FORWARD-LOOKING STATEMENTS





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superseded from time to time by subsequent reports we file with the SEC.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



  ? our future operating results and projected operating results;



? the ability of our Manager to locate suitable loan opportunities for us,

monitor and actively manage our loan portfolio, and implement our investment


    strategy;




  ? the allocation of loan opportunities to us by our Manager;




  ? the impact of inflation on our operating results;



? actions and initiatives of the federal or state governments and changes to

government policies related to cannabis and the execution and impact of these

actions, initiatives, and policies, including the fact that cannabis remains


    illegal under federal law;



? the estimated growth in and evolving market dynamics of the cannabis market;






  ? the demand for cannabis cultivation and processing facilities;




  ? shifts in public opinion regarding cannabis;



? the state of the U.S. economy generally or in specific geographic regions;






  ? economic trends and economic recoveries;




  ? the amount and timing of our cash flows, if any, from our loans;




  ? our ability to obtain and maintain financing arrangements;




  ? our expected leverage;




  ? changes in the value of our loans;




  ? our expected investment and underwriting process;




  ? rates of default or decreased recovery rates on our loans;



? the degree to which any interest rate or other hedging strategies may or may


    not protect us from interest rate volatility;




                                       20





  ? changes in interest rates and impacts of such changes on our results of
    operations, cash flows, and the market value of our loans;



? interest rate mismatches between our loans and our borrowings used to fund


    such loans;



? the departure of any of the executive officers or key personnel supporting and


    assisting us from our Manager or its affiliates;




  ? impact of and changes in governmental regulations, tax law and rates,
    accounting guidance, and similar matters;



? our ability to maintain our exclusion or exemption from registration under the


    Investment Company Act;




  ? our ability to qualify and maintain our qualification as a real estate
    investment trust ("REIT") for U.S. federal income tax purposes;



? estimates relating to our ability to make distributions to our stockholders in


    the future;




  ? our understanding of our competition;




  ? market trends in our industry, interest rates, real estate values, the
    securities markets or the general economy; and



? any of the other risks, uncertainties and other factors we identify in our


    annual report on Form 10-K or this quarterly report on Form 10-Q.




Available Information



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



Overview



We are a commercial real estate finance company. Our primary investment
objective is to provide attractive, risk-adjusted returns for stockholders over
time primarily through consistent current income dividends and other
distributions and secondarily through capital appreciation. We intend to achieve
this objective by originating, structuring and investing in first mortgage loans
and alternative structured financings secured by commercial real estate
properties. Our current portfolio is comprised primarily of senior loans to
state-licensed operators in the cannabis industry, secured by real estate,
equipment, receivables, licenses or other assets of the borrowers to the extent
permitted by applicable laws and regulations governing such borrowers. We intend
to grow the size of our portfolio by continuing the track record of our business
and the business conducted by our Manager and its affiliates by making loans to
leading operators and property owners in the cannabis industry. There is no
assurance that we will achieve our investment objective.



Our Manager and its affiliates seek to originate real estate loans between $5
million and $200 million, generally with one- to five-year terms and
amortization when terms exceed three years. We generally act as co-lenders in
such transactions and intend to hold up to $30 million of the aggregate loan
amount, with the remainder to be held by affiliates or third party co-investors.
We may revise such concentration limits from time to time as our loan portfolio
grows. Other investment vehicles managed by our Manager or affiliates of our
Manager may co-invest with us or hold positions in a loan where we have also
invested, including by means of splitting commitments, participating in loans or
other means of syndicating loans. We will not engage in a co-investment
transaction with an affiliate where the affiliate has a senior position to the
loan held by us. To the extent that an affiliate provides financing to one of
our borrowers, such loans will be working capital loans or loans that are
subordinate to our loans. We may also serve as co-lenders in loans originated by
third parties and, in the future, we may also acquire loans or loan
participations. Loans that have one to two year maturities are generally
interest only loans.



                                       21





Our loans are secured by real estate and, in addition, when lending to
owner-operators in the cannabis industry, other collateral, such as equipment,
receivables, licenses or other assets of the borrowers to the extent permitted
by applicable laws and regulations. In addition, we seek to impose strict loan
covenants and seek personal or corporate guarantees for additional protection.
As of March 31, 2023 and December 31, 2022, 50.0% and 13.6%, respectively, of
the loans held in our portfolio are backed by personal or corporate guarantees.
We aim to maintain a portfolio diversified across jurisdictions and across
verticals, including cultivators, processors, dispensaries, as well as ancillary
businesses. In addition, we may invest in borrowers that have equity securities
that are publicly traded on the Canadian Stock Exchange ("CSE") in Canada and/or
over-the-counter in the United States.



As of March 31, 2023, our portfolio is comprised primarily of first mortgages to
established multi-state or single-state cannabis operators or property owners.
We consider cannabis operators to be established if they are state-licensed and
are deemed to be operational and in good standing by the applicable state
regulator. We do not own any stock, warrants to purchase stock or other forms of
equity in any of our portfolio companies that are involved in the cannabis
industry, and we will not take stock, warrants or equity in such issuers until
permitted by applicable laws and regulations, including U.S. federal laws and
regulations.



We are an externally managed Maryland corporation that elected to be taxed as a
REIT under Section 856 of the Code, commencing with our taxable year ended
December 31, 2021. We believe that our method of operation will enable us to
continue to qualify as a REIT. However, no assurances can be given that our
beliefs or expectations will be fulfilled, since qualification as a REIT depends
on us continuing to satisfy numerous asset, income, and distribution tests,
which in turn depend, in part, on our operating results. We also intend to
operate our business in a manner that will permit us and our subsidiaries to
maintain one or more exclusions or exemptions from registration under the
Investment Company Act.



Revenues



We operate as one operating segment and are primarily focused on financing
senior secured loans and other types of loans for established state-licensed
operators in the cannabis industry. These loans are generally held for
investment and are substantially secured by real estate, equipment, licenses and
other assets of the borrowers to the extent permitted by the applicable laws and
the regulations governing such borrowers.



