FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-40564 CHICAGO ATLANTIC BDC, INC. Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Exact name of registrant as specified in its charter) Maryland 86-2872887 (State or other jurisdiction of inco ...

Chicago Atlantic BDC, Inc. Reports Second Quarter 2025 Financial Results Exhibit 99.1 Portfolio and Investment Activity Results of Operations For the three months ended June 30, 2025, total investment income was approximately $13.1 million. For the three months ended June 30, 2025, the Company incurred net expenses of approximately $5.4 million, resulting in net investment income of approximately $7.7 million, or $0.34 per weighted average share, and a net increase in net assets from operations of approxima ...

Financial Reporting - Chicago Atlantic BDC, Inc. will report its financial results for Q1 2025 on May 14, 2025, before market open[5] - The earnings conference call and live audio webcast will take place at 9:00 a.m. Eastern Time on May 14, 2025[5] - The press release regarding the financial results is included as Exhibit 99.1 to the Current Report[5]

Financial Performance - For the three months ended March 31, 2025, total investment income was $11,923,002, a significant increase from $2,760,247 for the same period in 2024, representing a growth of approximately 332%[13] - Net investment income for the three months ended March 31, 2025, was $7,648,421, compared to a net loss of $79,809 for the same period in 2024, indicating a turnaround in performance[13] - The net increase in net assets resulting from operations for the three months ended March 31, 2025, was $7,614,357, compared to $519,811 for the same period in 2024, showing a substantial improvement[13] - The net investment income per share for the three months ended March 31, 2025, was $0.34, compared to a loss of $0.01 per share for the same period in 2024[13] - The weighted average shares outstanding for the three months ended March 31, 2025, were 22,820,386, compared to 6,214,941 for the same period in 2024, indicating a significant increase in shares[13] Expenses and Cash Flow - Total expenses for the three months ended March 31, 2025, were $5,249,058, up from $2,840,056 in the same period in 2024, reflecting an increase of approximately 84%[13] - The net cash provided by (used in) operating activities was $(7,264,322) for the current period, a decrease from $2,103,079 in the prior year[20] - Cash and cash equivalents at the end of the period were $14,921,739, down from $33,160,294 at the end of March 31, 2024, reflecting a decrease of approximately 55.1%[20] - The company incurred offering costs of $989,645 during the current period, compared to $756 in the previous year, indicating increased financing activities[20] - The net cash used in financing activities was $(1,746,345), compared to $(1,554,420) in the prior year, showing a slight increase in cash outflow[20] Investment Portfolio - Total investments amount to $288,403,000, with a fair value of $289,264,000, representing 96.1% of net assets[24] - Total Cannabis investments amount to $210,854 million, representing 70.2% of net assets[23] - The company holds equity investments valued at $743,000, with a fair value of $688,000, accounting for 0.2% of total assets[24] - The total fair value of cannabis-related investments is $202.67 million, with a par value of $203.45 million[34] - The total amount of first lien senior secured U.S. debt is $240,063 million, which is 80.0% of net assets[23] Risks and Future Outlook - The company has identified various risks that could impact future performance, including changes in regulation affecting the cannabis industry and potential economic disruptions[8] - The company anticipates continued growth in investment income and is focused on expanding its portfolio and operational capabilities[7] - The company faces significant risks related to interest rate fluctuations, which could materially affect net investment income[112] - The company manages various risks, including market risk and credit risk, through diversified exposures and control mechanisms[102] Shareholder Distributions - The Company declared a quarterly dividend of $0.34 per share on March 14, 2025, totaling $7,758,931, compared to a dividend of $0.25 per share totaling $1,553,736 declared on March 8, 2024[155] - The total distributions for the tax year ended March 31, 2025, were $18,625,335, compared to $9,819,273 for the tax year ended March 31, 2024, indicating a substantial increase[173] Tax and Compliance - The Company intends to maintain its tax treatment as a RIC, requiring it to distribute at least 90% of its investment company taxable income annually[78] - The Company evaluates tax positions and has no uncertain tax positions as of March 31, 2025, indicating a stable tax compliance status[82] - As of March 31, 2025, the Company had $0 in accrued excise taxes, down from $88,709 as of December 31, 2024, indicating improved tax management[79] Valuation and Fair Value - The company utilizes significant unobservable inputs for valuing securities, categorized as Level 3 assets[25] - The company has adopted a multi-step valuation process for its investments, which includes establishing preliminary valuations based on independent third-party valuations[65] - The fair value of First Lien Senior Secured Loans increased from $239,860,206 as of December 31, 2024, reflecting a net change in unrealized appreciation of $74,055[122] Management and Governance - The Adviser waived approximately $658,477 of general and administrative expenses for the three months ended March 31, 2025, which will not be subject to future reimbursement[144] - The Company had co-investments with affiliates amounting to $245,658,531 as of March 31, 2025, down from $272,816,695 as of December 31, 2024[148] - The Expense Limitation Agreement caps the Company's operating expenses at an annualized rate of 2.15% of net assets through September 30, 2025[136]

