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AFC Gamma Inc (NASDAQ:AFCG)
Q2 2021 Earnings Call
Aug 5, 2021, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day and thank you for standing by and welcome to the AFC Gamma Quarter Two 2021 Earnings Call. At this time all participants lines are in a listen-only mode. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Ms. Francesca Smith, ma'am, please go ahead.

Francesca Smith -- Investor Relations

Thank you, ma'am. Good morning, and welcome to AFC Gamma, Inc.'s Second Quarter 2021 Earnings Conference Call. I am joined this morning by Leonard Tannenbaum, Chief Executive Officer; Jonathan Kalikow, Head of Real Estate; Robyn Tannenbaum, Head of Origination; and Thomas Geoffroy, Chief Financial Officer. Before we begin, I would like to note that this call is being recorded. Replay information is included in our July 14, 2021 Press Release and is posted on the Investor Relations section of ASC Gamma's website at afcgamma.com, along with our second quarter 2021 earnings release and investor presentation.

Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, anticipated market size, expected consolidation in the industry, future events and financial performance. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. New risks and uncertainties arise over time, and it is not possible for the company to predict those events or how they may affect it. Therefore, you should not place undue reliance on these forward-looking statements. We ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these forward-looking statements and projections.

During this call, we will refer to distributable earnings, which is a non-GAAP financial measure. Reconciliations of net income, the most comparable GAAP measure to distributable earnings, can be found in our earnings release or in the investor presentation available on our website. The format for today's call is as follows: Len will provide introductory remarks, an overview of our results and strategic commentary; Jon will discuss the real estate lending environment; Robyn will discuss the origination pipeline; and Tom will summarize the financials. We will then open the line for Q&A.

With that, I will now turn the call over to our Chief Executive Officer, Len Tannenbaum.

Leonard Tannenbaum -- Chief Executive Officer & Chairman

Thank you, Francesca, and welcome to AFC Gamma's second quarter earnings conference call. I would like to thank our current shareholders, prospective shareholders and analysts for joining us. Today, I will provide you with an update on AFC Gamma's business, there are many opportunities we have ahead of us and the current state of the cannabis industry.

AFC Gamma's is an institutional provider of loans to cannabis industry typically secured by three pillars, cash flow licenses and real estate. The companies that we lend to a domestic single and multi-state operators, which include those that are privately held as well as those listed on the Canadian exchanges. During the second quarter, we closed on new commitments of $71.3 million as of August 1, 2021 we lend to 14 borrowers, which have operations in 14 states. We are pleased that we have continued to diversify our portfolio across states and borrowers.

In mid-June we experienced a significant increase in the actionable pipeline, which was driven by an influx deals from large multi-state operators as well as smaller multistate and single state operators. Notably, this increase in the pipeline excludes any capital tied to New York, which we recently allowed adult use cannabis as the legislation there is not yet finalized. Since mid-June our actionable pipeline has remained at elevated levels, which was the primary reason for the follow-on offering that we completed in June. As a reminder, the deals in our actionable pipeline should they convert could take between three and nine months to close.

Many of the deals that we complete are high touch require significant due diligence and potentially require regulatory approval, making it difficult to predict the exact timing of closings. Our robust pipeline of potential borrowers includes many operators expanding into new states. Growth and demand for debt capital that we provide will come from the issuance of new licenses in states such as Georgia and additional new licenses in states such as Ohio, Illinois and Florida.

We are pleased that one of the recently issued Georgia licenses was awarded to our largest borrower Nature's medicines. We have also noticed that our customers are accelerating construction to meet these state-imposed limitation on build time and to gain a first mover advantage. During the quarter, we received an investment grade rating of BBB minus from Egan Jones rating company. This is an important step when we seek to issue debt. As our actionable pipeline conversion to sign deals is our intention to seek long-term, unsecured financing for part of this capital needs. We believe issuing debt and establishing a benchmark for our debt cost of capital is important as we continue to execute on our business plan.

