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 a 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, an increase from $54,120,000 on December 31, 2023[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]. - Senior Secured First Lien Term Loans accounted for 77.5% of the amortized cost as of September 30, 2024, slightly down from 84.9% on December 31, 2023[90]. - The geographic distribution of the portfolio as of September 30, 2024, showed 43.8% in the West and 42.7% in the Midwest, indicating a slight shift in regional investment focus[91]. - 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 is currently reviewing approximately $559 million of potential investments in various stages of underwriting[82]. - The investment strategy includes a focus on the cannabis industry, with investments only in companies compliant with applicable laws, targeting entities that derive at least 50% of revenues from cannabis-related activities[83]. - 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 has a strategy focused on growth capital and technology, targeting industry leaders and disruptive companies with strong growth trajectories[84]. - The liquidity solutions sub-strategy focuses on event-driven opportunities, including mergers and acquisitions, with companies showing strong cash flow performance and low leverage profiles[85]. - 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]. - A new investment strategy was approved on February 20, 2024, allowing investments in companies 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, compared to $2.9 million for the same period in 2023, reflecting a year-over-year increase of about 10.0%[98]. - The company had no loans in its portfolio placed on non-accrual status as of September 30, 2024, and December 31, 2023, indicating strong credit performance[97]. - The company reported a net change in unrealized appreciation on investments of $187,324 for the nine months ended September 30, 2024, compared to $166,012 for the same period in 2023[94]. - The company experienced a net realized gain/loss of $0 on investments for the nine months ended September 30, 2024, compared to a loss of $210,767 for the same period in 2023[94]. - Fee income for the three months ended September 30, 2024, was $489,176, significantly higher than $31,250 for the same period in 2023[98]. - 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[99]. - Total operating expenses for the nine months ended September 30, 2024, were $7,557,191, a 123% increase from $3,381,392 in the same period of 2023[99]. - 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 Economic Conditions - The company is subject to financial market risks, including valuation risk, interest rate risk, and credit risk, due to political tensions and market volatility[120]. - The fair value of investments may fluctuate significantly due to the inherent uncertainty in determining fair value, especially for investments without readily available market quotations[121]. - 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 a net income increase of $1,264 million[124]. - A 200 basis points increase in interest rates would lead to a net income increase of $843 million for the same period[124]. - Conversely, a 100 basis points decrease in interest rates would result in a net income loss of $400 million[124]. - A 300 basis points decrease in interest rates would lead to a net income loss of $934 million[124]. Corporate Governance and Structure - The company has a base management fee and an incentive fee structure under its Investment Advisory Agreement, which is based on a percentage of the value of average gross assets[107]. - The company has undergone a leadership change, with Andreas Bodmeier appointed as CEO and Umesh Mahajan as Co-Chief Investment Officer, among other board changes[117]. - The Company has been renamed "Chicago Atlantic BDC, Inc." with a new ticker symbol "LIEN," effective October 2, 2024[119]. - The company intends to maintain its tax treatment as a RIC by distributing at least 90% of its investment company taxable income annually[102]. - The company plans to enter into a credit facility in the future, depending on market conditions and other factors[101]. - The company’s primary use of funds will be investments in debt and equity securities, dividend payments, and operating expenses[101]. Legal and Regulatory Matters - The company is not currently subject to any material legal proceedings that could materially affect its financial condition or results of operations[128]. - The company does not expect any future legal or regulatory proceedings to have a material effect on its financial condition[128]. - The company recorded no sales or redemptions of investments during the three and nine months ended September 30, 2024[99]. - The company has not accrued any liability in connection with indemnifications due to the remote risk of loss based on past experience[108]. - The company reported no changes in internal control over financial reporting that materially affected its financial reporting during the three months ended September 30, 2024[127]. - The company has effective disclosure controls and procedures as of the end of the reporting period[126].
Chicago Atlantic BDC, Inc.(LIEN) - 2024 Q3 - Quarterly Report