Chicago Atlantic BDC (LIEN) FY2025 10-K Risk Factors: 74 New, 125 Dropped

What the changes say

Chicago Atlantic BDC expanded its risk disclosures following significant portfolio growth and loan acquisitions.
Risks center heavily on lower-middle market debt, esoteric lending, and cannabis industry compliance under federal law.

What changed since the prior 10-K

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grade are often referred to as “high-yield” or “junk” securities, and may be considered a higher risk than debt instruments that are rated above investment grade
The company invests in high-yield debt of private lower middle-market companies and maintains a pipeline of $732 million in potential cannabis-related investments compliant with U.S. federal laws.
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CHICAGO ATLANTIC BDC, INC
The adviser targets growth and technology companies in software, hardware, and e-commerce with low debt to enterprise value and strong cash runways.
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Esoteric & Asset-Based Lending
Esoteric and asset-based lending involves companies with regulatory, reputational, or idiosyncratic risks backed by accounts receivable, equipment, or real estate.
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None of our investment policies are fundamental, and thus may be changed without stockholder approval
Investment policies are not fundamental and can be altered without stockholder approval while the company is externally managed by its adviser.
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Our investment portfolio consists of fixed and floating rate loans, and our revolving credit facility also bears interest at a floating rate, when drawn. Macro trends in base interest rates like PRIME or SOFR may affect our net investment income (loss) over the long term
Macro trends in base interest rates like PRIME or SOFR can impact net investment income over the long term for fixed and floating rate loans.
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Dividend income on equity investments, if applicable, will be recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded companies
Revenue includes interest, dividends, and fees, while expenses include base management and incentive fees paid to the adviser.
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costs associated with reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws
Reporting and compliance obligations under the 1940 Act and federal securities laws create ongoing operational costs.
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Credit risk is the risk of default or non-performance by portfolio companies, equivalent to the investment’s carrying amount. Industry and sector concentrations will vary from period to period based on portfolio activity
Credit risk exposes the company to defaults, with three portfolio companies representing 31.8% of total investments at fair value as of December 31, 2025.
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Availability under the Credit Agreement (the “Revolving Period”) will terminate on February 11, 2027, and the Credit Agreement has a scheduled maturity date of March 31, 2028
The revolving credit facility provides $75 million in available borrowings but terminates its revolving period on February 11, 2027.
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The following discussion and analysis of our results of operations encompasses our results for the years ended December 31, 2025 and 2024
The $219.6 million loan portfolio acquisition on October 1, 2024, drove a 183% increase in average portfolio fair value for 2025.
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The Company also recognizes certain fees as one-time fee income, including, but not limited to, structuring fees
Operating expenses grew significantly, including $8.3 million in income-based incentive fees and $5.5 million in management fees for 2025.
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Net Realized Gains and Losses
Net realized gains and losses are measured against amortized cost basis upon the sale or write-off of financial instruments.
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Net Change in Unrealized Appreciation (Depreciation) from Investments
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Financial Condition, Liquidity and Capital Resources
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Dividend Reinvestment Plan
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U.S. Federal Income Taxes
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The Adviser conducts this valuation process on a quarterly basis
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Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement
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In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected previously
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Quarterly NAV Determination
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Valuation Determinations in Connection with Certain Offerings
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Other Contractual Obligations
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Ite m 7A. Quantitative and Qualitative Disclosures About Market Risk
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As of December 31, 2025, approximately 63% of our floating-rate investments based on PRIME or SOFR, were at their respective interest rate floors. As of December 31, 2024 approximately 41% of our floating-rate investments based on PRIME or SOFR, were at their respective interest rate floors
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Opinion on the Financial Statements
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Adjustments to reconcile net increase (decrease) in net assets resulting from
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Par represents the outstanding principal balance net of repayments, if any, as per the terms of the debt instrument’s contract
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All investments were valued at fair value. See "Note 4 — Fair Value of Financial Instruments" in the accompanying notes to the financial statements
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Portfolio company located in the Southwest
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The amortized cost represents the original cost adjusted for any accretion of discounts, amortization of premiums and payment-in-kind ("PIK") interest or dividends
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Cash and Cash Equivalents
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The Company’s investments are recorded at their fair value on the Statements of Assets and Liabilities
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Pursuant to Rule 2a-5 under the 1940 Act, the Board of Directors of the Company (the "Board") designated the Adviser as the Valuation Designee to perform the fair value determinations for the Company, subject to the oversight of the Board and certain Board reporting and other requirements
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Notes to Financial Statements
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Preferred Stock and Warrants
