| Fair Value of Investments |
7. Fair Value of Investments
Fair value is defined as the price that the Company
would receive upon selling an investment or paying to transfer a liability in an orderly transaction to a market participant in the principal
or most advantageous market for the investment. Accounting guidance emphasizes that valuation techniques maximize the use of observable
market inputs and minimize the use of unobservable inputs.
The valuation hierarchical levels are based upon
the transparency of the inputs to the valuation of the investment as of the measurement date. The three levels are defined as follows:
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Level 1 |
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Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date. |
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Level 2 |
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Valuations based on inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable at the measurement date. This category includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in non-active markets including actionable bids from third parties for privately held assets or liabilities, and observable inputs other than quoted prices such as yield curves and forward currency rates that are entered directly into valuation models to determine the value of derivatives or other assets or liabilities. |
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Level 3 |
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Valuations based on inputs that are unobservable and where there is little, if any, market activity at the measurement date. |
The inputs for the determination of fair value
may require significant management judgment or estimation and are based upon the Adviser’s assessment of the assumptions that market
participants would use in pricing the assets or liabilities. These investments include debt and equity investments in private companies
or assets valued using the market or income approach and may involve pricing models whose inputs require significant judgment or estimation
because of the absence of any meaningful current market data for identical or similar investments. The inputs in these valuations may
include, but are not limited to, capitalization and discount rates and earnings before interest, taxes, depreciation, and amortization
(“EBITDA”) multiples. The information may also include pricing information or broker quotes, which include a disclaimer that
the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied
by a disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence.
Pricing inputs and weightings applied to determine
fair value require subjective determination. Accordingly, valuations do not necessarily represent the amounts that may eventually be realized
from sales or other dispositions of investments.
A financial instrument’s categorization
within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following tables present the fair value hierarchy
of the Company’s investments as of June 30, 2026 and December 31, 2025:
| | |
Fair Value Hierarchy as of June 30, 2026 | |
| Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Senior Secured Loan Debt Investments | |
$ | - | | |
$ | - | | |
$ | 73,646,067 | | |
$ | 73,646,067 | |
| Equity Investments – Common Stock | |
| - | | |
| - | | |
| 3,964,196 | | |
| 3,964,196 | |
| Equity Investments – Preferred Stock | |
| - | | |
| - | | |
| 23,059,768 | | |
| 23,059,768 | |
| Money Market Funds | |
| 4,925,914 | | |
| - | | |
| - | | |
| 4,925,914 | |
| United States Treasury Bill | |
| - | | |
| 108,489,232 | | |
| - | | |
| 108,489,232 | |
| Total | |
$ | 4,925,914 | | |
$ | 108,489,232 | | |
$ | 100,670,031 | | |
$ | 214,085,177 | |
| | |
Fair Value Hierarchy as of December 31, 2025 | |
| Description | |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | |
| Senior Secured Loan Debt Investments | |
$ | - | | |
$ | - | | |
$ | 103,743,544 | | |
$ | 103,743,544 | |
| Equity Investments – Common Stock | |
| - | | |
| - | | |
| 4,459,016 | | |
| 4,459,016 | |
| Equity Investments – Preferred Stock | |
| - | | |
| - | | |
| 3,743,867 | | |
| 3,743,867 | |
| Money Market Funds | |
| 4,134 | | |
| - | | |
| - | | |
| 4,134 | |
| Short-Term Investments | |
| - | | |
| 105,317,160 | | |
| - | | |
| 105,317,160 | |
| Total | |
$ | 4,134 | | |
$ | 105,317,160 | | |
$ | 111,946,427 | | |
$ | 217,267,721 | |
The following tables present changes in the fair value of the Company’s
investments for which Level 3 inputs were used to determine the fair value of such investments as of and for the six months ended June
30, 2026, and 2025:
| | |
For the six months ended
June 30, | |
| Senior Secured Loan Debt Investments | |
2026 | | |
2025 | |
| Fair value, beginning of period | |
$ | 103,743,544 | | |
$ | 139,921,361 | |
