) |
|
|
(107,432 |
) |
Oasis - AZ GOAT AZ LLC |
|
|
21,874 |
|
|
|
(16,565 |
) |
|
|
1,616 |
|
|
|
(28,177 |
) |
Ocular Science, Inc. |
|
|
(9,838 |
) |
|
|
- |
|
|
|
(121,985 |
) |
|
|
- |
|
Ocular Science, Inc. - Warrants |
|
|
31,352 |
|
|
|
- |
|
|
|
72,248 |
|
|
|
- |
|
Portofino Labs, Inc. (d/b/a Because Market) |
|
|
(53,684 |
) |
|
|
- |
|
|
|
(81,728 |
) |
|
|
- |
|
Portofino Labs, Inc. (d/b/a Because Market) - Warrants |
|
|
10,750 |
|
|
|
- |
|
|
|
12,750 |
|
|
|
- |
|
Proper Holdings, LLC |
|
|
- |
|
|
|
(694 |
) |
|
|
- |
|
|
|
(1,543 |
) |
Protect Animals With Satellites LLC (Halo Collar): Incremental Term Loan |
|
|
16,606 |
|
|
|
18,067 |
|
|
|
55,881 |
|
|
|
21,232 |
|
Protect Animals With Satellites LLC (Halo Collar): Term Loan |
|
|
32,252 |
|
|
|
34,273 |
|
|
|
108,413 |
|
|
|
37,982 |
|
Remedy - Maryland Wellness, LLC |
|
|
(7,332 |
) |
|
|
(12,172 |
) |
|
|
(7,938 |
) |
|
|
(6,104 |
) |
Round 2 Holdings, LLC |
|
|
(28,989 |
) |
|
|
- |
|
|
|
(28,989 |
) |
|
|
- |
|
Round 2 Holdings, LLC - Warrants |
|
|
(3,709 |
) |
|
|
- |
|
|
|
(4,321 |
) |
|
|
- |
|
RTCP, LLC |
|
|
(1,712 |
) |
|
|
3,790 |
|
|
|
(3,405 |
) |
|
|
2,417 |
|
Shangri-La Columbia, LLC |
|
|
(17,728 |
) |
|
|
- |
|
|
|
(150,444 |
) |
|
|
- |
|
Silver Therapeutics, Inc. |
|
|
5,137 |
|
|
|
(87,300 |
) |
|
|
(57,573 |
) |
|
|
(87,300 |
) |
Simspace Corporation |
|
|
- |
|
|
|
51,430 |
|
|
|
- |
|
|
|
72,959 |
|
STIIIZY, Inc. (f/k/a Shryne Group Inc.) |
|
|
- |
|
|
|
26,093 |
|
|
|
- |
|
|
|
(10,994 |
) |
Subsero Holdings - Illinois, Inc |
|
|
1,467 |
|
|
|
14,675 |
|
|
|
16,592 |
|
|
|
48,401 |
|
48
Table of Contents
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
||||||||||
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
|
June 30, 2026 |
|
|
June 30, 2025 |
|
||||
Sunny Days Enterprises, LLC |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(43,094 |
) |
TerrAscend Corporation |
|
|
(12,723 |
) |
|
|
- |
|
|
|
(10,451 |
) |
|
|
- |
|
TheraTrue, Inc. |
|
|
29,857 |
|
|
|
(14,928 |
) |
|
|
14,929 |
|
|
|
(14,928 |
) |
Tulip.io Inc. |
|
|
(334 |
) |
|
|
17,788 |
|
|
|
14,930 |
|
|
|
30,144 |
|
Verano Holdings Corp. |
|
|
- |
|
|
|
7,357 |
|
|
|
(7,895 |
) |
|
|
5,316 |
|
Verano Holdings Corp. - Term Loan |
|
|
(381,813 |
) |
|
|
- |
|
|
|
(381,813 |
) |
|
|
- |
|
Verano Holdings Corp. - Revolver |
|
|
(133,334 |
) |
|
|
- |
|
|
|
(266,667 |
) |
|
|
- |
|
Wellgreens 2.0, LLC |
|
|
2,925 |
|
|
|
- |
|
|
|
(16,165 |
) |
|
|
- |
|
West Creek Financial Holdings, Inc. (d/b/a Koalafi) |
|
|
(1,124 |
) |
|
|
23,407 |
|
|
|
(24,465 |
) |
|
|
72,076 |
|
Workbox Holdings Inc. |
|
|
(20,690 |
) |
|
|
24,618 |
|
|
|
(18,728 |
) |
|
|
(16,376 |
) |
Workbox Holdings Inc.: A-3 Warrants |
|
|
55,000 |
|
|
|
(24,000 |
) |
|
|
142,000 |
|
|
|
(40,000 |
) |
Workbox Holdings Inc.:A-4 Warrants |
|
|
126,000 |
|
|
|
(62,715 |
) |
|
|
307,000 |
|
|
|
(83,715 |
) |
Youth Opportunity Investments, LLC |
|
|
(6,887 |
) |
|
|
(17,530 |
) |
|
|
(21,678 |
) |
|
|
19,772 |
|
Total net change in unrealized appreciation (depreciation) |
|
$ |
(1,589,114 |
) |
|
$ |
919,658 |
|
|
$ |
(3,016,014 |
) |
|
$ |
885,594 |
|
Financial Condition, Liquidity and Capital Resources
Our liquidity and capital resources are generated primarily from cash flows from operating activities, including proceeds from sales of investments and principal repayments, and interest and fee income earned on investments, as well as borrowings under our Revolving Line of Credit and potentially from future offerings of our securities. The primary uses of our cash includes (i) investments in portfolio companies, (ii) payment of operating expenses, and (iii) dividend payments to holders of our common stock. We have used, and expect to continue to use, our borrowings, including our Revolving Line of Credit, as well as proceeds from investment income and the turnover of our portfolio, to finance our investment objectives and activities.
In addition, on May 11, 2026, we filed a $500.0 million universal Shelf Registration Statement on Form N-2, which, once effective, would permit us to offer common stock, preferred stock, subscription rights, warrants, debt securities and units from time to time as an additional source of capital, subject to market conditions and the requirements of the 1940 Act.
