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Item 2. Management’s Discussion and Analysis

2023-11-17 compared with 2023-08-15 · 34 added, 31 removed, 96 unchanged (40% of the section changed)

27 unchanged sentences

PORTFOLIO AND INVESTMENT ACTIVITY

During the six months ended June 30, 2023, we made $8,900,500 of investment portfolio and had $9,149,194 of redemptions and repayments, resulting in net investments at amortized cost of $16,552,481 at the end of the period.

During the six months ended June 30, 2022, we made $9,103,580 of investment portfolio and had $7,977,898 of redemptions and repayments, resulting in net investments at amortized cost of $15,191,759 at the end of that period.

Our portfolio composition by major class, based on fair value at June 30, 2023, was as follows:

During the nine months ended September 30, 2023, we made $11,900,500 of investment purchases and had $11,124,193 of redemptions and repayments, resulting in net investments at amortized cost of $17,577,481 at the end of the period.

During the nine months ended September 30, 2022, we made $9,103,580 of investment purchases and had $7,977,898 of redemptions and repayments, resulting in net investments at amortized cost of $15,191,759 at the end of that period.

Our portfolio composition by major class, based on fair value at September 30, 2023, was as follows:

Investments at

2 unchanged sentences

RESULTS OF OPERATIONS

Our operating results for the three and six months ended June 30, 2023 and June 30, 2022 were as follows:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Our operating results for the three and nine months ended September 30, 2023 and September 30, 2022 were as follows:

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

Investment Income:

7 unchanged sentences

On occasion, we may also generate revenue from dividends and capital gains on equity investments we make, if any, or on warrants or other equity interests that we may acquire.

For the three and six months ended June 30, 2023, our total investment income was $907,502 and $1,771,530, respectively For the three and six months ended June 30, 2022 our total investment income was $1,236,505 and $2,236,711, respectively.

The decrease is due to a decrease in our short-term non-bank lending activity.

For the three and nine months ended September 30, 2023, our total investment income was $725,158 and $2,496,688, respectively.

For the three and nine months ended September 30, 2022, our total investment income was $1,115,224 and $3,351,935, respectively.

The decrease is due to an overall reduction in our short-term non-bank lending activity.

Our loan portfolio generates interest income, with an average rate on the loans of 15.2%.

Professional Fees

For the three and six months ended June 30, 2023, we had $287,325 and $417,176 professional fees expense, respectively.

For the three and six months ended June 30, 2022, we had $197,591 and $392,989 professional fees expense, respectively.

The increase is due to the costs incurred to amend our Form 10K filing for December 31, 2022.

For the three and nine months ended September 30, 2023, we had $184,008 and $601,184 professional fees expense, respectively.

For the three and nine months ended September 30, 2022, we had $916,359 and $1,309,348 professional fees expense, respectively.

The decrease is due to the significant costs we incurred during and in conjunction with our public offering of common stock in 2022, partially offset by our costs incurred to amend our Form 10K filing for December 31, 2022 during 2023.

Payroll and Directors Fees

For the three and six months ended June 30, 2023, we had $147,161 and $1,277,600 of payroll expense, respectively, and we had $30,000 and $562,968 of directors fees, respectively.

For the three and six months ended June 30, 2022, we had $114,542 and $310,984 of payroll expense, respectively, and we had $87,073 and $117,073 of directors fees, respectively.

For the three and nine months ended September 30, 2023, we had $141,040 and $1,418,640 of payroll expense, respectively, and we had $30,000 and $592,968 of directors fees, respectively.

For the three and nine months ended September 30, 2022, we had $122,477 and $433,461 of payroll expense, respectively, and we had $30,000 and $147,073 of directors fees, respectively.

The increase in the current period was due in large part to the company’s issuance of 870,000 10-year options to directors, officers and consultants in November and December 2022 (which were issued subject to shareholder approval).

2 unchanged sentences

Interest Expense

For the three and six months ended June 30, 2023, we had $43,333 and $78,000 of interest expense, respectively.

For the three and six months ended June 30, 2022, we had $47,794 and $117,853 of interest expense, respectively.

The decrease is due less borrowing on the line of credit during the current period.

For the three and nine months ended September 30, 2023, we had $0 and $78,000 of interest expense, respectively.

For the three and nine months ended September 30, 2022, we had $46,779 and $164,632 of interest expense, respectively.

The decrease is due to our reduced borrowing on the line of credit during the current period.

Net Realized Gain (Loss) from Investments

For the three and six months ended June 30, 2023, we had $94,569 and $94,569, respectively, of sales of investments and $5,109,625 and 9,054,625, respectively, of repayments on short-term loans, resulting in $41,371 of realized gains and $558,629 of realized losses, respectively.

For the three and six months ended June 30, 2022, we had $0 and $552,898, respectively, of sales of investments and $6,825,000 and 7,425,000, respectively, of repayments on short-term loans, resulting in $5,750 of realized losses and $133,020 of realized gains, respectively.

