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PORTFOLIO INVESTMENTS AND FAIR VALUE (Tables)

6 Months Ended

Jun. 30, 2023

PORTFOLIO INVESTMENTS AND FAIR VALUE

Schedule of total fair value and cost of investments

At June 30, 2023, the Company had investments in 32 portfolio companies. The composition of our investments as of June 30, 2023 is as follows:


		Cost			Fair Value
Senior Secured – First Lien⁽¹⁾		$	179,814,011		$	180,437,624
Equity			7,273,856			7,885,891
Total Investments		$	187,087,867		$	188,323,515

(1)

Includes unitranche investments, which may combine characteristics of first lien senior secured, as well as second lien and/or subordinated loans. Our unitranche loans may expose us to certain risk associated with second lien and subordinated loans to the extent we invest in the “last-out” portion of the unitranche loans which account for 5.8% of our portfolio at fair value.

At December 31, 2022, the Company had investments in 25 portfolio companies. The composition of our investments as of December 31, 2022 is as follows:


		Cost			Fair Value
Senior Secured – First Lien⁽¹⁾		$	152,825,940		$	152,257,418
Equity			5,196,737			5,247,337
Total Investments		$	158,022,677		$	157,504,755

(1)

Includes unitranche investments, which may combine characteristics of first lien senior secured, as well as second lien and/or subordinated loans. Our unitranche loans may expose us to certain risk associated with second lien and subordinated loans to the extent we invest in the “last-out” portion of the unitranche loans which account for 3.9% of our portfolio at fair value.

Schedule of aggregate gross unrealized appreciation and depreciation and aggregate cost and fair value of portfolio company securities


		June 30, 2023			December 31, 2022
Aggregate cost of portfolio company securities		$	187,087,867		$	158,022,677
Gross unrealized appreciation of portfolio company securities			2,355,976			550,229
Gross unrealized depreciation of portfolio company securities			(1,147,482)			(1,089,112)
Gross unrealized appreciation on foreign currency translation			27,154			20,961
Aggregate fair value of portfolio company securities		$	188,323,515		$	157,504,755

Schedule of fair values of investments disaggregated into three levels of fair value hierarchy

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 June 30, 2023 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		$	—		$	—		$	180,437,624		$	180,437,624
Equity			—			—			7,885,891			7,885,891
Total Investments		$	—		$	—		$	188,323,515		$	188,323,515

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 December 31, 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		$	—		$	—		$	152,257,418		$	152,257,418
Equity			—			—			5,247,337			5,247,337
Total Investments		$	—		$	—		$	157,504,755		$	157,504,755

Schedule of aggregate values of Level 3 portfolio investments change

The aggregate values of Level 3 portfolio investments change during the six months ended June 30, 2023 are as follows:


		Senior Secured
		Loans-First
		Lien			Equity			Total
Fair value at December 31, 2022		$	152,257,418		$	5,247,337		$	157,504,755
Purchases of investments			39,328,107			2,090,671			41,418,778
Sales and Redemptions			(12,561,190)			(13,553)			(12,574,743)
Change in unrealized appreciation on investments included in earnings			1,192,134			555,243			1,747,377
Change in unrealized appreciation on foreign currency translation included in earnings			—			6,193			6,193
Amortization of premium and accretion of discount, net			221,155			—			221,155
Fair value at June 30, 2023		$	180,437,624		$	7,885,891		$	188,323,515

The aggregate values of Level 3 portfolio investments change during the year ended December 31, 2022 are as follows:


		Senior Secured
		Loans-First
		Lien			Equity			Total
Fair value at December 31, 2021		$	—		$	—		$	—
Purchases of investments			163,129,279			5,196,737			168,326,016
Sales and Redemptions			(10,501,404)			—			(10,501,404)
Change in unrealized (depreciation) appreciation on investments included in earnings			(568,522)			29,639			(538,883)
Change in unrealized appreciation on foreign currency translation included in earnings			—			20,961			20,961
Amortization of premium and accretion of discount, net			198,065			—			198,065
Fair value at December 31, 2022		$	152,257,418		$	5,247,337		$	157,504,755

Summary of geographical concentration of investment portfolio

The following is a summary of geographical concentration of our investment portfolio as of June 30, 2023:


								% of Total
		Cost			Fair Value			Investments
Texas		$	46,914,981		$	47,584,275		25.26	%
Florida			40,551,893			40,635,492		21.57	%
New York			23,611,915			24,022,550		12.76	%
Illinois			14,132,446			13,664,574		7.26	%
United Kingdom			11,343,545			11,405,472		6.06	%
Arizona			7,923,725			8,075,572		4.29	%
Washington			7,139,165			7,156,607		3.80	%
Wisconsin			6,551,283			6,828,849		3.63	%
Indiana			6,394,525			6,490,494		3.45	%
Maryland			5,900,960			5,760,940		3.06	%
Tennessee			5,126,448			5,165,989		2.74	%
Idaho			4,067,492			4,101,522		2.18	%
Pennsylvania			2,947,177			2,947,176		1.56	%
South Carolina			2,277,017			2,278,708		1.21	%
Colorado			2,205,295			2,205,295		1.17	%
		$	187,087,867		$	188,323,515		100.00	%

The following is a summary of geographical concentration of our investment portfolio as of December 31, 2022:


								% of Total
		Cost			Fair Value			Investments
Texas		$	41,689,874		$	41,670,626		26.46	%
Florida			25,824,710			25,639,155		16.28	%
New York			23,971,538			23,990,132		15.23	%
Illinois			13,199,633			12,899,144		8.19	%
United Kingdom			9,977,695			9,971,437		6.33	%
Michigan			9,492,362			9,607,593		6.10	%
Washington			6,892,968			6,750,961		4.29	%
Indiana			6,384,015			6,339,226		4.02	%
Maryland			6,094,066			5,955,848		3.78	%
Arizona			5,161,586			5,259,750		3.34	%
Wisconsin			4,940,698			5,031,797		3.19	%
Idaho			4,393,532			4,389,086		2.79	%
		$	158,022,677		$	157,504,755		100.00	%

Summary of industry concentration of investment portfolio

The following is a summary of industry concentration of our investment portfolio as of June 30, 2023:


								% of Total
		Cost			Fair Value			Investments
Services: Business		$	48,425,646		$	48,783,021		25.91	%
Capital Equipment			24,490,108			24,963,290		13.26	%
Consumer Goods: Non-Durable			17,838,532			18,230,376		9.68	%
High Tech Industries			13,553,739			13,567,566		7.20	%
Consumer Goods: Durable			13,465,092			13,434,217		7.13	%
Healthcare & Pharmaceuticals			12,111,614			12,193,067		6.47	%
Media: Diversified & Production			11,343,545			11,405,472		6.07	%
Services: Consumer			9,648,607			9,632,244		5.11	%
Chemicals, Plastics, & Rubber			8,603,552			8,414,083		4.47	%
Construction & Building			7,594,506			7,557,771		4.01	%
Retail			6,210,160			6,193,305		3.29	%
Beverage, Food, & Tobacco			5,126,448			5,165,989		2.74	%
Media: Broadcasting & Subscription			4,613,200			4,673,753		2.48	%
Software			4,063,118			4,109,361		2.18	%
		$	187,087,867		$	188,323,515		100.00	%

The following is a summary of industry concentration of our investment portfolio as of December 31, 2022:


								% of Total
		Cost			Fair Value			Investments
Services: Business		$	35,188,973		$	35,046,444		22.25	%
Capital Equipment			20,713,352			20,768,686		13.19	%
Consumer Goods: Non-Durable			18,553,695			18,514,476		11.75	%
Consumer Goods: Durable			13,741,132			13,680,426		8.69	%
Media: Diversified & Production			9,977,695			9,971,437		6.33	%
Healthcare & Pharmaceuticals			9,866,275			9,866,275		6.26	%
Automotive			9,492,362			9,607,593		6.10	%
High Tech Industries			8,455,439			8,399,480		5.33	%
Chemicals, Plastics, & Rubber			7,490,771			7,351,701		4.67	%
Construction & Building			7,348,309			7,195,856		4.57	%
Retail			5,327,376			5,291,147		3.36	%
Media: Broadcasting & Subscription			4,614,114			4,614,114		2.93	%
Software			4,165,162			4,140,506		2.63	%
Services: Consumer			3,088,022			3,056,614		1.94	%
		$	158,022,677		$	157,504,755		100.00	%

Schedule of quantitative information about Level 3 fair value measurements

The following provides quantitative information about Level 3 fair value measurements as of June 30, 2023:


Description:		Fair Value			Valuation Technique		Unobservable Inputs		Range (Average)⁽¹⁾⁽³⁾
First lien debt		$	180,437,624		Income/Market		HY credit spreads,		-0.88% to 0.92% (-0.09%)
					approach⁽²⁾		Risk free rates		0.00% to 2.54% (1.09%)
							Market multiples		5.0x to 17.0x (10.3x)⁽⁴⁾

Equity investments		$	7,885,891		Market approach⁽⁵⁾		Underwriting multiple/
							EBITDA Multiple		5.7x to 22.5x (11.2x)
		$	188,323,515

(1)	Weighted average based on fair value as of June 30, 2023.

(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 -0.88% (-88 basis points) to 0.92% (92 basis points). The average of all changes was -0.09% (-9 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.

The following provides quantitative information about Level 3 fair value measurements as of December 31, 2022:


Description:		Fair Value			Valuation Technique		Unobservable Inputs		Range (Average)⁽¹⁾⁽³⁾
First lien debt		$	152,257,418		Income/Market		HY credit spreads,		-0.09% to 1.72% (1.06%)
					approach⁽²⁾		Risk free rates		0.63% to 2.87% (1.47%)
							Market multiples		5.2x to 15.1x (10.0x)⁽⁴⁾

Equity investments		$	5,247,337		Market approach⁽⁵⁾		Underwriting multiple/
							EBITDA Multiple		5.5x to 22.1x (10.4x)
		$	157,504,755

(1)	Weighted average based on fair value as of December 31, 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 -0.09% (-9 basis points) to 1.72% (172 basis points). The average of all changes was 1.06% (106 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.

Tabular disclosure of all significant concentrations of risk, including credit risk and market risk, arising from all financial instruments (as defined), whether from an individual counterparty or groups of counterparties. The disclosure concerning concentrations of risk may consist of the following information: (1) for concentrations of credit risk disclosure may include: (a) information about the (shared) activity, region, or economic characteristic that identifies the concentration, (b) the maximum amount of loss due to credit risk that, based on the gross fair value of the financial instrument, the entity would incur if parties to the financial instruments that make up the concentration failed completely to perform according to the terms of the contracts and the collateral or other security, if any, for the amount due proved to be of no value to the entity, (c) the policy of requiring collateral or other security to support financial instruments subject to credit risk, information about the entity's access to that collateral or other security, and the nature and a brief description of the collateral or other security supporting those financial instruments, and (d) the policy of entering into master netting arrangements to mitigate the credit risk of financial instruments, information about the arrangements for which the entity is a party, and a brief description of the terms of those arrangements, including the extent to which they would reduce the entity's maximum amount of loss due to credit risk and (2) for disclosure of quantitative information about the market risks of financial instruments that is consistent with the way the company manages or adjusts those risks, disclosure may include: (a) more details about current positions and perhaps activity during the period, (b) the hypothetical effects on comprehensive income (or net assets), or annual income, of several possible changes in market prices, (c) a gap analysis of interest rate re-pricing or maturity dates, (d) the duration of the financial instruments, (e) the entity's value at risk from derivatives and from other positions at the end of the reporting period and the average value at risk during the year, or (f) other ways of reporting quantitative information as internally developed.

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