Note 5 – Fair Value of Financial Instruments

The Company’s assets recorded at fair value have been categorized based upon a fair value hierarchy in accordance with ASC 820. Refer to "Note 2 – Summary of Significant Accounting Policies" for a discussion of the Company’s policies.

Investments measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations as of June 30, 2026 and December 31, 2025 (in thousands):


	Level 1		Level 2			Level 3		Measured at Net Asset Value(1)		Total
As of June 30, 2026
Portfolio Investments
Senior Secured Loans	$	-	$	-		$	1,074,494	$	-	$	1,074,494
Second Lien Loans		-		-			22,281		-		22,281
Subordinated Debt		-		-			25,554		-		25,554
Preferred Stock/Units		-		-			29,297		-		29,297
Common Stock/Units		333		-			634		-		967
Equity Interest		-		-			-		13,035		13,035
Warrants & Other Contractual Rights		-		347			26,375		-		26,722
Total Portfolio Investments		333		347			1,178,635		13,035		1,192,350
Cash equivalents		8,643		-			-		-		8,643
Total	$	8,976	$	347		$	1,178,635	$	13,035	$	1,200,993

As of December 31, 2025
Portfolio Investments
Senior Secured Loans	$	-	$	-		$	853,893	$	-	$	853,893
Second Lien Loans		-		-			6,434		-		6,434
Preferred Stock/Units		-		-			36,264		-		36,264
Common Stock/Units		42		-			18		-		60
Equity Interest		-		-			1,493		13,253		14,746
Warrants & Other Contractual Rights		-		423			15,582		-		16,005
Total Portfolio Investments		42		423			913,684		13,253		927,402
Cash equivalents		2,849		-			-		-		2,849
Foreign Currency Forward Contract		-		(711	)		-		-		(711	)
Total	$	2,891	$	(288	)	$	913,684	$	13,253	$	929,540

(1)

In accordance with ASC 820, the Company's equity investment in Runway-Cadma I LLC is measured using the net asset value as a practical expedient for fair value, and thus has not been classified in the fair value hierarchy.

The Company transfers investments in and out of Levels 1, 2 and 3 as of the beginning balance sheet date, based on changes in the use of observable and unobservable inputs utilized to perform the valuation for the period. During the three and six months ended June 30, 2026, the Company did not have any transfers of investments between levels. During the six months ended June 30, 2025, the Company's preferred stock investment in CareCloud, Inc., valued at $9.2 million at the beginning of the reporting period, was reclassified from Level 2 to Level 3 due to delisting from the NASDAQ stock exchange.

The following table presents a rollforward of Level 3 assets measured at fair value as of June 30, 2026 (in thousands):


		Senior Secured Loans				Second Lien Loans				Subordinated Debt				Preferred Stock/Units				Common Stock/Units				Equity Interest				Warrants & Other Contractual Rights			Total
Fair value at December 31, 2025	$		853,893		$		6,434		$		-		$		36,264		$		18		$		1,493		$		15,582		$	913,684
Transfers in (out) of Level 3			-				-				-				-				-				-				-			-
Purchases of investments(1)			272,181				15,457				31,373				2,037				645				-				20,054			341,747
PIK interest			6,328				426				-				-				-				-				-			6,754
Sales or prepayments of investments(1)			(30,870	)			-				-				-				-				(2,000	)			(10,484	)		(43,354	)
Scheduled principal repayments of investments			(12,403	)			-				-				-				-				-				-			(12,403	)
Amortization of fixed income premiums or accretion of discounts and ETP			7,227				15				-				-				-				-				-			7,242
Net realized gain (loss)			(47,643	)			-				-				-				-				1,050				3,466			(43,127	)
Net change in unrealized gain (loss)			25,781				(51	)			(5,819	)			(9,004	)			(29	)			(543	)			(2,243	)		8,092
Fair value at June 30, 2026	$		1,074,494		$		22,281		$		25,554		$		29,297		$		634		$		-		$		26,375		$	1,178,635
Net change in unrealized gain (loss) on Level 3 investments still held as of June 30, 2026	$		8,282		$		(51	)	$		(5,818	)	$		(9,004	)	$		(29	)	$		-		$		(2,127	)	$	(8,747	)

(1)

Net of reorganization and restructuring of investments.

The following table presents a rollforward of Level 3 assets measured at fair value as of June 30, 2025 (in thousands):


		Senior Secured Loans				Second Lien Loans			Convertible Notes			Preferred Stock/Units				Common Stock/Units			Equity Interest				Warrants & Other Contractual Rights			Total
Fair value at December 31, 2024	$		950,092		$		20,152	$		-	$		73,460		$		16	$		1,198		$		13,752		$	1,058,670
Transfers in (out) of Level 3			-				-			-			9,181				-			-				-			9,181
Purchases of investments(1)			49,499				-			1,000			2,773				-			-				767			54,039
PIK interest			6,977				376			-			-				-			-				-			7,353
Sales or prepayments of investments			(61,906	)			-			-			(37,355	)			-			-				-			(99,261	)
Scheduled repayments of investments			(7,895	)			-			-			-				-			-				-			(7,895	)
Amortization of fixed income premiums or accretion of discounts and ETP			4,026				80			-			-				-			-				-			4,106
Net realized gain (loss)			(1,501	)			-			-			9,255				-			-				(1,083	)		6,671
Net change in unrealized gain (loss)			2,413				170			-			(17,765	)			2			(203	)			701			(14,682	)
Fair Value at June 30, 2025	$		941,705		$		20,778	$		1,000	$		39,549		$		18	$		995		$		14,137		$	1,018,182
Net change in unrealized gain (loss) on Level 3 investments still held as of June 30, 2025	$		3,171		$		169	$		-	$		(8,510	)	$		2	$		(203	)	$		(203	)	$	(5,574	)

(1)

Net of reorganization and restructuring of investments.

The following table provides quantitative information regarding Level 3 fair value measurements as of June 30, 2026 (in thousands):


Description	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Senior Secured Loans(1)	$	873,842	Discounted Cash Flow Analysis	Discount rate	11.2% - 37.7% (14.9%)
			Discounted Cash Flow Analysis	Origination yield	10.2% - 37.8% (14.7%)
				Revenue multiples	0.92x - 6.99x (3.02x)
		200,652	PWERM	Discount rate	13.1% - 46.1% (27.4%)
				Origination yield	12.5% - 40.0% (15.9%)
				Revenue multiples	0.23x - 3.06x (2.08x)
Second Lien Loans(1)		22,281	Discounted Cash Flow Analysis	Discount rate	14.9% - 22.2% (17.1%)
			Discounted Cash Flow Analysis	Origination yield	14.5% - 18.4% (15.7%)
				Revenue Multiples	2.25x - 2.52x (2.33x)
Subordinated Debt		25,554	Discounted Cash Flow Analysis	Discount rate	20.5% - 20.5% (20.5%)
			Discounted Cash Flow Analysis	Origination yield	12.7% - 12.7% (12.7%)
				Revenue Multiples	0.23x - 0.23x (0.23x)
Preferred Stock/Units		26,920	Current Value Method (3)	Risk-free interest rate	4.1% - 4.1% (4.1%)
				Average industry volatility	55.0% - 80.0% (64.1%)
				Estimated time to exit	2.0 - 3.0 (2.6 years)
		396	Option Pricing Model	Risk-free interest rate	4.0% - 4.1% (4.0%)
			Option Pricing Model	Average industry volatility	37.5% - 80.0% (50.1%)
				Estimated time to exit	2.0 - 3.2 (2.3 years)
				Revenue multiples	2.39x - 2.57x (2.56x)
		1,981	PWERM	Risk-free interest rate	4.1% - 4.1% (4.1%)
				Average industry volatility	45.0% - 45.0% (45.0%)
				Estimated time to exit	4.6 - 4.6 (4.6 years)
				Revenue multiples	1.79x - 1.79x (1.79x)
Common Stock/Units		634	Option Pricing Model	Risk-free interest rate	4.1% - 4.2% (4.1%)
				Average industry volatility	35.0% - 62.5% (37.2%)
				Estimated time to exit	3.0 - 3.0 (3.0 years)
				Revenue multiples	2.78x - 3.48x (2.94x)
Warrants & Other Contractual Rights(2)		11,548	Option Pricing Model	Risk-free interest rate	4.0% - 4.2% (4.1%)
				Average industry volatility	27.5% - 85.0% (53.2%)
				Estimated time to exit	2.0 - 5.0 (3.1 years)
				Revenue multiples	1.42x - 54.18x (3.64x)
		7,292	Discounted Cash Flows(4)	Discount rate	13.0% - 28.1% (19.0%)
				Origination yield	13.0% - 28.1% (19.0%)
		4,246	Current Value Method	Risk-free interest rate	4.1% - 4.1% (4.1%)
				Average industry volatility	30.0% - 30.0% (30.0%)
				Estimated time to exit	3.0 - 3.0 (3.0 years)
				Revenue multiples	2.8 - 2.8 (2.8 years)
		3,289	PWERM (5)	N/A	N/A
Total Level 3 Investments	$	1,178,635

