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☑
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended June 30, 2016
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
(State or other Jurisdiction of
Incorporation or Organization)
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46-1396995
(I.R.S. Employer
Identification Number)
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767 Third Avenue, 25
th
Floor
New York, NY 10017
(Address of principal executive offices) (Zip Code)
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(212) 906-3592
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(Registrant's Telephone Number, Including Area Code)
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Large accelerated filer
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¨
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Accelerated filer
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þ
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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(Do not check if a smaller reporting Company)
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Page
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Statements of Assets and Liabilities
as of June 30, 2016 and December 31, 2015
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Statements of Operations
for the three months and six months ended June 30, 2016 and June 30, 2015
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Statements of Changes in Net Assets
for the six months ended June 30, 2016 and June 30, 2015
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Statements of Cash Flows
for the six months ended June 30, 2016 and June 30, 2015
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Schedule of Investments as of
June 30, 2016
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Schedule of Investments in and Advances to Affiliates for the six months ended June 30, 2016
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Schedule of Investments in and Advances to Affiliates for the twelve months ended December 31, 2015
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38
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||
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46
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June 30, 2016
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December 31, 2015
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ASSETS:
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||||
Non-affiliated/non-control investments, at fair value (cost of $133,581,375 at 6/30/16 and $135,198,490 at 12/31/15)
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$
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132,146,918
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$
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135,516,729
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Affiliated investments, at fair value (cost of $15,893,085 at 6/30/16 and $9,031,772 at 12/31/15)
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13,241,057
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7,243,697
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Control investments, at fair value (cost of $909,973 at 6/30/16 and $0 at 12/31/15)
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909,973
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—
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|||
Total investments, at fair value (cost of $150,384,433 at 6/30/16 and $144,230,262 at 12/31/15)
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146,297,948
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142,760,426
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||||
Cash
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155,231
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595,047
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Restricted cash
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2,615,358
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2,474,362
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Interest receivable
|
391,275
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1,112,885
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Accounts receivable – other
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51,524
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304,969
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Deferred offering costs
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954,404
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1,023,246
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Deferred financing costs
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634,702
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748,637
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Other assets
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232,721
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118,287
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Total assets
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$
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151,333,163
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$
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149,137,859
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LIABILITIES:
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Revolving line of credit
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$
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35,484,964
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$
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29,698,293
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Unsecured notes
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27,500,000
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27,500,000
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Accrued interest payable
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486,709
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412,099
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Accounts payable - base management fees
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744,016
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739,517
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Accounts payable - incentive management fees
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318,536
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848,841
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Accounts payable - administrative services expenses
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210,299
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220,872
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Accounts payable and accrued expenses
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346,382
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282,949
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Other liabilities
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11,214
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21,032
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Total liabilities
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65,102,120
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59,723,603
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Commitments and contingencies (Note 8)
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NET ASSETS:
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Common stock, $0.001 par value, 100,000,000 shares authorized, 6,293,298 issued and 6,287,798 outstanding at 6/30/16 and 6,269,669 issued and outstanding at 12/31/15
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6,293
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6,270
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Capital in excess of common stock
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90,254,484
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89,989,686
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Treasury shares at cost, 5,500 and 0 shares at 6/30/16 and 12/31/15, respectively
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(68,911
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)
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—
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Accumulated realized losses on investments
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(2,230,690
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)
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(1,066,131
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)
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Net unrealized depreciation on investments
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(4,086,485
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)
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(1,469,836
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)
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Undistributed net investment income
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2,356,352
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1,954,267
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Total net assets
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86,231,043
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89,414,256
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Total liabilities and net assets
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$
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151,333,163
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$
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149,137,859
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Common stock issued and outstanding
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6,287,798
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6,269,669
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Net asset value per common share
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$
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13.71
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$
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14.26
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Three Months Ended June 30,
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Six Months Ended June 30,
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||||||||||||
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2016
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2015
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2016
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2015
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||||||||
Investment Income:
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||||||||
Interest:
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||||||||
Cash - non-affiliated/non-control investments
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$
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3,552,174
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$
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3,828,387
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$
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8,107,925
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$
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7,168,423
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Cash - affiliated investments
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332,771
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91,000
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574,736
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181,000
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Cash - control investments
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31,155
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—
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31,155
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—
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PIK - non-affiliated/non-control investments
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387,391
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314,992
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541,216
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621,118
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PIK - control investments
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9,973
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—
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9,973
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—
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Amortization of fees, discounts and premiums, net
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366,408
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425,515
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863,516
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787,059
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||||
Total interest income
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4,679,872
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4,659,894
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10,128,521
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8,757,600
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Other income
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48,889
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9,118
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73,586
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23,701
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Total investment income
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4,728,761
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4,669,012
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10,202,107
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8,781,301
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Expenses:
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Interest expense – revolving line of credit
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342,754
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176,968
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597,332
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300,573
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|
||||
Interest expense - unused line of credit
|
23,815
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|
77,726
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71,535
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|
162,311
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|
||||
Interest expense - deferred financing costs
|
66,935
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66,057
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|
132,992
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|
132,114
