Q3 2024 Chicago Atlantic BDC Inc Earnings Call

November 8, 2024

Bye.

Operator: Good day. Thank you for standing by. Welcome to the Chicago Atlantic BDC, Inc. Q3 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Tripp Sullivan of Investor Relations. Please go ahead.

Speaker Change: Good day and thank you for standing by. Welcome to the Chicago Atlantic.

Speaker Change: BDC, Inc., Q3 2024 earnings call. At this time, all participants are in a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

Speaker Change: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Tripp Sullivan of Investor Relations. Please go ahead.

Tripp Sullivan: Thank you. Good morning. Welcome to the Chicago Atlantic BDC Conference Call to review the company's results. On the call today will be Scott Gordon, Executive Chairman and Co-Chief Investment Officer, Andreas Bodmeier, Chief Executive Officer, Umesh Mahajan, Co-Chief Investment Officer and Chief Financial Officer, and Dino Colonna, President. Our results were released last night in our earnings press release, which can be found in the investor relations section of our website, along with our supplemental earnings presentation filed with the SEC. A live audio webcast of this call is being made available today. For those who listen to the replay of this webcast, we remind you that the remarks made herein are as of today and will not be updated subsequent to this call.

Tripp Sullivan: Thank you. Good morning. Welcome to the Chicago Atlantic BDC conference call to review the company's results.

Tripp Sullivan: On the call today will be Scott Gordon, Executive Chairman and Co-Chief Investment Officer, Andreas Bodmeier, Chief Executive Officer, Umesh Mahajan, Co-Chief Investment Officer and Chief Financial Officer, and Dino Colonna, President.

Speaker Change: Our results were released last night in our earnings press release, which can be found in the best relations section of our website, along with our supplemental earnings presentation filed with the NCC.

Speaker Change: A live audio webcast of this call is being made available today. For those who listened to the replay of this webcast, we remind you that the remarks made herein are as of today and will not be updated subsequent to this call.

Tripp Sullivan: Before we begin, I'd like to remind everyone that certain statements that are not based on historical facts made during this call, including any statements related to financial guidance, may be deemed forward-looking statements under federal securities laws, because these forward-looking statements involve known and unknown risks and uncertainties that are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. We encourage you to refer to our most recent SEC filings for information on some of these risk factors. Chicago Atlantic BDC assumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, 8 November 2024. You are advised that time-sensitive information may no longer be accurate at the time of any replay or transcript reading. I'll now turn the call over to Scott Gordon.

Speaker Change: Before we begin, I would like to remind everyone that certain statements that are not based on the historical facts made during this call, including any statements related to financial guidance.

Speaker Change: may be deemed forward-looking statements under federal securities laws because these forward-looking statements involve known and unknown risk and uncertainties that are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements.

Speaker Change: We encourage you to refer to our most recent SEC filing for information on some of these risk factors.

Speaker Change: Chicago Atlantic BDC assumes no obligation or responsibility to update any forward-looking statement.

Please note that the information reported on this call.

Speaker Change: Speaks only as of today, November 8th, 2024. Therefore, you are advised that time sensitive information may no longer be accurate at the time of any replay or transcript reading. I'll now turn the call over to Scott Gordon. Please go ahead.

Tripp Sullivan: Please go ahead.

Scott Gordon: Thanks, Tripp. Good morning, everyone. A little over a month ago, we closed on the acquisition of a loan portfolio from Chicago Atlantic, renamed the company to Chicago Atlantic BDC, Inc., and began a new chapter in our history with the ticker symbol of LIEN. This was a long journey that we've updated you on throughout the year, and I'm pleased that we're now seeing the fruits of that hard work. LIEN came together as a joint venture between Chicago Atlantic and Silver Spike, combining two leading investment platforms in the cannabis industry. More importantly, LIEN is the only publicly traded BDC focused on lending to cannabis companies with net assets of over $300 million in investments in 28 portfolio companies. I am proud to be leading a great management team comprised of talent from both companies.

Thanks, Tripp. Good morning everyone.

Scott Gordon: A little over a month ago, we closed on the acquisition of a loan portfolio from Chicago Atlantic, renamed the company to Chicago Atlantic BDC Inc., and began a new chapter in our history with the ticker symbol of LEAN.

Scott Gordon: This was a long journey that we've updated you on throughout the year, and I'm pleased that we're now seeing the fruits of that hard work.

Scott Gordon: Lean came together as a joint venture between Chicago Atlantic and Silver Spike, combining two leading investment platforms in the cannabis industry.

Scott Gordon: And more importantly, LEAN is the only publicly traded BDC focused on lending to cannabis companies with net assets of over $300 million in investments in 28 portfolio companies.

Scott Gordon: I am proud to be leading a great management team comprised of talent from both companies.

Scott Gordon: We believe our BDC gives investors access to a differentiated source of credit alpha from what is typically found in other BDCs or private credit funds. By doing this, we increase the prospects for further growth within our core activity of providing capital to high-quality operators within grossly underserved sectors. In addition to our proven experience in cannabis lending, there are several reasons why we're confident in growing the non-cannabis lending vertical. The three biggest reasons are we have the right team with relevant origination and underwriting experience to succeed in non-cannabis investing. Chicago Atlantic has a track record in non-cannabis lending with a strong return profile and consistent growth in the portfolio. Lastly, Chicago Atlantic has a pipeline of self-originated deals in non-cannabis through its distinctive referral network. Since we began trading under our new name and ticker on 2 October, LEAN has been well received by investors.

Scott Gordon: We believe our BDC gives investors access to a differentiated source of credit alpha from what is typically found in other BDCs or private credit funds.

Scott Gordon: By doing this, we increase the prospects for further growth within our core activity of providing capital to high quality operators within grossly underserved sectors.

Scott Gordon: In addition to our proven experience in cannabis lending, there are several reasons why we're confident in growing the non-cannabis lending vertical. The three biggest reasons are we have the right team with relevant origination and underwriting experience to succeed in non-cannabis investing.

Scott Gordon: Chicago Atlantic has a track record in non-cannabis lending with a strong return profile and consistent growth in the portfolio. And lastly, Chicago Atlantic has a pipeline of self-originated deals in non-cannabis through its distinctive referral network.

Scott Gordon: Since we began trading under our new name and ticker on October 2nd, lean has been well received by investors.

Scott Gordon: This is what we were hoping for when Silver Spike and Chicago Atlantic began talks. We saw an accretive opportunity from which all shareholders and team members can benefit. We shared synergistic goals, and we are excited to collaborate, innovate, and drive collective results for the benefit of our shareholders. This week's election has certainly been front and center in everyone's mind, and none more so than in the cannabis industry. As we've talked about all year, federal rescheduling is likely a next year type of event. The Trump campaign had been generally supportive of rescheduling, we don't see too many hurdles to that ultimately occurring. Question will be the timing. SAFE Banking is going to take some time as well. With a gridlocked Congress, the timeline is likely pushed out even further than it was pre-election.

Speaker Change: This is what we were hoping for when Silver Spike and Chicago Atlantic began talks.

Speaker Change: We saw an accretive opportunity from which all shareholders and team members can benefit. We shared synergistic goals, and we are excited to collaborate, innovate, and drive collective results for the benefit of our shareholders.

Speaker Change: This week's election has certainly been front and center in everyone's mind and none more so than in the cannabis industry. As we've talked about all year, federal rescheduling is likely a next year type of event.

Speaker Change: The Trump campaign had been generally supportive of rescheduling so we don't see too many hurdles to that ultimately occurring.

Question will be the timing.

Speaker Change: Safer banking is going to take some time as well. With a gridlocked Congress, the timeline is likely pushed out even further than it was pre-election.

Scott Gordon: We have never underwritten our loans on the basis of rescheduling, state for banking or any other legislative or regulatory relief taking place in the immediate future. We underwrite on the current market as it exists today at the federal level and on each individual state regulatory scheme. Now, I'll hand it over to Andreas. Thanks, Scott. Chicago Atlantic BDC has a differentiated and unique approach to targeting potential investments in underfollowed sectors, which we believe is a durable long-term strategy that has the potential to deliver attractive risk-adjusted returns with low correlation to our peers in the BDC space. We are a very different BDC. We're the only BDC focused on and able to lend to cannabis companies. We're also going to other places where the more traditional BDC lenders don't go, and we're seeing idiosyncratic opportunities that aren't available in other BDCs or private funds.

Speaker Change: We have never underwritten our loans on the basis of rescheduling.

Speaker Change: safer banking, or any other legislative or regulatory relief taking place in the immediate future.

Speaker Change: We underwrite on the current market as it exists today at the federal level and on each individual state regulatory scheme.

Now, I'll hand it over to Andreas.

Andreas Bodmeier: Thanks Scott. Chicago Atlantic BDC has a differentiated and unique approach to targeting potential investments in underfollowed sectors, which we believe is a durable long-term strategy that has the potential to deliver attractive risk-adjusted returns with low correlation to our peers in the BDC space.

Andreas Bodmeier: We are a very different BDC. We're the only BDC focused on and able to lend to cannabis companies.

Andreas Bodmeier: We're also going to other places where the more traditional BDC lenders don't go. And we're seeing idiosyncratic opportunities that aren't available in other BDCs or private funds.

Andreas Bodmeier: We will remain focused on the cannabis industry as we're bullish on the prospects for the industry to continue growing in a dynamic fashion. Being among one of the fastest-growing sectors in the market brings a lot of opportunity for growth. We're in the early innings of the evolution of this industry that will continue to have further regulatory progress and catalysts, whether that's more states coming online for more medical and adult use. Federal legalization would be transformational, that's certainly hard to predict. We sit in a very privileged position as one of the biggest dedicated capital providers to the industry. We enjoy great relationships with many of the biggest operators in the space. We will continue to support them with capital and advice in the true spirit of a BDC partnership. We don't see ourselves as merely a lender.

Andreas Bodmeier: We will remain focused on the cannabis industry as we're bullish on the prospects for the industry to continue growing in a dynamic fashion.

Andreas Bodmeier: Being among one of the fastest growing sectors in the market brings a lot of opportunity for growth.

Andreas Bodmeier: We're in the early innings of the evolution of this industry that will continue to have further regulatory progress and catalysts. Whether that's more states coming online for more medical and adult use.

Andreas Bodmeier: Federal legalization would be transformational, but that's certainly hard to predict.

Andreas Bodmeier: We sit in a very privileged position as one of the biggest dedicated capital providers to the industry.

Andreas Bodmeier: We enjoy great relationships with many of the biggest operators in the space.

Andreas Bodmeier: We will continue to support them with capital and advice in the true spirit of a BDC partnership.

Andreas Bodmeier: We don't see ourselves as merely a lender. We like to help our borrowers think about their own success and how to get there.

Andreas Bodmeier: We like to help our borrowers think about their own success and how to get there. There's a real focus on understanding their challenges and helping them drive profitable growth. As the newest member of the Chicago Atlantic BDC team, I thought I might make some brief comments on the broader Chicago Atlantic platform and why we're excited about the potential of our two companies coming together for this opportunity in both cannabis and non-cannabis lending. Since our founding in 2019, Chicago Atlantic has continued to invest in growing our infrastructure. We now have offices in Chicago, Miami, and New York, and we have assembled a top-notch team of over 30 investment professionals. We have one of the largest cannabis lending platforms, our own originations team, our own real estate diligence and development team, decades of experience in direct lending, a diversified loan portfolio, and now two publicly traded vehicles.

Andreas Bodmeier: There's a real focus on understanding their challenges and helping them drive profitable growth.

Speaker Change: As the newest member of the Chicago Atlantic BDC team, I thought I might make some brief comments on the broader Chicago Atlantic platform and why we're excited about the potential of our two companies coming together for this opportunity in both cannabis and non-cannabis lending.

Speaker Change: Since our founding in 2019, Chicago Atlantic has continued to invest in growing our infrastructure. We now have offices in Chicago, Miami, and New York, and we have assembled a top-notch team of over 30 investment professionals.

Speaker Change: We have one of the largest cannabis lending platforms, our own originations team, our own real estate diligence and development team, decades of experience in direct lending, a diversified loan portfolio, and now two publicly traded vehicles.

Andreas Bodmeier: The strength and size of our platform, not to mention our operational, financial, legal, and underwriting expertise, has led to many exciting partnerships. As one of the largest and most experienced investment platforms in the industry, we're continually developing innovative approaches to support the industry's growth. We will also not sacrifice the platform we have created at Chicago Atlantic to pursue short-term or short-sighted growth. We do everything within our power to execute on the tremendous investment potential in cannabis in a manner that protects principal investment while maximizing potential long-term returns.

Speaker Change: As one of the largest and most experienced investment platforms in the industry, we're continually developing innovative approaches to support the industry's growth.

Speaker Change: We will also not sacrifice the platform we have created at Chicago Atlantic to pursue short-term or short-sighted growth.

Speaker Change: We do everything within our power to execute on the tremendous investment potential in cannabis in the manner that protects principal investment while maximizing potential long-term returns. Umesh, why don't you take it from here?

Andreas Bodmeier: Umesh, why don't you take it from here?

Umesh Mahajan: Good morning. Thanks, Dino. Before I begin my brief comments, I want to highlight our updated investor presentation that we filed last night. We've added some new disclosures to that presentation and intend to continue to expand our quarterly presentation more in the mode of an earnings supplemental going forward. Turning to our highlights for Q3. Gross investment income for Q3 was $3.2 million, compared to $2.9 million in Q3 last year. Excluding the costs specifically related to the loan portfolio acquisition, expenses were $731,000 compared to $1.3 million a year ago. Investment income excluding these transaction expenses was $2.4 million, or $0.39 per share, compared with $1.6 million or $0.26 per share a year ago. Transaction-related expenses totaled $2.4 million this Q3 and have been the primary factor in the decline of our reported net investment income this year in 2024.

Good morning. Thanks, Daniel.

Umesh Mahajan: Before I begin my brief comments, I want to highlight our updated investor presentation that we filed last night. We have added some new disclosures to that presentation and intend to continue to expand our quarterly presentation more in the mode of an earnings supplemental going forward.

So, turning to our highlights for the third quarter.

Umesh Mahajan: Gross investment income for the quarter was $3.2 million, compared to $2.9 million in the third quarter last year.

Umesh Mahajan: Excluding the cost specifically related to the loan portfolio acquisition, expenses were $731,000 compared to $1.3 million a year ago.

Umesh Mahajan: investment income excluding these transaction expenses was 2.4 million or 39 cents per share compared with 1.6 million or 26 cents per share a year ago.

Umesh Mahajan: Transaction related expenses totaled 2.4 million this quarter and have been the primary factor in the decline of our reported net investment income this year in 2024. We anticipate that we'll have some additional expenses incurred in the fourth quarter but nothing of the magnitude we have experienced to date.

Umesh Mahajan: We anticipate that we'll have some additional expenses incurred in Q4, but nothing of the magnitude we have experienced to date. Reported net investment income for the quarter was $15,000, or nearly $0.00 per share for the quarter, and net assets were $82.5 million at the end of the quarter, and the net asset value per share was $13.28. You'll notice in our new quarterly investor deck that we have provided a pro forma summary of the investment portfolio as of 1 October to reflect the addition of the loan portfolio acquisition that we did. These investments were listed in detail in our most recent 10-Q, which was filed last night. I wanted to highlight some of the important distinctions between our portfolio as of 30 September and as of 1 October.

Umesh Mahajan: Reported net investment income for the quarter was $15,000 or nearly 0 cents per share for the quarter.

Umesh Mahajan: And net assets were $82.5 million at the end of the quarter, and the net asset value per share was $13.28.

Umesh Mahajan: So you'll notice in our new quarterly investor deck that we have provided a pro forma summary of the investment portfolio as of October 1st.

Umesh Mahajan: to reflect the addition of the loan portfolio acquisition that we did. These investments were listed in detail in our most recent 10-Q, which was filed last night.

Umesh Mahajan: But I wanted to highlight some of the important distinctions between our portfolio as of September 30 and as of October 1.

Umesh Mahajan: The investment portfolio is not only five times larger in size, but also significantly more diversified. We now have 28 portfolio companies. Over 23% of our portfolio is invested outside of cannabis across multiple sectors, and our average position size is about 3% compared to a more concentrated portfolio earlier. Over 79% of our portfolio is floating rate loans, and 99% of those loans have a rate floor which shields us from declining interest rates. More importantly, our expanded portfolio retains some of the attractive characteristics that we've had previously. Average yield on the portfolio is approximately 17.2%. The weighted average secured net leverage for our portfolio companies is 1.6x. None of our loans is in non-accrual status. The greater size of this portfolio will make our previous periods less comparable in terms of net assets, investment income, and expenses going forward.

Umesh Mahajan: The investment portfolio is not only five times larger in size, but also significantly more diversified. We now have 28 portfolio companies, over 23% of our portfolio is invested outside of cannabis across multiple sectors.

Umesh Mahajan: And our average position size is about 3% compared to a more concentrated portfolio earlier.

Umesh Mahajan: And over 79% of our portfolio is floating rate loans. And 99% of those loans have a rate floor which shields us from declining interest rates.

Umesh Mahajan: More importantly, our expanded portfolio retains some of the attractive characteristics that we've had previously. Average yield on the portfolio is approximately 17.2%.

Umesh Mahajan: The weighted average secured net leverage for our portfolio companies is 1.6 times and none of our loans is in non-equal status.

Umesh Mahajan: So the greater size of the portfolio will make our previous periods less comparable in terms of net assets, investment income, and expenses going forward.

Umesh Mahajan: I'd also note that we have issued an additional 16.6 million shares of common stock at net asset value as of 28 September, in conjunction with the loan portfolio acquisition. There are approximately 22.8 million shares of the company's common stock outstanding today. Further, at the BDC level, we have no debt. As our BDC takes on leverage and deploys that capital to expand our investment portfolio, we are positioned to improve the returns for the benefit of our shareholders. We'll be providing an update on the dividend for this quarter through a separate announcement later this month after receiving the necessary approval from our board of directors. We expect our quarterly dividend per share to be higher than our prior dividend per share. I'll now turn it over to Dino to talk about our origination efforts.

Umesh Mahajan: But I would also note that we have issued an additional 16.6 million shares of common stock at net asset value as of September 28th, in conjunction with the loan portfolio acquisition. There are approximately 22.8 million shares of the company's common stock outstanding today.

Umesh Mahajan: Further, at the BDC level, we have no debt. So as our BDC takes on leverage and deploys that capital to expand our investment portfolio, we are positioned to improve the returns for the benefit of our shareholders.

Umesh Mahajan: We'll be providing an update on the dividend for this quarter through a separate announcement later this month after receiving the necessary approval from our Board of Directors. We expect our quarterly dividend per share to be higher than our prior dividend per share.

Speaker Change: I'll now turn it over to Dino to talk about our origination efforts.

Dino Colonna: Thanks, Umesh. We made two debt investments during the quarter. The first was with an existing borrower, Workbox Holdings, for an incremental $0.3 million. The second was with Ascend Wellness for $3.5 million. We are pleased to deepen our commitment to Workbox and to initiate a new relationship with Ascend, as they are both well-positioned for future growth in their respective industries. Subsequent to quarter end, we funded approximately $5.5 million in net investments, which included the funding of three investments offset by one repayment of an existing loan. The current pipeline across the Chicago Atlantic platform is robust, with approximately $559 million in potential debt transactions across 39 unique companies. This pipeline is comprised of a diverse set of companies across cannabis and non-cannabis, all with what we believe are attractive risk-reward characteristics.