In accordance with the 1940 Act, we are allowed to borrow amounts such that our asset coverage, calculated pursuant to the 1940 Act, is at least 150% after such borrowings (i.e., we are able to borrow up to two dollars for every dollar we have in assets less all liabilities and indebtedness not represented by senior securities issued by us). As of June 30, 2026, we had approximately $0.9 million in cash and $27.0 million in total aggregate principal amount of outstanding debt. Our asset coverage as of June 30, 2026, was 1220%. Subject to borrowing base and other restrictions, we had approximately $73.0 million available for additional borrowings under the Revolving Line of Credit as of June 30, 2026.
The amount of leverage that we employ will depend on our assessment of market conditions and other factors at the time of any proposed borrowing, such as the maturity, covenant package and rate structure of the proposed borrowings, our ability to raise funds through the issuance of shares of our common stock and the risks of such borrowings within the context of our investment outlook. Ultimately, we only intend to use leverage if the expected returns from borrowing to make investments will exceed the cost of such borrowing.
We believe we have sufficient liquidity available to meet our short-term and long-term obligations for at least the next 12 months and for the foreseeable future thereafter. We cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to us in sufficient amounts in the future.
As of June 30, 2026 and December 31, 2025, we had cash of approximately $0.9 million and $2.9 million, respectively. During the six months ended June 30, 2026, we experienced a net decrease in cash of approximately $2.0 million. During the period, cash provided by operating activities was approximately $12.1 million, primarily driven by the purchase of investments of approximately $95.4 million, partially offset by proceeds from sales of investments and principal repayments of portfolio investments of $95.6 million and net investment income of approximately $17.6 million. Cash used in financing activities was approximately $14.2 million, primarily driven by net borrowings and repayments under our Revolving Line of Credit of $2.0 million, offset by distributions paid of approximately $15.5 million and financing costs paid of approximately $0.5 million.
U.S. Federal Income Taxes
We elected to be treated, and intend to qualify annually to be treated, as a RIC under Subchapter M of the Code for federal income tax purposes. To maintain our tax treatment as a RIC, we must meet specified source-of-income requirements and timely distribute to our stockholders for each taxable year at least 90% of our investment company taxable income. Additionally, in order for us not to be subject
49
Table of Contents
to U.S. federal excise taxes, we must distribute annually an amount at least equal to the sum of (i) 98% of our net ordinary income for the calendar year, (ii) 98.2% of our capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years.
Critical Accounting Estimates
Basis of Presentation
The Company’s financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to Regulation S-X under the Securities Act of 1933, as amended (the “Securities Act”). The Company follows accounting and reporting guidance as determined by the Financial Accounting Standards Board (“FASB”) Topic 946 Financial Services – Investment Companies.
The preparation of financial statements in accordance with U.S. GAAP requires management to make certain estimates and assumptions affecting amounts reported in our financial statements. We will continuously evaluate our estimates, including those related to the matters described below. These estimates will be based on the information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates under different assumptions or conditions. For additional information, please refer to “Note 2 – Significant Accounting Policies” in the notes to the financial statements included with this quarterly report on Form 10-Q. Valuation of investments is considered to be our critical accounting policy and estimates. A discussion of our critical accounting estimates follows.
Investment Valuation
Investments for which market quotations are readily available will typically be valued at the bid price of those market quotations. To validate market quotations, the Adviser utilizes a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by the Adviser, as the Company’s valuation designee (the “Valuation Designee”), based on inputs that may include valuations, or ranges of valuations, provided by independent third-party valuation firm(s) engaged by the Adviser. Pursuant to Rule 2a-5 under the 1940 Act, the Board designated the Adviser as the Valuation Designee to perform the fair value determinations for the Company, subject to the oversight of the Board and certain Board reporting and other requirements.
As part of the valuation process, the Adviser takes into account relevant factors in determining the fair value of our investments, including: the estimated enterprise value of a portfolio company (i.e., the total fair value of the portfolio company’s debt and equity), the nature and realizable value of any collateral, the portfolio company’s ability to make payments based on its earnings and cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company’s securities to any similar publicly traded securities, and overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the Adviser considers whether the pricing indicated by the external event corroborates its valuation.
The Adviser undertakes a multi-step valuation process, which includes, among other procedures, the following:
The Adviser conducts this valuation process on a quarterly basis.
The Adviser applies Accounting Standards Codification ("ASC") 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value in accordance with U.S. GAAP and required disclosures of fair value measurements. ASC 820 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. Market participants are defined as buyers and sellers in the principal or most
50
Table of Contents
advantageous market (which may be a hypothetical market) that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820, the Adviser considers the principal market to be the market that has the greatest volume and level of activity. ASC 820 specifies a fair value hierarchy that prioritizes and ranks the level of observability of inputs used in determination of fair value. In accordance with ASC 820, these levels are summarized below:
All of our investments as of June 30, 2026 and December 31, 2025 were categorized at Level 3, and therefore, 100% of our portfolio requires significant estimates. Our investments may not have readily available market quotations (as such term is defined in Rule 2a-5 under the 1940 Act), and those investments which do not have readily available market quotations are valued at fair value as determined in good faith in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. Significant unobservable inputs create uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement of the Company’s investments may vary and may include the debt investments’ yield and volatility fluctuations. Significant increases (decreases) in discount rate in isolation would result in a significantly lower (higher) fair value assessment. Significant increases (decreases) in volatility in isolation would result in a significantly lower (higher) fair value assessment.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If we were required to liquidate a portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected previously.
Assumptions, or unobservable inputs, fluctuate based on both market and company specific factors. Please refer to “Note 4 – Fair Value of Financial Instruments” in the notes to the financial statements included with this quarterly report on Form 10-Q for specific unobservable inputs.
Common Stock
Our common stock began trading on the Nasdaq Global Market on February 4, 2022 in connection with our initial public offering of shares of our common stock. Since October 2, 2024, our common stock trades on the Nasdaq Global Market under the symbol “LIEN.”
The following table lists the net asset value per share of our common stock, the range of high and low closing sales prices of our common stock reported on the Nasdaq Global Market, the closing sale prices as a premium (or discount) to our net asset value per share and dividends per share for each fiscal quarter since our common stock began trading on the Nasdaq Global Market. On August 11, 2026, the last reported closing sales price of our common stock on the Nasdaq Global Market was $9.78 per share, which represented a discount of approximately (26.34%) to our net asset value per share of $13.26 as of June 30, 2026.