(1)

The significant unobservable inputs used in the fair value measurement of the Company’s debt securities are origination yields and discount rates. The origination yield is defined as the initial market price of an investment in a hypothetical market to hypothetical market participants where buyers and sellers are willing participants. The discount rate is related to company-specific characteristics such as underlying investment performance, projected cash flows, and other characteristics of the investment. Significant increases or decreases in the inputs in isolation may result in a significantly higher or lower fair value measurement, depending on the materiality of the investment. However, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase or decrease in the unobservable inputs.

(2)

The significant unobservable inputs used in the fair value measurement of the Company’s warrant and equity-related securities are inputs used in the OPM, which include industry volatility, risk free interest rate and estimated time to exit. The Equity Allocation model and the Black Scholes model were the main OPMs used during the period ended June 30, 2026. PWERM and other techniques were used as determined appropriate. Significant increases or decreases in the inputs in isolation may result in a significantly higher or lower fair value measurement, depending on the materiality of the investment. However, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase or decrease in the unobservable inputs. For some investments, additional consideration may be given to data from the last round of financing or merger/acquisition events near the measurement date.

(3)

Investments valued using the Current Value Method, which may include a Waterfall valuation technique or be based on the redemption value of preferred shares. In the case of the JobGet Holdings, Inc. valuation, the inputs applied are based on an option pricing model that was utilized to value the shares that JobGet Holdings, Inc. owns in JobGet, Inc. In the case of a redemption value technique, inputs may be utilized in order to calculate a DLOM.

(4)

Contractual right investments valued using the Discounted Cash Flows methodology include royalty interests and other contractual payment rights. Fair value is determined based on projected or contractual cash flows and an estimated discount rate reflecting the timing and risk associated with those cash flows.

(5)

Contractual right investments using a PWERM valuation technique contain success fees, in which case the inputs are not applicable because the nature of a success fee is a fixed payout dependent on certain liquidation events.

The following table provides quantitative information regarding Level 3 fair value measurements as of December 31, 2025 (in thousands):


Description	Fair Value		Valuation Technique	Unobservable Inputs	Range (Weighted Average)
Senior Secured Loans(1)	$	721,579	Discounted Cash Flow Analysis	Discount rate	9.3% - 26.0% (14.6%)
			Discounted Cash Flow Analysis	Origination yield	10.2% - 19.1% (13.7%)
				Revenue multiples	0.77x - 8.27x (3.58x)
		132,314	PWERM	Discount rate	13.6% - 46.2% (25.4%)
				Origination yield	12.7% - 29.9% (15.8%)
				Revenue multiples	0.28x - 121.39x (15.20x)
Second Lien Loans(1)		6,434	Discounted Cash Flow Analysis	Discount rate	20.5% - 20.5% (20.5%)
				Origination yield	18.4% - 18.4% (18.4%)
				Revenue Multiples	2.88x - 2.88x (2.88x)
Preferred Stock/Units		35,781	Current Value Method (5)	Risk-free interest rate	3.5% - 3.5% (3.5%)
				Average industry volatility	50.0% - 80.0% (58.1%)
				Estimated time to exit	2.0 - 3.0 (2.7 years)
		483	Option Pricing Model	Risk-free interest rate	3.5% - 3.6% (3.5%)
				Average industry volatility	35.0% - 55.0% (46.2%)
				Estimated time to exit	2.5 - 3.7 (2.7 years)
				Revenue multiples	2.73x - 2.88x (2.73x)
Common Stock/Units		18	Option Pricing Model	Risk-free interest rate	3.5% - 3.5% (3.5%)
				Average industry volatility	55.0% - 55.0% (55.0%)
				Estimated time to exit	3.0 - 3.0 (3.0 years)
Equity Interest		1,493	PWERM (4)	N/A	N/A
Warrants & Other Contractual Rights(2)		12,000	Option Pricing Model	Risk-free interest rate	3.5% - 3.6% (3.5%)
				Average industry volatility	25.0% - 90.0% (51.0%)
				Estimated time to exit	0.5 - 5.0 (2.9 years)
				Revenue multiples	2.08x - 121.39x (3.82x)
		3,582	PWERM (3)	N/A	N/A