For the three and nine months ended September 30, 2023, we had $0 and $94,569, respectively, of sales of investments and $1,975,000 and 11,029,625, respectively, of repayments on short-term loans, resulting in $0 and $558,629 of realized losses, respectively.

For the three and nine months ended September 30, 2022, we had $0 and $552,898, respectively, of sales of investments and $2,098,585 and $9,523,585, respectively, of repayments on short-term loans, resulting in $0 and $133,020 of realized gains, respectively.

Net Change in Unrealized Appreciation (Depreciation) on Investments

For the three and six months ended June 30, 2023, our investments had $21,107 of unrealized depreciation and $627,316 of unrealized appreciation, respectively.

For the three and six months ended June 30, 2022, our investments had $5,750 of unrealized appreciation and $16,297 of unrealized depreciation, respectively.

For the three and nine months ended September 30, 2023, our investments had $2,175 and $629,491 of unrealized appreciation, respectively.

For the three and nine months ended September 30, 2022, our investments had $0 and $16,297 of unrealized depreciation, respectively.

Changes in Net Assets from Operations

For the three and six months ended June 30, 2023, we recorded a net increase in net assets from operations of $70,721 and a net decrease in net assets from operations of $647,323, respectively.

Based on the weighted-average number of shares of common stock outstanding for the three and six months ended June 30, 2023, our per-share net increase in net assets from operations was $0.01 and our per share net decrease in net assets from operations was $0.10, respectively.

For the three and six months ended June 30, 2022, we recorded a net increase in net assets from operations of $518,008 and $930,119, respectively.

Based on the weighted-average number of shares of common stock outstanding for the three and six months ended June 30, 2022, our per-share net increase in net assets from operations was $0.11 and $0.19, respectively.

Cash Flows for the Six Months Ended June 30, 2023 and 2022

For the three and nine months ended September 30, 2023, we recorded a net increase in net assets from operations of $369,560 and a net decrease in net assets from operations of $277,763, respectively.

Based on the weighted-average number of shares of common stock outstanding for the three and nine months ended September 30, 2023, our per-share net increase in net assets from operations was $0.06 and our per share net decrease in net assets from operations was $0.04, respectively.

For the three and nine months ended September 30, 2022, we recorded a net decrease in net assets from operations of $36,126 and a net increase in net assets from operations of $893,993, respectively.

Based on the weighted-average number of shares of common stock outstanding for the three and nine months ended September 30, 2022, our per-share net decrease in net assets from operations was $0.01 and our per share net increase in net assets from operations was $0.18, respectively.

Cash Flows for the Nine months Ended September 30, 2023 and 2022

The level of cash flows used in or provided by operating activities is affected primarily by our provision of short-term loans, purchases of other investments, redemptions and repayments of our loans or investments, and other related factors.

For the six months ended June 30, 2023, net cash provided in operating activities was $11,886.

Cash flows provided in operating activities for the six months ended June 30, 2023 were primarily related to the funding of our short-term loans and purchases of investments aggregating $8,900,500, offset mostly by redemptions and repayments of short-term loans and investments totaling $9,149,194.

For the six months ended June 30, 2022, net cash used in operating activities was $3,381,576.

Cash flows used in operating activities for the six months ended June 30, 2022 were primarily related to the funding of our short-term loans and purchases of investments aggregating $9,103,580, offset mostly by redemptions and repayments of short-term loans and investments totaling $7,977,898.

For the nine months ended September 30, 2023, net cash used in operating activities was $550,781.

Cash flows used in operating activities for the nine months ended September 30, 2023 were primarily related to the funding of our short-term loans and purchases of investments aggregating $11,900,500, offset mostly by redemptions and repayments of short-term loans and investments totaling $11,124,193.

For the nine months ended September 30, 2022, net cash used in operating activities was $6,429,293.

Cash flows used in operating activities for the nine months ended September 30, 2022 were primarily related to the funding of our short-term loans and purchases of investments aggregating $13,924,333, offset mostly by redemptions and repayments of short-term loans and investments totaling $10,076,483.

FINANCIAL CONDITION

As of June 30, 2023, we had cash of $1,101,527, an increase of $11,886 from December 31, 2022.

As of September 30, 2023, we had cash of $962,860, a decrease of $126,781 from December 31, 2022.

The primary use of our existing funds and any funds raised in the future is expected to be for our investments in portfolio companies or for other general corporate purposes, including paying for operating expenses or debt service to the extent we borrow or issue senior securities.

22 unchanged sentences

OFF-BALANCE-SHEET ARRANGEMENTS

During the six months ended June 30, 2023, we did not engage in any off-balance sheet arrangements as described in Item 303(a)(4) of Regulation S-K.

During the nine months ended September 30, 2023, we did not engage in any off-balance sheet arrangements as described in Item 303(a)(4) of Regulation S-K.

FORWARD-LOOKING STATEMENTS

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis