| N-2 - $ / shares | 3 Months Ended | | | |
| Dec. 31, 2023 | Sep. 30, 2023 | Dec. 31, 2022 | Sep. 30, 2022 |
| Cover [Abstract] | | | | |
| Entity Central Index Key | 0001490349 | | | |
| Amendment Flag | false | | | |
| Securities Act File Number | 1-35040 | | | |
| Document Type | 10-Q | | | |
| Entity Registrant Name | PHENIXFIN CORPORATION | | | |
| Entity Address, Address Line One | 445 Park Avenue | | | |
| Entity Address, Address Line Two | 10th Floor | | | |
| Entity Address, City or Town | New York | | | |
| Entity Address, State or Province | NY | | | |
| Entity Address, Postal Zip Code | 10022 | | | |
| City Area Code | (212) | | | |
| Local Phone Number | 859-0390 | | | |
| Entity Emerging Growth Company | false | | | |
| General Description of Registrant [Abstract] | | | | |
| Risk Factors [Table Text Block] | Item 1A. Risk Factors In addition to other information set forth in
this report, you should carefully consider the “Risk Factors” discussed in our annual report on Form 10-K for the fiscal year
ended September 30, 2023, filed with the SEC on December 22, 2023, which could materially affect our business, financial condition and/or
operating results. Other than the items disclosed below, there have been no material changes during the three months ended December 31,
2023 to the risk factors discussed in “Item 1A. Risk Factors” of our annual report on Form 10-K. Additional risks or uncertainties
not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial condition and/or
operating results. Risks Related to Our Business We have internalized our operating structure,
including our management and investment functions, with the expectation that we will be able to operate more efficiently with lower costs,
but this may not be the case. On November 18, 2020, the board of directors approved
adoption of an internalized management structure, which we have operated under effective January 1, 2021. There can be no assurances that
internalizing our management structure will be and remain beneficial to us and our stockholders, as we may incur the costs and experience
the risks discussed below, and we may not be able to effectively replicate the services previously provided to us by our former investment
adviser and administrator. While we no longer bear the costs of the various
fees and expenses we previously paid under the investment management and administration agreements with our previous adviser and administrator,
we have other significant direct expenses. These include general and administrative costs, legal, accounting and other governance expenses
and costs and expenses related to managing our portfolio. Certain of these costs may be greater during the early stages of the transition
process. We also incur the compensation and benefits costs of our officers and other employees and consultants. In addition, we may be
subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes
and other employee-related liabilities and grievances. We may also experience operational disruptions
resulting from the transition from external to internal management, and we could fail to effectively manage our internalization over the
longer term, all of which could adversely affect our performance. If the expenses we incur as an internally-managed
company are higher than the expenses we would have paid and/or reimbursed under the externally-managed structure, our earnings per share
may be lower and our share value could suffer. As an internally managed BDC, we are dependent
upon our management team and other professionals, and if we are not able to hire and retain qualified personnel, we will not realize the
anticipated benefits of the internalization. Our ability to achieve our investment objectives
and to make distributions to our stockholders depends upon the performance of our management team and professionals. We may experience
difficulty identifying, engaging and retaining management, investment and general and administrative personnel with the necessary expertise
and credit-related investment experience. As an internally managed BDC, our ability to offer more competitive and flexible compensation
structures, such as offering both a profit-sharing plan and an equity incentive plan, is subject to the limitations imposed by the 1940
Act, which could limit our ability to attract and retain talented investment management professionals. If we are unable to attract and retain highly
talented professionals for the internal management of our Company, we will not realize the anticipated benefits of the internalization,
and the results of our operation could deteriorate. We may suffer credit and capital losses. Private debt in the form of secured loans to corporate
and asset-based borrowers is highly speculative and involves a high degree of risk of credit loss, and therefore an investment in our
securities may not be suitable for someone with a low tolerance for risk. These risks are likely to increase during an economic recession,
such as the economic recession or downturn that the United States and many other countries have recently experienced or are experiencing. Because we use borrowed funds to make investments
or fund our business operations, we are exposed to risks typically associated with leverage which increase the risk of investing in us. We have borrowed funds, including through the
issuance of $57.5 million in aggregate principal amount of 5.25% unsecured notes due November 1, 2028 (the “Notes” or the
“2028 Notes”) to leverage our capital structure, which is generally considered a speculative investment technique. In addition,
on December 15, 2022, the Company entered into a 3-year $50.0 million revolving credit facility (the “Credit Facility”) with
Woodforest Bank, N.A. (“Woodforest”), Valley National Bank, and Axiom Bank, (collectively, the “Lenders”). As
a result:
● our common stock may be exposed to an increased risk of loss because a decrease in the value of our investments may have a greater negative impact on the value of our common stock than if we did not use leverage;
● if we do not appropriately match the assets and liabilities of our business, adverse changes in interest rates could reduce or eliminate the incremental income we make with the proceeds of any leverage;
● our ability to pay distributions on our common stock may be restricted if our asset coverage ratio with respect to each of our outstanding senior securities representing indebtedness and our outstanding preferred shares, as defined by the 1940 Act, is not at least 200% and any amounts used to service indebtedness or preferred stock would not be available for such distributions;
● any credit facility to which we became a party may be subject to periodic renewal by our lenders, whose continued participation cannot be guaranteed;
● any credit facility to which we became a party may contain covenants restricting our operating flexibility;
● we, and indirectly our stockholders, bear the cost of issuing and paying interest or dividends on such securities; and
● any convertible or exchangeable securities that we issue may have rights, preferences and privileges more favorable than those of our common shares. Under the provisions of the 1940 Act, we are permitted,
as a BDC, to issue debt securities or preferred stock and/or borrow money from banks and other financial institutions, which we collectively
refer to as “senior securities”, only in amounts such that our asset coverage ratio equals at least 200% (or 150% if, pursuant
to the 1940 Act, certain requirements are met) after each issuance of senior securities. For a discussion of the terms of the Notes, see
“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition, Liquidity and
Capital Resources.” As of December 31, 2023, the Company’s asset
coverage was 275.4% after giving effect to leverage and therefore the Company’s asset coverage is above 200%, the minimum asset
coverage requirement under the 1940 Act. The lack of liquidity in our investments may adversely affect
our business. We anticipate that our investments generally will
be made in private companies. Substantially all of these securities will be subject to legal and other restrictions on resale or will
be otherwise less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such
investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize
significantly less than the value at which we had previously recorded our investments. In addition, we may face other restrictions on
our ability to liquidate an investment in a portfolio company to the extent that we have material non-public information regarding such
portfolio company. A substantial portion of our portfolio investments
will be recorded at fair value as determined in good faith by our valuation designee under the oversight of our board of directors and,
as a result, there may be uncertainty regarding the value of our portfolio investments. The debt and equity securities in which we invest
for which market quotations are not readily available will be valued at fair value as determined in good faith by our Chief Financial
Officer, the Company’s valuation designee, under the oversight of our board of directors. Most of our investments (other than cash
and cash equivalents) will be classified as Level 3 under Accounting Standards Codification Topic 820 - Fair Value Measurements and Disclosures.
This means that our portfolio valuations will be based on unobservable inputs and our own assumptions about how market participants would
price the asset or liability in question. We expect that inputs into the determination of fair value of our portfolio investments will
require significant management judgment or estimation. Even if observable market data are available, such information may be the result
of consensus 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 disclaimers materially reduces the reliability
of such information. We have retained the services of independent valuation firms to review the valuation of various loans and securities.
The types of factors that we may take into account in determining the fair value of our investments generally include, as appropriate,
comparison to publicly traded securities including such factors as yield, maturity and measures of credit quality, the enterprise value
of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and
its earnings and discounted cash flow, the markets in which the portfolio company does business and other relevant factors. Because such
valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short
periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have
been used if a ready market for these loans and securities existed. Our NAV could be adversely affected if our determinations regarding
the fair value of our investments were materially higher or lower than the values that we ultimately realize upon the disposal of such
loans and securities. We are a non-diversified investment company
within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested
in securities of a single issuer. We are classified as a non-diversified investment
company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our
assets that we may invest in securities of a single issuer. We also have not adopted any policy restricting the percentage of our assets
that may be invested in a single portfolio company. To the extent that we assume large positions in the securities of a small number of
issuers, our NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial
condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence
than a diversified investment company. Beyond our income tax diversification requirements under Subchapter M of the Code, we do not have
fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies. (Note our significant
investment in our affiliate FlexFIN – see Risks Related to our Investments). We are exposed to risks associated with changes in interest rates. Interest rate fluctuations may have a substantial
negative impact on our investments, the value of our common stock and our rate of return on invested capital. A reduction in the interest
rates on new investments relative to interest rates on current investments could also have an adverse impact on our net interest income.
