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FAIR VALUE OF FINANCIAL INSTRUMENTS
 6 Months Ended
Jun. 30, 2023
FAIR VALUE OF FINANCIAL INSTRUMENTS [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS
NOTE 4 — FAIR VALUE OF FINANCIAL INSTRUMENTS
 
ASC 820 defines fair value, establishes a framework for measuring fair value, and establishes a fair value hierarchy based on the quality of inputs used to measure fair value and enhances disclosure requirements for fair value measurements. The Company accounts for its investments at fair value. As of June 30, 2023 and December 31, 2022, the Company’s portfolio investments consisted of investments in secured loans and secured notes. The fair value amounts have been measured as of the reporting date and have not been reevaluated or updated for purposes of these financial statements subsequent to that date. As such, the fair values of these financial instruments subsequent to the reporting date may be different than amounts reported.
 
In accordance with ASC 820, the Company has categorized its investments based on the priority of the inputs to the valuation technique into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical investments (Level 1) and the lowest priority to unobservable inputs (Level 3).
 
As required by ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, the fair value related to such investments categorized within the Level 3 tables below may include components of the fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). The fair value determination of each portfolio investment categorized as Level 3 required one or more unobservable inputs.
 
The use of significant unobservable inputs creates uncertainty in the measurement of fair value as of the reporting date. The significant unobservable inputs used in the fair value measurement of the Company’s investments may vary and may include debt investments’ yield (i.e. discount rate) and volatility assumptions.

The Company’s investments measured at fair value by investment type on a recurring basis as of June 30, 2023 were as follows:
 
   
Fair Value Measurements at June 30, 2023 Using
  
Assets
  
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
    
Significant
Other
Observable
Inputs (Level 2)
    
Significant
Unobservable
Inputs (Level 3)
    
Total
  
Senior Secured First Lien Term Loan
  
$
-
    
$
-
    
$
49,731,544
    
$
49,731,544
  
Senior Secured Notes
    
-
      
-
      
7,937,500
      
7,937,500
  
Total
  
$
-
    
$
-
    
$
57,669,044
    
$
57,669,044
  

The Company’s investments measured at fair value by investment type on a recurring basis as of December 31, 2022 were as follows:
 
   
Fair Value Measurements at December 31, 2022 Using
  
Assets
  
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
    
Significant
Other
Observable
Inputs (Level 2)
    
Significant
Unobservable
Inputs (Level 3)
    
Total
  
Senior Secured First Lien Term Loan
  
$
-
    
$
-
    
$
40,660,663
    
$
40,660,663
  
Senior Secured Notes
    
-
      
-
      
9,593,917
      
9,593,917
  
Total
  
$
-
    
$
-
    
$
50,254,580
    
$
50,254,580
  

The following tables provide a summary of the significant unobservable inputs used to fair value the Level 3 portfolio investments as of June 30, 2023 and December 31, 2022. The methodology for the determination of the fair value of the Company’s investments is discussed in “Note 2 – Significant Accounting Policies”. Discount Rate ranges are shown as spread over PRIME and Treasuries, respectively, for Senior Secured First Lien Term Loans as of June 30, 2023 and December 31, 2022.
 
Investment Type
  
Fair Value as of
  June 30, 2023
  
Valuation Techniques/
Methodologies
  
Unobservable
Input
  
Range
    
Weighted Average (1)
  
 
      
 
  
 
            
Senior Secured First Lien Term Loan
  
$
49,731,544
  
Discounted Cash Flow
  
Discount Rate
    
8.4% - 11.4
%
    
9.9
%
Senior Secured Notes
    
7,937,500
  
Discounted Cash Flow
  
Discount Rate
    
12.2% - 17.6
%
    
14.8
%
Total
  
$
57,669,044
                        
 
Investment Type
  
Fair Value as of
December 31, 2022
  
Valuation Techniques/ Methodologies
  
Unobservable
Input
  
Range
    
Weighted Average (1)
  
 
      
 
  
 
            
Senior Secured First Lien Term Loan
  
$
40,660,633
  
Discounted Cash Flow
  
Discount Rate
    
7.2% - 9.6
%
    
8.4
%
 
Volatility
    
20.0% - 20.0
%
    
20.0
%
Senior Secured Notes
    
9,593,917
  
Discounted Cash Flow
  
Discount Rate
    
11.6% - 18.7
%
    
14.3
%
 
Volatility
    
7.0% - 20.0
%
    
12.4
%
Total
  
$
50,254,550
                        

(1) The weighted average is calculated based on the fair value of each investment.
 
Significant increases (decreases) in discount rate in isolation would result in a significantly higher (lower) fair value assessment. Significant increases (decreases) in volatility in isolation would result in a significantly lower (higher) fair value assessment.
 
The following table provides a summary of changes in the fair value of the Company’s Level 3 portfolio investments for the six months ended June 30, 2023:
 
   
Senior Secured
First Lien
Term Loan
    
Senior
Secured
Notes
    
Total
Investments
  
Fair Value as of December 31, 2022
  
$
40,660,633
    
$
9,593,917
    
$
50,254,550
  
Purchases
    
8,442,000
      
-
      
8,442,000
  
Accretion of discount and fees (amortization of premium), net
    
158,740
      
142,818
      
301,558
  
PIK interest
     62,587       -       62,587  
Proceeds from sales of investments and principal repayments
    
(90,000
)
    
(1,600,000
)
    
(1,690,000
)
Net realized gain (loss) on investments
    
-
      
(210,767
)
    
(210,767
)
Net change in unrealized appreciation (depreciation) on investments
    
497,584
      
11,532
   
509,116
  
Balance as of June 30, 2023
  
$
49,731,544
    
$
7,937,500
    
$
57,669,044
  
 
                        
Net change in unrealized appreciation/depreciation on Level 3 investments still held as of June 30, 2023
  
$
497,584
    
$
11,532
 
$
509,116
  


The following table provides a summary of changes in the fair value of the Company’s Level 3 portfolio investments for the six months ended June 30, 2022:

 
   
Senior Secured
First Lien
Term Loan
    
Total
Investments
  
Fair Value as of December 31, 2021
  
$
-
    
$
-
  
Purchases
    
24,417,500
      
24,417,500
  
Accretion of discount and fees (amortization of premium), net
    
9,508
      
9,508
  
PIK interest
    
-
      
-
  
Proceeds from sales of investments and principal repayments
    
-
      
-
  
Net realized gain (loss) on investments
    
-
      
-
  
Net change in unrealized appreciation (depreciation) on investments
    
(9,508
)
    
(9,508
)
Balance as of June 30, 2022
  
$
24,417,500
    
$
24,417,500
  
                 
Net change in unrealized appreciation/depreciation on Level 3 investments still held as of June 30, 2022
  
$
(9,508
)
  
$
(9,508
)