Company Overview - The company completed its IPO on February 8, 2022, raising approximately $83.3 million from the sale of 6,071,429 shares at $14.00 per share[20]. - The company has been renamed "Chicago Atlantic BDC, Inc." with a new ticker symbol "LIEN" effective October 2, 2024[29]. - As of December 31, 2024, Chicago Atlantic managed $1.9 billion in Capital Under Management, which includes total committed investor capital and available leverage[48]. - The company is classified as an emerging growth company and expects to remain so for up to five years or until certain revenue or market value thresholds are met[191][192]. - The company is regulated as a Business Development Company (BDC) under the 1940 Act, which imposes restrictions on transactions with affiliates and requires a majority of independent directors[195][196]. Investment Strategy - The company has an active pipeline of investments, currently reviewing approximately $644 million in potential investments[35]. - The company has expanded its investment strategy to include companies outside the cannabis and health and wellness sectors, effective April 22, 2024[22]. - The company focuses on investing in private leveraged lower middle-market and middle-market companies with up to $100 million in EBITDA[35]. - The company’s investment strategy includes secured debt, unsecured debt, equity warrants, and direct equity investments[32]. - Chicago Atlantic's investment strategies focus on opportunistic private credit and equity, particularly in esoteric industries and specialty asset-based loans[48]. - The investment strategy includes generating current income from debt investments and capital appreciation from equity-related investments[75]. Market Conditions - The U.S. state-legal cannabis retail sales are estimated to reach $32 billion in 2024 and approximately $58 billion by 2030, indicating significant growth potential in the cannabis market[52]. - In 2024, the capital raising environment for private credit finished with $209 billion in final closes, a 5% increase over 2023, highlighting strong momentum in the market[62]. - The cannabis industry has seen a significant reliance on debt financing, with debt capital increasing as a percentage of total capital raised, reflecting a shift from equity funding[56]. - In 2024, public and private cannabis equity raised only $0.5 billion while debt raised increased to $1.2 billion, showing a growing preference for debt solutions[58]. - The number of cannabis mergers and acquisitions decreased to 45 in 2024, down from 67 in 2023, indicating a potential slowdown in market activity[59]. - Chicago Atlantic expects demand for credit-based solutions to increase as companies prefer less dilutive forms of growth capital amid a scarcity of equity capital[61]. - The lower middle-market and certain parts of the middle-market are expected to provide better risk-adjusted return potential due to reduced competition from banks and large funds[64]. - The cannabis industry remains fragmented and subject to complex regulations, creating significant barriers to entry for new businesses[52]. Management and Operations - The company has restructured its board and management team following the Loan Portfolio Acquisition and Joint Venture[28]. - The management team possesses extensive expertise in cannabis-related and non-cannabis industries, enhancing the company's ability to evaluate investment opportunities[76]. - The company does not have any employees; day-to-day management is handled by the Adviser and its Investment Committee[125]. - The Adviser is responsible for determining fair value, with oversight from the Board of Directors, and utilizes independent third-party valuation firms when necessary[111][112]. - The Adviser provides administrative services, including maintaining financial records and preparing reports to stockholders[170]. Investment Process - The investment process involves a multi-channel sourcing strategy, focusing on strong management teams and direct negotiations with potential portfolio companies[89]. - The company employs a rigorous due diligence process, including preliminary and confirmatory due diligence phases before final investment approval[92][93]. - Investment criteria include targeting businesses with durable competitive advantages and consistent operational performance[87]. - The investment rating system is used to monitor the credit profile and expected returns on each investment, with a five-level numeric rating scale[104]. Financial Management - The company has entered into an Expense Limitation Agreement, capping operating expenses at an annualized rate of 2.15% of net assets through September 30, 2025[26]. - The base management fee is calculated at an annual rate of 1.75% of the company's gross assets, excluding cash and cash equivalents[135]. - The incentive fee on income is based on the company's "Pre-Incentive Fee Net Investment Income," with a hurdle rate of 1.75% per quarter (7% annualized)[136]. - The incentive fee on capital gains equals 20% of cumulative realized capital gains, less cumulative realized capital losses and unrealized capital depreciation[139]. - The company’s liabilities include accrued management fees and incentive fees based on realized capital gains, affecting the NAV calculation[118]. Compliance and Ethics - The company has a formal code of ethics governing the conduct of its officers and directors[182]. - The investment allocation policy aims to manage conflicts of interest in allocating investment opportunities among funds managed by the Company and its affiliates[178][180]. - Compliance policies and procedures are in place to prevent violations of federal securities laws, with annual reviews for adequacy and effectiveness[209]. - Proxy voting responsibility has been delegated to the Adviser, which will vote in the best interest of stockholders[210]. - The company is subject to periodic examination by the SEC for compliance with the 1940 Act[216].