We generate revenue primarily in the form of interest income on loans. As of
March 31, 2023 and December 31, 2022, approximately 88.0% and 83.1%,
respectively, of our portfolio was comprised of floating rate loans, and 12.0%
and 16.9% of our portfolio was comprised of fixed rate loans, respectively. The
floating rate loans described above are variable based upon the Prime Rate plus
an applicable margin, and in many cases, a Prime Rate floor.



The Prime Rate during the three months ended March 31, 2023 and the year ended December 31, 2022 was as follows:





Effective Date        Rate(1)
March 23, 2023            8.00 %
February 2, 2023          7.75 %
December 15, 2022         7.50 %
November 3, 2022          7.00 %
September 22, 2022        6.25 %
July 28, 2022             5.50 %
June 16, 2022             4.75 %
May 5, 2022               4.00 %
March 17, 2022            3.50 %
March 15, 2020            3.25 %



(1) Rate obtained from the Wall Street Journal's "Bonds, Rates & Yields" table.






                                       22





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



Expenses



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



  ? organizational and offering expenses;




  ? quarterly valuation expenses;



? fees payable to third parties relating to, or associated with, making loans


    and valuing loans (including third-party valuation firms);



? fees and expenses associated with investor relations and marketing efforts


    (including attendance at investment conferences and similar events);



? accounting and audit fees and expenses from our independent registered public


    accounting firm;




  ? federal and state registration fees;




  ? any exchange listing fees;




  ? federal, state and local taxes;




  ? independent directors' fees and expenses;




  ? brokerage commissions;




  ? costs of proxy statements, stockholders' reports and notices; and




  ? costs of preparing government filings, including periodic and current reports
    with the SEC.




                                       23





Income Taxes



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



To qualify as a REIT, we must meet a number of organizational and operational
requirements, including a requirement that we distribute annually to our
stockholders at least 90% of our REIT taxable income prior to the deduction for
dividends paid. To the extent that we distribute less than 100% of our REIT
taxable income in any tax year (taking into account any distributions made in a
subsequent tax year under Sections 857(b)(9) or 858 of the Code), we will pay
tax at regular corporate rates on that undistributed portion. Furthermore, if we
distribute less than the sum of 1) 85% of our ordinary income for the calendar
year, 2) 95% of our capital gain net income for the calendar year, and 3) any
undistributed shortfall from our prior calendar year (the "Required
Distribution") to our stockholders during any calendar year (including any
distributions declared by the last day of the calendar year but paid in the
subsequent year), then we are required to pay a non-deductible excise tax equal
to 4% of any shortfall between the Required Distribution and the amount that was
actually distributed. The 90% distribution requirement does not require the
distribution of net capital gains. However, if we elect to retain any of our net
capital gain for any tax year, we must notify our stockholders and pay tax at
regular corporate rates on the retained net capital gain. Our stockholders must
include their proportionate share of the retained net capital gain in their
taxable income for the tax year, and they are deemed to have paid the REIT's tax
on their proportionate share of the retained capital gain. Furthermore, such
retained capital gain may be subject to the nondeductible 4% excise tax. If it
is determined that our estimated current year taxable income will be in excess
of estimated dividend distributions (including capital gain dividend) for the
current year from such income, we will accrue excise tax on estimated excess
taxable income as such taxable income is earned. The annual expense is
calculated in accordance with applicable tax regulations. Excise tax expense, if
any, is included in the line item, income tax expense. For the three months
ended March 31, 2023 and the year ended December 31, 2022, we did not incur
excise tax expense.



Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("ASC") Topic 740 - Income Taxes ("ASC 740"), prescribes a recognition threshold
and measurement attribute for the consolidated financial statement recognition
and measurement of a tax position taken or expected to be taken in a tax return.
ASC 740 also provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. We have
analyzed our various federal and state filing positions and believe that our
income tax filing positions and deductions are well documented and supported as
of March 31, 2023. Based on our evaluation, there is no reserve for any
uncertain income tax positions. Accrued interest and penalties, if any, are
included within other liabilities in the consolidated balance sheets.



Factors Impacting our Operating Results





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



Changes in Market Interest Rates and Effect on Net Interest Income





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



                                       24





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



Interest Rate Cap Risk



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



These factors could lower our net interest income or cause a net loss during
periods of rising interest rates, which would harm our financial condition, cash
flows and results of operations. As of March 31, 2023, all of our floating rate
loans have interest rate floors, and one loan is subject to an interest rate
cap.



Interest Rate Mismatch Risk



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



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



Market Conditions



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



                                       25




Developments During the First Quarter of 2023

Updates to Our Loan Portfolio during the First Quarter of 2023





On January 12, 2023, we advanced approximately $0.2 million in aggregate
principal on an existing credit facility to one borrower. On January 24, 2023,
we refinanced and closed one credit facility with an existing borrower, which
resulted in a paydown of $18.3 million in aggregate principal. On January 24,
2023, we also purchased a senior secured loan from an affiliate under common
control. The purchase price of approximately $19.0 million was approved by the
Audit Committee of the Board. The fair value approximated the carrying value of
the loan plus accrued and unpaid interest through January 24, 2023. On January
24, 2023, we also closed one credit facility with a new borrower, which had an
aggregate commitment of $11.3 million, which was fully funded at closing. On
March 6, 2023, we advanced approximately $0.7 million in aggregate principal on
an existing credit facility to one borrower. On March 27, 2023, we closed one
credit facility with a new borrower, which has an aggregate commitment of
approximately $2.0 million. On March 31, 2023, we close one credit facility with
a new borrower, which has an aggregate commitment of approximately $1.0 million.



On March 3, 2023, an existing borrower paid down approximately $6.4 million in
aggregate principal. We received a prepayment premium and a success fee of
approximately $0.3 million and $0.1 million, respectively. On March 30, 2023, an
existing borrower repaid its loan in full in an amount of approximately $19.0
million in aggregate principal. The loan was comprised of a single tranche with
an original maturity date of October 31, 2024. We received a make-whole fee of
approximately $1.0 million. On March 31, 2023, we decided to and completed the
sale of a secured loan to an affiliate under common control. The selling price
of approximately $13.7 million was approved by the audit committee of the Board.
The fair value approximated the carrying value of the loan plus accrued and
unpaid interest through March 31, 2023.



