Second quarter 2025 GAAP net loss of $(13.2) million or $(0.60) per basic weighted average common share and
Distributable Earnings(1) of $3.4 million or $0.15 per basic weighted average common share
Announces Intention to Convert from Mortgage REIT to BDC
WEST PALM BEACH, Fla., Aug. 14, 2025 (GLOBE NEWSWIRE) — Advanced Flower Capital Inc. (Nasdaq: AFCG) (“Advanced Flower Capital”, “AFC” or the “Company”) today announced its results for the quarter ended June 30, 2025.
AFC reported generally accepted accounting principles (“GAAP”) net loss of $(13.2) million or $(0.60) per basic weighted average common share and Distributable Earnings of $3.4 million or $0.15 per basic weighted average common share for the second quarter of 2025.
“During the quarter, we focused on working through our non-accrual credits with the goal to achieve resolution, paydowns and paybacks of our loans. More broadly, there continues to be a lack of capital entering the cannabis market and we are selectively evaluating opportunities with established operators of scale in attractive markets,” said Dan Neville, AFC’s Chief Executive Officer.
Expansion of Investment Mandate
The Company announced that its Board of Directors, including its independent directors, and external manager have approved an amendment to the management agreement, expanding the Company’s investment mandate to include secured loans to companies ancillary to the cannabis industry as well as public and private middle market companies operating outside of the cannabis industry, all in accordance with the Company’s REIT and related regulatory obligations.
Proposed Conversion to BDC
AFC also announced today its intention to seek to convert from a commercial mortgage real estate investment trust (“REIT”) to a business development company (“BDC”), subject to shareholder approval of certain related matters. If approved, the conversion will enable the Company to pursue a broader array of investment opportunities, including both real estate- and non-real estate-related assets.
“The proposed conversion to a BDC marks an important milestone in AFC’s trajectory,” said Dan Neville, CEO, adding “Given the capital-intensive nature of the cannabis industry, combined with the high cost of capital, many operators do not own real estate, which significantly limits the universe of cannabis operators AFC can lend to as a mortgage REIT. Converting to a BDC would significantly expand our investable universe, allowing us to lend to ancillary cannabis businesses with high growth potential, as well as non-real estate covered, vertically integrated operators.”
AFC has historically targeted lending to vertically integrated cannabis companies with significant real estate holdings. Following the proposed conversion to a BDC, the Company would continue to operate under its recently expanded investment mandate that now includes direct lending opportunities outside of the cannabis industry. The Company believes there are attractive lending opportunities in other private and public middle-market companies that could generate attractive risk-adjusted returns. By expanding the investable universe, the Company will be positioned to diversify its exposure across industries and credit risk profiles, while maintaining its deal selectivity. The AFC investment team has over 30 years of experience in direct lending outside of the cannabis industry, 20 years operating BDCs and has completed over $10 billion of direct lending transactions.
The proposed conversion is subject to, among other things, approval by the Company’s shareholders of a new investment advisory agreement with its Manager that complies with the requirements of the Investment Company Act of 1940.
Common Stock Dividend
On July 15, 2025, the Company paid a regular cash dividend of $0.15 per common share for the second quarter of 2025 to shareholders of record as of June 30, 2025.
Additional Information
Advanced Flower Capital issued a presentation of its second quarter 2025 results, titled “Second Quarter 2025 Earnings Presentation,” which can be viewed at advancedflowercapital.com under the Investor Relations section. The Company also filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2025, with the Securities and Exchange Commission on August 14, 2025.
AFC routinely posts important information for investors on its website, advancedflowercapital.com. The Company intends to use this webpage as a means of disclosing material information, for complying with our disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis. AFC encourages investors, analysts, the media and others interested in AFC to monitor the Investors section of its website, in addition to following its press releases, SEC filings, public conference calls, presentations, webcasts and other information posted from time to time on the website. To sign-up for email-notifications, please visit the “Email Alerts” section of the website under the “IR Resources” section.
Conference Call & Discussion of Financial Results
Advanced Flower Capital will host a conference call at 10:00 am (Eastern Time) on Thursday, August 14, 2025, to discuss its quarterly financial results. All interested parties are welcome to participate. The call will be available through a live audio webcast at the Investor Relations section of AFC’s website found here: AFC — Investor Relations. To participate via telephone, please register in advance at this link. Upon registration, all telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number along with a unique passcode and registrant ID that can be used to access the call. The complete webcast will be archived for 90 days on the Investor Relations section of AFC’s website.
About Advanced Flower Capital
Advanced Flower Capital Inc. (Nasdaq: AFCG) is a leading commercial mortgage real estate investment trust (“REIT”) that primarily originates, structures, underwrites, invests in and manages senior secured mortgage loans and other types of loans and debt securities, with a specialization in loans to cannabis industry operators in states that have legalized medical and/or adult-use cannabis. Through the management team’s deep network and significant credit and cannabis expertise, AFC originates, structures, underwrites and manages loans ranging from $10 million to over $100 million, typically secured by quality real estate assets, license value (where applicable) and cash flows. It is based in West Palm Beach, Florida.