Financial Reporting - Chicago Atlantic BDC, Inc. will report its financial results for Q4 and the year ended December 31, 2024, on March 31, 2025[4]. - The earnings conference call will take place at 8:30 a.m. Eastern Time on March 31, 2025[4]. - The company has not disclosed specific financial metrics or performance indicators in this report[5]. Dividend Announcement - The company announced a cash dividend for the quarter ending March 31, 2025, details of which will be provided in a press release[13]. - The press release regarding the cash dividend is included as Exhibit 99.2 to the Current Report[14]. Leadership Changes - Mr. Andreas Bodmeier resigned as CEO on March 13, 2025, with no disagreements reported regarding company operations[10]. - Mr. Peter Sack has been appointed as the new CEO, bringing experience as a credit investor and portfolio manager[11][12]. - Ms. Supurna VedBrat and Mr. Patrick McCauley were appointed as Class 1 and Class 3 Directors, respectively, following the resignation of previous directors[6][7]. Company Classification and Strategy - The company is classified as an emerging growth company under the Securities Act[2]. - The company has a focus on sustainable and scalable trading solutions as part of its strategic vision[8].

Financial Reporting - Chicago Atlantic BDC, Inc. will report its financial results for Q3 2024 on November 8, 2024, before market open[2] - An earnings conference call and webcast will be held at 8:00 a.m. Eastern Time on November 8, 2024, to discuss the financial results[2]