Further increases in interest rates could decrease the value of any investments we hold which earn fixed interest rates and also could
increase our interest expense, thereby decreasing our net income. Also, an increase in interest rates available to investors could make
investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common
stock. Loans under our Credit Facility and the
financial credit we extend to our portfolio companies bear interest based on SOFR, but experience with SOFR based loans is limited. Loans under our current Credit Facility bear interest
at a rate based upon the Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. Also, the secured
terms loans that we make to our portfolio companies and the secured notes of our portfolio companies in which we invest bear interest
at SOFR based rates. Previously, our credit facilities and our debt investments in portfolio companies bore interest at U.S dollar London
Interbank Overnight (USD LIBOR) rates. ICE Benchmark Administration, the authorized and regulated administrator of LIBOR, ended publication
of the one-week and two-month USD LIBOR tenors on December 31, 2021, and ended publication of the remaining USD LIBOR tenors on June 30,
2023. The Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) was enacted in March 2022 to permit financing agreements
that contain a LIBOR-based benchmark without adequate “fallback provisions” to be automatically replaced by a benchmark recommended
by the Federal Reserve. In January 2023, the Federal Reserve adopted a final rule implementing the LIBOR Act that, among other things,
identifies the applicable SOFR-based benchmark replacements under the LIBOR Act. SOFR is considered to be a risk-free rate, and
USD LIBOR was a risk weighted rate. Thus, SOFR tends to be a lower rate than USD LIBOR, because SOFR does not contain a risk component.
This difference may negatively impact our net interest margin of our investments. Also, the use of SOFR based rates is relatively new,
and experience with SOFR based rate loans is limited. There could be unanticipated difficulties or disruptions with the calculation and
publication of SOFR based rates. This could result in increased borrowing costs for the Company or could adversely impact the interest
income we receive from our portfolio companies or the market value of the financial obligations that are due to us from our portfolio
companies. Because we use debt to finance various investments, changes in
interest rates will affect our cost of capital and net investment income. Because we borrow money to make investments, our
net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest
those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse
effect on our net investment income in the event we use our existing debt to finance our investments. In periods of rising interest rates,
such as the current period we are in, our cost of funds will increase to the extent we access any credit facility with a floating interest
rate, which could reduce our net investment income to the extent any debt investments have fixed interest rates. We expect that our long-term
fixed-rate investments will be financed primarily with issuances of equity and long-term debt securities. We may use interest rate risk
management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate
hedging activities to the extent permitted by the 1940 Act. You should also be aware that, to the extent we
make floating debt investments, a rise in the general level of interest rates typically leads to higher interest rates applicable to our
debt investments. If our investments are not managed effectively, we may be unable
to achieve our investment objective. Our ability to achieve our investment objective
will depend on our ability to manage our business, which will depend on the internalized management team. Accomplishing this result is
largely a function of the internalized management team’s ability to provide quality and efficient services to us. They may also
be required to provide managerial assistance to our portfolio companies. These demands on their time may distract them or slow our rate
of investment. Any failure to manage our business effectively could have a material adverse effect on our business, financial condition
and results of operations. We may experience fluctuations in our periodic operating results. We could experience fluctuations in our periodic
operating results due to a number of factors, including the interest rates payable on the debt securities we acquire, the default rate
on such securities, the performance of our portfolio companies, the level of our expenses (including the interest rates payable on our
borrowings), the dividend rates payable on preferred stock we issue, variations in and the timing of the recognition of realized and unrealized
gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors,
results for any period should not be relied upon as being indicative of performance in future periods. Any failure on our part to maintain our status as a BDC could
reduce our operating flexibility. If we fail to maintain our status as a BDC, we
might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more onerous regulatory
restrictions under the 1940 Act and correspondingly decrease our operating flexibility. We may have difficulty paying required distributions if we recognize
income before or without receiving cash representing such income. For U.S. federal income tax purposes, we may include
in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants
in connection with the making of a loan or possibly in other circumstances, such as PIK interest, which represents contractual interest
added to the loan balance and due at the end of the loan term. Such original issue discount, which could be significant relative to our
overall investment activities, or increases in loan balances as a result of PIK arrangements are included in income before we receive
any corresponding cash payments. We also may be required to include in income certain other amounts that we do not receive in cash. Since in certain cases we may recognize income
before or without receiving cash representing such income, we may have difficulty meeting the tax requirement to distribute at least 90%
of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to maintain
our tax treatment as a RIC. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise
additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If we are not able to
raise cash from other sources, we may fail to qualify and maintain our tax treatment as a RIC and thus become subject to corporate-level
U.S. federal income tax. See “Taxation as a RIC” and “Failure to Qualify as a RIC”. We may not be able to pay distributions to our shareholders. We cannot assure that we will achieve investment
results that will allow us to pay cash distributions. Our ability to pay distributions might be adversely affected by, among other things,
the impact of one or more of the risk factors described herein. In addition, the inability to satisfy the asset coverage test applicable
to us as a BDC could limit our ability to pay distributions. As of December 31, 2023, the Company’s asset coverage was 275.4% after
giving effect to leverage and therefore the Company’s asset coverage is above 200%, the minimum asset coverage requirement under
the 1940 Act. All distributions will be paid at the discretion of our board of directors and will depend on our earnings, our financial
condition, maintenance of our RIC tax treatment, compliance with applicable BDC regulations, and such other factors as our board of directors
may deem relevant from time to time. We cannot assure you that we will pay distributions to our stockholders in the future. The highly competitive market in which we operate may limit our
investment opportunities. A number of entities compete with us to make the
types of investments that we make. We compete with other BDCs and investment funds (including public and private funds, commercial and
investment banks, commercial financing companies, SBICs and, to the extent they provide an alternative form of financing, private equity
funds). Additionally, because competition for investment opportunities generally has increased among alternative investment vehicles,
such as hedge funds, those entities have begun to invest in areas in which they have not traditionally invested. As a result of these
new entrants, competition for investment opportunities has intensified in recent years and may intensify further in the future. Some of
our existing and potential competitors are substantially larger and have considerably greater financial, technical and marketing resources
than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In
addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a
wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory
restrictions and valuation requirements that the 1940 Act imposes on us as a BDC and the tax consequences of qualifying as a RIC. We cannot
assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results
of operations. Also, as a result of this existing and potentially increasing competition, we may not be able to take advantage of attractive
investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are
consistent with our investment objective. We do not seek to compete primarily based on the
interest rates we offer, and we believe that some of our competitors make loans with interest rates that are comparable to or lower than
the rates we offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we
match our competitors’ pricing, terms and structure, we may experience decreased net interest income and increased risk of credit
loss. A significant part of our competitive advantage stems from the fact that the market for investments in mid-sized companies is underserved
by traditional commercial banks and other financial institutions. A significant increase in the number and/or size of our competitors
in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience
operating under the regulatory restrictions of the 1940 Act and under an internalized management structure. In the event we make distributions, we would
need additional capital to finance our growth and such capital may not be available on favorable terms or at all. We have elected and intend to qualify annually
to be taxed for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. As a RIC, we must meet certain requirements,
including source-of-income, asset diversification and distribution requirements in order to not have to pay corporate-level U.S. on income
we distribute to our stockholders as distributions, which allows us to substantially reduce or eliminate our corporate-level U.S. federal
income tax liability. As a BDC, we are generally required to meet a coverage ratio of total assets to total senior securities, which includes
all of our borrowings and any preferred stock we may issue in the future, of at least 200% (or 150% if, pursuant to the 1940 Act, certain
requirements are met) at the time we issue any debt or preferred stock. This requirement limits the amount of our leverage. Because we
will continue to need capital to grow our investment portfolio, this limitation may prevent us from incurring debt or issuing preferred
stock and require us to raise additional equity at a time when it may be disadvantageous to do so. We cannot assure you that debt and
equity financing will be available to us on favorable terms, or at all, and debt financings may be restricted by the terms of any of our
outstanding borrowings. In addition, as a BDC, we are generally not permitted to issue common stock priced below NAV without stockholder
approval. If additional funds are not available to us, we could be forced to curtail or cease new lending and investment activities, and
our NAV could decline. Our board of directors may change our investment
objective, operating policies and strategies without prior notice or stockholder approval. Our board of directors has the authority to modify
or waive certain of our operating policies and strategies without prior notice and without stockholder approval. However, absent stockholder
approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the
effect any changes to our current operating policies and strategies would have on our business, operating results or value of our stock.