Subsequent Updates to Our Loan Portfolio

During the period from April 1, 2022 to May 9, 2023, we funded approximately $0.6 million to an existing borrower.

Dividends Declared Per Share


During the three months ended March 31, 2023, we declared an ordinary cash
dividend of $0.47 per share of our common stock, relating to the first quarter
of 2023, which was paid on April 14, 2023 to stockholders of record as of the
close of business on March 31, 2023. The total amount of the cash dividend
payment was approximately $8.5 million.



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





Results of Operations


Comparison of the three months ended March 31, 2023 and 2022





                                                  For the
                                               three months            For the
                                                   ended          three months ended               Variance
                                                 March 31,            March 31,
                                                   2023                  2022                Amount            %
Revenues
Interest income                                $  16,527,304     $          9,833,053     $  6,694,251          68.1
Interest expense                                  (1,618,296 )                (72,268 )     (1,546,028 )          **
Net interest income                               14,909,008                9,760,785        5,148,223          52.7

Expenses

Management and incentive fees, net                 2,138,005                  671,505        1,466,500            **
General and administrative expense                 1,274,825               

  556,142          718,683            **
Professional fees                                    569,375                  556,902           12,473           2.2
Stock based compensation                             138,335                  120,940           17,395          14.4

Provision for current expected credit losses          96,119                   51,344           44,775          87.2
Total expenses                                 $   4,216,659     $          1,956,833     $  2,259,826            **

Net Income before income taxes                    10,692,349               

7,803,952        2,888,397          37.0
Income tax expense                                         -                        -                -            **
Net Income                                     $  10,692,349     $          7,803,952     $  2,888,397          37.0



** Percentage over 100% or prior period amount was zero.






                                       26




? Interest income increased by approximately $6.7 million, or 68.1%, during the

quarter ended March 31, 2023, compared to the quarter ended March 31, 2022.

The increase was driven primarily by an increase in the Prime Rate from 3.50%

as of March 31, 2022, to 8.00% as of March 31, 2023, impacting approximately


    88.0% of the Company's loans, which bear a floating rate as well as new
    fundings of approximately $278.1 million in loan principal.



? Net interest income increased approximately $5.1 million or 52.7% during the

comparative period. The increase was primarily attributable to the increase in

interest income described above, and was offset by a corresponding increase in

interest expense. During the first quarter of 2023, we borrowed an additional

$37.5 million on the revolving credit facility, which also bears interest at

the Prime Rate plus an applicable margin and was subject to the Prime Rate


    increases during the quarter.



? We incurred base management and incentive fees payable to our Manager of

approximately $2.1 million for the three months ended March 31, 2023, as

compared to approximately $0.7 million for the three months ended March 31,

2022. The increase was primarily attributable to greater assets under

management, which was offset by less origination fee offsets in the three

months ended March 31, 2023 of approximately $5,000, compared to approximately

$0.7 million for the three months ended March 31, 2022 as well as an increase

in weighted average equity as defined by the Management Agreement for the


    comparable period.




  ? General and administrative expenses and professional fees increased by

approximately $0.7 million for the three months ended March 31, 2023, as

compared to the three months ended March 31, 2022. The increase was primarily

due to an increase in overhead reimbursements for costs incurred by the

Manager on behalf of the Company, offset in part by a decrease in audit,


    legal, investor relations and third-party consulting fees.



? Provision for current expected credit losses increased in the three months

ended March 31, 2023 as compared to the three months ended March 31, 2022,

primarily due to declines in risk ratings (discussed below) from March 31,

2022 to March 31, 2023, which are not due to any borrower specific credit

issues, but rather, are primarily due to our quarterly re-evaluations of

overall current macroeconomic conditions affecting our borrowers. As interest

rates have risen over the year ended December 31, 2022 and the quarter ended

March 31, 2023, the ability of our borrowers to service their debt and fund

operations has been reduced. The current expected credit loss reserve

represents 126 basis points of our aggregate loan commitments held at carrying

value of approximately $328.0 million and was bifurcated between (i) the

current expected credit loss reserve (contra-asset) related to outstanding

balances on loans held at carrying value of approximately $4.1 million and

(ii) a liability for unfunded commitments of $79,539. The liability is based

on the unfunded portion of loan commitments over the full contractual period

over which we are exposed to credit risk through a current obligation to

extend credit. Management considered the likelihood that funding will occur,

and if funded, the expected credit loss on the funded portion. We continuously

evaluate the credit quality of each loan by assessing the risk factors of each


    loan.




Loan Portfolio



As of March 31, 2023 and December 31, 2022, our portfolio included 24 and 22
loans held for investment of approximately $312.2 million and $335.3 million,
respectively. The aggregate originated commitment under these loans was
approximately $328.0 million and $351.4 million and outstanding principal was
approximately $320.2 million and $343.0 million as of March 31, 2023 and
December 31, 2022, respectively. As of March 31, 2023 and December 31, 2022, our
loan portfolio had a weighted-average yield-to-maturity internal rate of return
("YTM IRR") of 19.4% and 19.7%, respectively, and was substantially secured by
real estate and, with respect to certain of our loans, substantially all assets
of the borrowers and certain of their subsidiaries, including equipment,
receivables, and licenses. YTM IRR is calculated using various inputs, including
(i) cash and paid-in-kind ("PIK") interest, which is capitalized and added to
the outstanding principal balance of the applicable loan, (ii) original issue
discount ("OID"), (iii) amortization, (iv) unused fees, and (v) exit fees.
Certain of our loans have extension fees, which are not included in our YTM IRR
calculations, but may increase YTM IRR if such extension options are exercised
by borrowers.