Conceptually, we believe that using leverage against lower yielding assets of the portfolio is a good way to generate strong returns on equity for our shareholders. In addition, we are pleased that AFC Gamma's was added to the Russell 2000 and we expect the inclusion in this world-class market index will bring increased visibility across the investment community.

Turning to the industry, the legislative environment surrounding the cannabis market continues to evolve. Senator Schumer of New York recently put forth the Cannabis Administration and Opportunity Act, which if passed in its current form what among other things, remove marijuana from the Controlled Substances Act. Given the current political landscape, we believe it is very unlikely at this piece of legislation will succeed. That said, we remain optimistic that legislation, consistent with the goals of the SAFE Act will eventually pass.

The SAFE Act may allow for credit cards to be use at cannabis dispensaries and should certainly increased the number of banks accepting deposits from the industry. We recognize that increased competition, because of the SAFE Act may drive lower yields for a borrowers, however, the SAFE Act will also potentially lower AFC Gamma's cost of capital as more banks could lend to us and more institutions can invest in us.

Additionally, we continue to believe the states will have the right to set regulations around their own cannabis programs and we'll attempt to protect the significant source of tax revenue and job-creation the cannabis provides in these states. The M&A boom that we mentioned during last quarter's earnings call continues with many large public multi-state operators using a combination of equity, debt and cash as methods to acquire smaller single state operators. We believe that we are in a one to two year period of rapid consolidation with the big operators will continue to get bigger. Our goal is to be the lender of choice to at least half of the top 15 multi-state operators as well as companies that are seeking to achieve scale or be acquired by MSO.

We lend to different rates to the top MSOs. The mid-sized operators and the smaller state operators. We are seeing some yield compression for the top tier multistate operators due to their size, scale and access to capital going. Forward, we will continue to employ a high degree of selectivity in the deals that we underwrite an investor. As we continue to source and evaluate new transactions. We have further expanded our team to over 20 employees and continue to build our corporate infrastructure to support our business plan. We are pleased to announce the hiring of Brett Kaufman, the new Chief Financial Officer for AFC Gamma. The 12 years. Brett served as CFO at Ladenburg Thalmann a diversified financial services company, which is $1.5 billion and trailing 12-month revenue prior to its sale in 2020. Before that, he spent nine years at Bear Stearns serving in various roles of increasing responsibility including Managing Director and Director of Financial Planning and Analysis.

We are very excited to have Brett join our team and look forward to introducing him to our investors and analysts in the coming months. We also would like to thank Tom Jeffrey for his contributions, hard work and diligence as AFC Gamma's CFO. Tom will continue in his role as CFO of AFC Gamma's external manager AFC management.

Turning to our dividend policy the Board of Directors intends to declare a dividend for the September quarter on or about September 15, which will have a record date of September 30 and be payable October 15. It is anticipated that the quarterly dividend declared by the Board will be greater than or equal to $0.38 dividend that was paid in the June quarter. This dividend schedule is similar to many other REITs. We intend to follow the schedule for future quarters as this timing provides our Board with additional visibility into the earnings of that given quarter when declaring the dividend. As a reminder, our dividend policy is to pay between 90% and 100% of distributable earnings over the year with a special dividend at the end of the year if necessary.

I will now turn it over to Jon.

Jonathan Kalikow -- Head, Real Estate & Director

Thank you, Len. One of our core competencies and key differentiating factors as a lender focused on cannabis is our expertise and experience in construction financing. Construction lending itself is complex and cannabis adds an additional layer of complexity. For example cannabis facilities require unique heating and cooling units to regulate the temperature effectively to create the optimal growth environment. These units may require the buildings group to be reinforced and must be installed correctly to prevent mold. Our in-house construction manager and team of construction professionals make sure that the borrower and its contractors understand these nuances.