Nevertheless, the effects could adversely affect our business and impact our ability to make distributions and cause you to lose all or
part of your investment. Because we borrow money, the potential for
loss on amounts invested in us will be magnified and may increase the risk of investing in us. Borrowings, also known as leverage, magnify the
potential for loss on invested equity capital. If we use leverage to partially finance our investments, which we have done historically,
you will experience increased risks of investing in our securities. We issued the Notes, entered into the Credit Facility, and may issue
other debt securities or enter into other types of borrowing arrangements in the future. If the value of our assets decreases, leveraging
would cause our NAV to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would
cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to
make common stock distributions or scheduled debt payments. Leverage is generally considered a speculative investment technique and we
only intend to use leverage if expected returns will exceed the cost of borrowing. As
of December 31, 2023, there was $85.9 million of outstanding borrowings. The weighted average interest rate charged on our borrowings
as of December 31, 2023 was 6.25% (exclusive of debt issuance costs). We will need to generate sufficient cash flow to make these required
interest payments. If we are unable to meet the financial obligations under the Notes, the holders thereof will have the right to declare
the principal amount and accrued and unpaid interest on the outstanding Notes to be due and payable immediately. If we are unable to
meet the financial obligations under the Credit Facility or any other credit facility we enter into, the lenders thereunder would likely
have a superior claim to our assets over our stockholders. We
are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect
the market price of our common stock and our ability to pay distributions. Our
business is dependent on our and third parties’ communications and information systems. Any failure or interruption of those systems,
including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems
in our activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly
or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and
adversely affect our business. There could be:
● sudden electrical or telecommunications outages;
● natural disasters such as earthquakes, tornadoes and
hurricanes;
● disease pandemics (including the COVID-19 outbreak);
● events arising from local or larger scale political
or social matters, including terrorist acts; and
● cyber-attacks. These
events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock
and our ability to pay distributions to our stockholders. A
failure of cybersecurity systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity
planning could impair our ability to conduct business effectively. The
occurrence of a disaster, such as a cyber-attack against us or against a third-party that has access to our data or networks, a natural
catastrophe, an industrial accident, failure of our disaster recovery systems, or consequential employee error, could have an adverse
effect on our ability to communicate or conduct business, negatively impacting our operations and financial condition. This adverse effect
can become particularly acute if those events affect our electronic data processing, transmission, storage, and retrieval systems, or
impact the availability, integrity, or confidentiality of our data. We
depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures,
our computer systems, networks, and data, like those of other companies, could be subject to cyber-attacks and unauthorized access, use,
alteration, or destruction, such as from physical and electronic break-ins or unauthorized tampering, malware and computer virus attacks,
or system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary,
and other information processed, stored in, and transmitted through our computer systems and networks. Such an attack could cause interruptions
or malfunctions in our operations, which could result in financial losses, litigation, regulatory penalties, client dissatisfaction or
loss, reputational damage, and increased costs associated with mitigation of damages and remediation. Third
parties with which we do business may also be sources of cybersecurity or other technological risks. We outsource certain functions and
these relationships allow for the storage and processing of our information, as well as customer, counterparty, employee and borrower
information. Cybersecurity failures or breaches our service providers (including, but not limited to, accountants, custodians, transfer
agents and administrators), and the issuers of securities in which we invest, also have the ability to cause disruptions and impact business
operations, potentially resulting in financial losses, interference with our ability to calculate its net asset value, impediments to
trading, the inability of our stockholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties,
reputation damages, reimbursement of other compensation costs, or additional compliance costs. While we engage in actions to reduce our
exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure or destruction of data, or other
cybersecurity incidents, with increased costs and other consequences, including those described above. In addition, substantial costs
may be incurred in order to prevent any cyber incidents in the future. Privacy
and information security laws and regulation changes, and compliance with those changes, | | | |
| NAV Per Share | $ 73.14 | $ 70.75 | $ 59.38 | $ 57.49 |
| Risks Related to Our Business [Member] | | | | |
| General Description of Registrant [Abstract] | | | | |
| Risk [Text Block] | Risks Related to Our Business We have internalized our operating structure,
including our management and investment functions, with the expectation that we will be able to operate more efficiently with lower costs,
but this may not be the case. On November 18, 2020, the board of directors approved
adoption of an internalized management structure, which we have operated under effective January 1, 2021. There can be no assurances that
internalizing our management structure will be and remain beneficial to us and our stockholders, as we may incur the costs and experience
the risks discussed below, and we may not be able to effectively replicate the services previously provided to us by our former investment
adviser and administrator. While we no longer bear the costs of the various
fees and expenses we previously paid under the investment management and administration agreements with our previous adviser and administrator,
we have other significant direct expenses. These include general and administrative costs, legal, accounting and other governance expenses
and costs and expenses related to managing our portfolio. Certain of these costs may be greater during the early stages of the transition
process. We also incur the compensation and benefits costs of our officers and other employees and consultants. In addition, we may be
subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes
and other employee-related liabilities and grievances. We may also experience operational disruptions
resulting from the transition from external to internal management, and we could fail to effectively manage our internalization over the
longer term, all of which could adversely affect our performance. If the expenses we incur as an internally-managed
company are higher than the expenses we would have paid and/or reimbursed under the externally-managed structure, our earnings per share
may be lower and our share value could suffer. As an internally managed BDC, we are dependent
upon our management team and other professionals, and if we are not able to hire and retain qualified personnel, we will not realize the
anticipated benefits of the internalization. Our ability to achieve our investment objectives
and to make distributions to our stockholders depends upon the performance of our management team and professionals. We may experience
difficulty identifying, engaging and retaining management, investment and general and administrative personnel with the necessary expertise
and credit-related investment experience. As an internally managed BDC, our ability to offer more competitive and flexible compensation
structures, such as offering both a profit-sharing plan and an equity incentive plan, is subject to the limitations imposed by the 1940
Act, which could limit our ability to attract and retain talented investment management professionals. If we are unable to attract and retain highly
talented professionals for the internal management of our Company, we will not realize the anticipated benefits of the internalization,
and the results of our operation could deteriorate. We may suffer credit and capital losses. Private debt in the form of secured loans to corporate
and asset-based borrowers is highly speculative and involves a high degree of risk of credit loss, and therefore an investment in our
securities may not be suitable for someone with a low tolerance for risk. These risks are likely to increase during an economic recession,
such as the economic recession or downturn that the United States and many other countries have recently experienced or are experiencing. Because we use borrowed funds to make investments
or fund our business operations, we are exposed to risks typically associated with leverage which increase the risk of investing in us. We have borrowed funds, including through the
issuance of $57.5 million in aggregate principal amount of 5.25% unsecured notes due November 1, 2028 (the “Notes” or the
“2028 Notes”) to leverage our capital structure, which is generally considered a speculative investment technique. In addition,
on December 15, 2022, the Company entered into a 3-year $50.0 million revolving credit facility (the “Credit Facility”) with
Woodforest Bank, N.A. (“Woodforest”), Valley National Bank, and Axiom Bank, (collectively, the “Lenders”). As
a result:
● our common stock may be exposed to an increased risk of loss because a decrease in the value of our investments may have a greater negative impact on the value of our common stock than if we did not use leverage;
● if we do not appropriately match the assets and liabilities of our business, adverse changes in interest rates could reduce or eliminate the incremental income we make with the proceeds of any leverage;
● our ability to pay distributions on our common stock may be restricted if our asset coverage ratio with respect to each of our outstanding senior securities representing indebtedness and our outstanding preferred shares, as defined by the 1940 Act, is not at least 200% and any amounts used to service indebtedness or preferred stock would not be available for such distributions;
● any credit facility to which we became a party may be subject to periodic renewal by our lenders, whose continued participation cannot be guaranteed;
● any credit facility to which we became a party may contain covenants restricting our operating flexibility;
● we, and indirectly our stockholders, bear the cost of issuing and paying interest or dividends on such securities; and
● any convertible or exchangeable securities that we issue may have rights, preferences and privileges more favorable than those of our common shares. Under the provisions of the 1940 Act, we are permitted,
as a BDC, to issue debt securities or preferred stock and/or borrow money from banks and other financial institutions, which we collectively
refer to as “senior securities”, only in amounts such that our asset coverage ratio equals at least 200% (or 150% if, pursuant
to the 1940 Act, certain requirements are met) after each issuance of senior securities. For a discussion of the terms of the Notes, see
“Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition, Liquidity and
Capital Resources.” As of December 31, 2023, the Company’s asset
coverage was 275.4% after giving effect to leverage and therefore the Company’s asset coverage is above 200%, the minimum asset
coverage requirement under the 1940 Act. The lack of liquidity in our investments may adversely affect
our business. We anticipate that our investments generally will
be made in private companies. Substantially all of these securities will be subject to legal and other restrictions on resale or will
be otherwise less liquid than publicly traded securities. The illiquidity of our investments may make it difficult for us to sell such
investments if the need arises. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize
significantly less than the value at which we had previously recorded our investments. In addition, we may face other restrictions on
our ability to liquidate an investment in a portfolio company to the extent that we have material non-public information regarding such
portfolio company. A substantial portion of our portfolio investments
will be recorded at fair value as determined in good faith by our valuation designee under the oversight of our board of directors and,
as a result, there may be uncertainty regarding the value of our portfolio investments. The debt and equity securities in which we invest
for which market quotations are not readily available will be valued at fair value as determined in good faith by our Chief Financial
Officer, the Company’s valuation designee, under the oversight of our board of directors. Most of our investments (other than cash
and cash equivalents) will be classified as Level 3 under Accounting Standards Codification Topic 820 - Fair Value Measurements and Disclosures.
This means that our portfolio valuations will be based on unobservable inputs and our own assumptions about how market participants would
price the asset or liability in question. We expect that inputs into the determination of fair value of our portfolio investments will
require significant management judgment or estimation. Even if observable market data are available, such information may be the result
of consensus 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 disclaimers materially reduces the reliability
of such information. We have retained the services of independent valuation firms to review the valuation of various loans and securities.
The types of factors that we may take into account in determining the fair value of our investments generally include, as appropriate,
comparison to publicly traded securities including such factors as yield, maturity and measures of credit quality, the enterprise value
of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and
its earnings and discounted cash flow, the markets in which the portfolio company does business and other relevant factors. Because such
valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short
periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have
been used if a ready market for these loans and securities existed. Our NAV could be adversely affected if our determinations regarding
the fair value of our investments were materially higher or lower than the values that we ultimately realize upon the disposal of such
loans and securities. We are a non-diversified investment company
within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested
in securities of a single issuer. We are classified as a non-diversified investment
company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our
assets that we may invest in securities of a single issuer. We also have not adopted any policy restricting the percentage of our assets
that may be invested in a single portfolio company. To the extent that we assume large positions in the securities of a small number of
issuers, our NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial
condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence
than a diversified investment company. Beyond our income tax diversification requirements under Subchapter M of the Code, we do not have
fixed guidelines for diversification, and our investments could be concentrated in relatively few portfolio companies. (Note our significant
investment in our affiliate FlexFIN – see Risks Related to our Investments). We are exposed to risks associated with changes in interest rates. Interest rate fluctuations may have a substantial
negative impact on our investments, the value of our common stock and our rate of return on invested capital. A reduction in the interest
rates on new investments relative to interest rates on current investments could also have an adverse impact on our net interest income.
