Welcome to the AFC Gamma First Quarter 2022 Earnings Call. My name is Vanessa, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later will conduct a question-and-answer session. [Operator Instructions] I will now turn the call over to Gabriel Katz, Chief Legal Officer.

Good morning and thank you all for joining AFC Gamma's earnings call for the first quarter of 2022. I am joined this morning by Leonard Tannenbaum, our Chief Executive Officer; Jonathan Kalikow, our Head of Real Estate; Robyn Tannenbaum, our Head of Origination and Investor Relations; and Brett Kaufman, our Chief Financial Officer. Before we begin, I would like to note that this call is being recorded. Replay information is included in our May 10, 2022 press release and is posted on the Investor Relations section of ASC Gamma’s website at afcgamma.com, along with our first quarter earnings release and investor presentation. Today’s conference call includes forward-looking statements and projections that reflect the company’s current views with respect to, among other things, future market growth capital markets activity portfolio yield and financial performance and projections in 2022. These statements are subject to the inherent uncertainties in predicting future results and conditions, and certain factors could cause actual results to differ materially from those projected in these forward-looking statements. New risks and uncertainties arise over time, and it is not possible for the company to predict those events or how they may affect these statements. Therefore, you should not place undue reliance on these forward-looking statements. Please refer to AFC Gamma's most recent filings with the SEC for certain significant factors that could cause actual results to differ materially from those – from these forward-looking statements and projections. During this call, we will also refer to distributable earnings, which is a non-GAAP financial measure. Reconciliations of net income, the most comparable GAAP measure to distributable earnings, can be found in AFC Gamma's earnings release and investor presentation available on AFC Gamma's website. The format for today’s call is as follows; Len will provide introductory remarks, an overview of our first results 2022 performance and strategic commentary; Jon, will discuss AFC Gamma's portfolio; Robyn will discuss the origination pipeline, Brett will summarize our financial results. We will then open the line for Q&A. With that, I'll now turn the call over to our Chief Executive Officer, Leonard Tannenbaum.

Thank you, Gabe, and good morning and welcome to AFC Gamma's earnings call for the first quarter of 2022. I'd like to thank our analysts and investors for joining us today to discuss our results. Before turning to our first quarter results, I would like to briefly discuss the macro environment for cannabis. With a broader backdrop of rising interest rates and geopolitical unrest, combined with cannabis specific factors, such as the uncertainty of regulatory change and pricing compression, cannabis equities have been under pressure. Despite constraints in the equity markets, many cannabis operators have growth plans either to expand in existing states or enter new states, and these growth plans still need to be completed. As a result, many operators are seeking debt to finance their growth, which allows AFC Gamma to maintain its high level of selectivity while maintaining our interest margins. Now turning to our earnings. In the first quarter of 2022, AFC Gamma generated distributable earnings of $0.62 per weighted average share of common stock. Distributable earnings is the primary metric that the Board considers when declaring AMC Gamma's quarterly dividend. As a reminder, the Board of Directors declared a $0.55 dividend per share in the March quarter, which was paid on April 15, 2022, to shareholders of record as of March 31, 2022. This was the third consecutive quarterly increase to the dividend that was paid to our public shareholders. Since going public, we have generated distributable earnings well in excess of our dividend each quarter and currently have rollover income of approximately $3.1 million or $0.16 per share. At this time, the Board expects the current quarterly dividend level should be at least $0.55 per share over the course of 2022. That quarterly dividend would produce, if not increased, a $2.20 annual dividend per…

