WTI Fund XI's Assets Soar, But Rising Costs Drive Deeper Losses

TL;DR

**WTI Fund XI is aggressively expanding its loan portfolio, but ballooning expenses and a growing proportion of non-qualifying assets are flashing red flags for profitability and regulatory compliance.**

AI Summary

WTI Fund XI, Inc. reported a significant increase in total assets to $46,980,969 as of June 30, 2025, up from $35,774,141 at December 31, 2024, driven by a substantial rise in loans at fair value to $40,866,768 from $23,982,777. However, the company experienced a net investment loss of $961,204 for the six months ended June 30, 2025, a deterioration from the $518,464 loss in the same period of 2024. Total investment income surged to $4,132,480 for the six months ended June 30, 2025, compared to $6,892 in the prior year, primarily due to increased interest on loans. Expenses also dramatically increased, with management fees rising to $3,081,428 from $62,991 and interest expense reaching $1,744,274, up from zero, reflecting increased borrowings under its debt facility to $26,000,000 from $21,000,000. Net assets increased to $18,886,758 from $12,672,487, largely due to $10,000,000 in contributions from its shareholder, WTI Fund XI, LLC. The Fund's non-qualifying assets increased to 26.3% of total assets as of June 30, 2025, up from 19.4% at December 31, 2024, nearing the 30% regulatory limit for BDCs.

Why It Matters

For investors, WTI Fund XI's substantial growth in loan investments and total assets signals an aggressive expansion strategy, potentially offering higher returns but also increased risk. The significant rise in non-qualifying assets to 26.3% is a critical concern, as exceeding the 30% limit could restrict future investment opportunities and impact its BDC status, directly affecting its ability to generate income and distribute capital. The competitive landscape for BDCs is intense, and WTI Fund XI's increased leverage and operational losses, despite higher investment income, suggest challenges in efficiently scaling its operations. Employees and customers of the portfolio companies may see continued access to capital, but the Fund's financial health is paramount for sustained support.

Risk Assessment

Risk Level: high — The risk level is high due to the significant increase in non-qualifying assets to 26.3% of total assets, nearing the 30% regulatory limit under Section 55(a) of the 1940 Act. Additionally, the net investment loss widened to $961,204 for the six months ended June 30, 2025, from $518,464 in the prior year, indicating a deteriorating operational performance despite a surge in investment income.

Analyst Insight

Investors should closely monitor WTI Fund XI's non-qualifying asset ratio and its ability to manage escalating expenses. A deeper dive into the performance of its loan portfolio, particularly the higher-interest loans, is warranted to assess if the increased risk is yielding commensurate returns.

Financial Highlights

debt To Equity

1.49

revenue

$4,132,480

operating Margin

-23.1%

total Assets

$46,980,969

total Debt

$26,000,000

net Income

-$961,204

eps

-$9.61

gross Margin

N/A

cash Position

$3,912,239

revenue Growth

+59,900.0%

Revenue Breakdown

Key Numbers

• $46,980,969 — Total assets as of June 30, 2025 (Increased from $35,774,141 at December 31, 2024)
• $40,866,768 — Loans, at estimated fair value as of June 30, 2025 (Increased from $23,982,777 at December 31, 2024)
• $961,204 — Net investment loss for six months ended June 30, 2025 (Worsened from $518,464 loss in the same period of 2024)
• $4,132,480 — Total investment income for six months ended June 30, 2025 (Significantly increased from $6,892 in the same period of 2024)
• $3,081,428 — Management fees for six months ended June 30, 2025 (Increased from $62,991 in the same period of 2024)
• $1,744,274 — Interest expense for six months ended June 30, 2025 (Increased from $0 in the same period of 2024)
• $26,000,000 — Borrowings under debt facility as of June 30, 2025 (Increased from $21,000,000 at December 31, 2024)
• $18,886,758 — Net assets as of June 30, 2025 (Increased from $12,672,487 at December 31, 2024)
• 26.3% — Non-qualifying assets as a percentage of total assets as of June 30, 2025 (Increased from 19.4% at December 31, 2024, nearing the 30% regulatory limit)
• $10,000,000 — Contributions from shareholder for six months ended June 30, 2025 (Provided capital for operations and investments)

Key Players & Entities

• WTI Fund XI, Inc. (company) — Registrant and BDC
• Westech Investment Advisors LLC (company) — Manager of WTI Fund XI, Inc.
• P10, Inc. (company) — Ultimate parent of Westech Investment Advisors LLC
• WTI Fund XI, LLC (company) — Sole shareholder of WTI Fund XI, Inc.
• California Department of Financial Protection and Innovation (regulator) — Issued finance lender's license to WTI Fund XI, Inc.
• Biolojic Design Ltd. (company) — Biotechnology borrower with senior secured loans
• Innventure LLC (company) — Other Technology borrower with senior secured loans
• Merlyn Mind, Inc. (company) — Software borrower with senior secured loans
• Klar Holdings Limited (company) — Technology Services borrower with senior secured loans
• First American Government Obligations Fund - Class X (company) — Cash equivalent investment