Further increases in interest rates could decrease the value of any investments we hold which earn fixed interest rates and also could
increase our interest expense, thereby decreasing our net income. Also, an increase in interest rates available to investors could make
investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common
stock. Loans under our Credit Facility and the
financial credit we extend to our portfolio companies bear interest based on SOFR, but experience with SOFR based loans is limited. Loans under our current Credit Facility bear interest
at a rate based upon the Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. Also, the secured
terms loans that we make to our portfolio companies and the secured notes of our portfolio companies in which we invest bear interest
at SOFR based rates. Previously, our credit facilities and our debt investments in portfolio companies bore interest at U.S dollar London
Interbank Overnight (USD LIBOR) rates. ICE Benchmark Administration, the authorized and regulated administrator of LIBOR, ended publication
of the one-week and two-month USD LIBOR tenors on December 31, 2021, and ended publication of the remaining USD LIBOR tenors on June 30,
2023. The Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”) was enacted in March 2022 to permit financing agreements
that contain a LIBOR-based benchmark without adequate “fallback provisions” to be automatically replaced by a benchmark recommended
by the Federal Reserve. In January 2023, the Federal Reserve adopted a final rule implementing the LIBOR Act that, among other things,
identifies the applicable SOFR-based benchmark replacements under the LIBOR Act. SOFR is considered to be a risk-free rate, and
USD LIBOR was a risk weighted rate. Thus, SOFR tends to be a lower rate than USD LIBOR, because SOFR does not contain a risk component.
This difference may negatively impact our net interest margin of our investments. Also, the use of SOFR based rates is relatively new,
and experience with SOFR based rate loans is limited. There could be unanticipated difficulties or disruptions with the calculation and
publication of SOFR based rates. This could result in increased borrowing costs for the Company or could adversely impact the interest
income we receive from our portfolio companies or the market value of the financial obligations that are due to us from our portfolio
companies. Because we use debt to finance various investments, changes in
interest rates will affect our cost of capital and net investment income. Because we borrow money to make investments, our
net investment income will depend, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest
those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse
effect on our net investment income in the event we use our existing debt to finance our investments. In periods of rising interest rates,
such as the current period we are in, our cost of funds will increase to the extent we access any credit facility with a floating interest
rate, which could reduce our net investment income to the extent any debt investments have fixed interest rates. We expect that our long-term
fixed-rate investments will be financed primarily with issuances of equity and long-term debt securities. We may use interest rate risk
management techniques in an effort to limit our exposure to interest rate fluctuations. Such techniques may include various interest rate
hedging activities to the extent permitted by the 1940 Act. You should also be aware that, to the extent we
make floating debt investments, a rise in the general level of interest rates typically leads to higher interest rates applicable to our
debt investments. If our investments are not managed effectively, we may be unable
to achieve our investment objective. Our ability to achieve our investment objective
will depend on our ability to manage our business, which will depend on the internalized management team. Accomplishing this result is
largely a function of the internalized management team’s ability to provide quality and efficient services to us. They may also
be required to provide managerial assistance to our portfolio companies. These demands on their time may distract them or slow our rate
of investment. Any failure to manage our business effectively could have a material adverse effect on our business, financial condition
and results of operations. We may experience fluctuations in our periodic operating results. We could experience fluctuations in our periodic
operating results due to a number of factors, including the interest rates payable on the debt securities we acquire, the default rate
on such securities, the performance of our portfolio companies, the level of our expenses (including the interest rates payable on our
borrowings), the dividend rates payable on preferred stock we issue, variations in and the timing of the recognition of realized and unrealized
gains or losses, the degree to which we encounter competition in our markets and general economic conditions. As a result of these factors,
results for any period should not be relied upon as being indicative of performance in future periods. Any failure on our part to maintain our status as a BDC could
reduce our operating flexibility. If we fail to maintain our status as a BDC, we
might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more onerous regulatory
restrictions under the 1940 Act and correspondingly decrease our operating flexibility. We may have difficulty paying required distributions if we recognize
income before or without receiving cash representing such income. For U.S. federal income tax purposes, we may include
in income certain amounts that we have not yet received in cash, such as original issue discount, which may arise if we receive warrants
in connection with the making of a loan or possibly in other circumstances, such as PIK interest, which represents contractual interest
added to the loan balance and due at the end of the loan term. Such original issue discount, which could be significant relative to our
overall investment activities, or increases in loan balances as a result of PIK arrangements are included in income before we receive
any corresponding cash payments. We also may be required to include in income certain other amounts that we do not receive in cash. Since in certain cases we may recognize income
before or without receiving cash representing such income, we may have difficulty meeting the tax requirement to distribute at least 90%
of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any, to maintain
our tax treatment as a RIC. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise
additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If we are not able to
raise cash from other sources, we may fail to qualify and maintain our tax treatment as a RIC and thus become subject to corporate-level
U.S. federal income tax. See “Taxation as a RIC” and “Failure to Qualify as a RIC”. We may not be able to pay distributions to our shareholders. We cannot assure that we will achieve investment
results that will allow us to pay cash distributions. Our ability to pay distributions might be adversely affected by, among other things,
the impact of one or more of the risk factors described herein. In addition, the inability to satisfy the asset coverage test applicable
to us as a BDC could limit our ability to pay distributions. As of December 31, 2023, the Company’s asset coverage was 275.4% after
giving effect to leverage and therefore the Company’s asset coverage is above 200%, the minimum asset coverage requirement under
the 1940 Act. All distributions will be paid at the discretion of our board of directors and will depend on our earnings, our financial
condition, maintenance of our RIC tax treatment, compliance with applicable BDC regulations, and such other factors as our board of directors
may deem relevant from time to time. We cannot assure you that we will pay distributions to our stockholders in the future. The highly competitive market in which we operate may limit our
investment opportunities. A number of entities compete with us to make the
types of investments that we make. We compete with other BDCs and investment funds (including public and private funds, commercial and
investment banks, commercial financing companies, SBICs and, to the extent they provide an alternative form of financing, private equity
funds). Additionally, because competition for investment opportunities generally has increased among alternative investment vehicles,
such as hedge funds, those entities have begun to invest in areas in which they have not traditionally invested. As a result of these
new entrants, competition for investment opportunities has intensified in recent years and may intensify further in the future. Some of
our existing and potential competitors are substantially larger and have considerably greater financial, technical and marketing resources
than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us. In
addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a
wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory
restrictions and valuation requirements that the 1940 Act imposes on us as a BDC and the tax consequences of qualifying as a RIC. We cannot
assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results
of operations. Also, as a result of this existing and potentially increasing competition, we may not be able to take advantage of attractive
investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are
consistent with our investment objective. We do not seek to compete primarily based on the
interest rates we offer, and we believe that some of our competitors make loans with interest rates that are comparable to or lower than
the rates we offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we
match our competitors’ pricing, terms and structure, we may experience decreased net interest income and increased risk of credit
loss. A significant part of our competitive advantage stems from the fact that the market for investments in mid-sized companies is underserved
by traditional commercial banks and other financial institutions. A significant increase in the number and/or size of our competitors
in this target market could force us to accept less attractive investment terms. Furthermore, many of our competitors have greater experience
operating under the regulatory restrictions of the 1940 Act and under an internalized management structure. In the event we make distributions, we would
need additional capital to finance our growth and such capital may not be available on favorable terms or at all. We have elected and intend to qualify annually
to be taxed for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. As a RIC, we must meet certain requirements,
including source-of-income, asset diversification and distribution requirements in order to not have to pay corporate-level U.S. on income
we distribute to our stockholders as distributions, which allows us to substantially reduce or eliminate our corporate-level U.S. federal
income tax liability. As a BDC, we are generally required to meet a coverage ratio of total assets to total senior securities, which includes
all of our borrowings and any preferred stock we may issue in the future, of at least 200% (or 150% if, pursuant to the 1940 Act, certain
requirements are met) at the time we issue any debt or preferred stock. This requirement limits the amount of our leverage. Because we
will continue to need capital to grow our investment portfolio, this limitation may prevent us from incurring debt or issuing preferred
stock and require us to raise additional equity at a time when it may be disadvantageous to do so. We cannot assure you that debt and
equity financing will be available to us on favorable terms, or at all, and debt financings may be restricted by the terms of any of our
outstanding borrowings. In addition, as a BDC, we are generally not permitted to issue common stock priced below NAV without stockholder
approval. If additional funds are not available to us, we could be forced to curtail or cease new lending and investment activities, and
our NAV could decline. Our board of directors may change our investment
objective, operating policies and strategies without prior notice or stockholder approval. Our board of directors has the authority to modify
or waive certain of our operating policies and strategies without prior notice and without stockholder approval. However, absent stockholder
approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the
effect any changes to our current operating policies and strategies would have on our business, operating results or value of our stock.