Thank you, Lynn. As an enterprise value lender, we carefully evaluate a company's cash flows, licenses, capital structure and real estate prior to any loan we originate. Since our inception, nearly all of AFC Gamma's loans have had real estate as part of the collateral. And often, underwriting real estate is the most challenging aspect of diligence, especially when any construction or rehabilitation of the property is involved. One of our core competencies and key differentiating factors as a lender focused on cannabis is our expertise and experience in both real estate and real estate finance. In the past two years, we have seen many operators experience increase in construction costs and delivery comps. So, when underwriting loan, we utilize our knowledge of current construction conditions to enable us to correctly assess risks and timelines. We are able to leverage the expertise of our in-house construction team on loans made cannabis entrepreneurs, entrepreneurs who may have little experience in commercial construction, thus providing borrowers with valuable insights while also amplifying AFC Gamma's collateral protection. In order for us to land on a construction project, we must have vetted and approved the borrowers, general contractors, architects, engineers, construction documents, timelines, budgets and contracts, but our work does not stop there. Once construction has begun our in-house team with the assistance of local third-party specialists oversee construction progress to make sure the build is according to plan, invoices are accurate and processed timely, construction procedures and safety measures are followed, and there is continued adherence to the project budget. Despite this challenging environment for many operators currently in cannabis, we believe our careful underwriting prior to loan origination and oversight throughout the life of our loans has enabled us to create and build upon a well-secured portfolio. I'll now turn the call over to Robyn

Thank you, Jon. As a reminder, ASC Gamma is an institutional lender to the cannabis industry. The loans that we make are typically secured by three pillars: cash flow, licenses and real estate. The companies that we lend to are domestic single and multi-state operators, which include those that are privately held as well as those listed on the Canadian exchanges. Our origination platform is focused on both expanding loans with a variety of our existing borrowers and continually sourcing new borrowers. From January 2020 through May 9, 2022, we have sourced approximately $15 billion of transactions, which represents over 550 deals. The pipeline remains strong with an active pipeline of $783 million, yet it remains difficult to predict both the timing of converting and closing these deals. When sourcing deals incumbency has proven to give us an important edge, closing over $150 million in deals so far this year where we were the incumbent lender. We continue to source new transactions and expand our lending platform, while maintaining a high degree of selectivity. As of May 9th, from inception to-date, our selectivity ratio was 3.9%. Currently, our portfolio consists of 12 borrowers across 16 states. We remain focused on creating a portfolio that is diversified across AFC Gamma borrowers. As a reminder, currently, AFC Gamma has not lent to any borrowers with their primary operations in California, Washington, Oregon or Oklahoma, four states that allow unlimited licenses and have continually experienced pricing pressure. Before turning the call over to Brett, as Head of AFC Foundation, I'm excited to spotlight another deserving organization that we recently donated to, in conjunction with Brady Cobb, the Former CEO of our Former Borrower, One Plant. The Weldon Project is dedicated to funding social change and financial aid for those who are still serving prison time for nonviolent cannabis-related defenses, through extensive partnerships throughout the legal cannabis industry, The Weldon Project launched the Mission Green initiative to raise the bar for awareness, social justice and social equity by providing unique ways for cannabis businesses and consumers to participate in a nationwide campaign aimed to provide relief to those who have been negatively impacted by prohibition. At AFC Foundation, we were impressed by how Weldon underwrite has turned a negative experience into becoming a positive voice, bringing about social change, and we look forward to supporting this deserving organization. I will now turn it over to Brett, to review our financials.

Thank you, Robyn. We are pleased to begin the current fiscal year with strong results in the first quarter. For the quarter ended March 31st, 2022, we recorded GAAP net income of $10.2 million or earnings of $0.53 per basic weighted average common share. Compared to our fourth quarter of 2021, we had GAAP net income of $7 million or earnings of $0.43 per basic weighted average common share. For the first quarter of 2022, we generated net interest income of $16.9 million and distributable earnings of $11.9 million or $0.62 per basic weighted average common share compared to net interest income of $13 million and distributable earnings of $8.5 million or $0.52 per basic weighted average common share for the fourth quarter of 2021. As of March 31, 2022, AFC Gamma's portfolio consisted of $420.1 million of current commitments with $370.6 million funded across our 13 borrowers. During the first quarter, we closed an additional $46.9 million of new commitments to existing borrowers sold or we repaid on $45 million from three investments, and we funded $51.5 million of new and existing commitments. As of May 9, 2022, we had $482.7 million of current commitments across 12 bars. The weighted average portfolio yield to maturity, which is measured for each loan over the life of such loan, was approximately 19% as of March 31, 2022, as well as -- as of December 31, 2021. As mentioned on our last earnings call, we believe providing distributable earning is helpful to stockholders in assessing the overall performance of AFC Gamma's business. Distributable earnings represents the net income computed in accordance with US GAAP, excluding non-cash items such as equity compensation expense, and the unrealized gains or losses, provision for current expected credit losses, also known as CECL, or other non-cash items…