Thank you, Ben.

Speaker Change: We made two debt investments during the quarter. The first was with an existing borrower, Workbox Holdings, for an incremental $0.3 million.

The second was to extend wellness for 3.5 million.

Speaker Change: We are pleased to deepen our commitment to Workbox and to initiate a new relationship with Ascend as they are both well positioned for future growth in their respective industries.

Speaker Change: Subsequent to quarter end, we funded approximately $5.5 million in net investments, which included the funding of three investments offset by one repayment of an existing loan.

Speaker Change: The current pipeline across the Chicago Atlantic platform is robust, with approximately $559 million in potential debt transactions across 39 unique companies.

Speaker Change: This pipeline is comprised of a diverse set of companies across cannabis and non-cannabis.

all with what we believe are attractive risk-reward characteristics.

Dino Colonna: This unique and diverse set of opportunities is a direct result of the hard work and expertise of the origination team across the Chicago Atlantic platform. A team I'm proud to be a part of and see great future with. The company had previously been limited in its ability to execute on our pipeline due to being subscale. Now, with a significantly larger and more diversified portfolio, a healthy cash position, and better prospects for leverage, we are well-positioned to capture more of the pipeline and put available liquidity to work over the next few quarters. As mentioned earlier, we are now also engaged in activity outside of cannabis and are finding unique opportunities to provide credit in other sectors where traditional capital sources aren't focused. Effective 1 October.

Speaker Change: This unique and diverse set of opportunities is a direct result of the hard work and expertise of the Origination Team across the Chicago Atlantic platform.

Speaker Change: A team I'm proud to be a part of and see a great future with.

Speaker Change: The company had previously been limited in its ability to execute on our pipeline due to being subscale.

Speaker Change: But now, with a significantly larger and more diversified portfolio, a healthy cash position, and better prospects for leverage, we are well positioned to capture more of the pipeline and put available liquidity to work over the next few quarters.

Speaker Change: As mentioned earlier, we are now also engaged in activities outside of cannabis and are finding unique opportunities to provide credit in other sectors where traditional capital sources aren't focused.

Speaker Change: Effective October 1st, non-cannabis investments represented approximately 23% of our portfolio. So it's worth highlighting where we currently see opportunities outside of cannabis.

Dino Colonna: Non-cannabis investments represented approximately 23% of our portfolio, so it's worth highlighting where we currently see opportunities outside of cannabis. While there are many qualities in common to how we approach cannabis and non-cannabis investing, such as low debt to enterprise or asset value, as well as strong covenants, collateral coverage, and cash flow, the non-cannabis opportunities can be classified into three sub-strategies. The first is growth capital and technology, where we're focused on industry leaders and disruptive companies that are experiencing strong growth trajectories and typically need capital to support continued revenue growth or expansion of the overall business. The second is esoteric and asset-based lending. Here, we're focused on established companies with strong cash flow profiles in industries that carry idiosyncratic risks, which limit access to traditional sources of capital.

Speaker Change: While there are many qualities in common to how we approach cannabis and non-cannabis investing, such as low debt to enterprise or asset value, as well as strong covenants, collateral coverage, and cash flow, the non-cannabis opportunities can be classified into three sub-strategies.

Speaker Change: The first is growth capital and technology, where we're focused on industry leaders and disruptive companies that are experiencing strong growth trajectories and typically need capital to support continued revenue growth or expansion of the overall business.

Speaker Change: The second is esoteric and asset-based lending. Here, we're focused on established companies with strong cashflow profiles in industries that carry idiosyncratic risks, which limit access to traditional sources of capital.

Dino Colonna: The last is liquidity solutions, which is typically focused on event-driven opportunities, including, but not limited to mergers, acquisitions, refinancing, dividend recap, or other strategically driven liquidity needs to establish businesses. While we remain largely focused on the cannabis industry, the opportunities outside of cannabis are also very compelling. Whether cannabis or not, we are excited to continue creating customized financing solutions tailored to the unique needs of borrowers while maintaining a rigorous approach to underwriting and structuring. We look forward to reporting back on our progress and continuing to build the portfolio over the next several quarters. Operator, we are now ready to take questions.

Speaker Change: The last is liquidity solutions, which is typically focused on event-driven opportunities, including but not limited to mergers, acquisitions, refinancing, dividend re-tasks, or other strategically driven liquidity needs to establish businesses.

Speaker Change: While we remain largely focused on the cannabis industry, the opportunities outside of cannabis are also very compelling.

Speaker Change: Whether cannabis or not, we are excited to continue creating customized financing solutions tailored to the unique needs of borrowers while maintaining a rigorous approach to underwriting and structure.

Speaker Change: We look forward to reporting back on our progress and continuing to build a portfolio over the next several quarters. Operator, we're now ready to take questions.

Operator: Certainly. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question today will be coming from Pablo Zuanic of Zuanic & Associates. Your line is open, Pablo.

Speaker Change: Certainly. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question today will be coming from Pablo Vujanic.

Of Zuanik and Associates, your line is open, Pablo.

Pablo Zuanic: Thank you. Good morning. Look, the first question, can you just try to quantify how much liquidity do you have to put to work? You talked about no debt, so you can add leverage, and also there's cash on the balance sheet. Just remind us, what is tolerable in terms of a leverage target and the cash on the balance sheet? Just trying to think in terms of that pipeline you talked about, how much ability do you have to put to work here? Thanks.

Pablo Vujanic: Thank you. Good morning. Look, the first question, can you just try to quantify.

Pablo Vujanic: How much liquidity do you have to put to work? I mean, you talked about no debt, so you're going to have leverage, and also there's cash on the balance sheet. Just remind us of your, you know, what is...

Pablo Vujanic: in terms of leverage targets and the cash on the balance sheet, just trying to think in terms of that pipeline you talked about, how much you can put – how much cash – how much you have a – how much ability you have to put to work here.

Umesh Mahajan: Yeah. Hi, Pablo. This is Umesh. In terms of our liquidity, at the time when we closed the transaction, we had about $30 million. We currently have a little over $30 million in cash balance on our balance sheet. You're right, we do have a very concerted effort to add leverage to the balance sheet. If you think about our equity of over $300 million, and if you look at typical BDCs, we have a substantial amount of capacity to add debt. Even if we assume that we take a third of the turn of equity as our leverage, that would give us about $100 million. It's a little early to talk about exactly how much we will have on our balance sheet from the leverage facility, but those conversations are currently in progress, and we'll have an update for you on our next call.

Yes. Hi, Pablo. This is Umesh.

Pablo Vujanic: In terms of our liquidity, at the time when we closed the transaction, we had about $30 million. We currently have a little over $30 million in cash balance on our balance sheet.

Pablo Vujanic: But you're right, we do have a very concerted effort to add leverage to the balance sheet. If you think about our equity.

Pablo Vujanic: of over 300 million, and if you look at typical BDCs, we have a substantial amount of

capacity to add debt.

Pablo Vujanic: Even if we assume that we take a third of the turn of equity as our leverage, that would give us about $100 million. So, it's a little early to talk about exactly how much we will have on our balance sheet from the leverage facility, but those conversations...

Pablo Vujanic: are currently in progress and we will have an update for you on our next call.

Pablo Zuanic: Okay. Thank you. Just to be clear for people out there, when you talk about that $550 million plus pipeline, that's a group pipeline, right? Just remind us, how do you decide how much of that goes to, I don't know, to refi the REIT, how much does go to LIEN, the BDC? How are those decisions made? Thank you.

Speaker Change: Okay, thank you. And then just to be clear for people out there, when you talk about that 550 million plus pipeline, that's a group pipeline, right? So just remind us, how do you decide how much of that goes to, I don't know, to refi the REIT, how much does go to LEAN, the BDC, how are those decisions made? Thank you.

Umesh Mahajan: Yes. Yes, you're right. The pipeline is across the group, and we track all kinds of investments here across real estate, non-real estate, across cannabis, non-cannabis. A couple of things I'd point out. This pipeline is a very robust pipeline. It's not just a pipeline. There's a lot more thought that has gone into identifying the opportunities that are somehow more real and actionable. We feel good about that number across the platform. In terms of allocating across the different entities, it really is a function of what is best suited for which entity, and of course, following the regulations that require us to allocate in a certain manner according to 1940 Act. In terms of the allocation at a simplistic level, there are certain opportunities that are clearly suited better for certain entities within the platform.

Yes

Speaker Change: So yes, you're right. The pipeline is across the group, and we track all kinds of investments here across real estate, non-real estate, across cannabis, non-cannabis. But a couple of things I'll point out. This pipeline is a very robust pipeline, so it's not just—

a pipeline which could be, which.

Speaker Change: There's a lot more thought that has gone into identifying the opportunities that are somehow

more real and actionable.

Speaker Change: And so we feel good about that number across the platform. And then in terms of allocating across the different entities, it really is a function of what is best suited for which entity, and of course following the regulations that require us to allocate in a certain manner according to the 1940 Act.

Speaker Change: But in terms of the allocation at a simplistic level, there are certain opportunities that are clearly suited better for certain entities within the platform, real estate entities, real estate opportunities probably better suited for the REIT, BDC as you know.

Umesh Mahajan: Real estate opportunities probably better suited for the REIT. BDC, as you know, can invest in real estate or non-real estate, but we do not have the opportunity to invest in opportunities which have an equity-linked upside or equity-linked feature in it, especially in the cannabis sector. We can do the non-cannabis sector investments with attached equity features or upside features to it. There are a whole host of considerations that go into the allocation, but we feel good about the fact that we now have the ability to provide solutions to borrowers across sectors, but definitely in the cannabis sector, we have the ability to provide a different range of structuring solutions and provide the capital for the right borrowers and the right operators. Does that answer your question, Pablo?