Investment Portfolio - As of September 30, 2024, the investment portfolio had an aggregate fair value of approximately $55.8 million, consisting of $43.4 million in first lien, senior secured loans, $11.7 million in senior secured notes, and $0.7 million in equity securities across seven portfolio companies[89]. - The investment portfolio as of December 31, 2023, had an aggregate fair value of approximately $54.1 million, with $46.0 million in first lien, senior secured loans and $8.1 million in senior secured notes across five portfolio companies[89]. - As of September 30, 2024, the investment portfolio's fair value was $55,788,511, compared to $54,120,000 on December 31, 2023, indicating an increase in portfolio value[94]. - The largest portfolio company represented 35.6% of the total fair values of investments as of September 30, 2024, down from 38.7% on December 31, 2023[93]. - The investment portfolio's industry composition as of September 30, 2024, was 96.6% in Wholesale Trade and 3.4% in Real Estate Services[92]. - The geographic distribution of the portfolio as of September 30, 2024, showed 43.8% in the West and 42.7% in the Midwest[91]. - The company had no loans in the portfolio placed on non-accrual status as of September 30, 2024, and December 31, 2023, indicating stable credit performance[97]. - The company’s investments may not have readily available market quotations, leading to potential fluctuations in fair value assessments[121]. - As of September 30, 2024, 100% of the company's portfolio investments are categorized at Level 3, requiring significant estimates for fair value assessment[106]. Investment Strategy - The company focuses on investing in the cannabis industry, with a strategy to partner with private equity firms and entrepreneurs to provide credit and equity financing alternatives[83]. - The investment strategy includes four primary sub-strategies: Cannabis, Growth Capital & Technology, Esoteric & Asset-Based Lending, and Liquidity Solutions[85]. - The company aims to maximize risk-adjusted returns on equity for shareholders by generating current income from debt investments and capital appreciation from equity investments[82]. - The company expects to invest in loans primarily to private leveraged lower middle-market and middle-market companies[82]. - The company may invest in "covenant-lite" loans, which provide borrowers more freedom and may increase the risk of loss compared to loans with complete financial maintenance covenants[82]. - The Company expanded its investment strategy to include investments outside of the cannabis and health and wellness sectors, effective April 22, 2024[114]. Financial Performance - Total investment income for the three months ended September 30, 2024, was approximately $3.2 million, up from $2.9 million in the same period of 2023, reflecting a growth of about 8.9%[98]. - The company reported a total interest income of $2,686,771 for the three months ended September 30, 2024, compared to $2,885,725 for the same period in 2023, showing a decrease of approximately 6.9%[98]. - The company generated fee income of $489,176 for the three months ended September 30, 2024, significantly higher than $31,250 in the same period of 2023, indicating improved fee generation capabilities[98]. - Total operating expenses for the nine months ended September 30, 2024, were $7,557,191, representing a 123% increase compared to $3,381,392 for the same period in 2023[99]. - Net investment income was approximately $0.0 million for the three months ended September 30, 2024, down from $1.6 million in the same period of 2023, primarily due to transaction fees of $2.4 million related to the Loan Portfolio Acquisition[99]. - The net change in unrealized appreciation on investments for the nine months ended September 30, 2024, was $187,324, compared to $166,012 in the same period of 2023, reflecting a positive trend[94]. - The company reported a gross unrealized appreciation of $282,329 and gross unrealized depreciation of $(95,005) for the nine months ended September 30, 2024[100]. Expenses and Fees - The company expects general and administrative expenses to increase in dollar terms during periods of asset growth but decline as a percentage of total assets during such periods[87]. - Management fees decreased by 2% to $745,876 for the nine months ended September 30, 2024, compared to $760,473 in the same period of 2023[99]. - Income-based incentive fees saw a significant decline of 69%, totaling $328,503 for the nine months ended September 30, 2024, down from $1,051,741 in 2023[99]. - Legal expenses decreased by 40% to $200,073 for the nine months ended September 30, 2024, compared to $334,308 in the same period of 2023[99]. - The Company entered into a new expense limitation agreement, capping operating expenses at an annualized rate of 2.15% of net assets through September 30, 2025[117]. Liquidity and Capital Structure - Cash resources as of September 30, 2024, were approximately $30.1 million, down from $32.6 million as of December 31, 2023, with no indebtedness reported[101]. - The company maintains adequate liquidity to fund its unfunded commitments through existing cash and cash equivalents[108]. - The company’s shares have traded at prices both above and below the net asset value per share, indicating potential market volatility[110]. - The company intends to pay quarterly distributions to stockholders, subject to the discretion of the Board of Directors and dependent on various financial factors[110]. - The company declared a quarterly dividend of $0.25 per share for the third quarter of 2024, with total dividends paid amounting to $1,553,676[113]. Market and Risk Factors - The Company is subject to financial market risks, including valuation risk, interest rate risk, and credit risk due to global political tensions[120]. - As of September 30, 2024, 75.6% of the company's debt investments were floating-rate based on PRIME, while 24.4% were fixed-rate investments[122]. - For the year ended December 31, 2023, a 300 basis points increase in interest rates would result in an increase of $1,264 in net income[124]. - A 200 basis points increase in interest rates would lead to an increase of $843 in net income for the same period[124]. - A 100 basis points increase in interest rates would result in an increase of $421 in net income[124]. - A 100 basis points decrease in interest rates would lead to a decrease of $400 in net income[124]. Corporate Governance and Changes - The Company has undergone a leadership change, with Andreas Bodmeier becoming CEO and Umesh Mahajan serving as Co-Chief Investment Officer[117]. - The Company has been renamed "Chicago Atlantic BDC, Inc." with a new ticker symbol "LIEN," effective October 2, 2024[119]. - The effectiveness of the company's disclosure controls and procedures was confirmed as of the end of the reporting period[126]. - The company reported no changes in internal control over financial reporting that materially affected its operations during the three months ended September 30, 2024[127]. - The company is not currently subject to any material legal proceedings that could materially affect its financial condition[128]. Shareholder and Investment Activities - The Company issued 16,605,372 shares of common stock to Chicago Atlantic Loan Portfolio, LLC in exchange for a Loan Portfolio valued at $219,621,125 as of September 28, 2024[114]. - The Company did not repurchase any equity securities during the nine months ended September 30, 2024[114]. - The Company has adopted an "opt out" dividend reinvestment plan (DRIP), issuing shares under this plan during the nine months ended September 30, 2023, with a total of 33 shares issued[115]. - The company has outstanding commitments to fund investments totaling $1.5 million as of September 30, 2024, with no unfunded commitments identified as of December 31, 2023[108].

