INVESTMENTS

9 Months Ended

Sep. 30, 2023

NOTE 3 — INVESTMENTS

The Company seeks to invest in portfolio companies primarily in the form of loans (secured and unsecured), but may include equity warrants and direct equity investments. The loans typically pay interest with some amortization of principal. As of September 30, 2023, 86.0% of the portfolio (based on amortized cost) pays interest on a floating rate basis with a PRIME floor, and 14.0% of the portfolio (based on amortized cost) pays fixed interest. As of December 31, 2022, 80.9% of the portfolio (based on amortized cost) pays interest on a floating rate basis with a PRIME floor, and 19.1% of the portfolio (based on amortized cost) pays fixed interest. We will generally seek to obtain security interests in the assets of our portfolio companies that serve as collateral in support of the repayment of these loans. This collateral may take the form of first or second priority liens on the assets of a portfolio company. 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.

We expect that our loans will typically have final maturities of three to six years. However, we expect that our portfolio companies often may repay these loans early, generally within three years from the date of initial investment.

Portfolio Composition

The Company’s portfolio investments are in companies conducting business in or supporting the cannabis industries. The following tables summarize the composition of the Company’s portfolio investments by industry at amortized cost and fair value and as a percentage of the total portfolio as of September 30, 2023 and December 31, 2022.

	September 30, 2023
	Amortized Cost					Fair Value
Industry	Amount		%			Amount		%
Wholesale Trade	$	57,488,336		100.0	%	$	57,381,000		100.0	%
Total	$	57,488,336		100.0	%	$	57,381,000		100.0	%

	December 31, 2022
	Amortized Cost					Fair Value
Industry	Amount		%			Amount		%
Wholesale Trade	$	50,527,898		100.0	%	$	50,254,550		100.0	%
Total	$	50,527,898		100.0	%	$	50,254,550		100.0	%

The geographic composition is determined by the location of headquarters of the portfolio company. The following tables summarize the composition of the Company’s portfolio investments by geographic region of the United States at amortized cost and fair value and as a percentage of the total portfolio as of September 30, 2023 and December 31, 2022. 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 ND, SD, NE, KS, MO, IA, MN, WI, MI, IL, IN and OH; Northeast, for the states 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.

	September 30, 2023
	Amortized Cost					Fair Value
Geographic Location	Amount		%			Amount		%
West	$	24,834,972		43.2	%	$	24,804,000		43.2	%
Midwest		24,578,030		42.8			24,447,500		42.6
Northeast		8,075,334		14.0			8,129,500		14.2
Total	$	57,488,336		100.0	%	$	57,381,000		100.0	%

	December 31, 2022
	Amortized Cost					Fair Value
Geographic Location	Amount		%			Amount		%
Midwest	$	24,420,752		48.4	%	$	24,358,686		48.5	%
West		20,479,987		40.5			20,268,705		40.3
Northeast		3,854,475		7.6			3,854,475		7.7
Southeast		1,772,684		3.5			1,772,684		3.5
Total	$	50,527,898		100.0	%	$	50,254,550		100.0	%

The following tables summarize the composition of the Company’s portfolio investments by investment type at amortized cost and fair value and as a percentage of the total portfolio as of September 30, 2023 and December 31, 2022.

	September 30, 2023
	Amortized Cost					Fair Value
Investment	Amount		%			Amount		%
Senior Secured First Lien Term Loan	$	49,445,187		86.0	%	$	49,497,000		86.3	%
Senior Secured Notes		8,043,149		14.0			7,884,000		13.7
Total	$	57,488,336		100.0	%	$	57,381,000		100.0	%

	December 31, 2022
	Amortized Cost					Fair Value
Investment	Amount		%			Amount		%
Senior Secured First Lien Term Loan	$	40,871,914		80.9	%	$	40,660,633		80.9	%
Senior Secured Notes		9,655,984		19.1			9,593,917		19.1
Total	$	50,527,898		100.0	%	$	50,254,550		100.0	%

Certain Risk Factors

In the ordinary course of business, the Company manages a variety of risks including market 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, 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 is 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.

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 any 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.