As a secured lender we want to make sure the collateral securing our alone is built to the best possible standards by builders with requisite size and experience. As of August 1, about 70% of our loans at face value are our construction loans. Construction loans are drawn over time and with each draw we must make sure we have all needed lien releases. We must make sure our borrowers remain in material compliance with state and local ordinances and build in line with the construction plans. Construction loans are relatively new to the cannabis industry in fact prior to AFC Gamma sale leasebacks were a major source of external financing available to cannabis companies. Under a sale-leaseback a cannabis company with sell it's property and take a long-term lease. One with annual rent escalations, locking into such long term and potentially expensive obligations is no longer necessary.

The potential for legislation, such as the SAFE Act along with more flexible financing options encourages borrowers to own their real estate and to take loans they could refinance in three to five years and a expect the financing costs will decrease over time then alone, such as those provided by AFC Gamma will provide more flexibility over the near and long term.

Now let me turn the call over to Robyn.

Robyn Tannenbaum -- Managing Director, Partner, Head of Origination, IR & Marketing

Thank you, John. As a relationship lender we strive to help operators their businesses and succeed while acting as a flexible, partner to help sell capital needs along the way. Incumbency has proven to give us an important edge when sourcing potential deals as we've expanded loans with a variety of our existing borrowers as they continue to grow both organically and via acquisitions. For example when one of our borrowers decided to purchase a dispensary rather than lease it, we were able to provide a simple amendment to increase the size of the loan to provide them with the capital they needed to execute on their business plan. Once we complete a loan we have all of the documentation in place to grow with that borrower.

In addition to our construction expertise that Jon mentioned another key differentiator is AFC Gamma's available capital and the ability of its external manager to active agent. This allows our borrowers to deal with one lender when changes or amendments need to be completed versus going to a largest syndicate of lenders.

AFC Gamma's seeks to hold the majority of a borrower debt tranche and its external managers ability to act as lead agent is another differentiating factor that provides our borrowers with flexibility and seized of execution. As of August 1, 2021 ASC management agents did about 76% of our loans at face value. From January 2020 through June 30, 2021 we have sourced over $6.7 billion of transactions, which represents over 344 deals. We have built strong relationships with our borrowers, and we believe our reputation in the industry for being a trusted lender continues to grow.

I will now turn it over to Tom to talk about the financials.

Thomas Geoffroy -- Chief Financial Officer & Treasurer

Thank you, Robyn. We ended the second fiscal quarter of 2021 with total assets of $278.5 million as compared to $221.5 million at March 31, 2021. Portfolio investments totaled $164 million of principal outstanding. But the carrying value of $153.3 million spread across 13 companies as of June 30, 2021. In July 2021, the company completed its secondary offering, which resulted in the issuance of 2,750,000 shares at $20.50 per share with total net proceeds after fees and expenses of $52.6 million. In July 2021 the underwriters partially exercised their over-allotment option to purchase an additional 269,650 shares at $20.50 per share were $5.2 million in net proceeds to the company after fees and expenses. Currently AFC Gamma has 16,386,527 outstanding.

At the end of the June quarter, book value per share was $16.66 as compared to $16.18 and $14.83 for the quarters ended March 2021 and December 2020 respectively. As of June 30, 2021 AFC Gamma portfolio consisted of $187.7 million of transactions with $163.7 million funded. As of August 1, 2021, we completed $195.3 million of transactions with $175.3 million of principal outstanding to 14 companies in 14 states. All of the loans in the portfolio are current and performing. The weighted average portfolio yield to maturity, which is measured for each loan for the life of the loan is approximately 21% as of June 30, 2021 compared to 21% as of March 31, 2021.