Speaker Change: can invest in real estate or non-real estate but we do not have the opportunity to invest in

opportunities which have an equity link.

Speaker Change: upside or equity-linked feature in it, especially in the cannabis sector.

We can do the non-cannabis sector.

Speaker Change: investments with attached equity features or upside features to it. So, there are a whole host of considerations that go into the allocation, but we feel good about the fact that we now have the ability.

To do.

Speaker Change: provide solutions to borrowers across sectors, but definitely in the cannabis sector, we have the ability to provide a different range of structuring solutions and provide the capital for the right.

Speaker Change: bottle warriors and the right operators. Does that answer your question, Pablo? Yeah, no, that's good, Kolar. If I may, just a couple of follow-ups here. So, okay, 23-way portfolio, it's outside cannabis. I understand the advantages of having a diversified portfolio across sectors, and you explain what type of sectors.

Pablo Zuanic: Yeah, no, that's good color. If I may, just a couple of follow-ups here. Okay, 23-way portfolio, it's outside cannabis. I understand the advantages of having a diversified portfolio across sectors, you explained what type of sectors. I'm not going to draw comparisons, right? We saw the case of AFC Gamma, a very different company, right? They tried to go into commercial real estate, and according to them, the investor feedback was that they wanted something focused on cannabis. I'm assuming in your view, the investor feedback you've gotten is that there is value to having this diversified portfolio as opposed to being 100% in cannabis. If you can just expand on that. Thank you.

Speaker Change: And I'm not going to draw comparisons, but we saw the case of ASC Gamma, a very different company. They tried to go into commercial real estate, and according to them, the investor feedback was that they wanted something focused on cannabis.

Speaker Change: I'm assuming, in your view, the investor feedback you've gotten is that there is value to having this diversified portfolio as opposed to being 100% in cannabis. If you can just expand on that, thank you.

Umesh Mahajan: Yes, definitely. I will pass it on to Dino, who talked about the different strategies. At a higher level, yes, we've definitely seen that there is a strong case to have a diversified portfolio to be able to provide a portfolio which has, by diversified, I mean not just across sectors, but also across the kind of market-related factors that can keep the portfolio robust under different scenarios. That can really be achieved well if we have a little bit of exposure to the non-cannabis section as well. Just to point out, we are not at this point thinking that we're going to make a major shift away from cannabis. Cannabis will continue to be our core, and we are just adding non-cannabis at a level where we think it's an optimal mix to have the right kind of diversification.

Speaker Change: Yes, definitely. And I will pass it on to Dino who talked about the different strategies, but at a higher level, yes, we definitely feel that there is a strong case to have a diversified portfolio to be able to provide a portfolio which has

Speaker Change: not just across by diversified, I mean, not just across sectors, but also across.

the kind of

market-related

factors that can

Speaker Change: keep the portfolio robust under different scenarios and that can really be achieved well if we have a little bit of

Speaker Change: exposure to the non-cannabis section as well. And just to point out, we are not at this point thinking that we're gonna make a major shift away from cannabis. Cannabis will continue to be our core.

Speaker Change: And we are just adding non-cannabis at a level where we think it's an optimal mix.

Speaker Change: to have the right kind of diversification. But, you know, you want to jump in and talk a little bit more about the non-cannabis strategy here? Yeah, thanks, Abhishek. Just quickly, what I would say is, you know, diversification is great, and we're excited to have a bit more diversification in the portfolio, but I don't think we'd be doing this if we were giving up...

Umesh Mahajan: Dino, you want to jump in and talk a little bit more about the non-cannabis strategy here?

Dino Colonna: Yeah. Thanks, Vish. Just quickly, what I would say is diversification is great, and we're excited to have a bit more diversification in the portfolio. I don't think we'd be doing this if we were giving up or looking at less attractive opportunities. The non-cannabis part of the book from a relative risk and reward perspective is just as interesting as cannabis. I think both from a diversification perspective, but also the returns we're getting and the risks we're taking are comparable. It just felt like a really natural fit for the extension outside of cannabis.

or looking at less attractive opportunities. The non-economists.

Speaker Change: part of the book from a relative risk-reward perspective is just as interesting as cannabis.

Speaker Change: So I think both from a diversification perspective, but also the returns we're getting and the risk we're taking are comparable. So it just felt like a really natural fit for the extension outside of Canvas.

Pablo Zuanic: Thank you. One last one. Obviously, you talked at length on the regulatory environment, the political changes. I'm not going to get into that here. What would be your read at the moment in terms of the state of the industry? Particularly when we look at some of the results we've seen during the Q3 season. Are things pretty much in line with your expectations? If you can just comment on that. Thank you.

Speaker Change: Thank you, and one last one. I mean obviously you talked at length on the regulatory environment, you know, the political changes I'm not going to get into that here

Speaker Change: But, what would be your read at the moment in terms of the state of the industry, particularly when we look at some of the results we've seen during the third quarter season? Are things pretty much in line with your expectations? I mean, if you can just comment on that. Thank you.

Yeah, I think, I think from the perspective of the.

Umesh Mahajan: I think from the perspective of what we are seeing across the various markets, because we can't look at cannabis as a one monolithic market across the country, we have to look at it from a state-by-state basis. I think if we take a longer-term view, yes, things are progressing well across all of the markets, notwithstanding certain specific events that we might have seen, for example, in Florida or New York. There are bumps in the road, overall, the long-term thesis, the secular growth thesis still holds strong across the sector. In terms of what these operators are doing across each state, I think we are now seeing the better operators surface to the top. That is exactly what we focus on as lenders. We are looking for operators who have navigated through all these events well.

of what we are seeing across the.

Speaker Change: across the various markets because we can't look at cannabis as a one monolithic market across the country. We have to look at it from a state-by-state basis.

Speaker Change: I think if we take a longer-term view, yes, things are progressing well across all of the markets, notwithstanding certain specific events that we might have seen, for example, in Florida or New York, there are bumps in the road, but overall, the long-term,

Speaker Change: thesis, the secular growth thesis still holds strong across the sector.

And in terms of.

Speaker Change: in terms of what these operators are doing across each stage, I think we are now seeing the better operators surface to the top.

Speaker Change: And that is exactly what we focus on as lenders. We are looking for operators who have navigated through all of these events well, have a better strategy for not only

Umesh Mahajan: Have a better strategy for not only managing their costs effectively, but also position themselves well for the growth. There's the question. We're seeing growth strategies, both organic as well as M&A, across different markets being manifest in different forms. We are able to evaluate those strategies and choose the companies which have the right credit metrics. Overall, we feel that the sector is performing the way we would on a longer-term basis. There is clearly a need for capital, and we think we have the solution to provide that capital. Scott, do you have any additional comments on the overall shape?

Speaker Change: managing their costs effectively, but also position themselves well for the growth. And there's the question. We've seen growth strategies, both organic as well as M&A, across different markets being manifest in different forms.

Speaker Change: we are able to evaluate those strategies and choose the companies that have the right credit metrics.

Overall, the

Speaker Change: a need for capital and we think we are best positioned to provide that capital.

Speaker Change: Scott, do you have any additional comments on the overall state?

Scott Gordon: Yeah. No, I would just say, as we mentioned in the call, Pablo, as far as regulatory changes, we've always been sort of hopeful, yet skeptical that any of those would prevail. I think the sell-off that we've seen in the market is a result of the combination of quality getting rejected and what the market might think the Republican regime means for progress on the federal front. It truly doesn't matter to us. It's not in our models. I think it's business as usual for us, which is a market that's clearly growing, that continues to maintain momentum of reform, regulatory reform, and legislative progress at the state level. A murky and impossible trajectory to predict in terms of federal change, other than perhaps 280E and rescheduling. All that's sort of fine for us.

Scott Gordon: Yeah, no, I mean, I would just say, as we mentioned in the call, Pablo, you know, as far as regulatory changes, we've always been sort of hopeful yet skeptical that any of those would prevail. So, um.

Scott Gordon: You know, I think the sell off that we've seen in the market as a result of, you know, the combination of Florida getting rejected and what the market might.

Scott Gordon: think sort of a Republican regime means for progress on the federal front. It doesn't really, it truly doesn't matter to us. It's not in our models. I think it's business as usual for us, which is.

Scott Gordon: You know, a market that's clearly growing, that, you know, continues to maintain momentum of reform, regulatory reform and legislative progress at the state level, a murky and impossible trajectory to predict in terms of federal funding.

change other than you know perhaps 280E and rescheduling.

Scott Gordon: And all of that's sort of fine for us, you know, we've always felt that.

Scott Gordon: We've always felt that the growth is there, and the complexity in underwriting and being a good lender to the space is challenging. I think the backdrop of how we operate as a lender remains the same. We can pick and choose among a very selective subset of operators in the space that qualify for being good credits for our business. We think that's unchanged in this environment despite what's been sort of a tough quarter for some of the public operators and what's kind of like a volatile, maybe macro perspective currently. I think we're undeterred by all of that, and it's business as usual.

the growth is there, and the complexity and underwriting.

Scott Gordon: And being a good lender to the space is challenging. And I think the backdrop of how we operate as a lender remains the same. We can pick and choose among a very selective subset of operators in the space that qualify

Scott Gordon: being good credits for our business. And we think that's unchanged in this environment despite.

Scott Gordon: You know, what's been sort of a tough quarter for some of the public operators and, you know, what's kind of like a volatile, maybe macro perspective currently. So, I think we're undeterred by all of that and it's business as usual.