Nevertheless, the effects could adversely affect our business and impact our ability to make distributions and cause you to lose all or
part of your investment. Because we borrow money, the potential for
loss on amounts invested in us will be magnified and may increase the risk of investing in us. Borrowings, also known as leverage, magnify the
potential for loss on invested equity capital. If we use leverage to partially finance our investments, which we have done historically,
you will experience increased risks of investing in our securities. We issued the Notes, entered into the Credit Facility, and may issue
other debt securities or enter into other types of borrowing arrangements in the future. If the value of our assets decreases, leveraging
would cause our NAV to decline more sharply than it otherwise would have had we not leveraged. Similarly, any decrease in our income would
cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to
make common stock distributions or scheduled debt payments. Leverage is generally considered a speculative investment technique and we
only intend to use leverage if expected returns will exceed the cost of borrowing. As
of December 31, 2023, there was $85.9 million of outstanding borrowings. The weighted average interest rate charged on our borrowings
as of December 31, 2023 was 6.25% (exclusive of debt issuance costs). We will need to generate sufficient cash flow to make these required
interest payments. If we are unable to meet the financial obligations under the Notes, the holders thereof will have the right to declare
the principal amount and accrued and unpaid interest on the outstanding Notes to be due and payable immediately. If we are unable to
meet the financial obligations under the Credit Facility or any other credit facility we enter into, the lenders thereunder would likely
have a superior claim to our assets over our stockholders. We
are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect
the market price of our common stock and our ability to pay distributions. Our
business is dependent on our and third parties’ communications and information systems. Any failure or interruption of those systems,
including as a result of the termination of an agreement with any third-party service providers, could cause delays or other problems
in our activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly
or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and
adversely affect our business. There could be:
● sudden electrical or telecommunications outages;
● natural disasters such as earthquakes, tornadoes and
hurricanes;
● disease pandemics (including the COVID-19 outbreak);
● events arising from local or larger scale political
or social matters, including terrorist acts; and
● cyber-attacks. These
events, in turn, could have a material adverse effect on our operating results and negatively affect the market price of our common stock
and our ability to pay distributions to our stockholders. A
failure of cybersecurity systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity
planning could impair our ability to conduct business effectively. The
occurrence of a disaster, such as a cyber-attack against us or against a third-party that has access to our data or networks, a natural
catastrophe, an industrial accident, failure of our disaster recovery systems, or consequential employee error, could have an adverse
effect on our ability to communicate or conduct business, negatively impacting our operations and financial condition. This adverse effect
can become particularly acute if those events affect our electronic data processing, transmission, storage, and retrieval systems, or
impact the availability, integrity, or confidentiality of our data. We
depend heavily upon computer systems to perform necessary business functions. Despite our implementation of a variety of security measures,
our computer systems, networks, and data, like those of other companies, could be subject to cyber-attacks and unauthorized access, use,
alteration, or destruction, such as from physical and electronic break-ins or unauthorized tampering, malware and computer virus attacks,
or system failures and disruptions. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary,
and other information processed, stored in, and transmitted through our computer systems and networks. Such an attack could cause interruptions
or malfunctions in our operations, which could result in financial losses, litigation, regulatory penalties, client dissatisfaction or
loss, reputational damage, and increased costs associated with mitigation of damages and remediation. Third
parties with which we do business may also be sources of cybersecurity or other technological risks. We outsource certain functions and
these relationships allow for the storage and processing of our information, as well as customer, counterparty, employee and borrower
information. Cybersecurity failures or breaches our service providers (including, but not limited to, accountants, custodians, transfer
agents and administrators), and the issuers of securities in which we invest, also have the ability to cause disruptions and impact business
operations, potentially resulting in financial losses, interference with our ability to calculate its net asset value, impediments to
trading, the inability of our stockholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties,
reputation damages, reimbursement of other compensation costs, or additional compliance costs. While we engage in actions to reduce our
exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure or destruction of data, or other
cybersecurity incidents, with increased costs and other consequences, including those described above. In addition, substantial costs
may be incurred in order to prevent any cyber incidents in the future. Privacy
and information security laws and regulation changes, and compliance with those changes, may result in cost increases due to system changes
and the development of new administrative processes. In addition, we may be required to expend significant additional resources to modify
our protective measures and to investigate and remediate vulnerabilities or other exposures arising from operational and security risks.
We currently do not maintain insurance coverage relating to cybersecurity risks, and we may be required to expend significant additional
resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject
to litigation and financial losses that are not fully insured. | | | |
| Risks Related to Our Investments [Member] | | | | |
| General Description of Registrant [Abstract] | | | | |
| Risk [Text Block] | Risks
Related to Our Investments We
may not realize gains from our equity investments. When
we make a debt investment, we may acquire warrants or other equity securities as well. In addition, we may invest directly in the equity
securities of portfolio companies. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition
of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly,
we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests
may not be sufficient to offset any other losses we experience. Our
investments are very risky and highly speculative. We
have invested primarily in senior secured first lien term loans and senior secured second lien term loans issued by private companies. Senior
Secured Loans Equity
Investments In
addition, investing in private companies involves a number of significant risks. See “Our investments in private portfolio companies
may be risky, and you could lose all or part of your investment” below. Our
investments in private portfolio companies may be risky, and you could lose all or part of your investment. Investments
in private companies involve a number of significant risks. Generally, little public information exists about these companies, and we
are required to rely on the ability of our investment professionals to obtain adequate information to evaluate the potential returns
from investing in these companies. If we are unable to uncover all material information about these companies, we may not make a fully
informed investment decision, and we may lose money on our investments. Private companies may have limited financial resources and may
be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value
of any collateral and a reduction in the likelihood of our realizing any guarantees we may have obtained in connection with our investment.
In addition, they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses,
which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns.
Additionally, private companies are more likely to depend on the management talents and efforts of a small group of persons; therefore,
the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio
company and, in turn, on us. Private companies also generally have less predictable operating results, may from time to time be parties
to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence and may require
substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our
executive officers and directors may, in the ordinary course of business, be named as defendants in litigation arising from our investments
in these types of companies. We
have invested primarily in secured debt issued by our portfolio companies. In the case of our senior secured first lien term loans, the
portfolio companies usually have, or may be permitted to incur, other debt that ranks equally with the debt securities in which we invest.
With respect to our senior secured second lien term loans, the portfolio companies usually have, or may be permitted to incur, other
debt that ranks above or equally with the debt securities in which we invest. In the case of debt ranking above the senior secured second
lien term loans in which we invest, we would be subordinate to such debt in the event of an insolvency, liquidation, dissolution, reorganization
or bankruptcy of the relevant portfolio company and therefore the holders of debt instruments ranking senior to our investment in that
portfolio company would typically be entitled to receive payment in full before we receive any distribution. In the case of debt ranking
equally with debt securities in which we invest, we would have to share any distributions on an equal and ratable basis with other creditors
holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company. Additionally,
certain loans that we make to portfolio companies may be secured on a second priority basis by the same collateral securing senior secured
debt of such companies. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding
senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements
governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation
of, and be entitled to receive proceeds from, any realization of the collateral to repay their obligations in full before us. In addition,
the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and
other factors. There can be no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient
to satisfy the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority
liens on the collateral. If such proceeds are not sufficient to repay amounts outstanding under the loan obligations secured by the second
priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim
against the portfolio company’s remaining assets, if any. The
rights we may have with respect to the collateral securing the loans we make to our portfolio companies with senior debt outstanding
may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt.
Under such an intercreditor agreement, at any time that obligations that have the benefit of the first priority liens are outstanding,
any of the following actions that may be taken in respect of the collateral will be at the direction of the holders of the obligations
secured by the first priority liens: (1) the ability to cause the commencement of enforcement proceedings against the collateral; (2)
the ability to control the conduct of such proceedings; (3) the approval of amendments to collateral documents; (4) releases of liens
on the collateral; and (5) waivers of past defaults under collateral documents. We may not have the ability to control or direct such
actions, even if our rights are adversely affected. Our
portfolio companies may prepay loans, which prepayment may reduce stated yields if capital returned cannot be invested in transactions
with equal or greater expected yields. Our
loans to portfolio companies are prepayable at any time, and most of them at no premium to par. It is uncertain as to when each loan
may be prepaid. Whether a loan is prepaid will depend both on the continued positive performance of the portfolio company and the existence
of favorable financing market conditions that allow such company the ability to replace existing financing with less expensive capital.
As market conditions change frequently, it is unknown when, and if, this may be possible for each portfolio company. In the case of some
of these loans, having the loan prepaid early may reduce the achievable yield for us below the stated yield to maturity contained herein
if the capital returned cannot be invested in transactions with equal or greater expected yields. Our
failure to make follow-on investments in our portfolio companies could impair the value of our portfolio and our ability to make follow-on
investments in certain portfolio companies may be restricted. Following
an initial investment in a portfolio company, provided that there are no restrictions imposed by the 1940 Act, we may make additional
investments in that portfolio company as “follow-on” investments in order to: (1) increase or maintain in whole or in part
our equity ownership percentage; (2) exercise warrants, options or convertible securities that were acquired in the original or subsequent
financing; or (3) attempt to preserve or enhance the value of our initial investment. We
have the discretion to make any follow-on investments, subject to the availability of capital resources. We may elect not to make follow-on
investments or otherwise lack sufficient funds to make those investments. Our failure to make follow-on investments may, in some circumstances,
jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to
increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may
elect not to make such follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities,
because we are inhibited by compliance with BDC requirements or because we might lose our RIC tax treatment. We also may be restricted
from making follow-on investments in certain portfolio companies to the extent that affiliates of ours hold interests in such companies. As
of December 31, 2023, 15.6% of our total assets were invested in FlexFin, our affiliate’s asset-based lending business. This
significant exposure subjects our Company to various risks associated with such business (which are identified below) to a much greater
extent than companies not similarly concentrated. Client
borrowers, particularly with respect to asset-based lending activities, may lack the operating history, cash flows or balance sheet necessary
to support other financing options and may expose us to additional risk. A
portion of our loan portfolio consists, through FlexFIN, of asset-based lending involving gemstones. Some of these products arise out
of relationships with clients who lack the operating history, cash flows or balance sheet necessary to qualify for other financing options.