| Purchases of investments | |
| 4,587,770 | | |
| 1,670,250 | |
| Proceeds from principal pre-payments and sales of investments | |
| (34,198,407 | ) | |
| (17,804,798 | ) |
| Net realized loss | |
| (15,635,565 | ) | |
| - | |
| Net change in unrealized appreciation/(depreciation) | |
| 13,370,297 | | |
| (9,012,248 | ) |
| Payment-in-kind interest | |
| 1,864,234 | | |
| - | |
| Net accretion of discount (amortization of premium) on investments | |
| (85,806 | ) | |
| 3,458,217 | |
| Fair value, end of period | |
$ | 73,646,067 | | |
$ | 118,232,782 | |
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For the six months ended
June 30, | |
| Equity Investments - Common Stock | |
2026 | | |
2025 | |
| Fair value, beginning of period | |
$ | 4,459,016 | | |
$ | 3,957,055 | |
| Purchases of investments | |
| - | | |
| - | |
| Proceeds from sales of investments | |
| - | | |
| - | |
| Net realized loss | |
| (900,000 | ) | |
| - | |
| Net change in unrealized appreciation/(depreciation) | |
| 904,038 | | |
| 457,263 | |
| Transfers into (out of) Level 3(1) | |
| (498,858 | ) | |
| - | |
| Fair value, end of period | |
$ | 3,964,196 | | |
$ | 4,414,318 | |
| | |
For the six months ended
June 30, | |
| Equity Investments - Preferred Stock | |
2026 | | |
2025 | |
| Fair value, beginning of period | |
$ | 3,743,867 | | |
$ | 3,656,818 | |
| Purchases of investments | |
| 24,608,324 | | |
| 231,646 | |
| Proceeds from sales of investments | |
| (848,934 | ) | |
| (55,201 | ) |
| Net realized loss | |
| (1,835,887 | ) | |
| - | |
| Net change in unrealized appreciation/(depreciation) | |
| (3,106,460 | ) | |
| (93,343 | ) |
| Transfers into (out of) Level 3(1) | |
| 498,858 | | |
| - | |
| Fair value, end of period | |
$ | 23,059,768 | | |
$ | 3,739,920 | |
| (1) | During
the six months ended June 30, 2026, transfers into and out of Level 3 were attributable to the observability of market data and resulted
from decreases in liquidity, security restructurings, reclassification, or corporate actions. |
The following table presents the net change in
unrealized appreciation/(depreciation) of the Company’s investments for the period relating to these Level 3 assets that were still
held by the Company as of and for the six months ended June 30, 2026 and 2025:
| | |
For the six months ended
June 30, | |
| Net Change in Unrealized Appreciation/(Depreciation) | |
2026 | | |
2025 | |
| Senior Secured Loan Debt Investments | |
$ | 13,370,297 | | |
$ | (9,012,248 | ) |
| Equity Investments - Common Stock | |
| 904,038 | | |
| 457,263 | |
| Equity Investments - Preferred Stock | |
| (3,106,460 | ) | |
| (93,343 | ) |
| Total | |
$ | 11,167,875 | | |
$ | (8,648,328 | ) |
The following tables present quantitative information
about the significant unobservable inputs of the Company’s Level 3 investments as of June 30, 2026 and December 31, 2025. The tables
are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Adviser’s determination
of fair value.
| | | Fair Value as of
June 30,
2026 | | | Valuation
Technique | | Unobservable
Input | | Range/Input | | Weighted
Average
Inputs | | | Senior Secured Loan Debt Investments | | $ | 71,652,318 | | | Discounted cash flow | | Discount rate | | 4.59 - 16.72 | % | | 10.06 | % | | Senior Secured Loan Debt Investments | | | 1,993,750 | | | Recent Transaction Price(1) | | N/A | | N/A | | | N/A | | | Equity Investments - Common Stock | | $ | 3,964,196 | | | Market Approach | | EBITDA multiples | | 4.36x – 6.98x | | | 5.59x | | | Equity Investments - Preferred Stock | | $ | 848,933 | | | Contingent Payment(2) | | N/A | | N/A | | | N/A | | | Equity Investments - Preferred Stock | | $ | 2,059,460 | | | Market approach | | EBITDA multiples | | 6.43x - 7.91x | | | 7.81x | | | Equity Investments - Preferred Stock | | $ | 20,151,374 | | | Recent Transaction Price(1) | | N/A | | N/A | | | N/A | | | Total | | $ | 100,670,031 | | | | | | | | | | | |
| (1) | Transaction price consists of securities recently purchased.
The Company determined that there was no change to the valuation based on the underlying assumptions made at the closing of such transactions. |
| (2) | Expected
distribution of proceeds after estimated transaction expenses. |
| | | Fair Value
as of
December 31,
2025 | | | Valuation
Technique | | Unobservable
Input | | Range/Input | | Weighted
Average
Inputs | | | Senior Secured Loan Debt Investments | | $ | 103,743,544 | | | Discounted cash flow | | Discount rate | | 4.24% - 31.47% | | | 13.05 | % | | Equity Investments - Common Stock | | $ | 4,459,016 | | | Market approach | | EBITDA multiples | | 3.53x - 6.94x | | | 5.64x | | | Equity Investments - Preferred Stock | | $ | 3,743,867 | | | Market approach | | EBITDA multiples | | 6.43x - 6.80x | | | 7.22x | | | Total | | $ | 111,946,427 | | | | | | | | | | | |
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