What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-04-02 compared with 2023-04-17 · 35 added, 26 removed, 86 unchanged (41% of the section changed)

17 unchanged sentences

our ability to source quality prospective borrowers for our specialty finance solutions;

our ability to consummate transactions due to the uncertainty resulting from the ongoing COVID-19 pandemic and other unpredictable events such as terrorist attacks, natural disasters or other significant outbreaks of infectious diseases;

our ability to consummate transactions due to the uncertainty resulting from unpredictable events such as terrorist attacks, natural disasters or other significant outbreaks of infectious diseases;

the dependence of our success on the general economy and its impact on the industries in which we invest;

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the other risks and uncertainties discussed in “Risk Factors” and elsewhere in this report.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

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Interest Expense

Net Investment Gain

Total Operating Expenses

Net Investment Gain (Loss)

For the year ended December 31, 2023, we earned $2,836,060 from 26 different short-term loans;

and an aggregate of $462,575 in related origination fees.

For the year ended December 31, 2021, we earned $11,480 in interest payments from one equity investment company, an aggregate of $2,099,684 from 26 short-term loans;

an additional $25,037 in bank interest on cash balances and note receivable;

an aggregate of $467,500 in origination fees relating to our short-term loans;

and an additional $52,500 in late fee penalties.

For the year ended December 31, 2022, we earned $3,397,443 from 31 different short-term loans;

and an aggregate of $802,010 in related origination fees.

As the table above indicates, we incurred operating expenses aggregating $3,718,633 for the year ended December 31, 2023, and $3,398,877 for the year ended December 31, 2022.

2 unchanged sentences

Our general operating expenses were $149,708 for the year ended December 31, 2023 and $140,993 for the year ended December 31, 2022.

The increase in the current period is primarily related to fees incurred during 2022 in relation to our line of credit (see Liquidity and Capital Resources below for more information on the “Loan Agreement” comprising our line of credit).

The increase in the current period is primarily related to higher fees incurred in relation to the unused portion on our line of credit (see Liquidity and Capital Resources below for more information).

Legal and Accounting Expenses.

Our legal and accounting expenses were $761,525 for the year ended December 31, 2023 and $1,592,218 for the year ended December 31, 2022.

The increase in the current period is primarily related to legal, consulting and underwriting fees and costs incurred in connection with our public offering and listing on the Nasdaq Capital Market tier of the Nasdaq exchange.

The decrease in the current period is primarily related to a decrease in legal, consulting and marketing costs incurred.

Executive Management Compensation.

Our executive management compensation was $1,848,393 for the year ended December 31, 2023 and $941,590 for the year ended December 31, 2022.

The increase in 2023 over 2022 is due to a stock option issuance recognized in January 2023.

Director’s Fees.

Our director’s fees were $772,968 for the year ended December 31, 2023 and $417,073 for the year ended December 31, 2022.

The increase is due to a one-time director’s stock bonus in April, 2022.

The increase in 2023 over 2022 is due to a stock option issuance recognized in January 2023.

Interest Expense.

Our interest expense was $78,000 for the year ended December 31, 2023 and $195,893 for the year ended December 31, 2022.

The increase is due to our use of the line of credit arrangement we entered into in 2022 (see Liquidity and Capital Resources below for more information on the “Loan Agreement” comprising our line of credit).

For the year ended December 31, 2022 our net investment gain was $1,440,576.

The 2023 decrease from 2022 is due to a lower use of the line of credit arrangement we entered into in 2022 (see Liquidity and Capital Resources below for more information).

For the year ended December 31, 2023 our net investment loss was $419,998.

For the year ended December 31, 2022, our net investment gain was $800,576.

The increased net investment gain during 2022 was primarily the result of higher interest income earned during 2022 from the short-term specialty finance solutions we provided in the form of short-term promissory notes bearing higher rates of interest and return, including related origination fees.

The increased net investment loss during 2023 was primarily the result of the stock option issuance and recognition in January 2023 that was primarily to our officers and directors, in addition to lower interest income earned during the course of 2023, including related origination fees.

Financial Condition

For the year ended December 31, 2022, we had an increase in net assets of $4,928,290.

This increase in net assets was primarily due to the capital we raised during our August 2022 public offering and an increase in our interest income earned from the short-term loans we provided.

Our net assets increased by $1,773,162 for the year ended December 31, 2021, primarily due to the increase in our interest income earned from the short-term loans we provided.

At December 31, 2023, we had an increase in net assets of $718,703 as compared to December 31, 2022.

This increase in net assets was primarily due to the issuance and exercise of stock options, partially offset by the decrease in the fair value of our investments and reduced cash and cash equivalents.

Our net assets increased by $4,457,511 at December 31, 2022 as compared to December 31, 2021, due to the capital we raised during our August 2022 public offering and an increase in our interest income earned from the short-term loans we provided.

Liquidity and Capital Resources

Summary cash flow data is as follows:

For the Year Ended

Cash flows used by:

For the Year Ended December 31,

Cash flows provided (used) by:

Operating activities

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Berman Revocable Trust.

The Loan Agreement provides us with a $5 million revolving line of credit to use in the ordinary course of our short-term specialty finance business.

Amounts drawn under the Loan Agreement accrues interest at the per annum rate of 8%, and all our obligations under the Loan Agreement are secured by a grant of a collateral security interest in substantially all of our assets.

The Loan Agreement, together with our cash and cash equivalents, together comprise our sources of liquidity.

Management believes that these sources of liquidity, together with cash obtained through maturing investments earlier made, will be sufficient for the Company to fund its operations through the entirety of fiscal 2023.

Accordingly, at present we have no definitive plans to obtain other sources of liquidity through borrowing.

On February 11, 2022, we filed a registration statement on Form S-1 seeking to register an offering of five-year common stock warrants that we intended to distribute to our shareholders as a dividend, and up to 2,697,603 shares of our common stock purchasable upon the exercise of those warrants.

The warrants were contemplated to be exercisable at a price of $9.00 per share of common stock (adjusted to account for the August 2022 reverse stock split we effected on a 1-for-2.25 ratio).

We recently determined to abandon this contemplated offering, and expect to file a withdrawal of this registration statement with the Commission soon after the filing of this report.

The Loan Agreement provided us with a $5 million revolving line of credit to use in the ordinary course of our short-term specialty finance business.

Amounts drawn under the Loan Agreement accrued interest at the per annum rate of 8%, and all our obligations under the Loan Agreement were secured by a grant of a collateral security interest in substantially all of our assets.

In January 2024, we terminated the Loan Agreement after having earlier satisfied all amounts thereunder.

Any applicable fees for early termination of the Agreement were waived.

During the course of 2023, the Loan Agreement, together with our cash and cash equivalents, were our primary sources of liquidity.

With the termination of the Loan Agreement, however, our cash and cash equivalents are our remaining sources of liquidity as of the date of this report.

In addition, we expect that some of our investment positions will mature, resulting in additional available cash.

Management believes that these sources of liquidity, will be sufficient for the Company to fund its operations through the entirety of fiscal 2024.

Accordingly, at present we have no definitive plans to obtain other sources of liquidity through borrowing or otherwise.

Investment Activity

In 2023, we made new investments aggregating $12,900,500, and refinanced or otherwise extended the term to maturity of investments aggregating $10,857,500.

Of these amounts, $5 million were initially loaned to Mustang Funding, LLC in 2023, and another of $5 million earlier loaned in 2022 was refinanced, such that we had an aggregate of $10 million invested in Mustang Funding, LLC at December 31, 2023, all of which was due to mature at May 31, 2024.

In 2023, we also wrote-down (i.e., reduced the fair market value of our short-term loans) an aggregate of $935,000 of our investments in preferred stock and $345,421 in one of our short-term loan investments.

In general, these write-downs occurred due to our judgment that some aspect of our investment was no longer likely collectible in full on account of the borrower’s financial condition, prospects, or both.

The write-downs were offset by an increase in market valuations of our remaining short-term loan portfolio as well as market changes in our common stock and other equity holdings, resulting in a net change in unrealized depreciation of $641,433 as reflected in the statement of operations.

Capital Expenditures

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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-K

Item 7. Management’s Discussion and Analysis