                                       27





As of March 31, 2023 and December 31, 2022, approximately 88.0% and 83.1%,
respectively, of our portfolio was comprised of floating rate loans that pay
interest at the Prime Rate plus an applicable margin and were subject to a Prime
Rate floor. The Prime Rate was 3.25% for the period from January 1, 2022 through
March 16, 2022, increased to 3.50% effective March 17, 2022, increased to 4.00%
effective May 5, 2022, increased to 4.75% effective June 16, 2022, increased to
5.50% effective July 28, 2022, increased to 6.25% effective September 22, 2022,
increased to 7.00% effective November 3, 2022, increased to 7.50% effective
December 15, 2022, increased to 7.75% effective February 2, 2023, and increased
again to 8.00% effective March 23, 2023. The below summarizes our portfolio as
of March 31, 2023:



          Initial                       Total                                                Percent of Our                                                   Periodic            YTM
          Funding      Maturity                           Principal         Carrying              Loan              Future
Loan      Date (1)     Date (2)     Commitment (3)         Balance            Value            Portfolio           Fundings          Interest Rate (4)       Payment (5)        IRR (6)
1        10/27/2022   10/30/2026         30,000,000        30,000,000        29,195,836                  9.2 %              -          P + 6.50%(7)               I/O                16.8 %
                                                                                                                                   P + 6.65%(7)(8) Cash,
2         3/5/2021    12/31/2024         35,891,667        37,596,132        37,454,282                 11.8 %              -            4.25% PIK                P&I                18.0 %
                                                                                                                                   13.91% Cash(7), 2.59%
3        3/25/2021    11/29/2024         20,105,628        20,942,803        20,398,886                  6.5 %              -             PIK(10)                 P&I                22.8 %
4        4/19/2021    12/31/2023         12,900,000        12,075,490        12,075,490                  3.8 %              -          18.72%(7)(9)               P&I                24.5 %
5        4/19/2021    4/30/2025           3,500,000         2,666,000         2,666,000                  0.8 %        834,000          P + 12.25%(7)              P&I                22.8 %
                                                                                                                                  P + 9.00%(7) Cash, 12%
6        8/20/2021    2/20/2024           6,000,000         4,275,000         4,271,433                  1.4 %      1,500,000               PIK                   P&I                21.1 %
                                                                                                                                  P + 6.00%(7) Cash, 2.5%
7        8/24/2021    6/30/2025          25,000,000        25,623,762        25,402,772                  8.0 %              -               PIK                   P&I                18.1 %
8         9/1/2021     9/1/2024           9,500,000        10,535,399        10,445,335                  3.3 %              -           19.25% PIK                P&I                25.8 %
                                                                                                                                    P + 10.75%(7) Cash,
9         9/3/2021    6/30/2024          15,000,000        16,013,359        16,013,359                  5.1 %              -            6.0% PIK                 P&I                19.0 %
10       9/20/2021    9/30/2024             470,411           235,205           235,205                  0.1 %              -             11.00%                  P&I                21.4 %
                                                                                                                                   P + 8.75%(7) Cash, 2%
11       9/30/2021    9/30/2024          32,000,000        32,809,285        32,272,326                 10.2 %              -               PIK                   I/O                21.7 %
12       11/8/2021    10/31/2024         13,574,667        13,038,000        12,930,501                  4.1 %              -        P + 9.25%(7) Cash            P&I                19.7 %
                                                                                                                                  P + 6.00%(7) Cash, 1.5%
13       11/22/2021   11/1/2024          13,100,000        13,166,720        13,058,608                  4.1 %              -               PIK                   I/O                18.5 %
                                                                                                                                    P + 12.25%(7) Cash,
14       12/27/2021   12/27/2026          5,000,000         5,194,514         5,194,514                  1.6 %              -            2.5% PIK                 P&I                23.5 %
                                                                                                                                   P + 7.50%(7) Cash, 5%
15       12/29/2021   12/29/2023          6,000,000         3,835,398         3,801,740                  1.2 %      2,400,000               PIK                   I/O                26.9 %
16       12/30/2021   12/31/2024         13,000,000         7,050,000         7,006,176                  2.2 %      5,500,000          P + 9.25%(7)               I/O                22.5 %
17       1/18/2022    1/31/2025          15,000,000        15,000,000        14,768,664                  4.7 %              -          P + 4.75%(7)               P&I                14.1 %
                                                                                                                                   P + 6.00%(7) Cash, 5%
18        2/3/2022    2/28/2025          11,662,050        12,677,075        12,525,206                  4.0 %              -               PIK                   P&I                21.5 %
19       3/11/2022    8/29/2025          20,000,000        20,637,961        20,567,900                  6.5 %              -       11.00% Cash, 3% PIK           P&I                15.5 %
20        5/9/2022    5/30/2025          17,000,000        17,425,500        17,305,115                  5.5 %              -       11.00% Cash, 2% PIK           P&I                14.7 %
                                                                                                                                   P + 8.50%(7) Cash, 3%
21        7/1/2022    6/30/2026           9,000,000         5,114,907         5,041,408                  1.6 %      4,000,000               PIK                   P&I                26.4 %
                                                                                                                                  P + 5.75%(7) Cash, 1.4%
22       1/24/2023    1/24/2026          11,250,000        11,278,897        10,645,161                  3.4 %              -               PIK                   P&I                19.9 %
23       3/27/2023    3/31/2026           2,000,000         2,000,000         1,950,227                  0.6 %              -          P + 7.50%(7)               P&I                18.3 %
24       3/31/2023    9/27/2026           1,000,000         1,000,000         1,000,000                  0.3 %              -          P + 10.50%(7)              P&I                21.2 %

                       Subtotal         327,954,423       320,191,407       316,226,144                100.0 %     14,234,000              17.6%              Wtd Average            19.4 %



(1) All loans originated prior to April 1, 2021 were purchased from affiliated

entities at fair value plus accrued interest on or subsequent to April 1,


     2021.




                                       28




(2) Certain loans are subject to contractual extension options and may be

subject to performance based on other conditions as stipulated in the loan

agreement. Actual maturities may differ from contractual maturities stated

herein as certain borrowers may have the right to prepay with or without a

contractual prepayment penalty. The Company may also extend contractual

maturities and amend other terms of the loans in connection with loan

modifications.