Umesh Mahajan: Thank you. I may add one more, if I may. Obviously the demand supply imbalance for capital in the industry remains. With the drop in share prices, raising equity will probably be even more difficult. I suppose that's good for the debt providers, right? Correct me if I'm wrong, but at the same time, in terms of the demand for debt capital, but at the same time, comment on the competitive landscape, right? We saw Curaleaf, I think, refinance with Regional Bank at a 7.9% rate. They said it was 7.99%. Are we seeing more competition from that side of the business, or it's still very limited? That's all. Thank you.

Speaker Change: Thank you, if I may, I will add one more if I may. So obviously the demand-supply imbalance for capital in the industry remains, and with a drop in share prices, raising equity will probably be even more difficult.

Speaker Change: So, I suppose that's good for the debt providers, right? But I mean, correct me if I'm wrong, but at the same time, in terms of the demand for debt capital.

Speaker Change: But, at the same time, comment on the competitive landscape, right? We saw Coralief, I think, refinance with a regional bank at like 7.9% rate, they said it was 7.99%. You know, are we seeing more competition from that side of the business, or is that still very limited? That's all.

Scott Gordon: I think-

Speaker Change: I think – you go ahead. Go ahead, Amash. You start.

Umesh Mahajan: Pablo.

Scott Gordon: Okay. You go ahead. Go ahead, Umesh Mahajan. You start.

Umesh Mahajan: I was just going to say that, yes, we are seeing some of those banks stepping in a few specific instances over the last year. Overall, Pablo, even if you, again, look at the overall market and the demand for the capital that exists across all of the country, the demand is very, very robust, and the supplies of capital are very few, as you know. It's not as if we've seen a rush of capital come into the lender space. It's not as if there is a massive amount of liquidity available to support the demand that exists. Scott, sorry. Please go ahead.

I was just going to say that, yes, the.

Speaker Change: We have seen some of those banks stepping in, in a few specific instances over the last year.

Pablo Vujanic: But overall, Pablo, even if you, again, look at the overall market and the demand for the capital that exists across all of the country,

Pablo Vujanic: The demand is very, very robust and the suppliers of capital are very few, as you know, and it's not as if we've seen a rush of capital come into the lender space.

Pablo Vujanic: And it's not as if there is a massive amount of liquidity available to support the demand that exists. But Scott, sorry, please go ahead.

Scott Gordon: Yeah, no, I was just actually going to say the same thing. Look, I think capital coming into the space is good for everyone, and it's good for us. I think that if you take a step back and focus out the inherent imbalance of the demand for capital relative to the limited sources of supply that drive our business in terms of being able to dictate really attractive terms with respect to pricing and structure, it's still there. I think the nuclear winter of there being very little capital available on the credit side that we saw maybe 12 or 18 months ago is thawing a bit, which is good. I would still generally characterize the setup as being one of a pretty significant imbalance still, despite, on the margin, some new sources of capital coming in on the banking side and elsewhere.

Scott Gordon: Yeah, no, I was just actually going to say the same thing that, look, I think, you know,

Scott Gordon: capital coming into the space is good for everyone and it's good for us and but I think that if you take a step back

Scott Gordon: and focus out the inherent imbalance of the demand for capital relative to the limited sources of supply.

Scott Gordon: that drive our business in terms of being able to dictate really attractive terms with respect to pricing and structure, it's still there. So I think the nuclear winter of like they're being

Scott Gordon: Very little capital available on the credit side, you know, that we saw maybe 12 or 18 months ago is falling a bit, which is good. But I would still generally characterize the setup as being one of a pretty significant imbalance, still despite.

Scott Gordon: on the margin, some new sources of capital coming in on the banking side and elsewhere.

Umesh Mahajan: Thank you very much. Yes, do you want to weigh in from a Chicago Atlantic perspective on the same topic?

Scott Gordon: And yes, you want to weigh in from the Chicago Atlantic perspective on the same topic.

Andreas Bodmeier: I think what we're seeing is from the bank world, the interest and the deals that are getting executed come with very high deposit balances. Lending to cannabis businesses by banks appears to be used, to a large extent, to gather deposits, which for many operators is not a good solution.

Speaker Change: I think what we're seeing is from the bank world, the interest and the deals that are getting executed come with very high deposit balances. So lending to cannabis businesses by banks appears to be used to a large extent to gather deposits, which...

for many operators is not a good solution.

Umesh Mahajan: Right. Thank you.

Thank you.

Operator: There appears to be no further questions. I'd now like to turn it back to Scott Gordon for closing remarks.

Speaker Change: And there appears to be no further questions. I'd now like to turn it back to Scott Gordon for closing remarks.

Scott Gordon: Great. Well, thanks everybody for joining. Appreciate your time this morning, and we look forward to staying in touch with you. Take care.

Scott Gordon: Great. Well, thanks everybody for joining. Appreciate your time this morning and we look forward to staying in touch with you.

Operator: Good day, and thank you for standing by. Welcome to the Chicago Atlantic BDC, Inc. Q3 2024 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Tripp Sullivan of Investor Relations. Please go ahead.

video.

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Scott Gordon: a a a a a a a a a a a a a a a a a a

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Welcome to Chicago Atlantic BDC

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Speaker Change: Good day and thank you for standing by. Welcome to the Chicago Atlantic.

Speaker Change: BDC, Inc., Q3 2024 earnings call. At this time, all participants are in a listen-only mode.

Speaker Change: After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising that your hand is raised.

Tripp Sullivan: Thank you. Good morning. Welcome to the Chicago Atlantic BDC conference call to review the company's results.

Tripp Sullivan: On the call today will be Scott Gordon, Executive Chairman and Co-Chief Investment Officer, Andreas Bodmeier, Chief Executive Officer, Humesh Mahajan, Co-Chief Investment Officer and Chief Financial Officer, and Dino Colonna, President.

Speaker Change: Our result for a release last night in our earnings press release, which can be found in the best relations section of our website, along with our supplemental earnings presentation filed with the NCC.

Tripp Sullivan: Before we begin, I'd like to remind everyone that certain statements that are not based on historical facts made during this call, including any statements related to financial guidance, may be deemed forward-looking statements under federal securities laws. These forward-looking statements involve known and unknown risks and uncertainties that are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. We encourage you to refer to our most recent SEC filings for information on some of these risk factors. Chicago Atlantic BDC assumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call speaks only as of today, 8 November 2024. You are advised that time-sensitive information may no longer be accurate at the time of any replay or transcript reading. I'll now turn the call over to Scott Gordon.

Speaker Change: We encourage you to refer to our most recent SEC filing for information on some of these risk factors.

Speaker Change: Chicago Atlantic BDC assumes no obligation or responsibility to update any forward-looking statement.

Please note that the information reported on this call.

Tripp Sullivan: Please go ahead.

Scott Gordon: Thanks, Tripp. Good morning, everyone. A little over a month ago, we closed on the acquisition of a loan portfolio from Chicago Atlantic, renamed the company to Chicago Atlantic BDC, Inc., and began a new chapter in our history with the ticker symbol of LEAN. This was a long journey that we've updated you on throughout the year, and I'm pleased that we're now seeing the fruits of that hard work. LEAN came together as a joint venture between Chicago Atlantic and Silver Spike, combining two leading investment platforms in the cannabis industry. More importantly, LEAN is the only publicly traded BDC focused on lending to cannabis companies with net assets of over $300 million in investments in 28 portfolio companies. I am proud to be leading a great management team comprised of talent from both companies.

Thanks, Tripp. Good morning, everyone.

Scott Gordon: This was a long journey that we've updated you on throughout the year and I'm pleased that we're now seeing the fruits of that hard work.

Scott Gordon: Lean came together as a joint venture between Chicago Atlantic and Silverspike, combining two leading investment platforms in the cannabis industry.

Scott Gordon: And more importantly, Lean is the only publicly traded BDC focused on lending to cannabis companies with net assets of over $300 million in investments in 28 portfolio companies.

Thank you very much.

Speaker Change: I am proud to be leading a great management team comprised of talent from both companies.

Speaker Change: We believe our BDC gives investors access to a differentiated source of credit alpha from what is typically found in other BDCs or private credit funds.

Speaker Change: By doing this, we increase the prospects for further growth within our core activity of providing capital to high quality operators within grossly underserved sectors.

Speaker Change: In addition to our proven experience in cannabis lending, there are several reasons why we're confident in growing the non-cannabis lending vertical. The three biggest reasons are we have the right team with relevant origination and underwriting experience to succeed in non-cannabis investing.

Speaker Change: Chicago Atlantic has a track record in non-cannabis lending with a strong return profile and consistent growth in the portfolio. And lastly, Chicago Atlantic has a pipeline of self-originated deals in non-cannabis through its distinctive referral network.

Speaker Change: Since we began trading under our new name and ticker on October 2nd, lean has been well received by investors.

Scott Gordon: This is what we were hoping for when Silver Spike and Chicago Atlantic began talks. We saw an accretive opportunity from which all shareholders and team members can benefit. We shared synergistic goals, and we are excited to collaborate, innovate, and drive collective results for the benefit of our shareholders. This week's election has certainly been front and center in everyone's mind, and none more so than in the cannabis industry. As we've talked about all year, federal rescheduling is likely a next year type of event. The Trump campaign had been generally supportive of rescheduling, so we don't see too many hurdles to that ultimately occurring. Question will be the timing. SAFER Banking is going to take some time as well. With a gridlocked Congress, the timeline is likely pushed out even further than it was pre-election.

Speaker Change: This is what we were hoping for when Silver Spike and Chicago Atlantic began talks.

Speaker Change: This week's election has certainly been front and center in everyone's mind, and none more so than in the cannabis industry.

Speaker Change: As we've talked about all year, federal rescheduling is likely a next year type of event.