51
Table of Contents
|
|
Net Asset |
|
|
Price Range |
|
|
High Sales |
|
|
Low Sales |
|
|
Cash |
|
|
|||||||||
Class and Period |
|
Value(1) |
|
|
High |
|
|
Low |
|
|
Value(2) |
|
|
Value(2) |
|
|
Share(3) |
|
|
||||||
Year Ended December 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Third Quarter (Through August 11, 2026) |
|
* |
|
|
|
10.02 |
|
|
|
9.24 |
|
|
* |
|
|
* |
|
|
$ |
0.34 |
|
(7) |
|||
Second Quarter |
|
$ |
13.26 |
|
|
$ |
10.46 |
|
|
$ |
9.01 |
|
|
|
-21.1 |
% |
|
|
-32.0 |
% |
|
$ |
0.34 |
|
|
First Quarter |
|
$ |
13.33 |
|
|
$ |
10.91 |
|
|
$ |
9.31 |
|
|
|
-18.2 |
% |
|
|
-30.2 |
% |
|
$ |
0.34 |
|
|
Year Ended December 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fourth Quarter |
|
$ |
13.30 |
|
|
$ |
11.22 |
|
|
$ |
10.03 |
|
|
|
-15.6 |
% |
|
|
-24.6 |
% |
|
$ |
0.34 |
|
|
Third Quarter |
|
$ |
13.27 |
|
|
$ |
11.12 |
|
|
$ |
10.12 |
|
|
|
-16.2 |
% |
|
|
-23.7 |
% |
|
$ |
0.34 |
|
|
Second Quarter |
|
$ |
13.23 |
|
|
$ |
11.11 |
|
|
$ |
9.71 |
|
|
|
-16.0 |
% |
|
|
-26.6 |
% |
|
$ |
0.34 |
|
|
First Quarter |
|
$ |
13.19 |
|
|
$ |
12.56 |
|
|
$ |
10.92 |
|
|
|
-4.8 |
% |
|
|
-17.2 |
% |
|
$ |
0.34 |
|
|
Year Ended December 31, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fourth Quarter |
|
$ |
13.20 |
|
|
$ |
13.24 |
|
|
$ |
10.74 |
|
|
|
0.3 |
% |
|
|
-18.7 |
% |
|
$ |
0.34 |
|
|
Third Quarter |
|
$ |
13.28 |
|
|
$ |
12.00 |
|
|
$ |
10.64 |
|
|
|
-9.6 |
% |
|
|
-19.9 |
% |
|
$ |
0.25 |
|
|
Second Quarter |
|
$ |
13.56 |
|
|
$ |
12.38 |
|
|
$ |
9.61 |
|
|
|
-8.7 |
% |
|
|
-29.1 |
% |
|
$ |
0.25 |
|
|
First Quarter |
|
$ |
13.60 |
|
|
$ |
10.28 |
|
|
$ |
7.65 |
|
|
|
-24.4 |
% |
|
|
-43.8 |
% |
|
$ |
0.25 |
|
|
Year Ended December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fourth Quarter |
|
$ |
13.77 |
|
|
$ |
9.81 |
|
|
$ |
8.32 |
|
|
|
-28.8 |
% |
|
|
-39.6 |
% |
|
$ |
0.70 |
|
(6) |
Third Quarter |
|
$ |
14.06 |
|
|
$ |
10.37 |
|
|
$ |
7.65 |
|
|
|
-26.3 |
% |
|
|
-45.6 |
% |
|
$ |
0.63 |
|
(6) |
Second Quarter |
|
$ |
14.49 |
|
|
$ |
9.19 |
|
|
$ |
7.82 |
|
|
|
-36.3 |
% |
|
|
-45.8 |
% |
|
|
|
|
|
First Quarter |
|
$ |
14.29 |
|
|
$ |
9.98 |
|
|
$ |
8.25 |
|
|
|
-30.2 |
% |
|
|
-42.3 |
% |
|
|
|
|
|
Year Ended December 31, 2022(4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Fourth Quarter |
|
$ |
13.91 |
|
|
$ |
10.55 |
|
|
$ |
9.57 |
|
|
|
-24.2 |
% |
|
|
-31.2 |
% |
|
|
- |
|
|
Third Quarter |
|
$ |
13.73 |
|
|
$ |
10.74 |
|
|
$ |
9.00 |
|
|
|
-21.8 |
% |
|
|
-34.5 |
% |
|
|
- |
|
|
Second Quarter |
|
$ |
13.64 |
|
|
$ |
13.50 |
|
|
$ |
7.80 |
|
|
|
-1.0 |
% |
|
|
-42.8 |
% |
|
|
- |
|
|
First Quarter(5) |
|
$ |
13.61 |
|
|
$ |
14.41 |
|
|
$ |
12.57 |
|
|
|
5.9 |
% |
|
|
-7.6 |
% |
|
|
- |
|
|
(1) Net asset value per share is determined as of the last day in the relevant quarter and therefore may not reflect the net asset value per share on the date of the high and low closing sales prices. The net asset values shown are based on outstanding shares at the end of the relevant quarter.
(2) Calculated as the respective high or low closing sales price less net asset value, divided by net asset value (in each case, as of the end of the applicable quarter).
(3) Represents the dividend or distribution declared in the relevant quarter.
(4) On November 8, 2022, our Board approved a change to our fiscal year end from March 31 to December 31.
(5) Shares of our common stock began trading on the Nasdaq Global Market on February 4, 2022. Since October 2, 2024, our common stock trades on the Nasdaq Global Market under the symbol “LIEN.”
(6) Consists of a quarterly dividend and a special dividend.
(7) The dividend is payable on October 9, 2026 to stockholders of record on September 25, 2026.
* Not determined at time of filing.
Shares of BDCs may trade at a market price that is less than the value of the net assets attributable to those shares. At times, our shares of common stock have traded at prices both above and below our net asset value per share. The possibility that our shares of common stock will trade at a discount from net asset value per share or at premiums that are unsustainable over the long term are separate and distinct from the risk that our net asset value per share will decrease. It is not possible to predict whether our common stock will trade at, above, or below net asset value per share.
Holders
As of August 11, 2026, there were approximately 103 holders of record of our common stock, which does not include stockholders for whom shares are held in “nominee” or “street name.”
Distributions
To the extent that we have income available, we intend to make quarterly distributions to our stockholders. The amount of our distributions, if any, will be determined by our Board.
We have elected to be treated, and intend to qualify annually to be treated, as a RIC under Subchapter M of the Code, for U.S. federal income tax purposes, commencing with our taxable year ended March 31, 2022. As long as we qualify as a RIC, we will not be taxed on our investment company taxable income or realized net capital gains, to the extent that such taxable income or gains are distributed, or deemed to be distributed, to stockholders on a timely basis.