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For the years ended December 31, 2025, 2024 and 2023 , the Company accrued $ 72,406 , $ 120,024 and $ 10,655 , respectively, of excise taxes. As of December 31, 2025 and December 31, 2024 , $ 69,609 and $ 88,709 , respectively, of accrued excise taxes remained payable
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Transaction expenses related to the Loan Portfolio Acquisition
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The Company’s investments in portfolio companies are primarily in the form of debt investments, but may include equity warrants received in connection with debt investments, equity investments and derivative investments
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Any of the foregoing could have an adverse impact on our and our portfolio companies’ businesses, financial condition and results of operations
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NOTE 4 — FAIR VALUE OF FINANCIAL INSTRUMENTS
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The fair value determination of each portfolio investment categorized as Level 3 required the use of one or more unobservable inputs
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Significant increases (decreases) in discount rate in isolation would result in a significantly lower (higher) fair value assessment. Significant increases (decreases) in volatility in isolation would result in a significantly lower (higher) fair value assessment
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The fair value of the Revolving Line of Credit is equal to its carrying value because the revolver is a floating rate facility that reprices to a market rate frequently. The fair value is categorized as Level 2 under ASC 820
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(1) Total amount of each class of senior securities outstanding at the end of the period presented
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Investment Advisory Agreement
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For the years ended December 31, 2025, 2024 and 2023, the Company incurred income-based incentive fee expenses of $ 8,305,705 , $ 2,327,448 and $ 1,511,253 , respectively. As of December 31, 2025 and December 31, 2024, $ 2,073,319 and $ 1,998,945 , respectively, remained payable
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Expense Limitation Agreement
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The Expense Limitation Agreement expired in accordance with its terms on September 30, 2025 and was not renewed
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Affiliated Loan Administrative and Collateral Agent
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The Loan Administrator allocated PIK to the Company amounting to $ 65,041 and $ 4,755 , recorded as PIK income by the Company for the years ended December 31, 2025 and December 31, 2024, respectively
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Other Related Party Transactions
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removal of directors, certain amendments of the Company’s charter, the Company’s ability to issue its common stock at a price below NAV per share, and the approval of any merger or other extraordinary corporate action
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Off-Balance Sheet Arrangements
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Loan Portfolio Acquisition
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The Company’s maximum exposure under these agreements cannot be known; however, the Company expects any risk of loss to be remote
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NOTE 10 — EARNINGS PER SHARE
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In the normal course of business, the Company is subject to examination by federal and certain state and local tax regulators
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The Company’s taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each year. Therefore, the final taxable income earned in each year and carried forward for distribution in the following year may be different than this estimate
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NO TE 12 — FINANCIAL HIGHLIGHTS
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The amount shown may not correspond for the period as it includes the effect of the timing of the distribution and the issuance of common stock
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NOTE 13 — SEGMENT REPORTING
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NOTE 14 — LOAN PORTFOLIO ACQUISITION
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NOTE 15 — SUBSEQUENT EVENTS
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Evaluation of Disclosure Controls and Procedures
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Management’s Report on Internal Control Over Financial Reporting
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Changes in Internal Control Over Financial Reporting
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It em 9B. Other Information
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The information required by Item 10 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2026 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal year
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It em 11. Executive Compensation
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It em 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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It em 13. Certain Relationships and Related Transactions, and Director Independence
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Ite m 14. Principal Accounting Fees and Services
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It em 15. Exhibits, Financial Statement Schedules
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Cover Page Interactive Data File (embedded within the Inline XBRL document)

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The following is a summary of the principal risks that you should carefully consider before investing in our common stock and is followed by a more detailed discussion of the material risks related to us and an investment in our common stock
Economic recessions or downturns may impair portfolio companies' ability to repay debt.
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Our ability to achieve our investment objective depends on our Adviser’s ability to support our investment process; if our Adviser were to lose key personnel or they were to resign, our ability to achieve our investment objective could be significantly harmed
Loss of key personnel at the adviser could harm the investment process.
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A failure on our part to maintain qualification as a BDC would significantly reduce our operating flexibility
Failure to maintain BDC and RIC status would reduce operating and capital-raising flexibility.
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We may be unable to invest a significant portion of the net proceeds from our initial public offering, or any follow-on offering of shares of our common stock, on acceptable terms within an attractive time frame
Inability to invest initial or follow-on offering proceeds on acceptable terms quickly.
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We may not be able to pay you distributions, and if we are able to pay you distributions, our distributions may not grow over time and/or a portion of our distributions may be a return of capital. We have not established any limit on the extent to which we may use offering proceeds to fund distributions
Risk that distributions may not grow or could constitute a return of capital.
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Our investments in portfolio companies may be risky, and we could lose all or part of our investments
Risks of investing in below investment grade, speculative, and illiquid securities.
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The market price of our common stock may fluctuate significantly
Cannabis illegality under U.S. federal law limits investment opportunities and execution.
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Strict enforcement of U.S. federal laws regarding cannabis would likely result in our portfolio companies’ inability to execute a business plan in the cannabis industry, and could result in the loss of all or part of any of our loans
Strict federal cannabis enforcement could result in loan losses and business plan failure.
DroppedRisks Relating to Economic Conditions
Economic recessions or downturns may have a material adverse effect on our business, financial condition and results of operations, and could impair the ability of our portfolio companies to repay debt or pay interest
Economic recessions could cause market illiquidity and increase funding costs.
DroppedRisks Relating to Economic Conditions
Global economic, political and market conditions, including downgrades of the U.S. credit rating, may adversely affect our business, results of operations and financial condition
Global economic tensions, market volatility, and U.S. credit rating downgrades.
DroppedRisks Relating to Economic Conditions
The ongoing armed conflicts as a result of the Russian invasion of Ukraine and the conflict in the Middle East may have a material adverse impact on us and our portfolio companies
Ongoing armed conflicts in Ukraine and the Middle East causing market disruptions.
DroppedRisks Relating to Economic Conditions
Capital markets may experience periods of disruption and instability. Such market conditions may materially and adversely affect debt and equity capital markets in the United States and abroad, which may have a negative impact on our business and operations
Capital market disruptions limiting access to debt and equity capital.
DroppedRisks Relating to Economic Conditions
We may be affected by force majeure events (e.g., acts of God, fire, flood, earthquakes, outbreaks of an infectious disease, pandemic or any other serious public health concern, war, terrorism, nationalization of industry and labor strikes)
DroppedRisks Relating to Economic Conditions
General economic and market conditions, including those caused by inflation and a rising interest rate environment, could materially affect the success of our activities and investments
DroppedRisks Relating to Economic Conditions
Any public health emergency, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments and our portfolio companies
DroppedRisks Relating to Our Business and Structure
We have limited operating history and our Adviser is a recently registered investment adviser under the Advisers Act, with limited history of managing BDCs and limited history of making credit investments in the nascent cannabis industry
DroppedRisks Relating to Our Business and Structure
A general increase in interest rates will likely have the effect of increasing our net investment income, which would make it easier for our Adviser to receive Incentive Fees on Income
DroppedRisks Relating to Our Business and Structure
Our ability to achieve our investment objective will depend on our Adviser’s ability to support our investment process; if our Adviser were to lose key personnel or they were to resign, our ability to achieve our investment objective could be significantly harmed
DroppedRisks Relating to Our Business and Structure
Our business model depends to a significant extent upon strong referral relationships, and the inability of the personnel associated with our Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business
DroppedRisks Relating to Our Business and Structure
We may face increasing competition for investment opportunities, which could reduce returns and result in losses
DroppedRisks Relating to Our Business and Structure
Our ability to enter into transactions with our affiliates is restricted
DroppedRisks Relating to Our Business and Structure
Regulations governing our operation as a BDC and RIC may affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth
DroppedRisks Relating to Our Business and Structure
The Incentive Fee on Capital Gains may be effectively greater than 20%
DroppedRisks Relating to Our Business and Structure
Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse
DroppedRisks Relating to Our Business and Structure
Changes in laws or regulations governing our operations, including laws and regulations governing cannabis, may adversely affect our business or cause us to alter our business strategy
DroppedRisks Relating to Our Business and Structure
Our Board of Directors is authorized to reclassify any unissued shares of common stock into one or more classes or series of stock, including preferred stock, which could convey special rights and privileges to its owners
DroppedRisks Relating to Our Business and Structure
We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect our liquidity, financial condition or results of operations
DroppedRisks Relating to Our Business and Structure
These events, in turn, could have a material adverse effect on our business, financial condition and operating results and negatively affect the market price of our common stock and our ability to pay dividends to our stockholders
DroppedRisks Relating to Our Business and Structure
We may be unable to invest a significant portion of the net proceeds from our IPO, or any follow-on offering of shares of our common stock, on acceptable terms within an attractive time frame
DroppedRisks Relating to Our Business and Structure
We may experience fluctuations in our quarterly results
DroppedRisks Relating to Our Business and Structure
We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our shares of common stock less attractive to investors
DroppedRisks Relating to Our Business and Structure
Our status as an “emerging growth company” under the JOBS Act may make it more difficult to raise capital as and when we need it
DroppedRisks Relating to Our Business and Structure
We incur significant costs as a result of being a publicly traded company
DroppedRisks Relating to Conflicts of Interests
Our incentive fee may induce our Adviser to make speculative investments
DroppedRisks Relating to Conflicts of Interests
Our base management fee may induce our Adviser to incur leverage
DroppedRisks Relating to Conflicts of Interests
There are significant potential conflicts of interest that could adversely impact our investment returns
DroppedRisks Relating to Conflicts of Interests
We have adopted a formal code of ethics that governs the conduct of our officers and directors. Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Maryland General Corporation Law
DroppedRisks Relating to Conflicts of Interests
Our Adviser and its affiliates may face conflicts of interest with respect to services performed for issuers in which we may invest
DroppedRisks Relating to Our Use of Leverage and Credit Facilities
If we borrow money, the potential for loss on amounts invested in us will be magnified and may increase the risk of investing in us
DroppedRisks Relating to Our Use of Leverage and Credit Facilities
Any credit facility we may enter into in the future would likely subject all or significant amounts of our assets to security interests and if we default on our obligations under such a credit facility, we may suffer adverse consequences, including foreclosure on our assets
DroppedRisks Relating to Our Use of Leverage and Credit Facilities
The current period of capital markets disruption and economic uncertainty may make it difficult to obtain indebtedness and any failure to do so could have a material adverse effect on our business, financial condition or results of operations
DroppedRisks Relating to Distributions
Because we intend to distribute at least 90% of our taxable income each taxable year to our stockholders in connection with our election to be treated as a RIC, we will continue to need additional capital to finance our growth
DroppedRisks Relating to Distributions
We will be subject to corporate-level U.S federal income tax if we are unable to obtain and maintain our qualification as a RIC under Subchapter M of the Code or do not satisfy the annual distribution requirement
DroppedRisks Relating to Distributions
The 90% gross income test will be satisfied if we earn at least 90% of our gross income for each taxable year from dividends, interest, gains from the sale of stock or securities or similar sources
DroppedRisks Relating to Distributions
We may have difficulty paying our required distributions if we are required to recognize income for U.S. federal income tax purposes before or without receiving cash representing such income
DroppedRisks Relating to Distributions
We may in the future choose to pay distributions partly in our own stock, in which case you may be subject to tax in excess of the cash you receive
DroppedRisks Relating to Our Investments
Our investments in portfolio companies may be risky, and we could lose all or parts of our investments
DroppedRisks Relating to Our Investments
generally have less publicly available information about their businesses, operations and financial condition
DroppedRisks Relating to Our Investments
To the extent OID and PIK interest constitute a portion of our income, we may be exposed to higher risks with respect to such investments
DroppedRisks Relating to Our Investments
If we acquire the securities and obligations of distressed or bankrupt companies, such investments may be subject to significant risks, including lack of income, extraordinary expenses, uncertainty with respect to satisfaction of debt, lower-than-expected investment values or income potentials and resale restrictions
DroppedRisks Relating to Our Investments
Our portfolio companies may prepay loans, which may reduce our yields if capital returned cannot be invested in transactions with equal or greater expected yields
DroppedRisks Relating to Our Investments
We may be subject to risks arising from revolving credit facilities
DroppedRisks Relating to Our Investments
The lack of liquidity in our investments may adversely affect our business
DroppedRisks Relating to Our Investments
We may not have the funds or ability to make additional investments in our portfolio companies
DroppedRisks Relating to Our Investments
Portfolio companies may be highly leveraged
DroppedRisks Relating to Our Investments
Our portfolio companies may incur debt that ranks equally with, or senior to, some of our investments in such companies
DroppedRisks Relating to Our Investments
The disposition of our investments may result in contingent liabilities
DroppedRisks Relating to Our Investments
Second priority liens on collateral securing loans that we may make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us
DroppedRisks Relating to Our Investments
If we make unsecured debt investments, we may lack adequate protection in the event our portfolio companies become distressed or insolvent and will likely experience a lower recovery than more senior debtholders in the event such portfolio companies default on their indebtedness
DroppedRisks Relating to Our Investments
We may need to foreclose on loans that are in default, which could result in losses
DroppedRisks Relating to Our Investments
In the event a borrower defaults on any of its obligations to us and such debt obligations are equitized, we may not have the ability to hold such equity interests legally under federal law, which may result in additional losses on our loans to such entity
DroppedRisks Relating to Our Investments
Certain assets of our borrowers may not be used as collateral or transferred to us due to applicable state laws and regulations governing the cannabis industry, and such restrictions could negatively impact our profitability
DroppedRisks Relating to Our Investments
The market value of properties and equipment securing our loans may decrease upon foreclosure if they cannot be used for cannabis related operations
DroppedRisks Relating to Our Investments
We generally do not expect to control our portfolio companies
DroppedRisks Relating to Our Investments
Defaults by our portfolio companies would harm our operating results
DroppedRisks Relating to Our Investments
Our portfolio companies may experience financial distress and our investments in such companies may be restricted
DroppedRisks Relating to Our Investments
We are subject to certain risks associated with foreign investments
DroppedRisks Relating to Our Investments
In addition, such foreign investments generally do not constitute “qualifying assets” under the 1940 Act
DroppedRisks Relating to Our Investments
We may expose ourselves to risks if we engage in hedging transactions
DroppedRisks Relating to Our Investments
We may enter into total return swap agreements which expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage
DroppedRisks Relating to Our Investments
A TRS is subject to market risk, liquidity risk and risk of imperfect correlation between the value of the TRS and the assets underlying the TRS. In addition, we may incur certain costs in connection with a TRS that could in the aggregate be significant
DroppedRisks Relating to Our Investments
In addition, because a TRS is a form of synthetic leverage, such arrangements are subject to risks similar to those associated with the use of leverage. See “— Risks Related to Our Use of Leverage and Credit Facilities” above
DroppedRisks Relating to Our Investments
The health and wellness sector is highly regulated and competitive
DroppedRisks Relating to the Cannabis and Hemp Industries
Risks related to the cannabis industry may directly or indirectly affect us or our portfolio companies engaged in the cannabis industry
DroppedRisks Relating to the Cannabis and Hemp Industries
Cannabis, except for hemp, is currently illegal under U.S. federal law and in other jurisdictions, and strict enforcement of federal laws would likely result in our inability to execute our business plan
DroppedRisks Relating to the Cannabis and Hemp Industries
Legal status of cannabis, other than hemp
DroppedRisks Relating to the Cannabis and Hemp Industries
Legal status of hemp and hemp derivatives
DroppedRisks Relating to the Cannabis and Hemp Industries
Our investment opportunities are limited by the current illegality of cannabis under U.S. federal law; changes in the laws, regulations and guidelines that impact the cannabis industry may cause adverse effects on our ability to make investments
DroppedRisks Relating to the Cannabis and Hemp Industries
Competitive conditions, consumer tastes, patient requirements and spending patterns in this new industry and market are not well understood and may have unique circumstances that differ from existing industries and markets
DroppedRisks Relating to the Cannabis and Hemp Industries
Any potential growth in the cannabis industry continues to be subject to new and changing state and local laws and regulations
DroppedRisks Relating to the Cannabis and Hemp Industries
Change in the laws, regulations and guidelines that impact our portfolio companies’ businesses may cause adverse effects on operations
DroppedRisks Relating to the Cannabis and Hemp Industries
Portfolio companies operating in a highly regulated business will require significant resources
DroppedRisks Relating to the Cannabis and Hemp Industries
Differing regulatory environments may cause adverse effects on our or our portfolio companies’ operations
DroppedRisks Relating to the Cannabis and Hemp Industries
U.S. regulations and enforcement relating to hemp-derived CBD products are rapidly evolving
DroppedRisks Relating to the Cannabis and Hemp Industries
Marketing constraints under regulatory frameworks may limit a portfolio company’s ability to compete for market share in a manner similar to that of companies in other industries
DroppedRisks Relating to the Cannabis and Hemp Industries
Portfolio companies may become involved in regulatory or agency proceedings, investigations and audits
DroppedRisks Relating to the Cannabis and Hemp Industries
Research in the United States, Canada and internationally regarding the medical benefits, viability, safety, efficacy and dosing of cannabis or isolated cannabinoids remains in relatively early stages. There have been few clinical trials on the benefits of cannabis or isolated cannabinoids conducted
DroppedRisks Relating to the Cannabis and Hemp Industries
In the event we invest in a portfolio company operating in the medical and adult-use cannabis markets, such portfolio company may face competition from unlicensed and unregulated market participants, including illegal dispensaries and black market suppliers selling cannabis and cannabis-based products
DroppedRisks Relating to the Cannabis and Hemp Industries
If recreational or medical-use consumers elect to produce cannabis for their own purposes, it could reduce the addressable market for a portfolio company’s products
DroppedRisks Relating to the Cannabis and Hemp Industries
The cannabis industry faces significant opposition, and any negative trends may adversely affect the business operations of our portfolio companies
DroppedRisks Relating to the Cannabis and Hemp Industries
An initial surge in demand for cannabis may result in supply shortages in the short term, while in the longer term, supply of cannabis could exceed demand, which may cause a fluctuation in revenue
DroppedRisks Relating to the Cannabis and Hemp Industries
Consumer preferences may change, and the portfolio company may be unsuccessful in acquiring or retaining consumers and keeping pace with changing market developments
DroppedRisks Relating to the Cannabis and Hemp Industries
The cannabis industry is highly competitive and evolving
DroppedRisks Relating to the Cannabis and Hemp Industries
The technologies, process and formulations a portfolio company uses may face competition or become obsolete
DroppedRisks Relating to the Cannabis and Hemp Industries
There is uncertainty in pricing and demand for cannabis-based products
DroppedRisks Relating to the Cannabis and Hemp Industries
A portfolio company may have difficulty in forecasting sales and other business metrics
DroppedRisks Relating to the Cannabis and Hemp Industries
Portfolio companies may have difficulty borrowing from or otherwise accessing the service of banks, which may make it difficult to sell products and services
DroppedRisks Relating to the Cannabis and Hemp Industries
The development and operation of businesses in the cannabis industry may require additional financing, which may not be available on favorable terms, if at all
DroppedRisks Relating to the Cannabis and Hemp Industries
Portfolio companies may be subject to product liability claims
DroppedRisks Relating to the Cannabis and Hemp Industries
Due to our involvement in the regulated cannabis industry, we and our borrowers may have a difficult time obtaining or maintaining the various insurance policies that are desired to operate our business, which may expose us to additional risk and financial liabilities
DroppedRisks Relating to the Cannabis and Hemp Industries
We, portfolio companies or the cannabis industry more generally may receive unfavorable publicity or become subject to negative consumer or investor perception
DroppedRisks Relating to the Cannabis and Hemp Industries
If we invest in a portfolio company in the cannabis industry, the parties with which we do business may perceive that they are exposed to reputational risk as a result of our investment in a cannabis business. Failure to establish or maintain business relationships could have a material adverse effect on us
DroppedRisks Relating to the Cannabis and Hemp Industries
Portfolio companies may be subject to regulatory, legal or reputational risk associated with potential misuse of their products by their customers
DroppedRisks Relating to the Cannabis and Hemp Industries
A portfolio company may not succeed in promoting and sustaining its brands, which could have an adverse effect on its future growth and business
DroppedRisks Relating to the Cannabis and Hemp Industries
Certain events or developments in the cannabis industry more generally may impact our reputation or the reputation of our portfolio companies
DroppedRisks Relating to the Cannabis and Hemp Industries
The growing of cannabis is an agricultural process. As such, a portfolio company with operations in the cannabis industry is subject to the risks inherent in the agricultural business, including risks of crop failure presented by weather, insects, plant diseases and similar agricultural risks
DroppedRisks Relating to the Cannabis and Hemp Industries
The cannabis industry is subject to transportation disruptions, including those related to an agricultural product
DroppedRisks Relating to the Cannabis and Hemp Industries
Many cannabis businesses are subject to significant environmental regulations and risks
DroppedRisks Relating to the Cannabis and Hemp Industries
Many cannabis businesses are dependent on key personnel with sufficient experience in the cannabis industry
DroppedRisks Relating to the Cannabis and Hemp Industries
There are a limited number of management teams in the cannabis industry that are familiar with U.S. securities laws
DroppedRisks Relating to the Cannabis and Hemp Industries
It may be difficult to continuously maintain and retain a competitive talent pool with public company standards
DroppedRisks Relating to the Cannabis and Hemp Industries
