v3.26.1
Fair Value Measurements
 6 Months Ended
Jun. 30, 2026
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

13. FAIR VALUE MEASUREMENTS

GAAP requires disclosure of fair value information about financial and non-financial assets and liabilities, whether or not recognized in the financial statements, for which it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows using market yields, or other valuation methodologies. Any changes to the valuation methodology will be reviewed by the Company’s management to ensure the changes are appropriate. The methods used may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, while the Company anticipates that the valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial and non-financial assets and liabilities could result in a different estimate of fair value at the reporting date. The Company uses inputs that are current as of the measurement date, which may fall within periods of market dislocation, during which price transparency may be reduced.

Recurring Fair Value Measurements

The following table summarizes the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2026:

 

 

As of June 30, 2026

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

Loans, at fair value - related party

 

$

-

 

 

$

-

 

 

$

40,612,435

 

 

$

40,612,435

 

Warrants (1)

 

-

 

 

 

-

 

 

 

898,000

 

 

 

898,000

 

Total

 

$

-

 

 

$

-

 

 

$

41,510,435

 

 

$

41,510,435

 

(1) Warrants are included within other receivables and assets, net on the consolidated balance sheets.

The following table presents the changes in assets classified within Level 3 of the fair value hierarchy during the six months ended June 30, 2026:

 

 

For the six months
ended June 30, 2026

 

Balance at December 31, 2025

 

$

-

 

Purchase of loans held for investment

 

 

40,612,435

 

Purchase of warrants

 

 

1,328,000

 

Unrealized gain (loss)

 

 

(430,000

)

Balance at June 30, 2026

 

$

41,510,435

 

 

The following table summarizes the significant unobservable inputs used by the Company to value the assets categorized within Level 3 as of June 30, 2026. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values.

As of June 30, 2026

 

 

 

 

 

Unobservable Input

 

Fair Value

 

Primary Valuation Technique

Input

Value

 

Loans, at fair value - related party

$

40,612,435

 

Yield Analysis

Discount rate

 

14.16

%

Warrants

$

898,000

 

Black-Scholes Option Pricing Model

Expected Term
Volatility Factor
Risk Free Rate
Exercise Price

4.52 years
64.00%
4.20%
$1.30

 

Total

$

41,510,435

 

 

 

 

 

 

The portion of the fair value adjustments related to credit risk was determined based on a yield analysis and discount rate applied to the subject loan. Interest income on the loan measured at fair value is calculated based on the interest rate of the loan and is recorded in the interest income on the consolidated statement of operations. For the six months ended June 30, 2026, our loan held at fair value using the fair value option had $0 in unrealized gains (losses) in net income before income taxes, that are attributable to changes in instrument-specific credit risk.

Financial Assets and Liabilities Not Measured at Fair Value

As of June 30, 2026 and December 31, 2025, the carrying values and fair values of the Company’s financial assets and liabilities recorded at amortized cost are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of June 30, 2026

 

 

As of December 31, 2025

 

 

Level

 

 

Carrying
 Value

 

 

Fair Value

 

 

Carrying
Value

 

 

Fair Value

 

Financial assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans held for investment

 

 

3

 

 

$

407,899,817

 

 

$

405,343,060

 

 

$

408,955,567

 

 

$

407,364,639

 

Cash and cash equivalents

 

 

1

 

 

 

13,351,699

 

 

 

13,351,699

 

 

 

14,948,884

 

 

 

14,948,884

 

Interest receivable

 

 

2

 

 

 

5,077,545

 

 

 

5,077,545

 

 

 

4,009,800

 

 

 

4,009,800

 

Other receivables and assets, net

 

 

2

 

 

 

2,048,847

 

 

 

2,048,847

 

 

 

874,245

 

 

 

874,245

 

Related party receivables

 

 

2

 

 

 

1,181,661

 

 

 

1,181,661

 

 

 

1,189,937

 

 

 

1,189,937

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revolving loan

 

 

2

 

 

 

91,050,000

 

 

 

90,852,703

 

 

 

49,100,000

 

 

 

48,853,380

 

Notes payable, net

 

 

2

 

 

 

49,452,551

 

 

 

49,444,674

 

 

 

49,334,459

 

 

 

49,383,677

 

Dividend payable

 

 

2

 

 

 

10,639,254

 

 

 

10,639,254

 

 

 

11,157,220

 

 

 

11,157,220

 

Related party payables

 

 

2

 

 

 

2,061,428

 

 

 

2,061,428

 

 

 

2,214,920

 

 

 

2,214,920

 

Management and incentive fees payable

 

 

2

 

 

 

1,604,328

 

 

 

1,604,328

 

 

 

3,098,576

 

 

 

3,098,576

 

Interest payable

 

 

2

 

 

 

1,673,514

 

 

 

1,673,514

 

 

 

1,348,334

 

 

 

1,348,334

 

Accounts payable and other liabilities

 

 

2

 

 

 

1,039,790

 

 

 

1,039,790

 

 

 

834,977

 

 

 

834,977

 

Interest reserve

 

 

2

 

 

 

2,530,183

 

 

 

2,530,183

 

 

 

12,686

 

 

 

12,686

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Our loans are generally held for investment and are substantially secured by real estate, equipment, licenses and other assets of the borrowers to the extent permitted by the applicable laws and the regulations governing such borrowers. The aggregate fair value of the Company’s loans held for investment was approximately $405.3 million and $407.4 million, with gross unrecognized holding losses of $2.6 million and $1.6 million as of June 30, 2026 and December 31, 2025, respectively. The fair values, which are classified as Level 3 in the fair value hierarchy, are estimated using discounted cash flow models based on current market inputs for similar types of arrangements. The primary sensitivity in these models is based on the selection of appropriate discount rates. Fluctuations in these assumptions could result in different estimates of fair value.