Business Context and Reporting Period
AFC Gamma, Inc. (Nasdaq: AFCG), formerly identified in the request as Advanced Flower Capital Inc., filed a Form 8-K reporting events dated September 7, 2021. The filing concerns changes to the company’s lending commitments under an amended credit agreement with Devi Holdings, Inc.
Transaction and Key Financial Metrics
- The company acquired Flower Loan Holdco, LLC’s interest in an $8.5 million loan to Devi Holdings for a purchase price of $8.471 million.
- The purchase price equaled the loan’s outstanding principal plus accrued and unpaid interest, less unaccreted original issue discount.
- The company acquired, for no consideration, AFC Management, LLC’s commitment to fund up to an additional $20 million of loans to the borrower.
- Following the assignments, AFC Gamma’s aggregate loan commitments to Devi Holdings increased to $62.5 million.
- The loans are secured by real estate collateral consisting of three cultivation facilities in Arizona and Michigan and eleven dispensaries across Arizona, Maryland, Massachusetts and Michigan.
- The filing provides no revenue, profit, cash flow, margin, debt, liquidity, or other period-based operating metrics.
Material Changes, Related Parties, and Unusual Items
The transaction increased AFC Gamma’s lending exposure to the borrower and involved related parties. Flower Loan Holdco is beneficially owned by Leonard M. Tannenbaum, the company’s director and Chief Executive Officer, and Robyn Tannenbaum, the company’s Managing Director, Head of Origination and Investor Relations. AFC Management is the company’s external manager and is beneficially owned by members of the Tannenbaum family and Jonathan Kalikow, a company director and Head of Real Estate.
The company paid no consideration for the acquisition of AFC Management’s loan commitment. The filing does not state whether the transaction generated an immediate gain or loss.
Guidance, Outlook, Risks, and Contingencies
No financial guidance or operating outlook was provided. Key considerations include increased concentration and credit exposure to Devi Holdings, reliance on collateral values and operating performance of cannabis-related properties, and related-party involvement in the lending arrangements.
No financial statements or pro forma financial information were filed. The company stated that any required information would be filed by amendment within 71 calendar days after the filing deadline.
Important Facts for Investors to Verify
- Verify the final amount funded and outstanding under the Devi Holdings credit agreement.
- Review the credit agreement’s interest rate, maturity, covenants, repayment terms, and default provisions.
- Assess the valuation, priority, and enforceability of the cultivation-facility and dispensary collateral.
- Review the subsequent amendment for any required financial statements or pro forma information.
- Evaluate the related-party nature of the assignments and the company’s conflict-of-interest controls.