52
Table of Contents
To obtain and maintain RIC tax treatment, we must distribute (or be deemed to distribute) at least 90% of the sum of our: investment company taxable income (which is generally our ordinary income plus the excess of realized short-term capital gains over realized net long-term capital losses), determined without regard to the deduction for dividends paid, for such taxable year; and net tax-exempt interest income (which is the excess of our gross tax-exempt interest income over certain disallowed deductions) for such taxable year.
As a RIC, we (but not our stockholders) generally will not be subject to U.S. federal tax on investment company taxable income and net capital gains that we distribute to our stockholders. The discussion below assumes that we will qualify to be treated as a RIC for U.S. federal tax purposes each year.
We intend to distribute annually all or substantially all of such income. To the extent that we retain our net capital gains or any investment company taxable income, we generally will be subject to corporate-level U.S. federal income tax. We can be expected to carry forward our net capital gains or any investment company taxable income in excess of current-year dividend distributions, and pay the U.S. federal excise tax as described below.
We intend to pay quarterly distributions to our stockholders out of assets legally available for distribution. All distributions will be paid at the discretion of our Board and will depend on our earnings, financial condition, maintenance of our tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as our Board may deem relevant from time to time.
Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current-year distributions into the next tax year. We will be subject to a 4% excise tax on a certain portion of these undistributed amounts. Please refer to “Item 1. Business — Material U.S. Federal Income Tax Considerations” for further information regarding the consequences of our retention of net capital gains. We may, in the future, make actual distributions to our stockholders of our net capital gains. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and, if we issue senior securities, we may be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings. See “Item 1. Business — Business Development Company Regulations” and “Item 1. Business —Material U.S. Federal Income Tax Considerations.”
While we intend to distribute any income and capital gains in the manner necessary to minimize imposition of the 4% U.S. federal excise tax, sufficient amounts of our taxable income and capital gains may not be distributed and as a result, in such cases, the excise tax will be imposed. In such an event, we will be liable for this tax only on the amount by which we do not meet the foregoing distribution requirement.
To the extent our current taxable earnings for a year fall below the total amount of our distributions for that year, a portion of those distributions may be deemed a return of capital to our stockholders for U.S. federal income tax purposes. Thus, the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. Stockholders should read written disclosure carefully and should not assume that the source of any distribution is our ordinary income or gains.
A return of capital is a return of a portion of your original investment in shares of our common stock. As a result, a return of capital will (i) lower your tax basis in your shares and thereby increase the amount of capital gain (or decrease the amount of capital loss) realized upon a subsequent sale or redemption of such shares and (ii) reduce the amount of funds we have for investment in portfolio companies. We have not established any limit on the extent to which we may use offering proceeds to fund distributions. However, our Board, including a majority of our independent directors, will be required to determine that making return of capital distributions from our offering proceeds is in the best interests of our stockholders based upon our then-current financial condition and our expected future growth prospects.
53
Table of Contents
The following table summarizes distributions declared and/or paid by the Company from inception through June 30, 2026:
Declaration Date |
|
Type |
|
Record Date |
|
Payment Date |
|
Per Share |
|
|
Dividends Paid |
|
||
August 10, 2023 |
|
Quarterly |
|
September 15, 2023 |
|
September 29, 2023 |
|
$ |
0.23 |
|
|
$ |
1,429,375 |
|
August 10, 2023 |
|
Special |
|
September 15, 2023 |
|
September 29, 2023 |
|
$ |
0.40 |
|
|
$ |
2,485,869 |
|
November 9, 2023 |
|
Quarterly |
|
December 20, 2023 |
|
December 29, 2023 |
|
$ |
0.25 |
|
|
$ |
1,553,676 |
|
November 9, 2023 |
|
Special |
|
December 20, 2023 |
|
December 29, 2023 |
|
$ |
0.45 |
|
|
$ |
2,796,617 |
|
March 8, 2024 |
|
Quarterly |
|
March 20, 2024 |
|
March 28, 2024 |
|
$ |
0.25 |
|
|
$ |
1,553,736 |
|
May 9, 2024 |
|
Quarterly |
|
June 20, 2024 |
|
June 28, 2024 |
|
$ |
0.25 |
|
|
$ |
1,553,738 |
|
August 8, 2024 |
|
Quarterly |
|
September 19, 2024 |
|
September 27, 2024 |
|
$ |
0.25 |
|
|
$ |
1,553,741 |
|
December 9, 2024 |
|
Quarterly |
|
December 19, 2024 |
|
December 27, 2024 |
|
$ |
0.34 |
|
|
$ |
7,758,925 |
|
March 14, 2025 |
|
Quarterly |
|
March 28, 2025 |
|
April 11, 2025 |
|
$ |
0.34 |
|
|
$ |
7,758,931 |
|
May 12, 2025 |
|
Quarterly |
|
June 27, 2025 |
|
July 11, 2025 |
|
$ |
0.34 |
|
|
$ |
7,758,939 |
|
August 14, 2025 |
|
Quarterly |
|
September 29, 2025 |
|
October 10, 2025 |
|
$ |
0.34 |
|
|
$ |
7,759,001 |
|
November 11, 2025 |
|
Quarterly |
|
December 31, 2025 |
|
January 15, 2026 |
|
$ |
0.34 |
|
|
$ |
7,759,001 |
|
March 18, 2026 |
|
Quarterly |
|
March 30, 2026 |
|
April 14, 2026 |
|
$ |
0.34 |
|
|
$ |
7,759,001 |
|
May 12, 2026 |
|
Quarterly |
|
June 26, 2026 |
|
July 10, 2026 |
|
$ |
0.34 |
|
|
$ |
7,759,001 |
|
Dividend Reinvestment Plan
Prior to December 31, 2025, we operated an “opt out” Dividend Reinvestment Plan (“DRIP”) for our stockholders. As a result, if we declared a dividend, then stockholders’ cash distributions were automatically reinvested in additional shares of our common stock, unless they specifically chose to “opt out” of the DRIP so as to receive cash distributions. Stockholders who received distributions in the form of shares of our common stock generally were subject to the same U.S. federal income tax consequences as were stockholders who elected to receive their distributions in cash.
During the six months ended June 30, 2026, the Company issued no shares of common stock under the DRIP.