The weighted average yield to maturity of the portfolio as of August 1, 2021 was also approximately 21%, which is consistent with the last two quarters ended March and June of 2021. For the quarter ended June 30, 2021, we had. GAAP net income of $4.6 million or earnings of $0.34 per basic weighted average common share. For the three months ended June 30, 2021, we generated total investment income of $8.7 million and distributable earnings of $5.8 million or $0.43 per basic weighted average common share. Distributable earnings represents the net income computed in accordance with GAAP excluding non-cash items such as non-cash equity compensation expense, any unrealized gains or losses. Provision for current expected credit losses commonly referred to as CECL or other non-cash items recorded in net income for the period.

CECL was early adopted by the company in fiscal year 2020, as of June 30, 2021 the CECL reserve represents approximately 1.1% of loans at carrying value compared to approximately 1.3% at 31, 2021. Adjustments to arrive at distributable earnings of $0.43 per basic weighted average common share of common stock amounted to $0.09 per basic weighted average common share in aggregate and included both the impact of non-cash adjustments to the CECL reserve and change in unrealized gains. We believe providing distributable earnings is helpful to stockholders 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. We believe that dividends are generally one of the principal reasons the stockholders invest in our common stock. And we generally intend to pay dividends to our stockholders in an amount between 90% and 100% of our annual taxable income. On June 30 2021 AFC Gamma paid a dividend of $0.38 per common share outstanding for the June quarter, which represented approximately 87% of distributable earnings for the quarter. The company has distributed $7.3 million of distributable earnings for the six months ended June 30, 2021 or approximately 80% of its distributable income.

The Board of Directors intends to declare a dividend for the September quarter on or about September 15, which will have a record date of September 30 and be payable on October 15. It is anticipated that the quarterly dividend declared by the Board of Directors will be greater than or equal to the $0.38 dividend that was paid for the June quarter. In May, 2021, the company amended its secured revolving credit loan agreement to among other things, increased the loan commitments from $40 million to $50 million decreased the interest rate from 8% to 6% per year and extend the maturity date up to December 31-2021.

Currently, no draws on the revolving credit facility of occurred during the fiscal year-to-date and no interest or fee expenses were incurred related to the revolving credit facility. The revolving credit facility is an important component to the company's business strategy to offer greater flexibility, manage liquidity and bridge its investment commitment for future capital raises thereby potentially reducing the impact of cash drag on the returns to investors.

I will now turn it back over to Len.

Leonard Tannenbaum -- Chief Executive Officer & Chairman

AFC Gamma has a best-in-class team, strong balance sheet and increased access to capital and during the second half of 2021 we are well positioned as a first mover and leader in the rapidly growing cannabis lending market. I will now turn it back over to the operator to start Q&A. Operator?

Questions and Answers:

Operator

[Operator Instructions] We have the first question comes from Gerald Disraeli [Phonetic] of Cowen. Your line is now open. You may ask your question.

Unidentified Participant

Great, thanks good morning team. Thanks very much for taking the questions. Len, I think it's definitely encouraging that the notable pipeline increase that the company has seen from early June through current dates and include New York. But just sticking with the Northeast can you just talk about how you view the potential white space opportunity not only in New York. But in states like Connecticut and Virginia and New Jersey that recently legalize for adult use that are presumably going to require notable capital expenditures to build out capacity over the medium to long term. Any color you could provide there would be helpful. Thank you.

Leonard Tannenbaum -- Chief Executive Officer & Chairman

I think it's very exciting that a lot of people that have been sitting on their licenses watching them appreciate the value and we're actually starting to take action in building those licenses and building to the benefit of the consumers in that state and the states are waking up to the fact that they issue these licenses for our purpose right to have these cultivation and dispensary is built and states like Missouri and others were watching them pull licenses from people that haven't started building or not building according to plan. So that goes for New Jersey as well. Circling back to your question there's a number of New Jersey licenses that just happened built yet. And so what we're seeing as a huge demand for capital to start building out these licenses as per the agreements and why they got to ship in the first place, and that is a large supply of the demand.

Unidentified Participant

Got it. That's helpful. Another one from me is just on the competitive landscape as of today. You are the only cannabis mortgage REIT trading on a major exchange. I guess like over the past few months in your conversations what are your expectations for the evolution of the competitive landscape maybe over the back half of this year into early 2022 with more competition coming online to capitalize on these high yields.

Leonard Tannenbaum -- Chief Executive Officer & Chairman

Look, I think from a public standpoint, not just with the public currency is really important, it's very hard for a new competitor to they get in the scale every day that passes increases the moat around our position and our competitive position at least from a public standpoint. I will say that there is plenty of competition to large multi-state operators there are large private companies, large hedge funds at large institutions that are investing with the multi-state operators that and so it's really about there. It's about relationship. What we can deliver helping them in their business plan. Helping them as a partner even more urban capital because there is plenty of capital at very high end where it seems like the new institutions or large institutions feel most comfortable.

Unidentified Participant

Very helpful color. Thanks a lot. I'll pass it on.

Operator

Thank you. Next question comes from the line of Aaron Hecht of JMP Securities. Your line is now open. You may ask your question.

Aaron Hecht -- JMP Securities -- Analyst

Hey, everyone morning and great job putting capital to work this quarter. Had a question around that, the active pipeline obviously up pretty significantly about $300 million bucks give or take, quarter to quarter. The terms in that pipeline, the yield profile is that changing much and I guess that's part of that is going to be involved with the larger MSOs and kind of the exposure there. So any insight on the exposure to the larger MSOs within that pipeline would be helpful. Thanks.

Leonard Tannenbaum -- Chief Executive Officer & Chairman

So the pipeline itself has a mixture of the large MSO's which are much safer and lower yielding the mid tier providers, which are a couple of states with operations that are looking to expand and the single state operators, which are starting to build a license. And so we back them have been put a certain amount of equity in, there is some seller notes or sometimes is unsecured debt and then we will end the senior debt to first liens on the property. they all whole different yields as we said before. As we look forward to the deals that we've done the deals we've announced would look at the quarters with health consistent with over 20% weighted average yield held to maturity. And by the way, when I say that we all know that things are aren't held to maturity, there's going to be velocity. Therefore, the yields are actually been higher if a deal pays off early.

So when we say it's 20% held years of maturity that's actually and I know that sounds very high, that's actually conservative. Having said that just depends on which deals we close in when we close them and how that weighted average yield changes and I think you heard me say it in the transcript that if we did sign a big multistate operator at lower yields and higher safety, we would just be, our intention is to relever the return to increase the return on equity for the investors just by applying a better cost to our cost of leverage versus their cost of leverage and capturing a spread. And so it's hard to tell where weighted average yield goes. It depends on the mix, but we're very focused on the return on equity to our shareholders.

Aaron Hecht -- JMP Securities -- Analyst

Great. All right, makes sense. And then the deployment pace, obviously very strong in the second quarter. If we look into the first month or so in the third quarter a little bit slower, but the commitments are up in total any insight you can give us on pace of deployment over the remainder of the year or how we should think about it is going to be a chunky situation.

Leonard Tannenbaum -- Chief Executive Officer & Chairman

Let's see how I answer that. We -- you're right. I'm a little disappointed that some deals didn't close in the beginning of the quarter, which could have closed. You can see by our 10-Q and our disclosures that we got some of the way there on some loans and they haven't closed all the way there yet. It is chunky we are sitting in August, which is kind of interesting, it's typical for a lot of deals and in the past when I've managed money for 5th Street for 15 years, there was definitely a spurt after Labor Day magically that's what everybody likes to close in September. So this could be a back-end of the quarter and all that may slip into October, November, we just don't know because these deals are cannabis and cannabis is very chunky but very uncertain to timing of closing. We do plan to continue to announce material agent that closings as they occur. So I think that that's going to be the best indicator of our progression.

Aaron Hecht -- JMP Securities -- Analyst

And then one more for me, if I could, you did make the comment that New York wasn't included in deal pipeline, then why that you're already looking at deals there and any thought on what that would mean for the more near term as opposed to long-term.

