Chicago Atlantic BDC, Inc.(LIEN) - 2024 Q1 - Quarterly Report

Financial Performance - Total investment income for the three months ended March 31, 2024, was $2,760,247, an increase of 12.3% compared to$ 2,457,839 for the same period in 2023[7]. - Total expenses for the same period were $2,840,056, significantly higher than$ 1,087,116 in the prior year, reflecting a rise in transaction expenses related to the Loan Portfolio Acquisition[7]. - Net investment income (loss) for the quarter was $(79,809), a decrease from$ 1,370,723 in the previous year, indicating a substantial decline in profitability[7]. - The net increase in net assets resulting from operations was $519,811, down from$ 2,357,080 in the same quarter last year[7]. - The net investment income (loss) per share was $(0.01), compared to$ 0.22 for the same period in 2023, highlighting a significant drop in earnings per share[7]. - The net increase (decrease) in net assets resulting from operations per share was $0.08, down from$ 0.38 in the prior year[7]. - The company reported a net cash provided by operating activities of $2,103,079 for the three months ended March 31, 2024, compared to$ (2,581,293) for the same period in 2023[9]. - The total net increase in net assets from capital transactions was $74 for the three months ended March 31, 2024[8]. - The company declared a quarterly dividend of$ 0.25 per share on March 8, 2024, resulting in total dividends paid of $1,553,662[51]. - The net asset value at the end of the period was$ 13.60 per share, down from $14.29 at the end of March 31, 2023[65]. Investment Portfolio - The fair value of the investment in Curaleaf Holdings, Inc. was reported at$ 4,208,000, representing 4.98% of net assets[10]. - The total portfolio investments and cash equivalents amounted to $86,763,000, which is 104.13% of net assets[13]. - As of March 31, 2024, total investments in debt securities amounted to$ 53,603,000, representing 64.90% of the company's net assets[14]. - The company holds cash equivalents of $33,160,000, which accounts for 39.23% of total assets[14]. - The aggregate fair value of non-qualifying assets is$ 25,291,000, or 28.0% of the company's total assets as of March 31, 2024[14]. - The fair value of investments is determined using a multi-step valuation process, with quarterly assessments conducted by the Adviser[23]. - The company’s investments are categorized entirely at level 3, indicating that 100% of the portfolio requires significant estimates for fair value measurement[102]. - The investment portfolio had an aggregate fair value of approximately $54.8 million, consisting of approximately$ 46.6 million in first lien, senior secured loans and approximately $8.2 million in senior secured notes[84]. - The geographic composition of the portfolio shows 46.7% in the West and 45.8% in the Midwest as of March 31, 2024[36]. - The entire portfolio is concentrated in the wholesale trade industry, representing 100% of the amortized cost and fair value as of both March 31, 2024, and December 31, 2023[87]. Transaction Expenses - The company incurred transaction expenses of$ 2,106,050 related to the Loan Portfolio Acquisition, which was not present in the prior year[7]. - Transaction expenses related to the Loan Portfolio Acquisition increased to $2,817,314 as of March 31, 2024, from$ 711,264 as of December 31, 2023[32]. - The Company incurred capital gains incentive fee expenses of $119,924 for the three months ended March 31, 2024[48]. Risk Management - The company manages various risks including market risk, credit risk, and liquidity risk, particularly in the cannabis sector[39]. - The company is subject to financial market risks, including valuation risk, interest rate risk, and credit risk[111]. - Credit risk is associated with the risk of default or non-performance by portfolio companies, which is equivalent to the investment's carrying amount[87]. Future Plans and Strategy - The company plans to acquire a loan portfolio from Chicago Atlantic Loan Portfolio, LLC, with the transaction expected to close in mid-2024[19]. - A joint venture with Chicago Atlantic BDC Holdings, LLC is set to be established, which will lead to a new investment advisory agreement[19]. - The company has expanded its investment strategy to include companies outside of the cannabis and health and wellness sectors effective April 22, 2024[19]. - The company aims to maximize risk-adjusted returns on equity for shareholders by investing primarily in secured and unsecured debt, equity warrants, and direct equity investments in privately held cannabis businesses[80]. - The company is currently reviewing approximately$ 425 million of potential investments in various stages of underwriting[25]. Shareholder Information - Weighted average shares outstanding for the quarter were 6,214,941, slightly up from 6,214,672 in the previous year[7]. - SSC holds approximately 72% of the Company's voting stock, allowing substantial control over corporate actions[48]. - The Company plans to hold a stockholder meeting to obtain approvals required for the Loan Portfolio Acquisition[72]. 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[30]. - The company follows U.S. GAAP for financial reporting, requiring management to make estimates and assumptions that could materially affect reported amounts[99].