We will now begin the question-and-answer session. [Operator Instructions] We have our first question from Harrison Vivas with Cowen & Company.

Great. Thanks so much for taking the questions. So Len, in the past couple of quarters, you've given origination targets for the year. I think it was $500 million to $700 million was the most recent for gross originations and $300 million to $600 million for net of repayments. So can you just kind of refresh us on your targets for this year, or do you still hold? And kind of what's your outlook for 2022? A – Leonard Tannenbaum: Well, the good news is we do have a deal volume to be able to accomplish that. The bad news is, since you heard me say that we're not going to sell stock below book or that we currently don't anticipate sell stock below book, then I don't know how we're going to raise enough capital to deploy to satisfy that demand. So instead, you get more selective, you get better rates, you get even better deals. So it's great for the shareholders. You stay fully deployed and continue to earn a lot of money, but we're not able to expand potentially at the rate that we could, given our strong deal flow. So I still hope that we can do that for the year, we do have the deal flow to do it. I just -- I don't know how many payments we got and I don't know how much capital workover is.

Understood. Would you consider allowing your debt-to-equity ratio kind of tick up on the debt side? A – Leonard Tannenbaum: Well, we will because we took some senior debt where -- and we do intend to use it and deploy it at a really great cost of capital. But we don't anticipate issuing any more -- look, we're very lucky and/or good to issue $100 million of fixed-rate debt with a 5.75 coupon. I mean, to put it in perspective, the Aries nine-year debt in Aries is a BBB- or BBB multibillion dollar BDC is trading at 6.2%. So I mean we have a very good cost of capital on that $100 million debt piece, and we're really pleased with that. Having said that, we're not going to issue more of it because I don't think we'll be able to issue more of it at that rate. And so I think we're going to stick with our debt-to-equity ratios, and we're going to stick to our discipline to make accretive equity deals for like this last one for our shareholders where we made $0.41 a share in accretive book value on the last equity raise.

Absolutely. Last one for me. Just given [indiscernible] cannabis bill, do you think that jeopardizes any form of the safe at getting past this session? And then kind of what's your outlook on some form of the safe passing this legislative session. A – Leonard Tannenbaum: I've been out in different podcasts and panels talking about this. And it's funny. I was hoping, and it turns out that I still believe that it's going to pass on lame-duck without capital market support, which actually is the perfect storm for AFCG and the other lenders, you're going to get additional institutions that can invest in us, but not necessarily the widespread of banks and other lenders that can lend to the industry. So I think it's important to think of AMCG as a conduit that look, it's a lot of work, diligence in these companies, working with them. These are direct deals. They're not sponsor-backed deals. There's a lot of KYC and anti-money laundering stuff that we do. So I think the banks are going to utilize us lending group as the conduit to the operators. And I think that role should generate really good yields.

Understood, Thanks so much. I’ll hop back in the queue

We have our next question from John Hecht with Jefferies.

Hey, guys. Thanks very much and congratulations on a good quarter, and I'm getting the revolver. That sounds like that's a good opportunity. I'm wondering, can you talk about – then I forget for a moment that, there's you trade below book value, considering your good pipeline is that like, assuming repayments were somewhat normal and you guys worked through your pipeline in a fashion that's consistent with the history. Like, how big might the balance should be – this is not asking for guidance, it's just sort of saying, if you didn't have constraints, how -- much big you grow this year, just to give us a sense for the opportunity?