Speaker Change: The Trump campaign had been generally supportive of rescheduling so we don't see too many hurdles to that ultimately occurring.

Question will be the timing.

Speaker Change: Stay for banking is going to take some time as well. With the gridlock Congress, the timeline is likely pushed out even further than it was pre-election.

Scott Gordon: We have never underwritten our loans on the basis of rescheduling, SAFER Banking Act or any other legislative or regulatory relief taking place in the immediate future. We underwrite on the current market as it exists today at the federal level and on each individual state regulatory scheme. I'll hand it over to Andreas.

Speaker Change: We have never underwritten our loans on the basis of rescheduling, safer banking, or any other legislative or regulatory relief taking place in the immediate future.

Andreas Bodmeier: Thanks, Scott. Chicago Atlantic BDC has a differentiated and unique approach to targeting potential investments in underfollowed sectors, which we believe is a durable long-term strategy that has the potential to deliver attractive risk-adjusted returns with low correlation to our peers in the BDC space. We are a very different BDC. We're the only BDC focused on and able to lend to cannabis companies. We're also going to other places where the more traditional BDC lenders don't go, and we're seeing idiosyncratic opportunities that aren't available in other BDCs or private funds. We will remain focused on the cannabis industry as we're bullish on the prospects for the industry to continue growing in a dynamic fashion. Being among one of the fastest-growing sectors in the market brings a lot of opportunity for growth.

Speaker Change: Thanks, Scott. Chicago Atlantic BDC has a differentiated and unique approach to targeting potential investments in underfollowed sectors, which we believe is a durable long-term strategy that has the potential to deliver attractive risk-adjusted returns with low correlation to our peers in the BDC space.

Speaker Change: We are a very different BDC. We're the only BDC focused on and able to lend to cannabis companies.

Speaker Change: We're also going to other places where the more traditional BDC lenders don't go. And we're seeing idiosyncratic opportunities that aren't available in other BDCs or private funds.

Speaker Change: We will remain focused on the cannabis industry as we're bullish on the prospects for the industry to continue growing in a dynamic fashion.

Speaker Change: Being among one of the fastest growing sectors in the market brings a lot of opportunity for growth.

Andreas Bodmeier: We're in the early innings of the evolution of this industry that will continue to have further regulatory progress and catalysts, whether that's more states coming online for more medical and adult use. Federal legalization would be transformational, that's certainly hard to predict. We sit in a very privileged position as one of the biggest dedicated capital providers to the industry. We enjoy great relationships with many of the biggest operators in the space. We will continue to support them with capital and advice in the true spirit of a BDC partnership. We don't see ourselves as merely a lender. We like to help our borrowers think about their own success and how to get there. There's a real focus on understanding their challenges and helping them drive profitable growth.

Speaker Change: We're in the early innings of the evolution of this industry that will continue to have further regulatory progress and catalysts. Where that's more states coming online for more medical and adult use.

Speaker Change: Federal legalization would be transformational, but that's certainly hard to predict.

Speaker Change: We sit in a very privileged position as one of the biggest dedicated capital providers to the industry.

Speaker Change: We enjoy great relationships with many of the biggest operators in the space.

Speaker Change: We will continue to support them with capital and advice in the true spirit of a BDC partnership.

Speaker Change: We don't see ourselves as merely a lender. We like to help our borrowers think about their own success and how to get there.

Speaker Change: There's a real focus on understanding their challenges and helping them drive profitable growth.

Andreas Bodmeier: As the newest member of the Chicago Atlantic BDC team, I thought I might make some brief comments on the broader Chicago Atlantic platform and why we're excited about the potential of our two companies coming together for this opportunity in both cannabis and non-cannabis lending. Since our founding in 2019, Chicago Atlantic has continued to invest in growing our infrastructure. We now have offices in Chicago, Miami, and New York, and we have assembled a top-notch team of over 30 investment professionals. We have one of the largest cannabis lending platforms, our own originations team, our own real estate diligence and development team, decades of experience in direct lending, a diversified loan portfolio, and now two publicly traded vehicles. The strength and size of our platform, not to mention our operational, financial, legal, and underwriting expertise, has led to many exciting partnerships.

Speaker Change: The strength and size of our platform, not to mention our operational, financial, legal and underwriting expertise, has led to many exciting partnerships.

Andreas Bodmeier: As one of the largest and most experienced investment platforms in the industry, we're continually developing innovative approaches to support the industry's growth. We will also not sacrifice the platform we have created at Chicago Atlantic to pursue short-term or short-sighted growth. We do everything within our power to execute on the tremendous investment potential in cannabis in a manner that protects principal investment while maximizing potential long-term returns. Umesh, why don't you take it from here?

Speaker Change: As 1 of the largest and most experienced investment platforms in the industry, we're continually developing innovative approaches to support the industry's growth.

Speaker Change: We will also not sacrifice the platform we have created at Chicago Atlantic to pursue short-term or short-sighted growth.

Umesh Mahajan: Good morning. Thanks, Andreas. Before I begin my brief comments, I want to highlight our updated investor presentation that we filed last night. Turning to our highlights for Q3. Gross investment income for Q3 was $3.2 million, compared to $2.9 million in Q3 last year. Excluding the costs specifically related to the loan portfolio acquisition, expenses were $731,000 compared to $1.3 million a year ago. Investment income excluding these transaction expenses was $2.4 million, or $0.39 per share, compared with $1.6 million, or $0.26 per share a year ago. Transaction-related expenses totaled $2.4 million this quarter and have been the primary factor in the decline of our reported net investment income this year, in 2024.

Good morning. Thanks, Daniel.

So turning to our highlights for the third quarter.

Umesh Mahajan: Gross investment income for the quarter was $3.2 million, compared to $2.9 million in the third quarter last year.

Umesh Mahajan: Excluding the cost specifically related to the loan portfolio acquisition, expenses were $731,000 compared to $1.3 million a year ago.

Umesh Mahajan: investment income excluding these transaction expenses was 2.4 million or 39 cents per share compared with 1.6 million or 26 cents per share a year ago.

Umesh Mahajan: We anticipate that we'll have some additional expenses incurred in Q4, but nothing of the magnitude we have experienced to date. Reported net investment income for the quarter was $15,000, or nearly $0.00 per share for the quarter, and net assets were $82.5 million at the end of the quarter, and the net asset value per share was $13.28. You'll notice in our new quarterly investor deck that we have provided a pro forma summary of the investment portfolio as of October 1 to reflect the addition of the loan portfolio acquisition that we did. These investments were listed in detail in our most recent 10-Q, which was filed last night. I wanted to highlight some of the important distinctions between our portfolio as of September 30 and as of October 1.

Umesh Mahajan: Reported net investment income for the quarter was $15,000 or nearly 0 cents per share for the quarter.

Umesh Mahajan: So you'll notice in our new quarterly investor deck that we have provided a pro forma summary of the investment portfolio as of October 1st.

Umesh Mahajan: to reflect the addition of the loan portfolio acquisition that we did.

Umesh Mahajan: These investments were listed in detail in our most recent 10-Q, which was filed last night.

Umesh Mahajan: But I wanted to highlight some of the important distinctions between our portfolio as of September 30 and as of October 1.

Umesh Mahajan: The investment portfolio is not only 5x larger in size but also significantly more diversified. We now have 28 portfolio companies, over 23% of our portfolio is invested outside of cannabis across multiple sectors, and our average position size is about 3% compared to a more concentrated portfolio earlier. Over 79% of our portfolio is floating rate loans, and 99% of those loans have a rate floor which shields us from declining interest rates. More importantly, our expanded portfolio retains some of the attractive characteristics that they've had previously. Average yield on the portfolio is approximately 17.2%. The weighted average secured net leverage for our portfolio companies is 1.6x, and none of our loans is in non-accrual status. The greater size of this portfolio will make our previous periods less comparable in terms of net assets, investment income, and expenses going forward.

Umesh Mahajan: And our average position size is about 3% compared to a more concentrated portfolio earlier.

Umesh Mahajan: And over 79% of our portfolio is floating rate loans. And 99% of those loans have a rate floor which shields us from declining interest rates.

Umesh Mahajan: More importantly, our expanded portfolio retains some of the attractive characteristics that we've had previously. Average yield on the portfolio is approximately 17.2%.

Umesh Mahajan: The weighted average secured net leverage for our portfolio companies is 1.6 times and none of our loans is in non-equal status.

Umesh Mahajan: So the greater size of the portfolio will make our previous periods less comparable in terms of net assets, investment income, and expenses going forward.

Umesh Mahajan: But I would also note that we have issued an additional 16.6 million shares of common stock at net asset value as of September 28th in conjunction with a loan portfolio acquisition.

Umesh Mahajan: There are approximately 22.8 million shares of the company's common stock outstanding today.

Umesh Mahajan: Further, at the BDC level, we have no debt, so as our BDC takes on leverage and deploys that capital to expand our investment portfolio, we are positioned to improve the returns for the benefit of our shareholders.

Speaker Change: I'll now turn it over to Dino to talk about our origination efforts.

Thank you, Matt.

Speaker Change: We made two debt investments during the quarter. The first was with an existing borrower, Workbox Holdings, for an incremental $0.3 million.

The second was to send wellness for 3.5 million.

Speaker Change: Subsequent to quarter end, we funded approximately $5.5 million in net investments, which included the funding of three investments offset by one repayment of an existing loan.

Speaker Change: The current pipeline across the Chicago Atlantic platform is robust, with approximately $559 million in potential debt transactions across 39 unique companies.

Speaker Change: This pipeline is comprised of a diverse set of companies across cannabis and non-cannabis.

all with what we believe are attractive risk-reward characteristics.