This could increase our risk of loss. 15.6%
of the Company’s total assets (as of December 31, 2023) are invested in our affiliate’s asset-based lending business and
its activities are influenced by volatility in prices of gemstones and jewelry. Our
affiliate’s asset-based lending business is impacted by volatility in gemstone and jewelry prices. Among the factors that can impact
the price of gemstones and jewelry are supply and demand of gemstones; political, economic, and global financial events; movement of
the U.S. dollar versus other currencies; and the activity of large speculators and other participants. A significant decline in market
prices of gemstones could result in reduced collateral value and losses, (i.e., a lower balance of asset-based loans outstanding for
the Company’s affiliate.) The
gemstones and jewelry business is subject to the risk of fraud and counterfeiting. The
gemstones business is exposed to the risk of loss as a result of fraud in its various forms. We seek to minimize our exposure to fraud
through a number of means, including third-party authentication and verification and the establishment of procedures designed to detect
fraud. However, there can be no assurance that we will be successful in preventing or identifying fraud, or in obtaining redress in the
event such fraud is detected. We
may be subject to risks associated with our investments in unitranche loans. Unitranche
loans provide leverage levels comparable to a combination of first lien and second lien or subordinated loans, and may rank junior to
other debt instruments issued by the portfolio company. Unitranche loans generally allow the borrower to make a large lump sum payment
of principal at the end of the loan term, and there is a heightened risk of loss if the borrower is unable to pay the lump sum or refinance
the amount owed at maturity. From the perspective of a lender, in addition to making a single loan, a unitranche loan may allow the lender
to choose to participate in the “first out” tranche, which will generally receive priority with respect to payments of principal,
interest and any other amounts due, or to choose to participate only in the “last out” tranche, which is generally paid only
after the first out tranche is paid. We may participate in “first out” and “last out” tranches of unitranche
loans and make single unitranche loans, and we may suffer losses on such loans if the borrower is unable to make required payments when
due. Covenant-Lite
Loans may expose us to different risks, including with respect to liquidity, price volatility, ability to restructure loans, credit risks
and less protective loan documentation, than is the case with loans that contain financial maintenance covenants. A
significant number of high yield loans in the market, may consist of covenant-lite loans, or “Covenant-Lite Loans.” A significant
portion of the loans in which we may invest or get exposure to through our investments may be deemed to be Covenant-Lite Loans. Such
loans do not require the borrower to maintain debt service or other financial ratios and do not include terms which allow the lender
to monitor the performance of the borrower and declare a default if certain criteria are breached. Ownership of Covenant-Lite Loans may
expose us to different risks, including with respect to liquidity, price volatility, ability to restructure loans, credit risks and less
protective loan documentation, than is the case with loans that contain financial maintenance covenants. As
a BDC, our ability to invest in public companies and foreign companies is limited by the 1940 Act. To
maintain our tax treatment as a BDC, we are not permitted to acquire any assets other than “qualifying assets” specified
in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited
exceptions). Subject to certain exceptions for follow-on investments and distressed companies, an investment in an issuer that has outstanding
securities listed on a national securities exchange may be treated as qualifying assets only if such issuer has a market capitalization
that is less than $250 million at the time of such investment. In addition, we may invest up to 30% of our portfolio in opportunistic
investments which will be intended to diversify or complement the remainder of our portfolio and to enhance our returns to stockholders.
These investments may include private equity investments, securities of public companies that are broadly traded and securities of non-U.S.
companies. We expect that these public companies generally will have debt securities that are non-investment grade. Our
investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments. Our
investment strategy contemplates that a portion of our investments may be in securities of foreign companies. Investing in foreign companies
may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange
control regulations, political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available
information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers
and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing
standards and greater price volatility. Although
it is anticipated that most of our investments will be denominated in U.S. dollars, our investments that are denominated in a foreign
currency will be subject to the risk that the value of a particular currency may change in relation to the U.S. dollar. Among the factors
that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar
assets in different currencies, long-term opportunities for investment and capital appreciation and political developments. We may employ
hedging techniques to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk or, that if we do,
such strategies will be effective. As a result, a change in currency exchange rates may adversely affect our profitability. Hedging
transactions may expose us to additional risks. We
may engage in currency or interest rate hedging transactions. If we engage in hedging transactions, we may expose ourselves to risks
associated with such transactions. We may utilize instruments such as forward contracts, currency options and interest rate swaps, caps,
collars and floors to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange
rates and market interest rates. Hedging against a decline in the values of our portfolio positions does not eliminate the possibility
of fluctuations in the values of such positions or prevent losses if the values of such positions decline. However, such hedging can
establish other positions designed to gain from those same developments, thereby offsetting the decline in the value of such portfolio
positions. Such hedging transaction may also limit the opportunity for gain if the values of the underlying portfolio positions should
increase. Moreover, it may not be possible to hedge against an exchange rate or interest rate fluctuation that is so generally anticipated
that we are not able to enter into a hedging transaction at an acceptable price. While
we may enter into transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange
rates or interest rates may result in poorer overall investment performance than if we had not engaged in any such hedging transactions.
In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the
portfolio positions being hedged may vary. Moreover, for a variety of reasons, we may not seek or be able to establish a perfect correlation
between such hedging instruments and the portfolio holdings being hedged. Any such imperfect correlation may prevent us from achieving
the intended hedge and expose us to risk of loss. In addition, it may not be possible to hedge fully or perfectly against currency fluctuations
affecting the value of securities denominated in non-U.S. currencies because the value of those securities is likely to fluctuate as
a result of factors not related to currency fluctuations. The
disposition of our investments may result in contingent liabilities. We
currently expect that a significant portion of our investments will involve lending directly to private companies. In connection with
the disposition of an investment in private securities, we may be required to make representations about the business and financial affairs
of the portfolio company typical of those made in connection with the sale of a business. We may also be required to indemnify the purchasers
of such investment to the extent that any such representations turn out to be inaccurate or with respect to certain potential liabilities.
These arrangements may result in contingent liabilities that ultimately yield funding obligations that must be satisfied through our
return of certain distributions previously made to us. If
we invest in the securities and obligations of distressed and bankrupt issuers, we might not receive interest or other payments. We
may invest in the securities and obligations of distressed and bankrupt issuers, including debt obligations that are in covenant or payment
default. Such investments generally are considered speculative. The repayment of defaulted obligations is subject to significant uncertainties.
Defaulted obligations might be repaid only after lengthy workout or bankruptcy proceedings, during which the issuer of those obligations
might not make any interest or other payments. We may not realize gains from our equity investments. We
are subject to risks associated with significant investments in one or more economic sectors and/or industries, including the business
services sector, which includes our investment in our affiliate’s asset-based lending business. At
times, the Company may have a significant portion of its assets invested in securities of companies conducting business within one or
more economic sectors and/or industries, including the Services: Business sector, which includes our investment in an asset-based lending
business. Companies in the same sector or industry may be similarly affected by economic, regulatory, political or market events or conditions,
which may make the Company more vulnerable to unfavorable developments in that sector or industry than companies that invest more broadly.
Generally, the more broadly the Company invests, the more it spreads risk and potentially reduces the risks of loss and volatility. As
of December 31, 2023, investments in our affiliate’s asset-based lending business constituted 15.6% of our total assets. See above,
under Item 1A for risk factors related to our investment in that business. | | | |
| Risks Related to Our Operations as a BDC and a RIC [Member] | | | | |
| General Description of Registrant [Abstract] | | | | |
| Risk [Text Block] | Risks
Related to Our Operations as a BDC and a RIC Regulations
governing our operation as a BDC may limit our ability to, and the way in which we raise additional capital, which could have a material
adverse impact on our liquidity, financial condition and results of operations. Our
business requires a substantial amount of capital to operate and grow. We may acquire additional capital from the issuance of senior
securities (including debt and preferred stock), the issuance of additional shares of our common stock or from securitization transactions.