Investment Income and Assets - Total investment income for Q2 2024 was $3.1 million, with net investment income of $1.5 million, or $0.25 per share[2]. - Total investment income for the three months ended June 30, 2024, was $3,081,333, an increase of 6.5% compared to $2,893,699 for the same period in 2023[14]. - Net investment income for the three months ended June 30, 2024, was $1,525,633, compared to $1,899,412 for the same period in 2023, reflecting a decrease of 19.7%[14]. - Total assets increased to $90,076,727 as of June 30, 2024, up from $88,576,271 at the end of 2023, representing a growth of 1.7%[13]. - As of June 30, 2024, total net assets were $84.3 million, down from $84.5 million as of March 31, 2024[5]. - Cash and cash equivalents increased to $34,003,851 as of June 30, 2024, compared to $32,611,635 at the end of 2023, a rise of 4.2%[13]. Dividends and Shareholder Returns - The company declared a cash dividend of $0.25 per share, payable on September 27, 2024, to stockholders of record on September 19, 2024[2][10]. - Net asset value (NAV) per share decreased from $13.60 on March 31, 2024, to $13.56 on June 30, 2024, primarily due to dividend payments[5]. - The net asset value per share decreased to $13.56 as of June 30, 2024, down from $13.77 at the end of 2023, a decline of 1.5%[13]. Expenses and Financial Performance - Total expenses for the three months ended June 30, 2024, were $1,555,700, an increase of 56.5% from $994,287 in the same period last year[14]. - The company reported a transaction expense of $533,019 related to the Loan Portfolio Acquisition for the three months ended June 30, 2024[14]. - The company incurred income-based incentive fees of $328,503 for the three months ended June 30, 2024, down from $442,673 in the same period last year, a decrease of 25.8%[14]. - The net increase in net assets resulting from operations for the three months ended June 30, 2024, was $1,292,861, compared to $1,211,404 for the same period in 2023, indicating a growth of 6.7%[14]. Portfolio and Strategic Initiatives - The investment portfolio had a fair value of $53.4 million, consisting of $44.3 million in secured loans, $8.3 million in secured notes, and $0.8 million in equity[6]. - The company added one portfolio company during Q2 2024 and made an additional investment on July 16, 2024[6]. - The company is well-positioned to take advantage of increased debt capital markets activity in the cannabis sector[3]. - The company has filed a registration statement for the Loan Portfolio Acquisition with the SEC, indicating ongoing strategic expansion efforts[3][11]. - The company recorded a net unrealized loss of $0.2 million during Q2 2024, mainly related to the fair valuation of debt investments[4].

Financial Performance - Total investment income for the second quarter ended June 30, 2024, was $3.1 million, compared to $2.9 million for the same period in 2023 [2][21] - Net investment income was $1.5 million, or $0.25 per share, down from $1.9 million, or $0.31 per share, in the prior year [5][22] - The company recorded a net unrealized loss of $0.2 million during the quarter, primarily related to the fair valuation of debt investments [6] Asset and NAV Details - The investment portfolio had a fair value of approximately $53.4 million, consisting of $44.3 million in secured loans, $8.3 million in secured notes, and $0.8 million in equity [8] - Net asset value (NAV) per share decreased from $13.60 on March 31, 2024, to $13.56 on June 30, 2024, primarily due to dividend payments [7][19] - Total net assets as of June 30, 2024, were $84.3 million, down from $84.5 million as of March 31, 2024 [7] Dividend Declaration - The company declared a cash dividend of $0.25 per share, payable on September 27, 2024, to stockholders of record on September 19, 2024 [10][2] Loan Portfolio Acquisition - The company entered into an agreement to purchase a loan portfolio from Chicago Atlantic Loan Portfolio, LLC, in exchange for newly issued shares of common stock [4] - The acquisition is subject to customary closing conditions and has been filed with the SEC [4] Market and Industry Commentary - The CEO noted uncertainty around federal cannabis regulatory reform but highlighted positive momentum at the state level, with larger cannabis operators performing well [3] - The company is well-positioned to take advantage of increased activity in debt capital markets, which is expected to continue [3]