In accordance with the authoritative guidance on fair value measurements and disclosures under U.S. GAAP, the Company discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 — Quoted prices in markets that are not considered to be active or financial instruments for which significant inputs are observable, either directly or indirectly;

Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by management.

The Company considers whether the volume and level of activity for the asset or liability have significantly decreased and identifies transactions that are not orderly in determining fair value. Accordingly, if the Company determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value. Valuation techniques such as an income approach might be appropriate to supplement or replace a market approach in those circumstances.

At September 30, 2022, the Company had investments in 22 portfolio companies. The total fair value and cost of the investments were $128,200,252 and $127,382,778, respectively. The composition of our investments as of September 30, 2022 is as follows:

(1)

Includes unitranche investments, which account for 4.7% of our portfolio at fair value. Unitranche structures may combine characteristics of first lien senior secured as well as second lien and/or subordinated loans. Our unitranche loans will expose us to the risks associated with the second lien and subordinated loans to the extent we invest in the “last-out” tranche.

The Company’s investment portfolio may contain loans that are in the form of lines of credit or revolving credit facilities, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of September 30, 2022, the Company had 20 of such investments with aggregate unfunded commitments of $33,569,638. The Company maintains sufficient liquidity (through cash on hand, its ability to drawdown capital from investors, and/or available borrowings under the Credit Facilities) to fund such unfunded commitments should the need arise.

The aggregate gross unrealized depreciation and the aggregate cost and fair value of the Company’s portfolio company securities as September 30, 2022 was as follows:


	September 30,
	2022
Aggregate cost of portfolio company securities	$	128,200,252
Gross unrealized appreciation of portfolio company securities		236,964
Gross unrealized depreciation of portfolio company securities		(949,977)
Gross unrealized depreciation on foreign currency translation		(104,461)
Aggregate fair value of portfolio company securities	$	127,382,778

The fair values of our investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of September 30, 2022 are as follows:


	Quoted Prices
	in Active
	Markets		Significant Other		Significant
	for Identical		Observable		Unobservable
	Securities		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Senior Secured – First Lien	$	—	$	—	$	122,878,794	$	122,878,794
Equity		—		—		4,503,984		4,503,984
Total Investments	$	—	$	—	$	127,382,778	$	127,382,778

The aggregate values of Level 3 portfolio investments change during the three months ended September 30, 2022 are as follows:


	Senior Secured
	Loans-First
	Lien		Equity		Total
Fair value at beginning of period	$	—	$	—	$	—
Purchases of investments		130,707,471		4,316,459		135,023,930
Sales and Redemptions		(6,938,245)		—		(6,938,245)
Change in unrealized depreciation on investments included in earnings		(900,538)		187,525		(713,013)
Change in unrealized depreciation on foreign currency translation included in earnings		(104,461)		—		(104,461)
Amortization of premium and accretion of discount, net		114,567		—		114,567
Fair value at end of period	$	122,878,794	$	4,503,984	$	127,382,778

There were no Level 3 transfers during the three months ended September 30, 2022.

The following is a summary of geographical concentration of our investment portfolio as of September 30, 2022:


					% of Total
	Cost		Fair Value		Investments
Texas	$	28,713,229	$	28,794,095	22.60	%
New York		19,566,570		19,526,010	15.33	%
Florida		16,366,334		16,277,231	12.78	%
Illinois		12,967,472		12,814,899	10.06	%
Michigan		9,940,463		9,857,470	7.74	%
United Kingdom		9,975,156		9,782,509	7.68	%
Washington		6,904,888		6,803,077	5.34	%
Indiana		6,378,931		6,378,931	5.01	%
Maryland		6,464,883		6,285,151	4.93	%
Idaho		4,653,069		4,556,019	3.58	%
Wisconsin		3,304,315		3,304,315	2.59	%
Arizona		2,964,942		3,003,071	2.36	%
	$	128,200,252	$	127,382,778	100.00	%

The following is a summary of industry concentration of our investment portfolio as of September 30, 2022:


					% of Total
	Cost		Fair Value		Investments
Services: Business	$	26,422,031	$	26,267,210	20.62	%
Consumer Goods: Non-Durable		19,168,202		19,049,673	14.95	%
Consumer Goods: Durable		13,612,273		13,590,949	10.67	%
Capital Equipment		12,558,540		12,578,402	9.87	%
Automotive		9,940,463		9,857,470	7.74	%
Media: Diversified & Production		9,975,156		9,782,509	7.68	%
High Tech Industries		8,469,468		8,585,259	6.74	%
Chemicals, Plastics, & Rubber		7,863,931		7,686,892	6.03	%
Construction & Building		7,360,229		7,247,011	5.69	%
Retail		5,757,998		5,717,736	4.49	%
Software		4,172,490		4,159,685	3.27	%
Services: Consumer		2,899,471		2,859,982	2.25	%
	$	128,200,252	$	127,382,778	100.00	%

The following provides quantitative information about Level 3 fair value measurements as of September 30, 2022:


Description:	Fair Value		Valuation Technique	Unobservable Inputs	Range (Average)⁽¹⁾⁽³⁾
First lien debt	$	122,878,794	Income/Market	HY credit spreads,	0.91% to 1.90% (1.54%)
			approach⁽²⁾	Risk free rates	1.06% to 2.94% (1.82%)
				Market multiples	7.2x to 13.9x (10.5x)⁽⁴⁾

Equity investments	$	4,503,984	Market approach⁽⁵⁾	Underwriting multiple/
				EBITDA Multiple	5.9x to 15.6x (10.3x)
	$	127,382,778

(1)	Weighted average based on fair value as of September 30, 2022.

(2)	Income approach is based on discounting future cash flows using an appropriate market yield.

(3)

The Company calculates the price of the loan by discounting future cash flows, which include forecasted future rates based on the published forward curve at the valuation date, using an appropriate yield calculated as of the valuation date. This yield is calculated based on the loan’s yield at the original investment and is adjusted as of the valuation date based on: changes in comparable credit spreads, changes in risk free interest rates (per swap rates), and changes in credit quality (via an estimated shadow rating). Significant movements in any of these factors could result in a significantly lower or higher fair value measurement. As an example, the “Range (Average)” for first lien debt instruments in the table above indicates that the change in the HY spreads between the date a loan closed and the valuation date ranged from 0.91% (91 basis points) to 1.90% (190 basis points). The average of all changes was 1.54% (154 basis points).

(4)	Median of LTM (last twelve months) EBITDA multiples of comparable companies.

(5)

The primary significant unobservable input used in the fair value measurement of the Company’s equity investments is the EBITDA multiple (the “Multiple”). Significant increases (decreases) in the Multiple in isolation could result in a significantly higher (lower) fair value measurement. To determine the Multiple for the market approach, the Company considers current market trading and/or transaction multiple, portfolio company performance (financial ratios) relative to public and private peer companies and leverage levels, among other factors. Changes in one or more of these factors can have a similar directional change on other factors in determining the appropriate Multiple to use in the market approach.