Redemptions were suspended in December 2023 due to sector-wide liquidity issues. As borrower defaults increased and market conditions deteriorated, management determined that allowing redemptions could adversely affect remaining investors. Our priority has been preserving portfolio value, maximizing recoveries, and treating investors equitably during a period of industry-wide distress.

The Fund’s ability to make distributions has been impacted by loan defaults, restructuring activity, litigation costs, slower-than-expected asset recoveries, and broader challenges affecting the cannabis industry.

We recognize that investors are disappointed by reduced distributions and remain focused on improving cash flow through recoveries, restructurings, and asset monetization.

We do not believe current conditions determine the Fund’s ultimate outcome. While the portfolio has been affected by borrower defaults and industry challenges, significant recovery efforts remain underway, and we expect to be net positive across all repositioned assets. Our focus is on maximizing recoveries and returning capital to investors.

The transactions being referenced were permissible types of disclosed investment transactions – which are common throughout the industry - many of which have since been repaid, restructured, sold, or otherwise resolved with no loss of principal. As referenced in previous quarterly reports, there is only one remaining loan of this type and it is a superior credit in the loan portfolio.

No, other than an indirect interest in the Cannabis license that was transferred based on regulatory considerations. Certain ownership structures were created to address cannabis licensing and regulatory requirements for the benefit of fund members, and the Fund continues to retain contractual and economic protections associated with those assets. This is consistent with how all cannabis portfolio companies have been held since the Fund’s inception.

The premise is wrong. No Fund asset was transferred to anyone – other than an indirect interest in the Cannabis license that was transferred based on regulatory considerations. The Fund’s position was a loan. The borrower defaulted. The Fund exercised its remedies and realized 100% of its physical real property collateral securing that loan. The structure was designed to benefit fund members to legally hold title to federally issued licenses within applicable change of control regulations.

The Fund's remaining collateral is the contractual right to the entire economic benefit of the license-holding entity, irrespective of who holds record title. Federal licensing rules constrained which parties could hold record title following the foreclosure. Ethan Leimel holds a 49% non-controlling membership interest for that reason. He contributed no capital, holds no economic entitlement, receives no compensation, and has no voting or management authority.

The structure was meticulously designed with outside regulatory counsel and documented at inception through springing instruments under which the interest transfers to the Fund entity automatically once the rules permit direct Fund ownership. No further negotiation, consent, or consideration is required. Direct ownership by the Fund entity was always the intended end state — it was contracted before the interest was ever issued and deferred only until the rules allowed it. With those requirements now changing, that transfer is being effectuated.

The claims only underscore the desperate personal agenda of those launching these baseless and dishonest allegations designed to pressure Pelorus principals through family members.

In early 2024, a former employee, who is also participating in the shadow campaign against management, contacted the Fund’s then-auditor and made statements that conflicted with his prior year-end representations to the same firm. It is our belief that those communications caused the auditor to pause work on the 2023 audit and to require a re-review of prior-year financial statements.

Pelorus took the matter seriously. At significant additional cost, we engaged a new independent auditor to complete the 2023 and 2024 audits on an expedited basis so the Fund could continue meeting its debt-facility reporting requirements. Those audits were completed with no material deficiencies. The prior-year financial statements were also re-reviewed; the only material changes were additional footnote disclosures—the underlying numbers did not change in any material respect.

The original auditor has since indicated it is open to re-engaging for future work, subject to standard conditions.

The departure of the CFO seemed to be heavily influenced by the former employee. Employee departures can occur for many different reasons. The subsequent conversation with the former CFO seemed to indicate he may not have resigned if he had spoken with us first.

The JAMS arbitration involved a books-and-records dispute strictly concerning the parent of the Management Company (Pelorus Capital Group), not the Fund itself. It is important to emphasize that this matter pertains solely to internal corporate records of the parent of the Management Company and does not involve Fund-level records or assets.

Management prevailed on the core contractual merits of the dispute. On February 19, 2025, the Arbitrator denied Petitioners’ contractual inspection claims in full, finding that Claimant Travis Goad had no right to inspect records based on the Operating or Grant Agreements. Following that ruling, PCG made a good-faith offer to make certain non-privileged Management Company records available, subject to a standard confidentiality and non-disclosure agreement (NDA). Although the Arbitrator subsequently issued Case Management Order No. 5 on May 9, 2025—directing the parties to enter into an appropriate protective order so production could move forward—Goad refused to execute an NDA, engage in meet-and-confer efforts, or take the required steps to receive the documents.

Rather than concluding the matter after denying the primary contractual claim, the Arbitrator permitted the proceeding to transform into a statutory inspection claim under Section 18-305 of the Delaware Limited Liability Company Act. Throughout this secondary phase, the Arbitrator committed fundamental legal errors. Most notably, she ignored the legally dispositive fact that Goad had been preliminarily enjoined by a separate AAA arbitrator after the Fund provided compelling evidence it would suffer irreparable harm if Goad continued to breach his confidentiality obligations to the Company—misconduct that underlies the forfeiture of his membership interests and strips his standing under Section 18-305. She further disregarded settled Delaware precedent requiring document requests to be "necessary and essential" and described with "rifled precision," as well as law holding that plenary actions moot inspection demands.

Finally, the fee award compounds these procedural errors. The Operating Agreement’s fee-shifting provision applies strictly to contractual claims under the Agreement. Although PCG prevailed on the sole contractual claim in the matter, the Arbitrator improperly awarded Petitioners $347,414.84 in fees and costs for prevailing on a statutory claim the contract does not cover. PCG has filed a Motion to Vacate to address these mischaracterizations and legal errors, and management remains confident in its legal position as it actively pursues this relief.

No. We have continued to communicate with investors through reports, investor updates, audited financials and direct communications. At the same time, we recognize investor frustration and remain committed to improving transparency and communication.

We created the Growth Fund to provide a structure for managing and maximizing value from certain distressed and special-situation assets and to capture the value creation opportunity available through discounted valuations in cannabis today. Allegations that the purpose was simply to create additional management fees are false. Pelorus investors voted to majority approve the asset spin-out to create the Growth Fund based upon the opportunity. The Funds are independent, and there is no double-counting of management fees. Our objective has always been to create value and improve recovery prospects for investors.

Management fees for both the Pelorus Fund and the Pelorus Growth Fund remain governed by the applicable Fund documents and agreements. Consistent with prior communications to investors, substantial fees have been accrued rather than paid in cash. This approach was taken to prioritize the use of available capital for the benefit of the Fund and its investors during a period of elevated defaults, restructuring activity, and litigation expense.

Those campaigning to change management have falsely stated that qualified replacement managers are available and prepared to assume management responsibilities. Any claims of a ready replacement plan are misleading, and we believe investors should carefully evaluate any proposed successors should they be identified

Our primary objectives remain:
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• Maximizing recoveries on distressed assets.
• Resolving outstanding legal proceedings
• Increasing portfolio cash flow.
• Reducing leverage where appropriate.
• Preserving and enhancing portfolio value.
• Creating future liquidity opportunities for investors.

We believe investor outcomes will ultimately be determined by actual recovery results and the value realized from the portfolio, not by competing public allegations.

Contact us at ir@peloruscg.com.