During the six months ended June 30, 2025, the Company issued the following shares of common stock under the DRIP:
Declaration Date |
|
Type |
|
Record Date |
|
Payment Date |
|
Shares |
March 14, 2025 |
|
Quarterly |
|
March 28, 2025 |
|
April 11, 2025 |
|
22 |
Issuer Purchases of Equity Securities
We did not repurchase any of our equity securities during the six months ended June 30, 2026 or the fiscal year ended December 31, 2025.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Uncertainty with respect to the economic effects of political tensions in the United States and around the world (including the current conflicts between Russia and Ukraine and in the Middle East) 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 financial market risks, including valuation risk, interest rate risk and credit risk.
Valuation Risk
Our investments generally do not have readily available market quotations (as such term is defined in Rule 2a-5 under the 1940 Act), and those investments which do not have readily available market quotations are valued at fair value as determined in good faith in accordance with our valuation policy. There is no single standard for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Because of the inherent uncertainty of valuation, these estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and it is possible that the difference could be material.
Interest Rate Risk
Interest rate sensitivity and risk refer to the change in earnings that may result from changes in the level of interest rates. To the extent that we borrow money to make investments, including under our credit facility, our net investment income will be affected by the
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difference between the rate at which we borrow funds and the rate at which we invest these funds. In periods of rising interest rates, our cost of borrowing funds would increase, which may reduce our net investment income. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
As of June 30, 2026, 81.0% of our debt investments based on outstanding principal balance represented floating-rate investments based on PRIME or SOFR and approximately 19.0% of our debt investments based on outstanding principal balance represented fixed rate investments. As of December 31, 2025, 71.8% of our debt investments based on outstanding principal balance represented floating-rate investments based on PRIME or SOFR and approximately 28.2% of our debt investments based on outstanding principal balance represented fixed rate investments.
Based on our Statements of Assets and Liabilities as of June 30, 2026, the following table shows the annualized impact on net investment income of hypothetical base rate changes in the benchmark rate on our debt investments (considering interest rate floors/ceilings for floating rate instruments) and hypothetical changes in the SOFR on our Revolving line of credit, assuming that there is no change in our investment and borrowing structure (in thousands):
Change in |
|
Increase (Decrease) |
|
|
Increase (Decrease) |
|
|
Increase (Decrease) |
|
|||
Up 300 basis points |
|
$ |
6,836 |
|
|
$ |
810 |
|
|
$ |
6,026 |
|
Up 200 basis points |
|
|
4,097 |
|
|
|
540 |
|
|
|
3,557 |
|
Up 100 basis points |
|
|
1,513 |
|
|
|
270 |
|
|
|
1,243 |
|
Down 100 basis points |
|
|
(76 |
) |
|
|
(174 |
) |
|
|
98 |
|
Down 200 basis points |
|
|
(76 |
) |
|
|
(174 |
) |
|
|
98 |
|
Down 300 basis points |
|
|
(76 |
) |
|
|
(174 |
) |
|
|
98 |
|
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Interim Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report on Form 10-Q and determined that our disclosure controls and procedures are effective as of the end of the period covered by this quarterly report on Form 10-Q.
Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently subject to any material legal proceedings, nor, to our knowledge, are any material legal proceedings threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Furthermore, third parties may seek to impose liability on us in connection with the activities of our portfolio companies. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us. While the outcome of any future legal or regulatory proceedings cannot be predicted with certainty, we do not expect that any such future proceedings will have a material effect upon our financial condition or results of operations.
Item 1A. Risk Factors
There have been no material changes during the six months ended June 30, 2026 to the risk factors discussed in “Item 1A. Risk Factors” in our annual report on Form 10-K for the fiscal year ended December 31, 2025. Except for the following related to the Merger:
Sales of shares of our common stock after the completion of the Merger may cause the market price of our common stock to decline.
At the Merger Effective Time, each share of REFI’s common stock issued and outstanding immediately prior to such time (other than shares owned by us or any of our consolidated subsidiaries), will be converted into the right to receive a number of shares of our common stock equal to the Exchange Ratio, plus any cash (without interest) in lieu of fractional shares.
Former REFI shareholders may decide not to hold the shares of our common stock that they will receive pursuant to the Merger Agreement. Certain of REFI’s shareholders, such as funds with limitations on their permitted holdings of stock in individual issuers, may be required to sell the shares of our common stock that they receive pursuant to the Merger Agreement. In addition, our shareholders may decide not to hold their shares of our common stock after completion of the Merger. In each case, such sales of our common stock could have the effect of depressing the market price for our common stock and may take place soon after the completion of the Merger.
Immediately prior to the date and time that REFI elects to be regulated as a BDC under the 1940 Act by filing a Form N-54 with the SEC (the “BDC Election Time”), any vesting conditions applicable to each outstanding share of REFI’s restricted stock will, automatically and without any required action on the part of the holder thereof, accelerate in full and thereafter participate in the Merger along with the other shares of REFI’s common stock. Following the Merger Effective Time, holders of previously restricted shares may sell the shares of our common stock that they receive in the Merger, subject to applicable securities laws.
In addition, on July 9, 2026, REFI entered into a Loan Agreement with Koach Capital Fund I LLC, Koach Capital Fund II LP, Koach Capital Fund III LP and their respective wholly-owned subsidiaries (collectively, “Koach”), pursuant to which REFI issued 4,306,754 shares of REFI’s common stock, at a price of $14.53 per share, in a private placement in exchange for second lien promissory notes issued by Koach in an aggregate principal amount of approximately $62.5 million (collectively, the “Koach Notes” and, such transaction, the “Koach Transaction”). The shares of REFI’s common stock issued to Koach investors in the Koach Transaction will be converted into shares of our common stock in the Merger. These shares are subject to lock-up letters restricting transfers for periods of three months (as to 20% of the shares) and six months (as to the remaining 80% of the shares) following the July 9, 2026 closing of the Koach Transaction. Following expiration of the applicable lock-up periods, the shares of our common stock held by the Koach investors will become freely transferable, and the subsequent sale of these shares could create market overhang and adversely affect the market price of our common stock.
Our shareholders will experience a reduction in percentage ownership and voting power in the combined company as a result of the Merger.
Our shareholders will experience a substantial reduction in their respective percentage ownership interests and effective voting power in respect of the combined company relative to their respective ownership interests in the Company prior to the Merger. Consequently, Our shareholders should expect to exercise less influence over the management and policies of the combined company following the Merger than they currently exercise over the management and policies of the Company.
