Interest Income Recognition
Interest income, adjusted for amortization of premium, acquisition costs, and amendment fees and the accretion of original issue discount (“OID”), are recorded on an accrual basis to the extent that such amounts are expected to be collected. Generally, when a loan becomes 120 days or more past due, or if the Company’s qualitative assessment indicates that the debtor is unable to service its debt or other obligations, the Company will place the loan on non-accrual status and cease recognizing interest income on that loan for financial reporting purposes until the borrower has demonstrated the ability and intent to pay contractual amounts due. However, the Company will remain contractually entitled to this interest. Interest payments received on non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current or, due to a restructuring, the interest income is deemed to be collectible. As of June 30, 2024, the Company held one investment on non-accrual, which represented 0.92% and 0.53% of the Company’s total portfolio at cost and fair market value, respectively. As of December 31, 2023, the Company had no investments on non-accrual.
The Company currently holds loans in the portfolio that contain OID and that contain payment-in-kind (“PIK”) provisions. The Company recognizes OID for loans originally issued at a discount and recognizes the income over the life of the obligation based on an effective yield calculation. PIK interest, computed at the contractual rate specified in a loan agreement, is added to the principal balance of a loan and recorded as income over the life of the obligation. Therefore, the actual collection of PIK income may be deferred until the time of debt principal repayment. To maintain the ability to be taxed as a RIC, the Company may need to pay out of both OID and PIK non-cash income amounts in the form of distributions, even though the Company has not yet collected the cash on either.
As of June 30, 2024 and December 31, 2023, the Company held 261 and 245 investments in loans with OID , respectively. The unamortized balance of OID investments as of June 30, 2024 and December 31, 2023 totaled $5,069,464 and $4,930,002, respectively. For the three and six months ended June 30, 2024, the Company accrued OID income in the amount of $209,198 and $417,283, respectively. For the three and six months ended June 30, 2023, the Company accrued OID income in the amount of $183,859 and $349,489, respectively.
As of June 30, 2024, the Company held 12 investments that had a PIK interest component. As of December 31, 2023, the Company held 7 investments that had a PIK interest component. During the three and six months ended June 30, 2024, the Company accrued PIK income in the amount of $23,066, and $207,149 respectively. During the three and six months ended June 30, 2023, the Company accrued PIK income in the amount of $34,058 and $121,564 respectively.
As of June 30, 2024 and December 31, 2023, the Company held $37,692,055 and $20,940,279 cash and cash equivalents, respectively. For the three and six months ended June 30, 2024, the Company earned $156,767 and $242,627, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations. For the three and six months ended June 30, 2023, the Company earned $61,029 and $125,578, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations.
Other Income Recognition
The Company generally records prepayment fees and amendment fees upon receipt of cash or as soon as the Company becomes aware of the prepayment or amendment.
Dividend income on equity investments is accrued to the extent that such amounts are expected to be collected and if the Company has the option to collect such amounts in cash.
Prepayment fees, amendment fees and dividend income are accrued in other income in the accompanying statements of operations.
For the three and six months ended June 30, 2024, the Company accrued $34,807 and $43,952 of other income, respectively, related to amendment fees. For the three and six months ended June 30, 2023, the Company accrued $8,618 and $71,253 of other income, respectively, related to amendment fees.