Fraudulent or illegal activity by employees, contractors and consultants may adversely affect our portfolio companies’ business, financial condition or results of operations
DroppedRisks Relating to the Cannabis and Hemp Industries
A portfolio company may be reliant on key inputs and may not be able to realize its cannabis production or capacity targets. The price of production of cannabis will also vary based on a number of factors outside of our portfolio companies’ control
DroppedRisks Relating to the Cannabis and Hemp Industries
A portfolio company may be vulnerable to rising energy costs
DroppedRisks Relating to Our Common Stock
Shares of closed-end investment companies, including BDCs, may trade at a discount to their NAV
DroppedRisks Relating to Our Common Stock
Investing in our common stock may involve an above-average degree of risk
DroppedRisks Relating to Our Common Stock
general economic trends and other external factors
DroppedRisks Relating to Our Common Stock
Sales of substantial amounts of our common stock in the public market, including by the Adviser or CALP, may have an adverse effect on the market price of our common stock
DroppedRisks Relating to Our Common Stock
The Adviser and CALP have significant influence over us, including having an approximately 80% vote for matters that require the approval of stockholders, which could limit your ability to influence the outcome of matters submitted to stockholders for a vote
DroppedRisks Relating to Our Common Stock
Certain provisions of our charter and bylaws and actions of our Board of Directors could deter takeover attempts and have an adverse impact on the value of shares of our common stock
DroppedRisks Relating to Our Common Stock
Our common stockholders will bear the expenses associated with our borrowings, and the holders of our debt securities will have certain rights senior to our common stockholders
DroppedRisks Relating to Our Common Stock
Stockholders may incur dilution if we issue securities to subscribe to, convert to or purchase shares of our common stock
DroppedRisks Relating to Our Common Stock
Members of our management team and our board of directors and affiliated companies have been, and may from time to time be, involved in legal proceedings or governmental investigations unrelated to our business
DroppedRisks Relating to the Loan Portfolio Acquisition
Sales of shares of our common stock after the completion of the Loan Portfolio Acquisition may cause the market price of our common stock to decline
DroppedRisks Relating to the Loan Portfolio Acquisition
We may be unable to realize the benefits anticipated by the Loan Portfolio Acquisition, including estimated cost savings, or it may take longer than anticipated to achieve such benefits

All 74 risk factors

Headings as the filing states them, in filing order.

Other

01grade are often referred to as “high-yield” or “junk” securities, and may be considered a higher risk than debt instruments that are rated above investment gradeNew
02CHICAGO ATLANTIC BDC, INCNew
03Esoteric & Asset-Based LendingNew
04None of our investment policies are fundamental, and thus may be changed without stockholder approvalNew
05Our investment portfolio consists of fixed and floating rate loans, and our revolving credit facility also bears interest at a floating rate, when drawn. Macro trends in base interest rates like PRIME or SOFR may affect our net investment income (loss) over the long termNew
06Dividend income on equity investments, if applicable, will be recorded on the record date for private portfolio companies or on the ex-dividend date for publicly traded companiesNew
07costs associated with reporting and compliance obligations under the 1940 Act and applicable federal and state securities lawsNew
08Credit risk is the risk of default or non-performance by portfolio companies, equivalent to the investment’s carrying amount. Industry and sector concentrations will vary from period to period based on portfolio activityNew
09Availability under the Credit Agreement (the “Revolving Period”) will terminate on February 11, 2027, and the Credit Agreement has a scheduled maturity date of March 31, 2028New
10The following discussion and analysis of our results of operations encompasses our results for the years ended December 31, 2025 and 2024New
11The Company also recognizes certain fees as one-time fee income, including, but not limited to, structuring feesNew
12Net Realized Gains and LossesNew
13Net Change in Unrealized Appreciation (Depreciation) from InvestmentsNew
14Financial Condition, Liquidity and Capital ResourcesNew
15Dividend Reinvestment PlanNew
16U.S. Federal Income TaxesNew
17The Adviser conducts this valuation process on a quarterly basisNew
18Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurementNew
19In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected previouslyNew
20Quarterly NAV DeterminationNew
21Valuation Determinations in Connection with Certain OfferingsNew
22Other Contractual ObligationsNew
23Ite m 7A. Quantitative and Qualitative Disclosures About Market RiskNew
24As of December 31, 2025, approximately 63% of our floating-rate investments based on PRIME or SOFR, were at their respective interest rate floors. As of December 31, 2024 approximately 41% of our floating-rate investments based on PRIME or SOFR, were at their respective interest rate floorsNew
25Opinion on the Financial StatementsNew
26Adjustments to reconcile net increase (decrease) in net assets resulting fromNew