FAQ

Risk Factors

• Increased Leverage and Interest Expense [high — financial]: The Fund has increased its borrowings under its debt facility to $26,000,000 from $21,000,000. This has led to a substantial rise in interest expense to $1,744,274 for the six months ended June 30, 2025, from $0 in the prior year. Higher leverage amplifies both potential gains and losses.
• Proximity to Non-Qualifying Asset Limit [medium — regulatory]: Non-qualifying assets have increased to 26.3% of total assets as of June 30, 2025, up from 19.4% at December 31, 2024. This is nearing the 30% regulatory limit for Business Development Companies (BDCs), which could restrict future investment flexibility.
• Significant Increase in Management Fees [medium — operational]: Management fees have surged to $3,081,428 for the six months ended June 30, 2025, from $62,991 in the comparable period of 2024. This represents a substantial increase in operating costs, impacting net investment income.
• Net Investment Loss Deterioration [high — financial]: The Fund reported a net investment loss of $961,204 for the six months ended June 30, 2025, a significant worsening from a loss of $518,464 in the same period of 2024. This is despite a large increase in investment income.
• Asset Growth Outpacing Income Generation Efficiency [medium — financial]: Total assets grew significantly to $46,980,969, primarily due to a rise in loans. However, the net investment loss indicates that the cost of funding and operations is currently exceeding the income generated by the expanded asset base.

Industry Context

WTI Fund XI, Inc. operates within the Business Development Company (BDC) sector, which typically invests in small and medium-sized private companies. The industry is characterized by its role in providing debt and equity financing to businesses that may not have access to traditional capital markets. BDCs are sensitive to interest rate environments, credit quality of their portfolios, and regulatory changes.

Regulatory Implications

The Fund's increasing percentage of non-qualifying assets (26.3%) is a significant regulatory concern, as it approaches the 30% limit for BDCs. Exceeding this limit could lead to penalties or force divestment of non-qualifying assets, impacting the Fund's investment strategy and profitability.

What Investors Should Do

1. Monitor the trend of non-qualifying assets closely to ensure compliance with the 30% BDC limit.
2. Analyze the drivers of the net investment loss despite increased revenue to assess the sustainability of the current operating model.
3. Evaluate the risk-reward profile of the increased leverage and its impact on future earnings and capital preservation.
4. Assess the management fee structure in light of the significant increase and its impact on net returns.
5. Consider the impact of rising interest expenses on the profitability of the loan portfolio.

Key Dates

• 2025-06-30: End of Q2 2025 reporting period — Key financial data for the first six months of 2025 and the second quarter are reported, showing significant asset growth but also a net investment loss.
• 2025-06-30: Total assets reached $46,980,969 — Represents substantial growth from $35,774,141 at year-end 2024, driven by loan portfolio expansion.
• 2025-06-30: Net investment loss of $961,204 for H1 2025 — Indicates that operating expenses and interest costs are currently outweighing investment income, despite increased revenue.
• 2025-06-30: Borrowings under debt facility at $26,000,000 — Shows increased leverage to fund asset growth, leading to higher interest expenses.
• 2025-06-30: Non-qualifying assets at 26.3% of total assets — Approaching the 30% BDC regulatory limit, posing a potential constraint on future investment strategies.
• 2024-12-31: End of Fiscal Year 2024 — Provides the comparative baseline for asset, liability, and net asset values at the start of the reporting period.

Glossary

Loans, at estimated fair value

Assets representing amounts lent to borrowers, valued at their current market price rather than their original cost. (The primary asset class for WTI Fund XI, Inc., showing significant growth and driving total assets.)

Net investment loss

The amount by which investment income is less than investment expenses over a period. A negative result indicates a loss. (A key performance indicator showing the Fund's operational profitability before considering any realized or unrealized gains/losses on investments.)

Debt facility

A line of credit or loan agreement that allows a company to borrow funds up to a certain limit, often used for working capital or investment purposes. (The source of the Fund's increased borrowings, contributing to higher interest expenses and financial leverage.)

Non-qualifying assets

Assets held by a regulated investment company (like a BDC) that do not meet specific criteria for qualifying investments, potentially subject to regulatory limits. (The increasing proportion of these assets is a regulatory concern for the Fund.)

Capital paid in on shares of capital stock

The total amount of money received by the company from issuing its stock to investors. (Shows the equity contributions from shareholders, which have increased significantly, bolstering the Fund's capital base.)