I think if the stock traded at a level that allowed us to do equity offerings that added to book value for our shareholders, I think, the same plan we outlined last quarter and maybe the same indication the quarter before holds where I think we could do $500 million to $700 million of gross originations. We could do – we're going to get $100 million to $300 million -- $100 million to $200 million of repayments, maybe even a little more. We could net and grow the balance sheet by around $200 million to $300 million by the end of the year. I still think that, that's the sort of benchmark. But it could be better or worse, depends on the repayments and it depends on where the stock trades.

Yep. And the – you talked about maybe a little bit of disruption on the macro basis that maybe hitting some of the industry and maybe even some of the lenders. Can you give us an update of competition? It sounds like you're even able to kind of successfully firm up your requirements on a deal and still get a lot of volume, what's the competitive environment like in that regard?

Well, the good news for us is AFCG is not our only a pocket of capital. So we have an expanded pocket of capital available to our clients. And that allows us to take hold sizes that are some of the biggest in the industry. And you could see that on the Bloom deal, you could see us holding $100 million of Verano, where the REIT doesn't hold all of it, but we hold $100 million of Verano. And so that ability to do large deals to be – to develop the certainty of capital necessary for our clients, when they want to build large projects is really important to them, allows us to command a premium price. It allows us to lead a transaction. And I think that's really important. So I feel like, we're really well positioned in the industry. There are a couple of competitors. Their stocks are also trading down. I can't tell you whether they're going to issue stock below book value, but we don't intend to. And so they'll run out of capital, and they also – my guesses have smaller hold sizes than we do.

Okay. Wonderful. Thanks very much for – for taking my questions.

Sure.

We have our next question from Mark Smith with Lake Street Capital Markets.

Hi, guys. First just kind of a big picture question, are you seeing any industry improvement in the mature states, and I know you're not in California, Washington, Oregon, but are you seeing any improvement there, or are you seeing any continued weakness in some of the states where you may be operating?

So really, it's going state by state. I mean, we're seeing Pennsylvania cultivation fall off a cliff. And we're seeing Arizona, where we have a large exposure actually firm up a little bit, which is – it took a while to firm up after Croctober, but it is firming. Michigan continues on decline and staying near the bottom. There's way too much oversupply. At the same time, New Jersey is great, right? So it's -- you're looking at every state, the constantly changing dynamics and we're reevaluating and really keeping tabs on the pulse of what's going on. It leads us to want to be, in general, with multi-state operators versus single state operators, because I think single state risk is really enhanced from two or three years ago.

Okay. And then as we see these volatile equity markets, how much of an opportunity does this create for these guys looking for debt financing rather than equity financing and pushing them operators into you maybe rather than equity markets?

I mean it creates really a much better opportunity because, as I said, I think in previous calls, one of our biggest competitors in partners, right, were Canaccord and Seaport in terms of their ability to syndicate all those partners that they're sent at all, all the target, many of the partners that they syndicate to are full up on their cannabis exposure and/or watching Curaleaf funds, trade 95 or south, watching Curaleaf bonds trade down, watching tetracentron bonds trade down, they're taking losses, but also rates have gone up to 100 basis points, and that does affect the high end of the market, right, the more secure ones. So I think that rate back up really provides a floor for our discussions with the second-tier multi-state operators and saying, look, Curaleaf is borrowing at X [ph] Trulieve is borrowing X industry leaders, you're wide of that. And then it's just a question of how why you are. And so that conversation goes a lot better when those interest rates back up from the 9%, 10% to 11% to 12%. And so everything moves from there. As always happens, right? You take your industry benchmarks and new benchmark off of them.

Okay. Great. Thank you.

And thank you. We have no further questions in queue. I will now turn the call over to Leonard Tannenbaum, CEO for closing remarks.

We really appreciate everyone attending the call. We had a very exciting quarter. We are all excited about our prospects as lending to the industry and our customers' prospects in developing their business plans, and we look forward to continue reporting to you in the future quarters our progress.

And thank you, ladies and gentlemen. This concludes our conference. We thank you for participating. You may now disconnect.