Leonard Tannenbaum -- Chief Executive Officer & Chairman

I would think New York is a next year event from a deal flow perspective because New York still hasn't figured out its own regulations opt out programs for the different locales or not until December 31. So it seems like everybody is talking to us about not everybody. Many people are talking to us about New York, but there is no definitive questions around how much they need or how big they want to build. But New York is just one of them, I think Florida is going to be very active, I think Georgia which is announced licenses will start will start to be active even only six winners. I think the Ohio build the 72 dispensaries ever base lining up to apply and build those out and which means they also cultivation. So we're seeing an Illinois. One of the reasons we think Illinois stagnated was lack of retail distribution with Illinois New Retail allocations over 100 retail allocations.

Cultivators now, we're saying, OK, now we can increase cultivation because we see the retail coming on. Therefore we anticipate demand. So all of it flows into capital expansion as new licenses across the country are issued. We also now I might as well say something new. We also are for the first time looking at California. We haven't done anything in California. We don't have anything yet signed in California, but we are considering California where we hadn't in the past, especially given the $1.2 billion compensation that we saw in California as the black market starts to get restricted California gets more interesting to us.

Aaron Hecht -- JMP Securities -- Analyst

Great insight. Thanks.

Operator

Thank you. We have the next question comes from the line of John Hecht of Jefferies, your line is now open. You may ask your question.

John Hecht -- Jefferies -- Analyst

Good morning, guys. Thanks very much for taking my questions. I'm just wondering how do we think about cost of capital opportunities and kind of how you would toggles average given that the rating, you guys just got.

Leonard Tannenbaum -- Chief Executive Officer & Chairman

So look, we have one benchmark out there, which is the industry leader in sale leasebacks IPR is debt, about $300 million trunk trades. I mean that pretty liquidly at sub 4.5% yields on the 5-year unsecured piece of paper there Egan Jones rating is BBB plus. So those are all facts. I'm not saying we have anything close to 4.5% cost of capital, but at least that's the bench market which people are looking and we are going to see where the market is I'm starting to get a pretty good idea but I don't want to put on leverage until we are close to putting on the assets that I would want to take leverage against. So it's always a timing issue. We do have a credit line that we could use as well. And so what we do anticipate putting on leverage in the medium term.

John Hecht -- Jefferies -- Analyst

Okay. And then you guys have remarkably stable yield to maturities in your book, assuming you hit your objectives for the year, do you still think you'd be in the low 20% range or how do we think about the migration of that over time given the pipeline and so forth.

Leonard Tannenbaum -- Chief Executive Officer & Chairman

It's great question, I'd like to, this year we're on plan and we have an aggressive plan and we're on it. Next year is, we know we're going to have growth, we don't know where that growth is going to be, it's going to be in all three segments. I think seeing what the forward-looking discussions are. M&A activity also is actually to starting to drive growth where you have acquisitions of companies that are not necessarily by the big MSOs at seven times multiples or so of EBITDA and that's tiered out by equity seller debt and senior debt where we're typically three times senior debt, very similar to the middle market loans that I used to do in normal middle-market lending, you're seeing that activity start to happen from both individual private equity sponsors and private equity funds. So I think there is a variety of drivers and every day, it changes cannabis moves faster than anything. So it's very hard to predict that. But what I'm really pleased that the yields. Right now we're holding up over 20% as I said to you FTEs are SAFE Act passed and I said, we think that there some yield compression those refinancings will cause actually our earnings to go even higher because we'd get prepayment penalties. In some cases, we have a right up to OID we'd have exit fees in some cases. And to remind all of our investors exit fees, which we do have on many deals are not accrued into income. So as we yet prudent income, so as we receive them they provide additional bumps to income.

John Hecht -- Jefferies -- Analyst

Wonderful. Thanks very much for the detail.