Year-Over-Year Comparison

Compared to the prior year's comparable period, WTI Fund XI, Inc. has experienced a dramatic increase in total assets, largely driven by a significant expansion of its loan portfolio. Investment income has surged due to this growth, but this has been overshadowed by a substantial rise in expenses, particularly management fees and newly incurred interest expenses from increased borrowings. Consequently, the Fund has moved from a net investment loss to a larger net investment loss, indicating that the cost of funding and operations has outpaced the income generated by the expanded asset base. The proportion of non-qualifying assets has also increased, moving closer to a key regulatory threshold.

Key Financial Figures

• $0.001 — ng as of August 13, 2025 Common Stock, $0.001 par value 100,000 WTI FUND XI, INC.
• $250,000 — Insurance Corporation ("FDIC") limit of $250,000 is uninsured by the FDIC, while all cas

Filing Documents

• wti-20250630.htm (10-Q) — 1341KB
• wtixi10q063025ex311.htm (EX-31.1) — 10KB
• wtixi10q063025ex312.htm (EX-31.2) — 10KB
• wtixi10q063025ex321.htm (EX-32.1) — 4KB
• wtixi10q063025ex322.htm (EX-32.2) — 4KB
• 0001987731-25-000025.txt ( ) — 6187KB
• wti-20250630.xsd (EX-101.SCH) — 43KB
• wti-20250630_cal.xml (EX-101.CAL) — 30KB
• wti-20250630_def.xml (EX-101.DEF) — 172KB
• wti-20250630_lab.xml (EX-101.LAB) — 461KB
• wti-20250630_pre.xml (EX-101.PRE) — 313KB
• wti-20250630_htm.xml (XML) — 1025KB

— FINANCIAL INFORMATION

PART I — FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements Condensed Statements of Assets and Liabilities (Unaudited) As of June 30, 2025 and December 31, 2024 Condensed Statements of Operations (Unaudited) For the three and six months ended June 30, 2025 and 2024 Condensed Statements of Changes in Net Assets (Unaudited) For the three and six months ended June 30, 2025 and 2024 Condensed Statements of Cash Flows (Unaudited) For the six months ended June 30, 2025 and 2024 Condensed Schedules of Investments (Unaudited) As of June 30, 2025 and December 31, 2024 Notes to Condensed Financial Statements (Unaudited)

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Controls and Procedures

Item 4. Controls and Procedures

— OTHER INFORMATION

PART II — OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings

Risk Factors

Item 1A. Risk Factors

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities

Mine Safety Disclosures

Item 4. Mine Safety Disclosures

Other Information

Item 5. Other Information

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements WTI FUND XI, INC. CONDENSED STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) AS OF JUNE 30, 2025 AND DECEMBER 31, 2024 June 30, 2025 December 31, 2024 ASSETS Loans, at estimated fair value (amortized cost of $ 40,866,768 and $ 23,982,777 , respectively) $ 40,866,768 $ 23,982,777 Cash and cash equivalents 3,912,239 9,535,729 Dividend and interest receivables 788,260 495,733 Other assets 1,413,702 1,759,902 Total assets 46,980,969 35,774,141 LIABILITIES Borrowings under debt facility 26,000,000 21,000,000 Accrued management fees 1,533,485 1,655,566 Accounts payable and other accrued liabilities 560,726 446,088 Total liabilities 28,094,211 23,101,654 NET ASSETS $ 18,886,758 $ 12,672,487 Analysis of Net Assets: Capital paid in on shares of capital stock $ 32,325,000 $ 22,325,000 Cumulative return of capital distributions ( 8,734,164 ) ( 5,909,639 ) Total distributable losses ( 4,704,078 ) ( 3,742,874 ) Net assets (equivalent to $ 188.87 and $ 126.72 per share based on 100,000 shares of capital stock outstanding - See Note 5 and Note 11) $ 18,886,758 $ 12,672,487 Commitments & Contingent Liabilities: Unexpired unfunded commitments (See Note 9) $ 17,562,500 $ 17,129,000 See notes to condensed financial statements (unaudited). 3 WTI FUND XI, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2025 AND 2024 For the Three Months Ended June 30, 2025 For the Three Months Ended June 30, 2024* For the Six Months Ended June 30, 2025 For the Six Months Ended June 30, 2024* INVESTMENT INCOME: Interest on loans $ 2,261,659 $ 5,406 $ 3,992,697 $ 5,406 Other income 49,142 1,486 139,783 1,486 Total investment income 2,310,801 6,892 4,132,480 6,892 EXPENSES: Management fees 1,533,485 $ 62,991 $ 3,081,428 $ 62,991 Interest expense 883,477 — 1,744,274 — Banking and professional fees 88,518 92,816 156,015 116,018 Directors' fees 33,750 33,750 67,500 67,500

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