Prior to completion of the Merger, subject to certain restrictions in the Merger Agreement, and certain restrictions under the 1940 Act for issuances at prices below the then current net asset value per share of our common stock, we may issue additional shares of our common stock, which would further reduce the percentage ownership of the combined company to be held by our shareholders.
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The Merger Agreement conditions completion of the Merger on approval by our and REFI’s unaffiliated shareholders who vote at the relevant shareholder meetings, and the failure to obtain such approvals will result in the Merger not being completed.
In addition to the customary shareholder approvals required for the Merger, the Merger Agreement conditions completion of the Merger on approval of the Merger Agreement by at least a majority of the shares of our common stock voted at the special meeting of our shareholders held by the unaffiliated holders of our common stock (the “LIEN Minority Vote”), and on approval of the Merger Agreement by at least a majority of the shares of REFI’s common stock voted at the special meeting of REFI’s shareholders (the “REFI Special Meeting”) held by the unaffiliated holders of REFI’s common stock (the “REFI Minority Vote,” and together with the LIEN Minority Vote, the “Minority Vote Requirements”).
The Minority Vote Requirements are heightened voting standards that were added to the Merger Agreement in response to our affiliation with REFI (as we share a common investment adviser platform) and the potential conflicts of interest presented by the Merger. Because affiliated shares are excluded from both the numerator and the denominator of the Minority Vote Requirements, a relatively small number of unaffiliated shareholder votes can determine whether the Merger is approved. If the Minority Vote Requirements are not obtained on either side, the Merger cannot be completed, notwithstanding Voting and Support Agreements or the affirmative vote of affiliated shareholders.
The Minority Vote Requirements also make the vote outcome more sensitive to shareholder participation. Broker non-votes and abstentions have the effect of votes against the Merger Agreement because approval of the Merger Agreement requires the affirmative vote of at least a majority of the outstanding shares of our common stock and REFI’s common stock. As a result, low shareholder turnout or high broker non-vote levels could result in failure of the Merger even if a substantial majority of unaffiliated shareholders who actually vote support the Merger. However, abstentions will not be counted as votes cast for purposes of the separate majority-of-the-minority-shares-voted requirement.
The REFI Special Meeting will be conducted in two sessions, which are expected to occur on the same day, pursuant to a sequencing adjournment, and this meeting structure may be subject to challenge that could delay or prevent the completion of the Merger.
The REFI Special Meeting is expected to be conducted in two sessions, which are expected to occur on the same day. At the initial session, REFI’s shareholders will vote on REFI’s election to be regulated as a BDC (the “BDC Election”), REFI’s investment advisory agreement with the Adviser (the “New BDC Advisory Agreement”) and a proposal to approve the adjournment of the REFI Special Meeting, from time to time, if necessary or appropriate, including (a) to permit the filing and SEC acceptance of the BDC Election and REFI’s board of director’s consideration and adoption of the approvals required to be made by the board of directors of REFI pursuant to Rule 17a-8 of the 1940 Act (the "Post-BDC Election Approvals") prior to the vote on the Merger Agreement, and (b) to solicit additional proxies if there are insufficient votes to approve the BDC Election, the New BDC Advisory Agreement or the Merger Agreement (such proposal, the "REFI Adjournment Proposal"). Following the vote on the BDC Election and the New BDC Advisory Agreement, the REFI Special Meeting will be adjourned pursuant to the REFI Adjournment Proposal for a short period of time, during which (i) REFI will file its Form N-54A with the SEC and, upon acceptance of such filing, the BDC Election Time will occur, and (ii) the board of directors of REFI (acting on the recommendation of REFI’s special committee) will consider and adopt the Post-BDC Election Approvals. The REFI Special Meeting will thereafter be reconvened, which is expected to occur on the same day, and REFI’s shareholders will vote on the Merger Agreement at the reconvened session.
The two-session meeting structure is designed to accommodate the sequencing required by the Merger Agreement and the 1940 Act. Specifically, REFI’s status must change from a real estate investment trust (“REIT”) to a BDC (and the Post-BDC Election Approvals must be adopted) before REFI’s shareholders vote on the Merger Agreement, because REFI’s shareholders voting on the Merger Agreement at the reconvened session will be voting as shareholders of a BDC rather than a REIT.
In addition, the two-session structure requires that a series of steps be completed within a limited timeframe, including SEC acceptance of the Form N-54A, REFI’s special committee’s recommendation to the board of directors of REFI, and the board of directors of REFI’s adoption of the Post-BDC Election Approvals. Any delay in completing these steps could require an additional adjournment (which could implicate a new record date if not completed within 120 days of the original record date) and could delay or prevent the completion of the Merger.
We may be unable to realize the benefits anticipated by the Merger, including estimated cost savings, or it may take longer than anticipated to achieve such benefits.
The realization of certain benefits anticipated as a result of the Merger will depend in part on the integration of REFI’s investment portfolio with our investment portfolio and the integration of REFI’s business with our business. There can be no assurance that REFI’s investment portfolio or business can be operated profitably or integrated successfully into our operations in a timely fashion or at all. The dedication of management resources to such integration may detract attention from the day-to-day business of the combined
57
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company, and there can be no assurance that there will not be substantial costs associated with the transition process or that there will not be other material adverse effects as a result of these integration efforts. Such effects, including incurring unexpected costs or delays in connection with such integration and failure of REFI’s investment portfolio to perform as expected, could have a material adverse effect on the financial results of the combined company.
We also expect to achieve certain cost savings from the Merger when the two companies have fully integrated their portfolios. It is possible that the estimates of the potential cost savings could ultimately be incorrect. The cost savings estimates also assume we will be able to combine the operations of the Company and REFI in a manner that permits those cost savings to be fully realized. If the estimates turn out to be incorrect or if we are not able to combine REFI’s investment portfolio or business with our operations successfully, the anticipated cost savings may not be fully realized or realized at all or may take longer to realize than expected.
The Merger may trigger certain “change of control” provisions and other restrictions in our or REFI’s contracts or of our respective affiliates and the failure to obtain any required consents or waivers could adversely impact the combined company.
Certain of our or REFI’s agreements or contracts of our respective affiliates, which may include agreements governing indebtedness of us or REFI, will or may require the consent or waiver of one or more counterparties in connection with the Merger. The failure to obtain any such consent or waiver may permit such counterparties to terminate, or otherwise increase their rights or our or REFI’s obligations under, any such agreement because the Merger or other transactions contemplated by the Merger Agreement may violate an anti-assignment, change of control or other similar provision relating to any of such transactions. If this occurs, we may have to seek to replace that agreement with a new agreement or seek an amendment to such agreement. We cannot assure you that we will be able to replace or amend any such agreement on comparable terms or at all.