Operator

The next question comes from the line of Mark Smith of Lake Street Capital, your line is now open. You may ask your question.

Mark Smith -- Lake Street Capital -- Analyst

Hi guys. First question for me is pipeline looks really solid out there, do you guys have everybody on the team that you feel like you need at this point, are there additions and human capital that you guys need to make.

Leonard Tannenbaum -- Chief Executive Officer & Chairman

Okay, I got to make an advertisement to for more employees, which is always a positive on the call, so thanks for asking the question. We're looking to hire many people that we've hired a lot. We've grown so nicely over 20 employees, we've added Brett recently which adds a really good institutional person to the infrastructure, but also the team as we build our leadership team and we're continuing to hire. We need another originator, for sure, because there is as good as Robin and Chris are at uncovering opportunities and managing the processes, we continue to expand and have more touch points and the origination is a very intensive process. We are hiring more underwriting, the underwriting team is coming up to speed very nicely and developing terrific processes. We have in-house construction management now, which has been a huge plus both for our customers and our underwriting. So that's already taking care of but we have probably four or five open positions at any given time, and we expect anybody who has knows people that want a terrific job in fast growing company in this terrific industry related send them our way.

Mark Smith -- Lake Street Capital -- Analyst

Perfect. And then you touched on it a bit early in your commentary as well early in the Q&A, but looking at geographic expansion, a lot of people, obviously in New York, and people talk about in Northeast. But as we look through the rest of the country, what other states are attractive maybe smaller states for you to move into where the licenses are attractive. And then as you look at possibly increased competition, will that, maybe, push you into some smaller steps at some point?

Leonard Tannenbaum -- Chief Executive Officer & Chairman

We looked throughout the country at the limited license states in the supply and demand dynamics. We now have a lot more data that we did a year ago, all through the supply and demand equation is we know price per pound and how it's fluctuating in seasonal. Our new data that we're really applying seasonal changes in price and demand on a state basis as different grows especially greenhouse growth achieved different throughputs coming of the summer or winter or fall and that we're incorporating that into our trucks and our thinking. But if you think about Texas someday, that will be a great state not for a while not of cannabis 1%.

A smaller states like Arkansas that we definitely are looking at and looking at financing, but again there are not a lot of players in the smaller states and not a lot of room for players in smaller states. I think the demand will continue to be driven by Illinois, Ohio, New York Maryland, Maryland needs a lot of growth, build out and that seems to be happening if Virginia expand its licenses then that'll be it a good growth area, in Virginia, I think, West Virginia, it may be too many licenses. So we're a little bit careful in West Virginia, Arizona is a terrific state. One of the highest throughputs in the country and the licenses on the distribution side, are very valuable. So we'd like the distributors a lot in Arizona.

So look it constantly varies. I think what we haven't done and over a third of that or 40% of the volume is in states that we do not yet lend to. So if we're starting to, as I said to find select opportunities in California that may be interesting. That's going to expand 30% probably the way, the way we look at the United States if we can find some good opportunities there.

Mark Smith -- Lake Street Capital -- Analyst

Okay. Great, thank you.

Operator

Thank you. There are no further questions at this time. I would like to turn the call over to Len Tannenbaum.

Leonard Tannenbaum -- Chief Executive Officer & Chairman

Thank you so much. And thank you all for listening to the call.

Operator

[Operator Closing Remarks]

Duration: 38 minutes

Call participants:

Francesca Smith -- Investor Relations

Leonard Tannenbaum -- Chief Executive Officer & Chairman

Jonathan Kalikow -- Head, Real Estate & Director

Robyn Tannenbaum -- Managing Director, Partner, Head of Origination, IR & Marketing

Thomas Geoffroy -- Chief Financial Officer & Treasurer

Unidentified Participant

Aaron Hecht -- JMP Securities -- Analyst

John Hecht -- Jefferies -- Analyst

Mark Smith -- Lake Street Capital -- Analyst

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