| FAIR VALUE OF FINANCIAL INSTRUMENTS |
NOTE 7 – FAIR VALUE OF FINANCIAL INSTRUMENTS Level 3 valuation information: Due to the inherent uncertainty in the valuation process, the estimate of the fair value of our investment portfolio as of December 31, 2021 and 2020 may differ materially from values that would have been used had a readily available market for the securities existed. The following table presents the fair value measurements of our portfolio investments by major class, as of December 31, 2021, according to the fair value hierarchy: | | | | | | | | | | | | | | | As of December 31, 2021 | | | Level 1 | | Level 2 | | Level 3 | | Total | Short-term Non-banking Loans | | $ | — | | $ | — | | $ | 11,650,000 | | $ | 11,650,000 | Preferred Stock | | | — | | | — | | | 1,200,000 | | | 1,200,000 | Common Stock | | | 436,175 | | | — | | | — | | | 436,175 | Other Equity | | | — | | | — | | | 812,500 | | | 812,500 | Total | | $ | 436,175 | | $ | — | | $ | 13,662,500 | | $ | 14,098,675 |
The following table presents the fair value measurements of our portfolio investments by major class, as of December 31, 2020, according to the fair value hierarchy: | | | | | | | | | | | | | | | As of December 31, 2020 | | | Level 1 | | Level 2 | | Level 3 | | Total | Short-term Non-banking Loans | | $ | — | | $ | — | | $ | 2,789,000 | | $ | 2,789,000 | Preferred Stock | | | — | | | — | | | 300,000 | | | 300,000 | Common Stock | | | 3,300,000 | | | — | | | — | | | 3,300,000 | Other Equity | | | — | | | — | | | 278,897 | | | 278,897 | Total | | $ | 3,300,000 | | $ | — | | $ | 3,367,897 | | $ | 6,667,897 |
The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 portfolio investment assets for the year ended December 31, 2021: | | | | | | | | | | | | | | | | | | For the year ended December 31, 2021 | | | | | | ST | | | | | | | | | | | | | | | Non-banking | | Preferred | | Common | | | | | | | | | Loans | | Stock | | Stock | | Warrants | | Other Equity | Balance as of January 1, 2021 | | $ | 2,789,000 | | $ | 300,000 | | $ | — | | $ | — | | $ | 278,897 | Net change in unrealized appreciation | | | — | | | — | | | — | | | — | | | — | Purchases and other adjustments to cost | | | 24,765,333 | | | 900,000 | | | — | | | — | | | 812,500 | Sales and redemptions | | | (15,904,333) | | | — | | | — | | | — | | | (278,897) | Net realized loss | | | — | | | — | | | — | | | — | | | — | Balance as of December 31, 2021 | | $ | 11,650,000 | | $ | 1,200,000 | | $ | — | | $ | — | | $ | 812,500 |
The net change in unrealized appreciation for the year ended December 31, 2021 attributable to Level 3 portfolio investments still held as of December 31, 2021 is $0, and is included in net change in unrealized appreciation (depreciation) on investments on the statement of operations. The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 portfolio investment assets for the year ended December 31, 2020: | | | | | | | | | | | | | | | | | | For the year ended December 31, 2020 | | | | | | ST Non-banking | | Preferred | | Common | | | | | | | Loans | | Stock | | Stock | | Warrants | | Other Equity | Balance as of January 1, 2020 | | $ | — | | $ | 300,000 | | $ | — | | $ | — | | $ | 534,200 | Net change in unrealized appreciation | | | — | | | — | | | — | | | — | | | 486,018 | Purchases and other adjustments to cost | | | 7,543,000 | | | — | | | — | | | — | | | — | Sales and redemptions | | | (4,754,000) | | | — | | | — | | | — | | | (91,313) | Net realized loss | | | — | | | — | | | — | | | — | | | (650,008) | Balance as of December 31, 2020 | | $ | 2,789,000 | | $ | 300,000 | | $ | — | | $ | — | | $ | 278,897 |
The net change in unrealized appreciation for the year ended December 31, 2020 attributable to Level 3 portfolio investments still held as of December 31, 2020 is $0, and is included in net change in unrealized appreciation (depreciation) on investments on the statement of operations. The following table lists our Level 3 investments held as of December 31, 2021 and the unobservable inputs used to determine their valuation: | | | | | | | | | | | Security Type | | 12/31/21 FMV | | Valuation Technique | | Unobservable Inputs | | Range | | ST Non-banking Loans | | $ | 11,650,000 | | discounted cash flow | | determining private company interest rate based on credit | | 12-44 | % | Other Equity | | | 812,500 | | last secured funding known by company | | economic changes since last funding | | | | Preferred Stock | | | 1,200,000 | | last funding secured by company | | economic changes since last funding | | | | | | $ | 13,662,500 | | | | | | | |
The following table presents a reconciliation of the beginning and ending fair value balances for our Level 3 portfolio investment assets for the year ended December 31, 2020: | | | | | | | | | | | Security Type | | 12/31/20 FMV | | Valuation Technique | | Unobservable Inputs | | Range | | ST Non-banking Loans | | $ | 2,789,000 | | discounted cash flow | | determining private company interest rate based on credit | | 14-44 | % | Other Equity | | | 278,897 | | last secured funding known by company | | economic changes since purchase | | | | Preferred Stock | | | 300,000 | | last funding secured by company | | economic changes since last funding | | | | | | $ | 3,367,897 | | | | | | | |
There were no transfers between levels during the years ended December 31, 2021 and 2020.
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