Non-GAAP Metrics
In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use Distributable Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan activity and operations. Distributable Earnings is a measure that is not prepared in accordance with GAAP. Distributable Earnings and the other capitalized terms not defined in this section have the meanings ascribed to such terms in our most-recently filed Quarterly Report on Form 10-Q. We use this non-GAAP financial measure both to explain our results to shareholders and the investment community and in the internal evaluation and management of our businesses. Our management believes that this non-GAAP financial measure and the information it provides is useful to investors since this measure permits investors and shareholders to assess the overall performance of our business using the same tools that our management uses to evaluate our past performance and prospects for future performance.
The determination of Distributable Earnings is substantially similar to the determination of Core Earnings under our Management Agreement, provided that Core Earnings is a component of the calculation of any Incentive Compensation earned under the Management Agreement for the applicable time period, and thus Core Earnings is calculated without giving effect to Incentive Compensation expense, while the calculation of Distributable Earnings accounts for any Incentive Compensation earned for such time period.
We define Distributable Earnings as, for a specified period, the net income (loss) computed in accordance with GAAP, excluding (i) stock-based compensation expense, (ii) depreciation and amortization, (iii) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss); provided that Distributable Earnings does not exclude, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash, (iv) provision for (reversal of) current expected credit losses, (v) taxable REIT (as defined below) subsidiary (“TRS”) (income) loss, net of any dividends received from TRS and (vi) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of such independent directors.
We believe providing Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to shareholders in assessing the overall performance of our business. As a REIT, we are required to distribute at least 90% of our annual REIT taxable income, subject to certain adjustments, and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of such taxable income. Given these requirements and our belief that dividends are generally one of the principal reasons that shareholders invest in our common stock, we generally intend to attempt to pay dividends to our shareholders in an amount at least equal to such REIT taxable income, if and to the extent authorized by our Board of Directors. Distributable Earnings is one of many factors considered by our Board of Directors in authorizing dividends and, while not a direct measure of net taxable income, over time, the measure can be considered a useful indicator of our dividends.
Distributable Earnings is a non-GAAP financial measure and should not be considered as a substitute for GAAP net income. We caution readers that our methodology for calculating Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our reported Distributable Earnings may not be comparable to similar measures presented by other REITs.
The following table provides a reconciliation of GAAP Net income (loss) to Distributable Earnings:
|
Three months ended June 30, |
Six months ended June 30, |
||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Net (loss) income | $ | (13,164,651 | ) | $ | 16,446,121 | $ | (9,096,966 | ) | $ | 16,392,005 | |||||
| Adjustments to net income (loss): | |||||||||||||||
| Stock-based compensation expense | 484,502 | 369,343 | 1,038,251 | 912,565 | |||||||||||
| Depreciation and amortization | — | — | — | — | |||||||||||
| Unrealized losses (gains) or other non-cash items | 1,055,970 | 1,420,001 | 1,741,448 | 5,033,694 | |||||||||||
| Provision for (reversal of) current expected credit losses2 | 14,074,320 | (6,190,240 | ) | 13,374,896 | (1,258,566 | ) | |||||||||
| TRS loss (income), net of dividends | 934,187 | (624,235 | ) | 870,605 | 306,998 | ||||||||||
| One-time events pursuant to changes in GAAP and certain non-cash charges | — | — | — | — | |||||||||||
| Distributable earnings | $ | 3,384,328 | $ | 11,420,990 | $ | 7,928,234 | $ | 21,386,696 | |||||||
| Basic weighted average shares of common stock outstanding | 22,114,341 | 20,400,004 | 22,106,205 | 20,396,940 | |||||||||||
| Distributable earnings per basic weighted average share | $ | 0.15 | $ | 0.56 | $ | 0.36 | $ | 1.05 | |||||||
Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views and projections with respect to, among other things, future events and financial performance. Words such as “believes,” “expects,” “will,” “intends,” “plans,” “guidance,” “estimates,” “projects,” “anticipates,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements, including statements about our future growth and strategies for such growth, are subject to the inherent uncertainties in predicting future results and conditions and are not guarantees of future performance, conditions or results. Certain factors, including the ability of our Manager to locate suitable loan opportunities for us, monitor and actively manage our loan portfolio and implement our investment strategy; the demand for cannabis cultivation and processing facilities and dispensaries; management’s current estimate of expected credit losses and current expected credit loss reserve and other factors could cause actual results and performance to differ materially from those projected in these forward-looking statements. More information on these risks and other potential factors that could affect our business and financial results is included in AFC’s filings with the SEC, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of AFC’s most recently filed periodic reports on Form 10-K, Form 10-Q and subsequent filings. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect AFC. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Investor Relations Contact
Robyn Tannenbaum
(561) 510-2293
[email protected]
Media Contact
Collected Strategies
Jim Golden / Jack Kelleher
[email protected]
1 Distributable Earnings is a non-GAAP financial measure. See the “Non-GAAP Metrics” section of this release for a reconciliation of GAAP Net Income to Distributable Earnings.
2 The provision for current expected credit losses above includes zero and zero for the three and six months ended June 30, 2025, respectively, and approximately $71.9 thousand and $71.9 thousand for the three and six months ended June 30, 2024, respectively, in connection with the Spin-Off, which is included in the net income from discontinued operations, net of tax financial statement line on the consolidated statements of operations.
