Advanced Flower Capital Inc. (AFC) reported significant financial developments in its latest 10-Q filing for the quarter ending March 31, 2026. The company generated total investment income of $9.8 million, a 16% increase from $8.5 million in the same period last year. This growth was primarily driven by an increase in other income, which rose to $1.8 million, largely due to fees from loan exits. However, interest income decreased slightly to $7.7 million, attributed to lower earnings from a loan to Justice Cannabis Company, which remains on nonaccrual status. The company’s net investment income for the quarter was $4.8 million, translating to a net investment income per share of $0.21.
In terms of expenses, AFC reported total expenses of $5.1 million, up from $4.4 million in the previous year. The increase was driven by a new income-based incentive fee of $1.0 million following the company's transition to a business development company (BDC) structure in January 2026. Management fees also saw a slight increase, while general and administrative expenses rose by 17.1%. The company declared a distribution of $0.05 per share, totaling $1.2 million, reflecting a strategic decision to manage cash flow while maintaining a focus on growth.
AFC's total assets as of March 31, 2026, stood at $394.9 million, a substantial increase from $275.6 million at the end of 2025. This growth was primarily due to the company's expanded investment portfolio, which now includes 15 loans with a total commitment of approximately $375.7 million. The fair value of these loans was reported at $279.2 million, with 72% of the portfolio concentrated in the cannabis sector. The company also noted that 23.5% of its investments were on nonaccrual status, indicating a need for ongoing monitoring and management of credit risk.
Strategically, AFC has made significant changes to its operational structure, including the formation of wholly-owned subsidiaries to facilitate investment activities. The company has also expanded its investment strategy beyond the cannabis industry to include ancillary businesses and lower middle-market companies across various sectors. This diversification aims to enhance risk-adjusted returns and capitalize on broader market opportunities. The company’s leverage ratio remains healthy, with an asset coverage ratio of 191% as of March 31, 2026, indicating a strong capacity to meet its financial obligations.
Looking ahead, AFC expressed optimism about its growth trajectory, supported by its robust cash position of $112.7 million and available borrowing capacity under its credit facilities. The company plans to continue monitoring market conditions and may explore refinancing options to optimize its debt profile. As it transitions fully into its BDC structure, AFC aims to leverage its expanded investment mandate to drive future growth and deliver value to shareholders.
About Advanced Flower Capital Inc.
Advanced Flower Capital Inc. is a Maryland-based institutional lender specializing in senior secured loans to cannabis operators in states with legalized cannabis. With a focus on providing capital to a capital-constrained market, the company aims to deliver attractive risk-adjusted returns through its loan portfolio. Following a recent spin-off of its commercial real estate assets, AFC is well-positioned to capitalize on the growing demand for financing in the cannabis industry.
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