However, we may not be able to raise additional capital in the future on favorable terms or at all. Additionally, we may only issue senior
securities up to the maximum amount permitted by the 1940 Act. The 1940 Act permits us to issue senior securities only in amounts such
that our asset coverage, as defined in the 1940 Act, equals at least 200% (or 150% if, pursuant to the 1940 Act, certain requirements
are met) after such issuance or incurrence. If our assets decline in value and we fail to satisfy this test, we may be required to liquidate
a portion of our investments and repay a portion of our indebtedness at a time when such sales or repayment may be disadvantageous, which
could have a material adverse impact on our liquidity, financial condition and results of operations. As of December 31, 2023, the Company’s
asset coverage was 275.4% after giving effect to leverage and therefore the Company’s asset coverage is above 200%, the minimum
asset coverage requirement under the 1940 Act. Changes
in the laws or regulations governing our business, or changes in the interpretations thereof, and any failure by us to comply with these
laws or regulations, could have a material adverse effect on our business, results of operations or financial condition. Changes
in the laws or regulations or the interpretations of the laws and regulations that govern BDCs, RICs or non-depository commercial lenders
could significantly affect our operations and our cost of doing business. We are subject to federal, state and local laws and regulations
and are subject to judicial and administrative decisions that affect our operations, including our loan originations, maximum interest
rates, fees and other charges, disclosures to portfolio companies, the terms of secured transactions, collection and foreclosure procedures
and other trade practices. If these laws, regulations or decisions change, or if we expand our business into jurisdictions that have
adopted more stringent requirements than those in which we currently conduct business, we may have to incur significant expenses in order
to comply, or we might have to restrict our operations. In addition, if we do not comply with applicable laws, regulations and decisions,
we may lose licenses needed for the conduct of our business and may be subject to civil fines and criminal penalties. As
an internally managed BDC, we are subject to certain restrictions that may adversely affect our ability to offer certain compensation
structures. As
an internally managed BDC, our ability to offer more competitive and flexible compensation structures, such as offering both a profit-sharing
plan and an equity incentive plan, is subject to the limitations imposed by the 1940 Act, which limits our ability to attract and retain
talented investment management professionals. As such, these limitations could inhibit our ability to grow, pursue our business plan
and attract and retain professional talent, any or all of which may have a negative impact on our business, financial condition and results
of operations. As
an internally managed BDC, we are dependent upon our management team and investment professionals for their time availability and for
our future success, and if we are not able to hire and retain qualified personnel, or if we lose key members of our senior management
team, our ability to implement our business strategy could be significantly harmed. As
an internally managed BDC, our ability to achieve our investment objectives and to make distributions to our stockholders depends upon
the performance of our management team and investment professionals. We depend upon the members of our management and our investment
professionals for the identification, final selection, structuring, closing and monitoring of our investments. These employees have critical
industry experience and relationships on which we rely to implement our business plan. If we lose the services of key members of our
senior management team, we may not be able to operate the business as we expect, and our ability to compete could be harmed, which could
cause our operating results to suffer. We believe our future success will depend, in part, on our ability to identify, attract and retain
sufficient numbers of highly skilled employees. If we do not succeed in identifying, attracting and retaining such personnel, we may
not be able to operate our business as we expect. As an internally managed BDC, our compensation structure is determined and set by our
Board of Directors and its Compensation Committee. This structure currently includes salary, bonus and incentive compensation. We are
subject to limitations by the 1940 Act on our ability to employ an incentive compensation structure that directly ties performance of
our investment portfolio and results of operations to incentive compensation. Members of our senior management team may receive offers
of more flexible and attractive compensation arrangements from other companies, particularly from investment advisers to externally managed
BDCs that are not subject to the same limitations on incentive-based compensation that we are subject to as an internally managed BDC.
A departure by one or more members of our senior management team could have a negative impact on our business, financial condition and
results of operations. We
have internalized our operating structure, including our management and investment functions; as a result, we may incur significant
costs and face significant risks associated with being self-managed, including adverse effects on our business and financial condition. Effective
January 1, 2021, we operate under an internalized operating structure, including our management and investment functions. There can be
no assurances that internalizing our operating structure will be beneficial to us and our stockholders, as we may incur the costs and
risks discussed below and may not be able to effectively replicate or improve upon the services previously provided to us by our former
investment adviser and administrator, MCC Advisors. While
we will no longer bear the costs of the various fees and expenses we previously paid to MCC Advisors under the Investment Advisory Agreement,
our direct expenses will generally include general and administrative costs, including legal, accounting, and other expenses related
to corporate governance, SEC reporting and compliance, as well as costs and expenses related to making and managing our investments.
We will also now incur the compensation and benefits costs of our officers and other employees and consultants, and, subject to adherence
to applicable law, we may issue equity or other incentive-based awards to our officers, employees and consultants, which awards may decrease
net income and funds from our operations and may dilute our stockholders. We may also be subject to potential liabilities commonly faced
by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and
grievances. In
addition, if the expenses we assume as a result of our internalization are higher than the expenses we would have paid and/or reimbursed
to MCC Advisors, our earnings per share may be lower as a result of our internalization than they otherwise would have been, potentially
decreasing the amount of funds available to distribute to our stockholders and the value of our shares. Further,
an inability to effectively manage our internalization could result in our incurring excess costs and operating inefficiencies, and may
divert our management’s attention from managing our investments. All
of these factors could have a material adverse effect on our results of operations, financial condition, and ability to pay distributions. The
impact of financial reform legislation on us is uncertain. The
Dodd-Frank Reform Act became effective on July 21, 2010. Many provisions of the Dodd-Frank Reform Act have delayed effective dates or
have required extensive rulemaking by regulatory authorities. The upcoming presidential and congressional elections may cause uncertainty
regarding the implementation of the Dodd-Frank Reform Act and other financial reform rulemaking. Given the uncertainty associated with
the manner in which and whether the provisions of the Dodd-Frank Act will be implemented, repealed, amended, or replaced, the full impact
such requirements will have on our business, results of operations or financial condition is unclear. The changes resulting from the
Dodd-Frank Act or any changes to the regulations already implemented thereunder may require us to invest significant management attention
and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements. Failure to comply
with any such laws, regulations or principles, or changes thereto, may negatively impact our business, results of operations or financial
condition. While we cannot predict what effect any changes in the laws or regulations or their interpretations would have on us as a
result of recent financial reform legislation, these changes could be materially adverse to us and our stockholders. We
cannot predict how tax reform legislation will affect us, our investments, or our stockholders, and any such legislation could adversely
affect our business. Legislative
or other actions relating to taxes could have a negative effect on us, our investments, or our stockholders. The rules dealing with U.S.
federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department
of the Treasury. We cannot predict with certainty how any changes in the tax laws might affect us, our stockholders, or our portfolio
investments. New legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation
could significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences
to us and our stockholders of such qualification, or could have other adverse consequences. Stockholders are urged to consult with their
tax advisors regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment
in our securities. Legislation
that became effective in 2018 may allow the Company to incur additional leverage, which could increase the risk of investing in the Company. The
1940 Act generally prohibits the Company from incurring indebtedness unless immediately after such borrowing we have an asset coverage
for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets). However, in March 2018,
the SBCA was signed into law, which included various changes to regulations under the federal securities laws that impact BDCs. The SBCA
included changes to the 1940 Act to allow BDCs to decrease their asset coverage requirement from 200% to 150%, if certain requirements
are met. Under the 1940 Act, the Company is allowed to increase its leverage capacity if our stockholders representing at least a majority
of the votes cast, when a quorum is present, approve a proposal to do so. If we receive stockholder approval, we would be allowed to
increase our leverage capacity on the first day after such approval. Alternatively, the 1940 Acts allows the majority of our independent
directors to approve an increase in our leverage capacity, and such approval would become effective after the one-year anniversary of
such proposal. In either case, we would be required to make certain disclosures on our website and in SEC filings regarding, among other
things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage. Leverage
is generally considered a speculative investment technique and increases the risk of investing in our securities. Leverage magnifies
the potential for loss on investments in our indebtedness and on invested equity capital. As we use leverage to partially finance our
investments, our stockholders will experience increased risks of investing in our securities. If the value of our assets increases, then
leveraging would cause the NAV attributable to our common stock to increase more sharply than it would have had we not leveraged. Conversely,
if the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have had we not leveraged
our business. Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment
income to increase more than it would without the leverage, while any decrease in our income would cause net investment income to decline
more sharply than it would have had we not borrowed. Such a decline could negatively affect the Company’s ability to pay common
stock dividends, scheduled debt payments or other payments related to our securities. If
we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC, which would have a material
adverse effect on our business, financial condition and results of operations. As
a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such
acquisition, at least 70% of our total assets are qualifying assets. See “Regulation”. Our intent is that a substantial portion
of the investments that we acquire will constitute qualifying assets. However, we may be precluded from investing in what we believe
are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient
portion of our assets in qualifying assets, we could be found to be in violation of the 1940 Act provisions applicable to BDCs and possibly
lose our tax treatment as a BDC, which would have a material adverse effect on our business, financial condition and results of operations. We
would become subject to corporate-level U.S. federal income tax if we are unable to maintain our qualification as a RIC under Subchapter
M of the Code or satisfy RIC distribution requirements. We
have elected, and intend to qualify annually, to be treated as a RIC under Subchapter M of the Code. No assurance can be given that we
will be able to maintain our qualification as a RIC. To maintain RIC tax treatment under the Code, we must meet the following annual
distribution, income source and asset diversification requirements.
● The annual distribution
requirement for a RIC is satisfied if we timely distribute to our stockholders on an annual basis at least 90% of our net ordinary
income and realized short-term capital gains in excess of realized net long-term capital losses. Depending on the level of taxable
income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next
year and pay a 4% U.S. federal excise tax on such income. Any such carryover taxable income must be distributed through a dividend
declared prior to filing the final tax return related to the year that generated such taxable income.
● The source of income requirement
is satisfied if we obtain at least 90% of our gross income for each taxable year from dividends, interest, payments with respect
to certain securities loans, gains from the sale or other disposition of stock or other securities or foreign currencies or other
income derived with respect to our business of investing in such stock, securities or currencies and net income derived from an interest
in a “qualified publicly traded partnership” (as defined in the Code).