(3) Total Commitment excludes future amounts to be advanced at sole discretion


     of the lender.
(4)  "P" = Prime Rate and depicts floating rate loans that pay interest at the
     Prime Rate plus a specific percentage; "PIK" = paid in kind interest;

subtotal represents weighted average interest rate. (5) P&I = principal and interest. I/O = interest only. P&I loans may include

interest only periods for a portion of the loan term. (6) Estimated YTM includes a variety of fees and features that affect the total

yield, which may include, but is not limited to, OID, exit fees, prepayment

fees, unused fees and contingent features. OID is recognized as a discount

to the funded loan principal and is accreted to income over the term of the

loan.

The estimated YTM calculations require management to make estimates and

assumptions, including, but not limited to, the timing and amounts of loan

draws on delayed draw loans, the timing and collectability of exit fees, the

probability and timing of prepayments and the probability of contingent

features occurring. For example, certain credit agreements contain

provisions pursuant to which certain PIK interest rates and fees earned by

us under such credit agreements will decrease upon the satisfaction of

certain specified criteria which we believe may improve the risk profile of

the applicable borrower. To be conservative, we have not assumed any

prepayment penalties or early payoffs in our estimated YTM calculation.

Estimated YTM is based on current management estimates and assumptions,


     which may change. Actual results could differ from those estimates and
     assumptions.
(7)  This Loan is subject to Prime Rate floor.

(8) This Loan is subject to an interest rate cap. (9) The aggregate loan commitment to Loan #4 includes a $10.9 million advance,

which has a base interest rate of 15.00%, and a second advance of $2.0

million, which has an interest rate of 39.00%. The statistics presented

reflect the weighted average of the terms under both advances for the total

aggregate loan commitment. (10) The aggregate loan commitment to Loan #3 includes a $15.9 million initial

advance, which has a base interest rate of 13.625%, 2.75% PIK and a second

advance of $4.2 million, which has an interest rate of 15.00%, 2.00% PIK.

The statistics presented reflect the weighted average of the terms under


     both advances for the total aggregate loan commitment.




                                       29





The following tables summarize our loans held for investment as of March 31,
2023 and December 31, 2022:



                                                                  As of March 31, 2023
                                                                                                   Weighted
                                                                                                    Average
                                                                Original                           Remaining
                                            Outstanding          Issue           Carrying            Life
                                           Principal (1)        Discount         Value (1)        (Years) (2)
Senior Term Loans                          $  320,191,407     $ (3,965,263 )   $ 316,226,144            2.0

Current expected credit loss reserve                    -                -        (4,051,934 )
Total loans held at carrying value, net    $  320,191,407     $ (3,965,263 )   $ 312,174,210




                                                                 As of December 31, 2022
                                                                                                   Weighted
                                                                                                    Average
                                                                Original                           Remaining
                                            Outstanding          Issue           Carrying            Life
                                           Principal (1)        Discount         Value (1)        (Years) (2)
Senior Term Loans                          $  343,029,334     $ (3,755,796 )   $ 339,273,538            2.2

Current expected credit loss reserve                    -                - 

(3,940,939 ) Total loans held at carrying value, net $ 343,029,334 $ (3,755,796 ) $ 335,332,599

(1) The difference between the Carrying Value and the Outstanding Principal

amount of the loans consists of unaccreted original issue discount, deferred

loan fees and other upfront fees. Outstanding principal balance includes


    capitalized PIK interest, if applicable.



(2) Weighted average remaining life is calculated based on the carrying value of


    the loans as of March 31, 2023 and December 31, 2022, respectively.



The following tables present changes in loans held for investment at carrying value as of and for the three months ended March 31, 2023 and 2022:





                                                                                Current
                                                               Original         Expected
                                                                Issue         Credit Loss        Carrying
                                             Principal         Discount         Reserve          Value (1)

Balance at December 31, 2022               $ 343,029,334     $ (3,755,796 )   $ (3,940,939 )   $ 335,332,599
New fundings                                  34,060,000       (1,118,340 )              -        32,941,660
Principal repayment of loans                 (45,754,443 )              -                -       (45,754,443 )
Accretion of original issue discount                   -          908,873  

             -           908,873
Sale of loans                                (13,399,712 )              -                -       (13,399,712 )
PIK Interest                                   2,256,228                -                -         2,256,228

Current expected credit loss reserve                   -                -         (110,995 )        (110,995 )
Balance at March 31, 2023                  $ 320,191,407     $ (3,965,263 )
$ (4,051,934 )   $ 312,174,210

(1) The difference between the Carrying Value and the Outstanding Principal

amount of the loans consists of unaccreted original issue discount, deferred

loan fees and loan origination costs. Outstanding principal balance includes


    capitalized PIK interest, if applicable.




                                       30





                                                                                 Current
                                                               Original         Expected
                                                                Issue          Credit Loss        Carrying
                                             Principal         Discount          Reserve          Value (1)

Balance at December 31, 2021               $ 200,632,056     $ (3,647,490 )   $    (134,542 )   $ 196,850,024
New fundings                                  86,725,308       (1,128,415 )               -        85,596,893
Principal repayment of loans                  (5,619,201 )              -                 -        (5,619,201 )
Accretion of original issue discount                   -          894,087                 -           894,087
PIK Interest                                     970,569                -                 -           970,569
Provision for credit losses                            -                -           (48,296 )         (48,296 )
Balance at March 31, 2022                  $ 282,708,732     $ (3,881,818 )
$    (182,838 )   $ 278,644,076

(1) The difference between the Carrying Value and the Outstanding Principal

amount of the loans consists of unaccreted original issue discount, deferred

loan fees and loan origination costs. Outstanding principal balance includes


    capitalized PIK interest, if applicable.




We may make modifications to loans, including loans that are in default. Loan
terms that may be modified include interest rates, required prepayments,
maturity dates, covenants, principal amounts and other loan terms. The terms and
conditions of each modification vary based on individual circumstances and will
be determined on a case by case basis. Our Manager monitors and evaluates each
of our loans held for investment and has maintained regular communications with
borrowers regarding potential impacts on our loans.



