COMMITMENTS AND CONTINGENCIES
As of December 31, 2024 and 2023, the Company had the following commitments to fund various investments:
| | | | | | | | | | | | | | |
| | As of
December 31, |
| | 2024 | | 2023 |
| | | | |
| Total loan commitments | | $ | 361,278,431 | | | $ | 431,239,913 | |
| Less: drawn commitments | | (350,943,832) | | | (421,239,913) | |
| Total undrawn commitments | | $ | 10,334,599 | | | $ | 10,000,000 | |
The Company from time to time may be a party to litigation in the normal course of business. As of December 31, 2024, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.
On March 17, 2023, the Company appointed Brandon Hetzel to serve as its Chief Financial Officer and Treasurer in place of Brett Kaufman, effective as of such date, with Mr. Kaufman’s employment with AFC Management, LLC, the Company’s external manager (the “Manager”), terminated, effective as of April 17, 2023 (the “Separation Date”). In connection with his termination, Mr. Kaufman received (i) twelve (12) months’ worth of his current base salary, (ii) his annual target bonus, (iii) continued payment by our Manager of 100% of the COBRA premiums for him and his dependents for a period of twelve (12) months following his Separation Date, (iv) accelerated vesting of one (1) additional tranche of each of Mr. Kaufman’s outstanding equity awards, and (v) extension of the exercise period for Mr. Kaufman’s outstanding options until one (1) year following the Separation Date, contingent on Mr. Kaufman executing and not revoking a release of claims in favor of the Company. During the year ended December 31, 2024 and 2023, the Company recorded zero and approximately $0.7 million in severance expense within general and administrative expenses within the consolidated statements of operations, respectively.
The Company provides loans to companies operating in the cannabis industry which involves significant risks, including the risk of strict enforcement against the Company’s borrowers on the federal illegality of cannabis, the Company’s borrowers’ inability to renew or otherwise maintain their licenses or other requisite authorizations for their cannabis operations, and such loans lack of liquidity, and the Company could lose all or part of any of the Company’s loans.
The Company’s ability to grow or maintain its business with respect to the loans it makes to companies operating in the cannabis industry depends on state laws pertaining to the cannabis industry. New laws that are adverse to the Company’s borrowers may be enacted, and current favorable state or national laws or enforcement guidelines relating to cultivation, production and distribution of cannabis may be modified or eliminated in the future, which would impede the Company’s ability to grow and could materially adversely affect the Company’s business.
Management’s plan to mitigate risks include monitoring the legal landscape as deemed appropriate. Also, should a loan default or otherwise be seized, the Company may be prohibited from owning cannabis assets and thus could not take possession of collateral, in which case the Company would look to sell the loan, which could result in the Company realizing a loss on the transaction.