Dino Colonna: This unique and diverse set of opportunities is a direct result of the hard work and expertise of the origination team across the Chicago Atlantic platform, a team I'm proud to be a part of and see great future with. The company had previously been limited in its ability to execute on our pipeline due to being subscale. Now, with a significantly larger and more diversified portfolio, a healthy cash position, and better prospects for leverage, we are well-positioned to capture more of the pipeline and put available liquidity to work over the next few quarters. As mentioned earlier, we are now also engaged in activity outside of cannabis and are finding unique opportunities to provide credit in other sectors where traditional capital sources aren't focused. Effective 1 October, non-cannabis investments represented approximately 23% of our portfolio, so it's worth highlighting where we currently see opportunities outside of cannabis.

Speaker Change: This unique and diverse set of opportunities is a direct result of the hard work and expertise of the Origination Team across the Chicago Atlantic platform.

Speaker Change: A team I'm proud to be a part of and see a great future with.

Speaker Change: The company had previously been limited in its ability to execute on our pipeline due to being subscale.

Speaker Change: But now, with a significantly larger and more diversified portfolio, a healthy cash position, and better prospect for leverage, we are well positioned to capture more of the pipeline and put available liquidity to work over the next few quarters.

Dino Colonna: While there are many qualities in common to how we approach cannabis and non-cannabis investing, such as low debt to enterprise or asset value, as well as strong covenants, collateral coverage, and cash flow, the non-cannabis opportunities can be classified into three sub-strategies. The first is growth capital and technology, where we're focused on industry leaders and disruptive companies that are experiencing strong growth trajectories and typically need capital to support continued revenue growth or expansion of the overall business. The second is esoteric and asset-based lending. Here, we're focused on established companies with strong cash flow profiles in industries that carry idiosyncratic risks, which limit access to traditional sources of capital. The last is liquidity solutions, which is typically focused on event-driven opportunities, including but not limited to mergers, acquisitions, refinancing, dividend recap, or other strategically driven liquidity needs to establish businesses.

Speaker Change: While there are many qualities in common to how we approach cannabis and non-cannabis investing, such as low debt to enterprise or asset value, as well as strong covenants, collateral coverage, and cashflow, the non-cannabis opportunities can be classified into three sub-strategies.

Speaker Change: The second is esoteric and asset-based lending. Here, we're focused on established companies with strong cashflow profiles in industries that carry idiosyncratic risks.

which limit access to traditional sources of capital.

Speaker Change: The last is liquidity solutions, which is typically focused on event-driven opportunities, including, but not limited to, mergers, acquisitions, refinancing, dividend re-tasks, or other strategically driven liquidity needs to establish businesses.

Dino Colonna: While we remain largely focused on the cannabis industry, the opportunities outside of cannabis are also very compelling. Whether cannabis or not, we are excited to continue creating customized financing solutions tailored to the unique needs of borrowers while maintaining a rigorous approach to underwriting and structuring. We look forward to reporting back on our progress and continuing to build the portfolio over the next several quarters. Operator, we are now ready to take questions.

Speaker Change: While we remain largely focused on the cannabis industry, the opportunities outside of cannabis are also very compelling.

Speaker Change: We look forward to reporting back on our progress and continuing to build a portfolio over the next several quarters. Operator, we're now ready to take questions.

Speaker Change: Certainly. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Our first question today will be coming from Pablo Vujanic.

Of Zuanik and Associates, your line is open, Pablo.

Pablo Zuanic: Thank you. Good morning. Look, the first question, can you just try to quantify how much liquidity do you have to put to work? You talked about no debt, so you can add leverage. Also there's cash on the balance sheet. Just remind us of what is tolerable in terms of a leverage target and the cash on the balance sheet. Just trying to think in terms of that pipeline you talked about, how much ability do you have to put to work here? Thanks.

Pablo Vujanic: Thank you. Good morning. Look, the first question, can you just try to quantify.

Umesh Mahajan: Yes. Hi, Pablo. This is Umesh. In terms of our liquidity, at the time when we closed the transaction, we had about $30 million. We currently have a little over $30 million in cash balance on our balance sheet. You're right, we do have a very concerted effort to add leverage to the balance sheet. If you think about our equity

Yes. Hi, Pablo. This is Umesh.

Pablo Vujanic: In terms of our liquidity, at the time when we closed the transaction, we had about $30 million. We currently have a little over $30 million in cash balance on our balance sheet.

Pablo Vujanic: But you're right, we do have a very concerted effort to add leverage to the balance sheet. If you think about our equity.

Umesh Mahajan: Of over $300 million. If you look at typical BDCs, we have a substantial amount of capacity to add debt. Even if we assume that we take a third of the turn of equity as our leverage, that would give us about $100 million. It's a little early to talk about exactly how much we will have on our balance sheet from the leverage facility, but those conversations are currently in progress, and we'll have an update for you on our next call.

Pablo Vujanic: of over 300 million, and if you look at typical BDCs, we have a substantial amount of capacity to add debt.

Pablo Vujanic: currently in progress and we will have an update for you on our next call.

Pablo Zuanic: Okay, thank you. Just to be clear for people out there, when you talk about that $550 million plus pipeline, that's a group pipeline, right? Just remind us, how do you decide how much of that goes to, I don't know, to REFI, the REIT, how much does go to LIEN, the BDC?

Speaker Change: Okay. Thank you. And then just to be clear for people out there, when you talk about that 550 million plus pipeline, that's a group pipeline, right? So just remind us, how do you decide how much of that goes to, I don't know, to refi, the REIT, how much does go to LEAN, the BDC? How are those decisions made? Thank you.

Pablo Zuanic: How are those decisions made? Thank you.

Umesh Mahajan: Yes. Yes, you're right. The pipeline is across the group, and we track all kinds of investments here, across real estate, non-real estate, across cannabis, non-cannabis. A couple of things I'll point out. This pipeline is a very robust pipeline. It's not just a pipeline. There's a lot more thought that has gone into identifying the opportunities that are somehow more real and actionable. We feel good about that number across the platform. In terms of allocating across the different entities, it really is a function of what is best suited for which entity, and of course, following the regulations that require us to allocate in a certain manner according to 1940 Act. In terms of the allocation, at a simplistic level, there are certain opportunities that are clearly suited better for certain entities within the platform.

Speaker Change: Yes. So, yes, you're right. The pipeline is across the group, and we track all kinds of investments here across real estate, non-real estate, across cannabis, non-cannabis, but a couple of things I'll point out. This pipeline is a very robust pipeline, so it's not just

a pipeline which could be, which.

Speaker Change: There's a lot more thought that has gone into identifying the opportunities that are somehow more real and actionable.

Speaker Change: And so, we feel good about that number across the platform. And then, in terms of allocating across the different entities,

Speaker Change: It really is a function of what is best suited for which entity, and of course, following the regulations that require us to allocate in a certain manner, according to the 1940 Act.

Speaker Change: But in terms of the allocation at a simplistic level, there are certain opportunities that are clearly suited better for certain entities within the platform, real estate entities, real estate opportunities, probably better suited for the REIT, BDC as you know.

Umesh Mahajan: Real estate entities with real estate opportunities are probably better suited for the REIT. BDC, as you know, can invest in real estate or non-real estate, but we do not have the opportunity to invest in opportunities which have an equity-linked upside or equity-linked feature in it, especially in the cannabis sector. We can do the non-cannabis sector investments with attached equity features or upside features to it. There are a whole host of considerations that go into the allocation, but we feel good about the fact that we now have the ability to provide solutions to borrowers across sectors, but definitely in the cannabis sector, we have the ability to provide a different range of structuring solutions and provide the capital for the right borrowers and the right operators. Does that answer your question, Pablo?

Speaker Change: can invest in real estate or non-real estate, but we do not have the opportunity to invest in opportunities which have an equity-linked upside or equity-linked feature in it, especially in the cannabis sector.

We can do the non-cannabis sector.

to do

Pablo Zuanic: Yeah, no, that's good color. If I may, just a couple of follow-ups here. Okay, $23 billion portfolio, it's outside cannabis. I understand the advantages of having a diversified portfolio across sectors, and you explained what type of sectors. I'm not going to draw comparisons, right? We saw the case of AFC Gamma, a very different company, right? They tried to go into commercial real estate, according to them, the investor feedback was that they wanted something focused on cannabis. I'm assuming in your view, the investor feedback you've gotten is that there is value to having this diversified portfolio as opposed to being 100% in cannabis. If you can just expand on that. Thank you.

Speaker Change: Does that answer your question, Pablo? Yeah, no, that's good, Kohler. If I may, just a couple of follow-ups here. So, okay, 23-way portfolio, it's outside cannabis. I understand the advantages of having a diversified portfolio across sectors, and you explain what type of sectors.

Umesh Mahajan: Yes, definitely. I will pass it on to Dino, who talked about the different strategies. At a higher level, yes, we definitely feel that there is a strong case to have a diversified portfolio to be able to provide a portfolio which has, by diversified, I mean not just across sectors, but also across the kind of market-related factors that can keep the portfolio robust under different scenarios. That can really be achieved well if we have a little bit of exposure to the non-cannabis section as well. Just to point out, we are not at this point thinking that we're going to make a major shift away from cannabis. Cannabis will continue to be our core. We are just adding non-cannabis at a level where we think it's an optimal mix to have the right kind of diversification.

Speaker Change: Yes, definitely. And I will pass it on to Dino, who talked about the different strategies, but

Speaker Change: At a higher level, yes, we definitely feel that there is a strong case to have a diversified portfolio to be able to provide a portfolio which has

Speaker Change: not just across, by diversified, I mean not just across sectors, but also across

the kind of

market-related

Speaker Change: factors that can keep the portfolio robust under different scenarios and that can really be achieved well if we have a little bit of

Speaker Change: And we are just adding non-cannabis at a level where we think it's an optimal mix.