Non-GAAP Measures and Key Financial Measures and Indicators

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

Distributable Earnings and Adjusted Distributable Earnings


In addition to using certain financial metrics prepared in accordance with GAAP
to evaluate our performance, we also use Distributable Earnings and Adjusted
Distributable Earnings to evaluate our performance. Each of Distributable
Earnings and Adjusted Distributable Earnings is a measure that is not prepared
in accordance with GAAP. We define Distributable Earnings as, for a specified
period, the net income (loss) computed in accordance with GAAP, excluding (i)
non-cash equity compensation expense, (ii) depreciation and amortization, (iii)
any unrealized gains, losses or other non-cash items recorded in net income
(loss) for the period; provided that Distributable Earnings does not exclude, in
the case of investments with a deferred interest feature (such as OID, debt
instruments with PIK interest and zero coupon securities), accrued income that
we have not yet received in cash, (iv) provision for current expected credit
losses and (v) one-time events pursuant to changes in GAAP and certain non-cash
charges, in each case after discussions between our Manager and our independent
directors and after approval by a majority of such independent directors. We
define Adjusted Distributable Earnings, for a specified period, as Distributable
Earnings excluding certain non-recurring organizational expenses (such as
one-time expenses related to our formation and start-up).



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



                                       31





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



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



                                                               For the three      For the three
                                                                months ended       months ended
                                                                 March 31,          March 31,
                                                                    2023               2022
Net Income                                                     $   10,692,349     $    7,803,952
Adjustments to net income
Non-cash equity compensation expense                                  138,335            120,940
Depreciation and amortization                                         167,304             72,268
Provision for current expected credit losses                           96,119             51,343
Distributable Earnings                                         $   11,094,107     $    8,048,503
Adjustments to Distributable Earnings
Adjusted Distributable Earnings                                    

11,094,107 8,048,503 Basic weighted average shares of common stock outstanding (in shares)

                                                        17,879,444         17,641,090
Adjusted Distributable Earnings per Weighted Average Share     $         0.62     $         0.46
Diluted weighted average shares of common stock outstanding
(in shares)                                                        

17,960,103 17,737,975 Adjusted Distributable Earnings per Weighted Average Share $ 0.62 $ 0.45






Book Value Per Share


The book value per share of our common stock as of March 31, 2023 and December 31, 2022 was approximately $15.04 and $14.86, respectively.

Liquidity and Capital Resources


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



Our primary sources of cash generally consist of unused borrowing capacity under
our financing sources, the net proceeds of future offerings of equity or debt
securities, payments of principal and interest we receive on our portfolio of
assets and cash generated from our operating results. On a long-term basis, we
expect that our primary sources of financing will be, to the extent available to
us, through (a) credit facilities and (b) public and private offerings of our
equity and debt securities. We may utilize other sources of financing to the
extent available to us. As the cannabis industry continues to evolve and to the
extent that additional states legalize cannabis, the demand for capital
continues to increase as operators seek to enter and build out new markets. In
the short-term, we expect the principal amount of the loans we originate to
increase and that we will need to raise additional equity and/or debt financing
to increase our liquidity. We expect to achieve this through recycling capital
from loan paydowns, repayments, and sales of common stock related to our shelf
registration statement.



As of March 31, 2023 and December 31, 2022, all of our cash was unrestricted and
totaled approximately $4.6 million and $5.7 million, respectively. We believe
that our cash on hand, capacity available under our Revolving Loan, and cash
flows from operations for the next twelve months will be sufficient to satisfy
the operating requirements of our business through at least the next twelve
months. The sources of financing for our target investments are described below.



                                       32





Credit Facilities



In May 2021, in connection with our acquisition of our wholly-owned financing
subsidiary, CAL, we were assigned a secured revolving credit facility (the
"Revolving Loan"). The Revolving Loan had an original aggregate borrowing base
of up to $10,000,000 and bore interest, payable in cash in arrears, at a per
annum rate equal to the greater of (x) Prime Rate plus 1.00% and (y) 4.75%. We
incurred debt issuance costs of $100,000 related to the origination of the
Revolving Loan, which were capitalized and are subsequently being amortized
through maturity. The maturity date of the Revolving Loan was the earlier of (i)
February 12, 2023 and (ii) the date on which the Revolving Loan is terminated
pursuant to terms in the Revolving Loan Agreement.



On December 16, 2021, CAL entered into an amended and restated Revolving Loan
agreement (the "First Amendment and Restatement"). The First Amendment and
Restatement increased the loan commitment from $10,000,000 to $45,000,000 and
decreased the interest rate, from the greater of the (1) Prime Rate plus 1.00%
and (2) 4.75% to the greater of (1) the Prime Rate plus the applicable margin
and (2) 3.25%. The applicable margin is derived from a floating rate grid based
upon the ratio of debt to equity of CAL and increases from 0% at a ratio of 0.25
to 1 to 1.25% at a ratio of 1.5 to 1. The First Amendment and Restatement also
extended the maturity date from February 12, 2023 to the earlier of (i) December
16, 2023 and (ii) the date on which the Revolving Loan is terminated pursuant to
the terms of the Revolving Loan agreement. We have the option to extend the
initial term for an additional one-year term, provided no events of default
exist and we provide the required notice of the extension pursuant to the First
Amendment and Restatement. We incurred debt issuance costs of $859,500 related
to the First Amendment and Restatement, which were capitalized and are
subsequently being amortized through maturity.



On May 12, 2022, CAL entered into a second amended and restated Revolving Loan
agreement (the "Second Amendment and Restatement") which provides for an
increase in the aggregate commitment from $45 million to $65 million. No other
material terms of the Revolving Loan were modified as a result of the execution
of the Second Amendment and Restatement. We incurred debt issuance costs of
$177,261 related to the Second Amendment and Restatement, which were capitalized
and are subsequently amortized through maturity.



On November 7, 2022, CAL entered into a third amended and restated Revolving
Loan agreement (the "Third Amendment and Restatement") whereby we exercised the
existing accordion feature of the Revolving Loan to increase the aggregate
commitment by $27.5 million, from $65 million to $92.5 million. No other
material terms of the Revolving Loan were modified as a result of the execution
of the Third Amendment and Restatement. We incurred debt issuance costs of
$323,779 related to the Third Amendment and Restatement, which were capitalized
and are subsequently amortized through maturity.