● The asset diversification
requirement is satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. To
satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S Government securities,
securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value
of our assets or more than 10% of the outstanding voting securities of the issuer (which for these purposes includes the equity securities
of a “qualified publicly traded partnership”). In addition, no more than 25% of the value of our assets can be invested
in the securities, other than U.S Government securities or securities of other RICs, (1) of one issuer (2) of two or more issuers
that are controlled, as determined under applicable tax rules, by us and that are engaged in the same or similar or related trades
or businesses or (3) of one or more “qualified publicly traded partnerships”. If
we fail to qualify for RIC tax treatment for any reason or are subject to corporate-level U.S. federal income tax, the resulting corporate-level
taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.
In addition, to the extent we had unrealized gains, we would have to establish deferred tax liabilities for taxes, which would reduce
our NAV accordingly. In addition, our stockholders would lose the tax credit realized if we, as a RIC, decide to retain the net realized
capital gain and make deemed distributions of net realized capital gains, and pay taxes on behalf of our stockholders at the end of the
tax year. The loss of this pass-through tax treatment could have a material adverse effect on the total return of an investment in our
common stock. | | | |
| Risks Relating to an Investment in our Securities [Member] | | | | |
| General Description of Registrant [Abstract] | | | | |
| Risk [Text Block] | Risks
Relating to an Investment in Our Securities Investing
in our securities may involve an above average degree of risk. The
investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options
and a higher risk of volatility or loss of principal. Our investments in portfolio companies involve higher levels of risk and, therefore,
an investment in our securities may not be suitable for someone with lower risk tolerance. Shares
of closed-end investment companies, including business development companies, may, at times, trade at a discount to their NAV and the
Company’s shares have not traded at or above NAV since the first quarter of 2015. Shares
of closed-end investment companies, including business development companies, may, at times, trade at a discount from NAV. This characteristic
of closed-end investment companies and business development companies is separate and distinct from the risk that our NAV per share may
decline. Our common stock has not traded at or above NAV since the first quarter of 2015, and we cannot predict whether our common stock
will trade at, above or below NAV in the future. The
market price of our common stock fluctuates. The
market price and liquidity of the market for shares of our common stock fluctuates and may be significantly affected by numerous factors,
some of which are beyond our control and may not be directly related to our operating performance. These
factors include:
● significant volatility
in the market price and trading volume of securities of business development companies or other companies in our sector, which are
not necessarily related to the operating performance of the companies;
● changes in regulatory policies,
accounting pronouncements or tax guidelines, particularly with respect to BDCs or RICs;
● loss of our qualification
as a RIC or BDC;
● changes in earnings or variations in operating results;
● changes in the value of our portfolio of investments;
● changes in accounting guidelines governing valuation
of our investments;
● any shortfall in revenue or net income or any increase
in losses from levels expected by investors or securities analysts;
● departure of our key personnel;
● operating performance of
companies comparable to us;
● general economic trends
and other external factors; and
● loss of a major funding
source. Certain
provisions of the Delaware General Corporation Law and our certificate of incorporation and bylaws could deter takeover attempts and
have an adverse impact on the price of our common stock. The
Delaware General Corporation Law, our certificate of incorporation and our bylaws contain provisions that may have the effect of discouraging
a third party from making an acquisition proposal for us. These anti-takeover provisions may inhibit a change in control in circumstances
that could give the holders of our common stock the opportunity to realize a premium over the market price of our common stock. The
NAV per share of our common stock may be diluted if we sell shares of our common stock in one or more offerings at prices below the then
current NAV per share of our common stock or securities to subscribe for or convertible into shares of our common stock. While
we currently do not have the requisite stockholder approval to sell shares of our common stock at a price or prices below our then current
NAV per share, we may seek such approval in the future. In addition, at our 2012 Annual Meeting of Stockholders, we received approval
from our stockholders to authorize the Company, with the approval of our board of directors, to issue securities to, subscribe to, convert
to, or purchase shares of the Company’s common stock in one or more offerings, subject to certain conditions as set forth in the
proxy statement. Such authorization has no expiration. Any
decision to sell shares of our common stock below its then current NAV per share or issue securities to subscribe for or convertible
into shares of our common stock would be subject to the determination by our board of directors that such issuance is in our and our
stockholders’ best interests. If
we were to sell shares of our common stock below its then current NAV per share, such sales would result in an immediate dilution to
the NAV per share of our common stock. This dilution would occur as a result of the sale of shares at a price below the then current
NAV per share of our common stock and a proportionately greater decrease in the stockholders’ interest in our earnings and assets
and their voting interest in us than the increase in our assets resulting from such issuance. Because the number of shares of common
stock that could be so issued and the timing of any issuance is not currently known, the actual dilutive effect cannot be predicted. If
we issue warrants or securities to subscribe for or convertible into shares of our common stock, subject to certain limitations, the
exercise or conversion price per share could be less than NAV per share at the time of exercise or conversion (including through the
operation of anti-dilution protections). Because we would incur expenses in connection with any issuance of such securities, such issuance
could result in a dilution of the NAV per share at the time of exercise or conversion. This dilution would include reduction in NAV per
share as a result of the proportionately greater decrease in the stockholders’ interest in our earnings and assets and their voting
interest than the increase in our assets resulting from such issuance. Further,
if our current stockholders do not purchase any shares to maintain their percentage interest, regardless of whether such offering is
above or below the then current NAV per share, their voting power will be diluted. For example, if we sell an additional 10% of our shares
of common stock at a 5% discount from NAV, a stockholder who does not participate in that offering for its proportionate interest will
suffer NAV dilution of up to 0.5% or $5 per $1,000 of NAV. The
terms of the Credit Facility place restrictions on our and/or our subsidiaries activities. The
terms of the Credit Facility place restrictions on our and/or our subsidiaries’ ability to, among other things, issue securities
or otherwise incur additional indebtedness or other obligations, and in certain cases we may need the approval of WoodForest, as the
Administrative Agent, in order to incur further indebtedness. In addition, the Credit Facility contains customary events of default for
credit facilities of this type, including (without limitation): nonpayment of principal, interest, fees or other amounts after a stated
grace period; inaccuracy of material representations and warranties; change of control; violations of covenants, subject in certain cases
to stated cure periods; and certain bankruptcies and liquidations. If an event of default occurs and is continuing, the Company may be
required to repay all amounts outstanding under the Credit Facility, which would adversely affect our liquidity position and, in turn,
could force us to dispose of investments at inopportune times at reduced prices. Repayment could also adversely affect our ability to
implement our investment strategy and achieve our investment objectives. If
we issue preferred stock, the NAV and market value of our common stock may become more volatile. If
we issue preferred stock, we cannot assure you that such issuance would result in a higher yield or return to the holders of our common
stock. The issuance of preferred stock would likely cause the NAV and market value of our common stock to become more volatile. If the
dividend rate on the preferred stock were to approach the net rate of return on our investment portfolio, the benefit of leverage to
the holders of our common stock would be reduced. If the dividend rate on the preferred stock were to exceed the net rate of return on
our portfolio, the leverage would result in a lower rate of return to the holders of our common stock than if we had not issued preferred
stock. Any decline in the NAV of our investments would be borne entirely by the holders of our common stock. Therefore, if the market
value of our portfolio were to decline, the leverage would result in a greater decrease in NAV to the holders of our common stock than
if we were not leveraged through the issuance of preferred stock. This greater NAV decrease would also tend to cause a greater decline
in the market price for our common stock. We might be in danger of failing to maintain the required asset coverage of the preferred stock
or of losing our ratings on the preferred stock or, in an extreme case, our current investment income might not be sufficient to meet
the dividend requirements on the preferred stock. In order to counteract such an event, we might need to liquidate investments in order
to fund a redemption of some or all of the preferred stock. In addition, we would pay (and the holders of our common stock would bear)
all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, including higher advisory fees if our
total return exceeds the dividend rate on the preferred stock. Holders of preferred stock may have different interests than holders of
our common stock and may at times have disproportionate influence over our affairs. Holders
of any preferred stock we might issue would have the right to elect members of the board of directors and class voting rights on certain
matters. Holders
of any preferred stock we might issue, voting separately as a single class, would have the right to elect two members of the board of
directors at all times and in the event dividends become two full years in arrears, would have the right to elect a majority of our directors
until such arrearage is completely eliminated. In addition, preferred stockholders would have class voting rights on certain matters,
including changes in fundamental investment restrictions and conversion to open-end status, and accordingly would be able to veto any
such changes. Restrictions imposed on the declarations and payment of dividends or other distributions to the holders of our common stock
and preferred stock, both by the 1940 Act and by requirements imposed by rating agencies or the terms of any credit facility to which
the Company is a party, might impair our ability to maintain our qualification as a RIC for U.S. federal income tax purposes. While we
would intend to redeem our preferred stock to the extent necessary to enable us to distribute our income as required to maintain our
qualification as a RIC, there can be no assurance that such actions could be effected in time to meet the tax requirements. Our
business and operations could be negatively affected if we become subject to any securities class actions and derivative lawsuits, which
could cause us to incur significant expense, hinder execution of investment strategy and impact our stock price. In
the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has
often been brought against that company. Stockholder activism, which could take many forms or arise in a variety of situations, has been
increasing in the BDC space recently. Securities litigation and stockholder activism, including potential proxy contests, could result
in substantial costs and divert management’s and our board of directors’ attention and resources from our business. Additionally,
such securities litigation and stockholder activism could give rise to perceived uncertainties as to our future, adversely affect our
relationships with service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to
incur significant legal fees and other expenses related to any securities litigation and activist stockholder matters. Further, our stock
price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities
litigation and stockholder activism. | | | |