Total Level 3 Investments	$	913,684

(1)

(2)

The significant unobservable inputs used in the fair value measurement of the Company’s warrant and equity-related securities are inputs used in the OPM, which include industry volatility, risk free interest rate and estimated time to exit. The Equity Allocation model and the Black Scholes model were the main OPMs used during the year ended December 31, 2025. PWERM and other techniques were used as determined appropriate. Significant increases (decreases) in the inputs in isolation may result in a significantly higher (lower) fair value measurement, depending on the materiality of the investment. However, a significantly higher or lower fair value measurement of any of the Company’s portfolio investments may occur regardless of whether there is a significant increase (decrease) in the unobservable inputs. For some investments, additional consideration may be given to data from the last round of financing or merger/acquisition events near the measurement date.

(3)

(4)

Investment valued using a PWERM valuation technique and includes inputs that are based on scenario analysis specific to the asset recovery of such investment.

(5)

Investment valued using a Waterfall valuation technique. The inputs utilized in the valuation are based on an option pricing model that was utilized to value the shares that JobGet Holdings, Inc. owns in JobGet, Inc.

Fair Value of Financial Instruments Reported at Cost

The Company records its debt at amortized cost on the Consolidated Statements of Assets and Liabilities. The fair values of the Company’s Credit Facility, April 2028 Notes and December 2029 Notes (each defined in "Note 7 – Borrowings") are estimated using Level 3 inputs, which involves discounting the remaining payments based on comparable market rates for similar instruments as of the measurement date. The SWK 2027 Notes, July 2027 Notes, and February 2031 Notes are publicly traded on NASDAQ and are valued using Level 1 inputs, reflecting the most recent market prices of $25.24, $25.30 and $24.35 per share as of June 30, 2026, respectively. As of December 31, 2025, the market prices of the July 2027 Notes and December 2027 Notes were $25.24 and $25.24 per share, respectively. On March 5, 2026, the Company fully redeemed $51.75 million of its December 2027 Notes and partially redeemed $40.25 million of its July 2027 Notes.

The following table provides additional information about the approximate fair value and level in the fair value hierarchy of the Company’s outstanding borrowings as of June 30, 2026 and December 31, 2025 (in thousands):


			Fair Value Hierarchy
	Carrying Value		Level 1		Level 2		Level 3		Total
As of June 30, 2026
Credit Facility	$	346,433	$	-	$	-	$	360,011	$	360,011
SWK 2027 Notes		33,326		33,279		-		-		33,279
July 2027 Notes		39,965		40,733		-		-		40,733
April 2028 Notes		106,750		-		-		110,614		110,614
December 2029 Notes		48,729		-		-		51,053		51,053
February 2031 Notes		100,175		100,566		-		-		100,566
Total	$	675,378	$	174,578	$	-	$	521,678	$	696,256

As of December 31, 2025
Credit Facility	$	168,783	$	-	$	-	$	179,962	$	179,962
April 2026 Notes		24,962		-		-		25,528		25,528
July 2027 Notes		79,649		81,272		-		-		81,272
December 2027 Notes		51,030		52,247		-		-		52,247
April 2028 Notes		106,696		-		-		93,848		93,848
Total	$	431,120	$	133,519	$	-	$	299,338	$	432,857

- Definition

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

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+ Details