On February 27, 2023, CAL entered into an amendment to the Third Amendment and
Restatement (the "Amendment"). The Amendment extended the contractual maturity
date of the Revolving Loan until December 16, 2024 and we retained our option to
extend the initial term for an additional one-year period, provided no events of
default exist and we provide 365 days' notice of the extension pursuant to the
Amendment. No other material terms of the Revolving Loan were modified as a
result of the execution of the Amendment. As of March 31, 2023 and December 31,
2022, unamortized debt issuance costs related to the Revolving Loan, including
all amendments and amendments and restatements thereto, as applicable, of
$641,279 and $805,596, respectively, are recorded in other receivables and
assets, net on the consolidated balance sheets.



The Revolving Loan incurs unused fees at a rate of 0.25% per annum which began
on July 1, 2022 pursuant to the Second Amendment and Restatement. During the
three months ended March 31, 2023 and 2022, we incurred approximately $10,000
and $0 in unused fees and approximately $1.4 million and $0 in interest expense,
respectively, in connection with the Revolving Loan. In the future, we may use
certain sources of financing to fund the origination or acquisition of our
target investments, including credit facilities and other secured and unsecured
forms of borrowing. These financings may be collateralized or non-collateralized
and may involve one or more lenders. We expect that these facilities will
typically have maturities ranging from two to five years and may accrue interest
at either fixed or floating rates.



The Revolving Loan provides for certain affirmative covenants, including
requiring us to deliver financial information and any notices of default, and
conducting business in the normal course. Additionally, the Company must comply
with certain financial covenants including: (1) maximum capital expenditures of
$150,000, (2) maintaining a debt service coverage ratio greater than 1.35 to 1,
and (3) maintaining a leverage ratio less than 1.50 to 1. As of March 31, 2023,
we were in compliance with all financial covenants with respect to the Revolving
Loan.



                                       33





During the three months ended March 31, 2023, we borrowed $37.5 million against
the Revolving Loan, had $37.5 million outstanding, and $55.0 million available
under the Revolving Loan. For the year ended December 31, 2022, we borrowed
$58.0 million against the Revolving Loan, had $58.0 million outstanding, and
$34.5 million available under the Revolving Loan. For the three months ended
March 31, 2022, we did not borrow against the Revolving Loan and therefore had
$0 outstanding and $45 million available under the Revolving Loan as of such
date.





Capital Markets


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





Cash Flows


The following table sets forth changes in cash for the three months ended March 31, 2023 and 2022, respectively:





                                                                  For the
                                                                three months      For the three
                                                                   ended           months ended
                                                                 March 31,          March 31,
                                                                    2023               2022

Net income                                                     $  

10,692,349 $ 7,803,952 Adjustments to reconcile net income to net cash provided by operating activities and changes in operating assets and liabilities

                                                        (8,990,282 )       (4,768,320 )
Net cash provided by operating activities                           1,702,067          3,035,632
Net cash provided by/(used) in investing activities                25,316,886        (77,175,374 )
Net cash used in financing activities                             (28,093,875 )          (30,606 )
Change in cash and cash equivalents                            $   (1,074,922 )   $  (74,170,348 )

Net Cash Provided by Operating Activities





For the three months ended March 31, 2023 and 2022, we reported "Net cash
provided by operating activities" of $1.7 million and $3.0 million,
respectively. Net cash flows provided by operating activities decreased $1.3
million, primarily attributable to an increase in provision for current expected
credit losses of approximately $48 thousand, an increase in PIK interest of
approximately $1.3 million, an increase in interest receivable of approximately
$2.8 million, an increase in related party receivable of approximately $0.2
million, an increase in related party payable of approximately $0.1 million, an
increase in management and incentive fees payable of approximately $0.9 million,
and an increase in accounts payable and other accrued expenses of approximately
$0.4 million, partially offset by an increase in net income of approximately
$2.9 million, decrease in interest reserve of approximately $1.4 million,
increase in debt issuance costs of approximately $0.1 million, and an increase
in stock based compensation of approximately $17 thousand.



Net Cash Provided by/(Used) in Investing Activities

For the three months ended March 31, 2023 and 2022, we reported "Net cash provided by/(used in) investing activities" of $25.3 million and ($77.2 million), respectively.


For the three months ended March 31, 2023, cash outflows primarily related to
$32.9 million used for the origination and funding of loans held for investment,
partially offset by $13.4 million received from the sales of loans and $44.9
million of cash received from the principal repayment of loans held for
investment.



For the three months ended March 31, 2022, cash outflows primarily related to
$82.8 million used for the origination and funding of loans held for investment,
partially offset by $5.6 million of cash received from the principal repayment
of loans held for investment.



                                       34




Net Cash Used in Financing Activities

For the three months ended March 31, 2023 and 2022, we reported "Net cash used in financing activities" of $28.1 million and approximately $31 thousand, respectively.





For the three months ended March 31, 2023, cash inflows of approximately $6.0
million related to proceeds received from the registered direct offering and
$28.5 million related to draw downs on our Revolving Loan, which were offset by
approximately $49.0 million in repayments on our Revolving Loan, $13.5 million
in dividends paid, approximately $3 thousand in debt issuance costs paid, and
approximately $0.1 million in offering costs associated with the registered
direct offering.



For the three months ended March 31, 2022, cash inflows primarily related to
approximately $4.5 million received from the underwriters' partial exercise of
their over-allotment option, offset by approximately $4.5 million in dividends
paid, and approximately $24 thousand related to offering costs associated with
our initial public offering.



Leverage Policies



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



Dividends



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



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

debt
securities.



                                       35




The following table summarizes the Company's dividends declared during the three months ended March 31, 2023 and 2022, respectively.





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

Regular cash dividend     3/31/2023     4/14/2023     $             0.47     $        0.47     $         -     $         0.47
Total cash dividend                                   $             0.47     $        0.47     $         -     $         0.47




                                                         Common Share           Taxable
                                                         Distribution          Ordinary         Return of       Section 199A
                         Record Date   Payment Date         Amount              Income           Capital         Dividends
Regular cash dividend     3/31/2022     4/14/2022     $             0.40     $        0.40     $         -     $         0.40
Total cash dividend                                   $             0.40     $        0.40     $         -     $         0.40




CECL Reserve



In accordance with ASC 326, we record allowances for our loans held for
investment. The allowances are deducted from the gross carrying amount of the
assets to present the net carrying value of the amounts expected to be collected
on such assets. The Company estimates its CECL Reserve using among other inputs,
third-party valuations, and a third-party probability-weighted model that
considers the likelihood of default and expected loss given default for each
individual loan based on the risk profile for approximately three years after
which we immediately revert to use of historical loss data.