If any such agreement is material, the failure to obtain consents, amendments or waivers under, or to replace on similar terms or at all, any of these agreements could adversely affect the financial performance or results of operations of the combined company following the Merger, including preventing us from operating a material part of REFI’s business.
In addition, the consummation of the Merger may violate, conflict with, result in a breach of provisions of, or the loss of any benefit under, constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, or result in the termination, cancellation, acceleration or other change of any right or obligation (including any payment obligation) under, certain agreements of us or REFI. Any such violation, conflict, breach, loss, default or other effect could, either individually or in the aggregate, have a material adverse effect on the financial condition, results of operations, assets or business of the combined company following completion of the Merger.
The Merger is conditioned on the assumption or repayment of REFI’s outstanding indebtedness, and consent from the lenders under REFI’s unsecured notes has not been obtained.
It is a condition to the closing of the Merger that the lenders under REFI’s revolving credit facility and unsecured notes shall have either agreed to our assumption of the indebtedness or such indebtedness shall have been repaid prior to the closing of the Merger. As of the date of the Merger Agreement, the agent and lenders under REFI’s revolving credit facility have provided a preliminary consent supporting the Merger, and we and REFI expect to obtain a definitive consent prior to the closing of the Merger. However, the lenders under REFI’s unsecured notes have not provided any consent as of the date of the Merger Agreement, and although REFI expects to obtain their consent (or, alternatively, to repay the notes) prior to the closing of the Merger, there is no assurance that either outcome will occur. If REFI is unable to satisfy the closing condition, we may not be able to consummate the Merger.
The opinion delivered to the special committee of our Board (the “LIEN Special Committee”) by its financial advisor prior to the signing of the Merger Agreement will not reflect changes in circumstances since the date of the opinion.
The opinion of the financial advisor to the LIEN Special Committee was delivered to the LIEN Special Committee on, and dated, June 16, 2026. Changes in our or REFI’s operations and prospects, general market and economic conditions and other factors that may be beyond the control of us or REFI may significantly alter our or REFI’s respective value or the price of shares of our common stock or REFI’s common stock by the time the Merger is completed. The opinion does not speak as of the time the Merger will be completed or as of any date other than the date of such opinion.
The announcement and pendency of the Merger could adversely affect both our and REFI’s business, financial results and operations.
The announcement and pendency of the Merger could cause disruptions in and create uncertainty surrounding both our and REFI’s business, including affecting relationships with existing and future borrowers, which could have a significant negative impact on future revenues and results of operations, regardless of whether the Merger is completed. In addition, we and REFI have diverted, and will
58
Table of Contents
continue to divert, management resources towards the completion of the Merger, which could have a negative impact on each of our and REFI’s future revenues and results of operations.
We and REFI are also subject to restrictions on the conduct of each of our and REFI’s businesses prior to the completion of the Merger as provided in the Merger Agreement, generally requiring us and REFI to conduct business only in the ordinary course and subject to specific limitations, including, among other things, certain restrictions on each of our and REFI’s respective ability to make certain investments and acquisitions, sell, transfer or dispose of our and REFI’s respective assets, amend each of our and REFI’s respective organizational documents and enter into or modify certain material contracts. These restrictions could prevent us or REFI from pursuing otherwise attractive business opportunities, industry developments and future opportunities and may otherwise have a significant negative impact on the respective future investment income and results of operations of each of us and/or the combined company following the Merger.
If the Merger does not close, we will benefit from the expenses incurred in its pursuit.
The Merger may not be completed. If the Merger is not completed, we will have incurred substantial expenses for which no ultimate benefit will have been received. We have incurred out-of-pocket expenses in connection with the Merger for investment banking, legal and accounting fees and financial printing and other related charges, much of which will be incurred even if the Merger is not completed.
The termination of the Merger Agreement could negatively impact us.
If the Merger Agreement is terminated, there may be various consequences, including:
The Merger Agreement limits our ability to pursue alternatives to the Merger.
The Merger Agreement contains provisions that limit our ability to discuss, facilitate or commit to competing third-party proposals to acquire all or a significant part of us. These provisions, which are typical for transactions of this type, might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of us from considering or proposing that acquisition even if it were prepared to pay consideration with a higher per share market price than that proposed in the Merger or might result in a potential competing acquirer proposing to pay a lower per share price to acquire us than it might otherwise have proposed to pay. However, unlike many public-company merger agreements, the Merger Agreement does not require us to pay a termination fee to the other party under any circumstance.
The Merger is subject to closing conditions, including shareholder approvals, that, if not satisfied or (to the extent legally allowed) waived, will result in the Merger not being completed, which may result in material adverse consequences to our business and operations.
The Merger is subject to closing conditions, including certain approvals of our and REFI’s respective shareholders that, if not satisfied, will prevent the Merger from being completed. The closing condition that REFI’s shareholders adopt the Merger Agreement and approve the Merger, the BDC Election and the New BDC Advisory Agreement may not be waived under applicable law and must be satisfied for the Merger to be completed. If REFI’s shareholders do not approve the Merger Agreement and the Merger, the BDC Election and the New BDC Advisory Agreement and the Merger is not completed, the resulting failure of the Merger could have a material adverse impact on our business and operations. In addition, the closing condition that our shareholders approve the Merger Agreement, including the Merger and related transactions, and the issuance of shares of our common stock pursuant to the Merger Agreement (the “Merger Stock Issuance Proposal”) may not be waived under applicable law and must be satisfied for the Merger to be completed. If our shareholders do not approve the Merger Stock Issuance Proposal and the Merger Agreement, including the Merger and related transactions, and the Merger is not completed, the resulting failure of the Merger could have a material adverse impact on our business and operations. The Merger is also conditioned on receipt by REFI of the Post-BDC Election Approvals from REFI’s board of directors (upon recommendation of REFI’s special committee) under Rule 17a-8 of the 1940 Act following the BDC Election Time. If the Post-BDC Election Approvals are not obtained on the anticipated schedule, the Merger will not be completed on the anticipated timeline and may not be completed at all. In addition to the required approvals of our and REFI’s shareholders, the Merger is subject to a number of other conditions beyond our control that may prevent, delay or otherwise materially adversely affect completion of the Merger. We cannot predict whether and when these other conditions will be satisfied.
