FAIR VALUE OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2023

FAIR VALUE OF FINANCIAL INSTRUMENTS

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, 2023 and 2022 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, 2023, according to the fair value hierarchy:

		As of December 31, 2023
		Level 1				Level 2				Level 3				Total

Short-term Non-banking Loans		$	—			$	—			$	16,961,766			$	16,961,766
Preferred Stock			—				—				265,000				265,000
Common Stock			47,910				—				—				47,910
Warrants			—				—				—				—
Other Equity			—				—				10,000				10,000
Total		$	47,910			$	—			$	17,236,766			$	17,284,676

The following table presents the fair value measurements of our portfolio investments by major class, as of December 31, 2022, according to the fair value hierarchy:

		As of December 31, 2022
		Level 1				Level 2				Level 3				Total

Short-term Non-banking Loans		$	—			$	—			$	15,285,932			$	15,285,932
Preferred Stock			—				—				1,200,000				1,200,000
Warrants			—				—				—				—
Other Equity			—				—				222,500				222,500
Total		$	—			$	—			$	16,708,432			$	16,708,432

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, 2023:

		For the year ended December 31, 2023
		ST Non-banking Loans				Preferred Stock				Other Equity

Balance as of January 1, 2023		$	15,285,932			$	1,200,000			$	222,500
Net change in unrealized depreciation			(195,041	)			(935,000	)			600,000
Purchases and other adjustments to cost			12,900,500				—				—
Sales and redemptions			(11,029,625	)			—				—
Realized gain (loss)			—				—				(600,000	)
Transfers between level 3 and level 1			—				—				(212,500	)
Balance as of December 31, 2023		$	16,961,766			$	265,000			$	10,000

The net change in unrealized depreciation for the year ended December 31, 2023 attributable to Level 3 portfolio investments still held as of December 31, 2023 is $1,126,877, and is included in net change in unrealized 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, 2022:

		For the year ended December 31, 2022
		ST Non-banking Loans				Preferred Stock				Other Equity

Balance as of January 1, 2022		$	11,650,000			$	1,200,000			$	812,500
Net change in unrealized depreciation			(200,693	)			—				(600,000	)
Purchases and other adjustments to cost			23,548,458				—				10,000
Sales and redemptions			(19,711,833	)			—				—
Balance as of December 31, 2022		$	15,285,932			$	1,200,000			$	222,500

The net change in unrealized depreciation for the year ended December 31, 2022 attributable to Level 3 portfolio investments still held as of December 31, 2022 is $651,371, and is included in net change in unrealized depreciation on investments on the statement of operations.

The following table lists our Level 3 investments held as of December 31, 2023 and the unobservable inputs used to determine their valuation:

Security Type		12/31/23 FMV				Valuation Technique		Unobservable Inputs		Range
ST Non-banking Loans		$	16,961,766			discounted cash flow		determining private company interest rate based on changes in market rates of instruments with comparable creditworthiness		12-23%
Other Equity			10,000			last secured funding known by company
Preferred Stock			265,000			last funding secured by company		economic changes since last funding
		$	17,236,766

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, 2022:

Security Type		12/31/22 FMV				Valuation Technique		Unobservable Inputs		Range
ST Non-banking Loans		$	15,285,932			discounted cash flow		determining private company interest rate based on changes in market rates of instruments with comparable creditworthiness		12-33%
Other Equity			222,500			last secured funding known by company
Preferred Stock			1,200,000			last funding secured by company		economic changes since last funding
		$	16,708,432

There was one transfer between levels during 2023 due to an initial public offering of a previously privately held security. The shares of that security are now free trading. There were no transfers between levels during the years ended December 31, 2022.

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details