27Par represents the outstanding principal balance net of repayments, if any, as per the terms of the debt instrument’s contractNew
28All investments were valued at fair value. See "Note 4 — Fair Value of Financial Instruments" in the accompanying notes to the financial statementsNew
29Portfolio company located in the SouthwestNew
30The amortized cost represents the original cost adjusted for any accretion of discounts, amortization of premiums and payment-in-kind ("PIK") interest or dividendsNew
31Cash and Cash EquivalentsNew
32The Company’s investments are recorded at their fair value on the Statements of Assets and LiabilitiesNew
33Pursuant to Rule 2a-5 under the 1940 Act, the Board of Directors of the Company (the "Board") designated the Adviser as the Valuation Designee to perform the fair value determinations for the Company, subject to the oversight of the Board and certain Board reporting and other requirementsNew
34Notes to Financial StatementsNew
35Preferred Stock and WarrantsNew
36For the years ended December 31, 2025, 2024 and 2023 , the Company accrued $ 72,406 , $ 120,024 and $ 10,655 , respectively, of excise taxes. As of December 31, 2025 and December 31, 2024 , $ 69,609 and $ 88,709 , respectively, of accrued excise taxes remained payableNew
37Transaction expenses related to the Loan Portfolio AcquisitionNew
38The Company’s investments in portfolio companies are primarily in the form of debt investments, but may include equity warrants received in connection with debt investments, equity investments and derivative investmentsNew
39Any of the foregoing could have an adverse impact on our and our portfolio companies’ businesses, financial condition and results of operationsNew
40NOTE 4 — FAIR VALUE OF FINANCIAL INSTRUMENTSNew
41The fair value determination of each portfolio investment categorized as Level 3 required the use of one or more unobservable inputsNew
42Significant increases (decreases) in discount rate in isolation would result in a significantly lower (higher) fair value assessment. Significant increases (decreases) in volatility in isolation would result in a significantly lower (higher) fair value assessmentNew
43The fair value of the Revolving Line of Credit is equal to its carrying value because the revolver is a floating rate facility that reprices to a market rate frequently. The fair value is categorized as Level 2 under ASC 820New
44(1) Total amount of each class of senior securities outstanding at the end of the period presentedNew
45Investment Advisory AgreementNew
46For the years ended December 31, 2025, 2024 and 2023, the Company incurred income-based incentive fee expenses of $ 8,305,705 , $ 2,327,448 and $ 1,511,253 , respectively. As of December 31, 2025 and December 31, 2024, $ 2,073,319 and $ 1,998,945 , respectively, remained payableNew
47Expense Limitation AgreementNew
48The Expense Limitation Agreement expired in accordance with its terms on September 30, 2025 and was not renewedNew
49Affiliated Loan Administrative and Collateral AgentNew
50The Loan Administrator allocated PIK to the Company amounting to $ 65,041 and $ 4,755 , recorded as PIK income by the Company for the years ended December 31, 2025 and December 31, 2024, respectivelyNew
51Other Related Party TransactionsNew
52removal of directors, certain amendments of the Company’s charter, the Company’s ability to issue its common stock at a price below NAV per share, and the approval of any merger or other extraordinary corporate actionNew
53Off-Balance Sheet ArrangementsNew
54Loan Portfolio AcquisitionNew
55The Company’s maximum exposure under these agreements cannot be known; however, the Company expects any risk of loss to be remoteNew
56NOTE 10 — EARNINGS PER SHARENew
57In the normal course of business, the Company is subject to examination by federal and certain state and local tax regulatorsNew
58The Company’s taxable income for each period is an estimate and will not be finally determined until the Company files its tax return for each year. Therefore, the final taxable income earned in each year and carried forward for distribution in the following year may be different than this estimateNew
59NO TE 12 — FINANCIAL HIGHLIGHTSNew
60The amount shown may not correspond for the period as it includes the effect of the timing of the distribution and the issuance of common stockNew
61NOTE 13 — SEGMENT REPORTINGNew
62NOTE 14 — LOAN PORTFOLIO ACQUISITIONNew
63NOTE 15 — SUBSEQUENT EVENTSNew
64Evaluation of Disclosure Controls and ProceduresNew
65Management’s Report on Internal Control Over Financial ReportingNew
66Changes in Internal Control Over Financial ReportingNew
67It em 9B. Other InformationNew
68The information required by Item 10 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2026 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission within 120 days following the end of our fiscal yearNew
69It em 11. Executive CompensationNew
70It em 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersNew
71It em 13. Certain Relationships and Related Transactions, and Director IndependenceNew
72Ite m 14. Principal Accounting Fees and ServicesNew
73It em 15. Exhibits, Financial Statement SchedulesNew
74Cover Page Interactive Data File (embedded within the Inline XBRL document)New

Other Chicago Atlantic BDC 10-Ks

FY2024 10-K risk factors
125 risks
Concentrated risk exposure to the federally illegal cannabis industry, including changing state regulations and enforcement threats.
Filed Mar 31, 2025

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The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.