ASC 326 requires an entity to consider historical loss experience, current
conditions, and a reasonable and supportable forecast of the macroeconomic
environment. We consider multiple datapoints and methodologies that may include
likelihood of default and expected loss given default for each individual loans,
valuations derived from discount cash flows ("DCF"), and other inputs including
the risk rating of the loan, how recently the loan was originated compared to
the measurement date, and expected prepayment, if applicable. The measurement of
expected credit losses under CECL is applicable to financial assets measured at
amortized cost, and off-balance sheet credit exposures such as unfunded loan
commitments.



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



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



To estimate the historic loan losses relevant to our portfolio, we evaluate our
historical loan performance, which includes zero realized loan losses since our
inception of operations. Additionally, we analyzed our repayment history, noting
we have limited "true" operating history, since the incorporation date of March
30, 2021. However, our Sponsor has had operations for the past two fiscal years
and has made investments in similar loans that have similar characteristics,
including interest rate, collateral coverage, guarantees, and prepayment/make
whole provisions, which fall into the pools identified above. Given the
similarity of the structuring of the credit agreements for the loans in our
portfolio, management considered it appropriate to consider the past repayment
history of loans originated by the Sponsor in determining the extent to which we
should record a CECL Reserve.



                                       36





In addition, we review each loan on a quarterly basis and evaluate the
borrower's ability to pay the monthly interest and principal, if required, as
well as the loan-to-value (LTV) ratio. In considering the potential current
expected credit loss, the Manager primarily considers significant inputs to our
forecasting methods, which include (i) key loan-specific inputs such as the
value of the real estate collateral, liens on equity (including the equity in
the entity that holds the state-issued license to cultivate, process,
distribute, or retail cannabis), presence of personal or corporate guarantees,
among other credit enhancements, LTV ratio, ratio type (fixed or floating) and
IRR, loan-term, geographic location, and expected timing and amount of future
loan fundings, (ii) performance against the underwritten business plan and our
internal loan risk rating and (iii) a macro-economic forecast. Estimating the
enterprise value of our borrowers in order to calculate LTV ratios is often a
significant estimate. We rely primarily on comparable transactions to estimate
enterprise value of our portfolio companies and supplement such analysis with a
multiple-based approach to enterprise value to revenue multiples of
publicly-traded comparable companies obtained from S&P Capital IQ as of the
quarter end, to which we apply a private company discount based on our current
borrower profile. These estimates may change in future periods based on
available future macro-economic data and might result in a material change in
our future estimates of expected credit losses for our loan portfolio.



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



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



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



Risk Ratings



We assess the risk factors of each loan, and assigns a risk rating based on a
variety of factors, including, without limitation, payment history, real estate
collateral coverage, property type, geographic and local market dynamics,
financial performance, enterprise value of the portfolio company, loan structure
and exit strategy, and project sponsorship. This review is performed quarterly.
Based on a 5-point scale, our loans are rated "1" through "5," from less risk to
greater risk, which ratings are defined as follows:



Rating                                  Definition
1        Very low risk
2        Low risk
3        Moderate/average risk
4        High risk/potential for loss: a loan that has a risk of realizing a

principal loss 5 Impaired/loss likely: a loan that has a high risk of realizing principal

loss, has incurred principal loss or an impairment has been recorded






The risk ratings are primarily based on historical data and current conditions
specific to each portfolio company, as well as consideration of future economic
conditions and each borrower's estimated ability to meet debt service
requirements. The risk ratings shown in the following table as of March 31, 2023
and December 31, 2022 consider borrower specific credit history and performance
and quarterly re-evaluation of overall current macroeconomic conditions
affecting the borrowers. As interest rates have increased due to rising rates
from the Federal Reserve Board, it has impacted borrowers' ability to service
their debt obligations on a global scale. This decline in risk ratings had an
effect on the level of the current expected credit loss reserve, though the
loans continued to perform as expected. For approximately 80% of the portfolio,
the fair value of the underlying real estate collateral exceeded the amounts
outstanding under the loans as of March 31, 2023. The remaining approximately
20% of the portfolio, while not fully collateralized by real estate, was secured
by other forms of collateral including equipment, receivables, licenses and/or
other assets of the borrowers to the extent permitted by applicable laws and
regulations governing such borrowers.



                                       37





As of March 31, 2023 and December 31, 2022, the carrying value, excluding the
CECL Reserve, of the Company's loans within each risk rating by year of
origination is as follows:



                                                 As of March 31, 2023                                                                  As of December 31, 2022
Risk Rating        2023             2022              2021           2020       2019          Total             2022              2021              2020          2019          Total
1                         -                 -           235,205          -          -           235,205                 -           274,406                -          -           274,406
2                13,595,388       124,333,205        71,790,767          -          -       209,719,360        94,467,449        88,444,868       29,140,546          -       212,052,863
3                         -        12,525,206        65,657,524          -          -        78,182,730        30,415,113        83,131,444                -          -       113,546,557
4                         -                 -        28,088,849          -          -        28,088,849                 -        13,399,712                -          -        13,399,712
5                         -                 -                 -          -          -                 -                 -                 -                -          -                 -
Total            13,595,388       136,858,411       165,772,345          -          -       316,226,144       124,882,562       185,250,430       29,140,546          -       339,273,538



(1) Amounts are presented by loan origination year with subsequent advances shown


    in the original year of origination.



Accounting Policies and Estimates


As of March 31, 2023, there were no significant changes in the application of
our accounting policies or estimates from those presented in our annual report
on Form 10-K. Refer to Note 2 to our consolidated financial statements for the
three months ended March 31, 2023, titled "Significant Accounting Policies" for
information on recent accounting pronouncements.

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