Speaker Change: to have the right kind of diversification. But, you know, you want to jump in and talk a little bit more about the non-cannabis strategy here. Yeah, thanks, Abhishek. Just quickly, what I would say is, you know, diversification is great, and we're excited to have a bit more diversification in the portfolio, but I don't think we'd be doing this if we were giving up...

Umesh Mahajan: Dino, you want to jump in and talk a little bit more about the non-cannabis strategy here?

Dino Colonna: Yeah. Thank you, Mahesh. Just quickly, what I would say is diversification is great. We're excited to have a bit more diversification in the portfolio. I don't think we'd be doing this if we were giving up or looking at less attractive opportunities. The non-cannabis part of the book from a relative risk-reward perspective is just as interesting as cannabis. I think both from a diversification perspective, but also the returns we're getting and the risks we're taking are comparable. It just felt like a really natural fit for the extension outside of cannabis.

or looking at less attractive opportunities. The non-economists.

Speaker Change: part of the book from a relative risk-reward perspective is just as interesting as cannabis.

Pablo Zuanic: Thank you. One last one. Obviously, you talked at length on the regulatory environment, the political changes. I'm not going to get into that here, but what would be your read at the moment in terms of state of the industry? Particularly when we look at some of the results we've seen during the Q3 season. Are things pretty much in line with your expectations? If you can just comment on that. Thank you.

Speaker Change: Thank you. And one last one. I mean, obviously, you talked at length on the regulatory environment, you know, the political changes. I'm not going to get into that here.

Umesh Mahajan: Yeah, I think from the perspective of what we are seeing across the various markets, because we can't look at cannabis as a monolithic market across the country. We have to look at it from a state-by-state basis. I think if we take a longer-term view, yes, things are progressing well across all other markets, notwithstanding certain specific events that we might've seen, for example, in Florida or New York. There are bumps in the road, but overall, the long-term thesis, the secular growth thesis still holds strong across the sector. In terms of what these operators are doing across each state, I think we are now seeing the better operators surface to the top. That is exactly what we focus on as lenders.

Speaker Change: Yeah, I think from the perspective of what we are seeing across the

Speaker Change: across the various markets because we can't look at cannabis as a one monolithic market across the country. We have to look at it from a state-by-state basis.

Speaker Change: thesis, the secular growth thesis still holds strong across the sector.

Speaker Change: and in terms of what these operators are doing across each state, I think we are now seeing the better operators surface to the top.

Speaker Change: And that is exactly what we focus on as lenders. We are looking for operators who have navigated through all of these events well.

Umesh Mahajan: We are looking for operators who have navigated through all of these events well, have a better strategy for not only managing their costs effectively, but also position themselves well for the growth. There's the question. We've seen growth strategies, both organic as well as M&A, across different markets being manifest in different forms. We are able to evaluate those strategies and choose the companies which have the right credit metrics. Overall, we feel that the sector is performing the way we would on a longer-term basis. There is clearly a need for capital, and we think we are best positioned to provide that capital. Scott, do you have any additional comments on the overall shape?

have a better strategy for not only

Overall, the

Speaker Change: We feel that the sector is performing the way we would on a longer term basis. There is clearly a need for capital and we think we are best positioned to provide that capital.

Speaker Change: Scott, do you have any additional comments on the overall state?

Scott Gordon: Yeah. No, I would just say, as we mentioned in the call, Pablo, as far as regulatory changes, we've always been hopeful, yet skeptical that any of those would prevail. I think the sell-off that we've seen in the market is a result of the combination of Florida getting rejected and what the market might think the Republican regime means for progress on the federal front. It doesn't really. It truly doesn't matter to us. It's not in our models. I think it's business as usual for us, which is a market that's clearly growing, that continues to maintain momentum of reform, regulatory reform, and legislative progress at the state level. A murky and impossible trajectory to predict in terms of federal change, other than perhaps 280E and rescheduling. All that's fine for us.

Scott Gordon: You know, I think the sell off that we've seen in the market as a result of, you know, the combination of Florida getting rejected and what the market might.

change other than you know perhaps 280E and rescheduling.

Scott Gordon: And all of that is sort of fine for us. We've always felt that.

Scott Gordon: We've always felt that the growth is there, and the complexity in underwriting and being a good lender to the space is challenging. I think the backdrop of how we operate as a lender remains the same. We can pick and choose among a very selective subset of operators in the space that qualify for being good credits for our business. We think that's unchanged in this environment despite what's been a tough quarter for some of the public operators and what's a volatile, maybe macro perspective currently. I think we're undeterred by all of that, and it's business as usual.

Scott Gordon: you know, the growth is there, and the complexity and underwriting.

Scott Gordon: and being a good lender to the space is challenging. And I think the backdrop of, you know, how we operate as a lender.

Scott Gordon: remains the same. You know, we can pick and choose among a very selective subset of operators in the space that qualify.

Scott Gordon: being good credit for our business. And we think that's unchanged in this environment despite.

Pablo Zuanic: Thank you. I will add one more, if I may. Obviously the demand, supply, and balance for capital in the industry remains. With the drop in share prices, raising equity will probably be even more difficult. I suppose that's good for the debt providers, right? Correct me if I'm wrong, but at the same time, in terms of the demand for debt capital. At the same time, comment on the competitive landscape, right? We saw Curaleaf, I think, refinance with Regional Bank at like 7.9% rate. They said 7.99%. Are we seeing more competition from that side of the business, or it's still very limited? That's all. Thank you.

Speaker Change: I will add one more if I may. So obviously the demand supply imbalance for capital in the industry remains, and with the drop in share prices, raising equity will probably be even more difficult.

Speaker Change: So, I suppose that's good for the debt providers, right? But I mean, correct me if I'm wrong, but at the same time, in terms of the demand for debt capital.

Speaker Change: But, at the same time, comment on the competitive landscape, right? We saw Coralief, I think, refinance with a regional bank at like 7.9% rate, they said 7.99. But, you know, are we seeing more competition from that side of the business or is that still very limited? That's all.

Umesh Mahajan: I think-

Speaker Change: I think – you go ahead. Go ahead, Umesh. You start.

Scott Gordon: Pablo.

Umesh Mahajan: Okay. You go ahead. Go ahead, Umesh Mahajan. You start. I was just going to say that, yes, we are seeing some of those banks stepping in a few specific instances over the last year. Overall, Pablo, even if you, again, look at the overall market and the demand for the capital that exists across all of the country, the demand is very, very robust, and the suppliers of capital are very few, as you know. It's not as if we've seen a rush of capital come into the lender space, and it's not as if there is a massive amount of liquidity available to support the demand that exists. Scott, sorry, please go ahead.

I was just going to say that, yes, the.

Umesh Mahajan: We have seen some of those banks stepping in, in a few specific instances over the last year.

Speaker Change: But overall, Pablo, even if you, again, look at the overall market and the demand for the capital that exists across all of the country,

Speaker Change: The demand is very, very robust and the suppliers of capital are very few, as you know, and it's not as if we've seen a rush of capital come into the lender space.

Scott Gordon: And it's not as if there is a massive amount of liquidity available to support the demand that exists, but Scott, sorry, please go ahead.

Scott Gordon: Yeah, no, I was just actually going to say the same thing. Look, I think capital coming into the space is good for everyone, and it's good for us. I think that if you take a step back and focus out the inherent imbalance of the demand for capital relative to the limited sources of supply that drive our business in terms of being able to dictate really attractive terms with respect to pricing and structure, it's still there. I think the nuclear winter of there being very little capital available on the credit side that we saw maybe 12 or 18 months ago is falling a bit, which is good. I would still generally characterize the setup as being one of a pretty significant imbalance still, despite, on the margin, some new sources of capital coming in on the banking side and elsewhere.

Scott Gordon: Yeah, no, I was just actually going to say the same thing that, look, I think, you know,

Speaker Change: capital coming into the space is good for everyone and it's good for us and but I think that if you take a step back

Speaker Change: and focus out the inherent imbalance of the demand for capital relative to the limited sources of supply.

Speaker Change: that drive our business in terms of being able to dictate really attractive terms with respect to pricing and structure, it's still there. So I think the nuclear winter of like they're being

Speaker Change: Very little capital available on the credit side, you know, that we saw maybe 12 or 18 months ago is falling a bit, which is good. But I would still generally characterize the setup as being one of a pretty significant imbalance still, despite.

Speaker Change: on the margin, some new sources of capital coming in on the banking side and elsewhere.

Pablo Zuanic: Great. Thanks very much.

Speaker Change: Thank you very much. And, Dennis, do you want to weigh in from the Chicago Atlantic perspective on the same topic?

Scott Gordon: Andreas, do you want to weigh in from a Chicago Atlantic perspective on the same topic?

Andreas Bodmeier: I think what we're seeing is from the bank world, the interest and the deals that are getting executed come with very high deposit balances. Lending to cannabis businesses by banks appears to be used to a large extent to gather deposits, which for many operators is not a good solution.

Dennis: I think what we're seeing is from the bank world, the interest and the deals that are getting executed come with very high deposit balances. So lending to cannabis businesses by banks appears to be used to a large extent to gather deposits, which.

for many operators is not a good solution.

Scott Gordon: Great. Thank you.

Thank you.

Operator: There appears to be no further questions. I'd now like to turn it back to Scott Gordon for closing remarks.

Speaker Change: And there appears to be no further questions. I'd now like to turn it back to Scott Gordon for closing remarks.

Scott Gordon: Great. Well, thanks everybody for joining. Appreciate your time this morning, and we look forward to staying in touch with you. Take care.

Scott Gordon: Great. Well, thanks everybody for joining. Appreciate your time this morning and we look forward to staying in touch with you.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Take care.

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