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Litigation filed against us and REFI in connection with the Merger could result in substantial costs and could delay or prevent the Merger from being completed.
We and REFI may be subject to legal actions, including securities class action lawsuits and derivative lawsuits, as well as various regulatory, governmental and law enforcement inquiries, investigations and subpoenas in connection with the Merger. These or any similar securities class action lawsuits and derivative lawsuits, regardless of their merits, may result in substantial costs and divert management time and resources. An adverse judgment in such cases could have a negative impact on the liquidity and financial condition of us and/or the combined company following the Merger or could prevent the Merger from being completed.
We will be subject to operational uncertainties and contractual restrictions while the Merger is pending.
Uncertainty about the effect of the Merger may have an adverse effect on us and, consequently, on the combined company following completion of the Merger. These uncertainties may cause those that deal with us to seek to change their existing business relationships with us. In addition, the Merger Agreement restricts us from taking actions that we might otherwise consider to be in our best interests. These restrictions may prevent us from pursuing certain business opportunities that may arise prior to the completion of the Merger.
We and REFI may waive one or more conditions to the Merger without resoliciting shareholder approval.
Certain conditions to our and REFI’s respective obligations to complete the Merger may be waived, in whole or in part, to the extent legally allowed, either unilaterally or by agreement of us and REFI. In the event that any such waiver does not require resolicitation of shareholders, the parties to the Merger Agreement will have the discretion to complete the Merger without seeking further shareholder approval. The conditions requiring the approval of the Merger Stock Issuance Proposal and the Merger Agreement, including the Merger and related transactions, by our shareholders and the BDC Election, the New BDC Advisory Agreement, and the Merger Agreement by REFI’s shareholders, however, cannot be waived.
The market price of our common stock after the Merger may be affected by factors different from those affecting our common stock currently.
Our business and REFI’s business differ in some respects and, accordingly, the results of operations of the combined company and the market price of our common stock after the Merger may be affected by factors different from those currently affecting the independent results of operations of us and REFI and the market prices of our common stock. These factors include a larger shareholder base, differences in the investment strategies and a different capital structure.
Accordingly, our historical trading prices and financial results may not be indicative of these matters for the combined company following the Merger.
Our shareholders and REFI’s shareholders do not have appraisal rights in connection with the Merger.
Appraisal rights are statutory rights that enable shareholders to dissent from certain extraordinary transactions, such as certain mergers, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to shareholders in connection with the applicable transaction. Under Maryland law, our shareholders and REFI’s shareholders will not have rights to an appraisal of the fair value of their shares in connection with the Merger.
The Merger may not be treated as a tax-free reorganization under Section 368(a) of the Code.
We and REFI intend that the Merger will qualify as a tax-free reorganization under Section 368(a) of the Code, and each expect to receive a legal opinion to that effect. However, if the Internal Revenue Service or a court determines that the Merger should not be treated as a tax-free reorganization under Section 368(a) of the Code, then a shareholder would generally recognize gains or losses for U.S. federal income tax purposes upon the exchange of REFI’s common stock for our common stock in the Merger.
The combined company may incur adverse tax consequences if either we or REFI have failed or fails to qualify for taxation as a RIC or a REIT, respectively, for United States federal income tax purposes.
REFI has elected to qualify as a REIT and has operated in a manner that it believes has allowed it to qualify as a REIT for U.S. federal income tax purposes under the Code and intends to continue to so qualify as a REIT at the time of the Merger. We have elected to qualify as a RIC and have operated in a manner that we believe has allowed us to qualify as a RIC for U.S. federal income tax purposes under the Code and intend to continue to do so through and following the Merger. In order to qualify as a RIC or a REIT, a corporation must satisfy numerous requirements relating to, among other things, the nature of its assets, income and distributions. If we or REFI had failed or fails to qualify as a RIC or a REIT, respectively, for U.S. federal income tax purposes, the combined company may have
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Table of Contents
significant tax liabilities, or may have to make significant distributions and pay penalty or excise taxes in order for the combined company to qualify as a RIC. These liabilities could substantially reduce the combined company’s cash available for distribution to its shareholders and the value of our common stock. In addition, if either we or REFI have failed or fail to qualify as a RIC or a REIT, respectively, for U.S. federal income tax purposes, the analysis of the Merger as a tax-free reorganization could be impacted.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Dividend Reinvestment Plan
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
During the quarter ended June 30, 2026,
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Item 6. Exhibits
The following exhibits are filed as part of this quarterly report on Form 10-Q or hereby incorporated by reference to exhibits previously filed with the SEC:
Exhibit Number |
|
Description of Exhibit |
2.1 |
|
Agreement and Plan of Merger, dated as of June 17, 2026, by and among Chicago Atlantic Real Estate Finance, Inc., Chicago Atlantic BDC, Inc., Chicago Atlantic BDC Advisers, LLC, and Chicago Atlantic REIT Manager, LLC(1) |
3.1 |
|
Articles of Amendment and Restatement of the Company(2) |
3.2 |
|
Articles of Amendment of the Company(3) |
3.3 |
|
Second Amended and Restated Bylaws of the Company(4) |
10.1 |
|
WATC Custody Agreement(5) |
10.2 |
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WAB Custody Agreement(6) |
10.3 |
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Credit Agreement(7) |
10.4 |
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Form of Support Agreement (REFI Stockholders), dated as of June 17, 2026, by and among Chicago Atlantic Real Estate Finance, Inc. and the stockholders party thereto(8) |
10.5 |
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Form of Support Agreement (LIEN Stockholders), dated as of June 17, 2026, by and among Chicago Atlantic BDC, Inc., and the stockholders party thereto(9) |
31.1 |
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Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
31.2 |
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Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002* |
32.1 |
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Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
32.2 |
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Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
101.INS |
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Inline XBRL Instance Document (this instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)* |
101.SCH |
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Inline XBRL Taxonomy Extension Schema with Embedded Linkbase Documents* |
104 |
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Cover page formatted as Inline XBRL and contained in Exhibit 101* |
* Filed herewith.
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Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on August 12, 2026.
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CHICAGO ATLANTIC BDC, INC. |
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By: |
/s/ Peter Sack |
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Peter Sack |
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Chief Executive Officer (Principal Executive Officer) |
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By: |
/s/ Thomas Geoffroy |
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Thomas Geoffroy |
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Interim Chief Financial Officer (Principal Financial Officer) |
63