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|
||||
Interest expense - unsecured notes
|
481,251
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|
481,251
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962,502
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|
823,474
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|
||||
Interest expense - deferred offering costs
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48,721
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45,007
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|
96,485
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|
74,520
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|
||||
Total interest expense
|
963,476
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|
847,009
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1,860,846
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1,492,992
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||||||||
Professional fees
|
195,896
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|
205,949
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|
377,790
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|
|
387,531
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|
||||
General and administrative
|
227,069
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|
227,645
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|
445,546
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|
|
416,404
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|
||||
Base management fees
|
744,016
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|
|
654,905
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1,481,831
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|
1,264,237
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|
||||
Incentive management fees
|
318,536
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|
|
543,946
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|
961,387
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|
|
868,711
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|
||||
Administrative services expense
|
210,299
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|
|
173,931
|
|
|
431,218
|
|
|
323,931
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|
||||
Total expenses
|
2,659,292
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|
|
2,653,385
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|
|
5,558,618
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|
|
4,753,806
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|
||||
Net Investment Income, before taxes
|
2,069,469
|
|
|
2,015,627
|
|
|
4,643,489
|
|
|
4,027,495
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|
||||
Excise tax
|
—
|
|
|
35,864
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|
|
(2,615
|
)
|
|
35,864
|
|
||||
Net Investment Income, after taxes
|
2,069,469
|
|
|
2,051,491
|
|
|
4,640,874
|
|
|
4,063,359
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|
||||
|
|
|
|
|
|
|
|
||||||||
Net realized gains (losses):
|
|
|
|
|
|
|
|
||||||||
Non-affiliated / Non-control investments
|
55,226
|
|
|
(674,880
|
)
|
|
(22,296
|
)
|
|
(659,061
|
)
|
||||
Affiliated investments
|
—
|
|
|
—
|
|
|
(1,142,263
|
)
|
|
—
|
|
||||
Net realized gains (losses)
|
55,226
|
|
|
(674,880
|
)
|
|
(1,164,559
|
)
|
|
(659,061
|
)
|
||||
Net change in unrealized (depreciation) appreciation
|
(1,132,027
|
)
|
|
1,814,698
|
|
|
(2,616,649
|
)
|
|
70,541
|
|
||||
Total net unrealized and realized (losses) gains
|
(1,076,801
|
)
|
|
1,139,818
|
|
|
(3,781,208
|
)
|
|
(588,520
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Net increase in net assets resulting from operations
|
$
|
992,668
|
|
|
$
|
3,191,309
|
|
|
$
|
859,666
|
|
|
$
|
3,474,839
|
|
|
|
|
|
|
|
|
|
||||||||
Net investment income per share
|
|
$0.33
|
|
|
|
$0.33
|
|
|
|
$0.74
|
|
|
|
$0.65
|
|
Net increase in net assets resulting from operations per share
|
|
$0.16
|
|
|
|
$0.51
|
|
|
|
$0.14
|
|
|
|
$0.56
|
|
Weighted average shares outstanding (basic and diluted)
|
6,286,014
|
|
|
6,248,539
|
|
|
6,280,428
|
|
|
6,238,844
|
|
||||
Dividends paid per common share
|
|
$0.34
|
|
|
|
$0.34
|
|
|
|
$0.68
|
|
|
|
$0.68
|
|
|
|
|
Six Months Ended
June 30, |
||||||
|
2016
|
|
2015
|
||||
|
|
|
|
||||
Increase in net assets from operations:
|
|
|
|
||||
Net investment income
|
$
|
4,640,874
|
|
|
$
|
4,063,359
|
|
Net realized losses on investments
|
(1,164,559
|
)
|
|
(659,061
|
)
|
||
Net change in unrealized (depreciation) appreciation on investments
|
(2,616,649
|
)
|
|
70,541
|
|
||
Net increase in net assets resulting from operations
|
859,666
|
|
|
3,474,839
|
|
||
|
|
|
|
||||
Distributions to shareholders (1):
|
|
|
|
||||
Distributions from net investment income
|
(4,238,789
|
)
|
|
(4,210,783
|
)
|
||
Decrease in net assets resulting from shareholder distributions
|
(4,238,789
|
)
|
|
(4,210,783
|
)
|
||
|
|
|
|
||||
Capital share transactions:
|
|
|
|
||||
Reinvestment of dividends (2)
|
264,821
|
|
|
376,804
|
|
||
Share repurchases
|
(68,911
|
)
|
|
—
|
|
||
Net increase in net assets from capital share transactions
|
195,910
|
|
|
376,804
|
|
||
|
|
|
|
||||
|
|
|
|
||||
Total decrease in net assets
|
(3,183,213
|
)
|
|
(359,140
|
)
|
||
Net assets at beginning of period
|
89,414,256
|
|
|
90,872,315
|
|
||
|
|
|
|
||||
Net assets at end of period
|
$
|
86,231,043
|
|
|
$
|
90,513,175
|
|
|
|
|
|
||||
Capital share activity (common shares):
|
|
|
|
||||
Shares issued from reinvestment of dividends
|
23,629
|
|
|
30,537
|
|
||
Shares repurchased
|
(5,500
|
)
|
|
—
|
|
||
Net increase in capital share activity
|
18,129
|
|
|
30,537
|
|
||
|
|
|
|
(1
|
)
|
Net investment income exceeded distributions for the six months ended June 30, 2016 in the amount of $402,085. Distributions for the six months ended June 30, 2015 were in excess of net investment income in the amount of $147,424. See Dividends and Distributions Policy in Note 2.
|
(2
|
)
|
Net of par value of shares issued of $24 and $30 and funds received for fractional shares of $46 and $24 for the six months ended June 30, 2016 and 2015, respectively.
|
|
Six Months Ended June 30,
|
|||||||
|
2016
|
|
2015
|
|
||||
|
|
|
|
|
||||
Cash flows from operating activities:
|
|
|
|
|
||||
Net (decrease) increase in net assets resulting from operations
|
$
|
859,666
|
|
|
$
|
3,474,839
|
|
|
Adjustments to reconcile net increase in net assets resulting from operations to net cash used by operating activities:
|
|
|
|
|
||||
Paid in kind income
|
(551,189
|
)
|
|
(690,968
|
)
|
|
||
Paid in kind income collected
|
436,775
|
|
|
69,850
|
|
|
||
Net realized losses on investments
|
1,164,559
|
|
|
659,061
|
|
|
||
Net change in unrealized depreciation (appreciation) of investments
|
2,616,649
|
|
|
(70,541
|
)
|
|
||
Amortization of fees, discounts and premiums, net
|
(863,516
|
)
|
|
(787,059
|
)
|
|
||
Amortization of deferred financing costs
|
132,992
|
|
|
132,114
|
|
|
||
Amortization of deferred offering costs
|
96,485
|
|
|
74,520
|
|
|
||
Purchase of investments (net of loan origination and other fees)
|
(23,189,202
|
)
|
|
(18,855,898
|
)
|
|
||
Proceeds from principal payments
|
16,839,713
|
|
|
6,573,543
|
|
|
||
Changes to operating assets and liabilities
|
|
|
|
|
||||
Decrease (increase) in interest receivable
|
721,610
|
|
|
(368,793
|
)
|
|
||
Decrease (increase) in accounts receivable - other and other assets (1)
|
147,708
|
|
|
(293,251
|
)
|
|
||
Increase in accrued interest payable
|
74,610
|
|
|
390,843
|
|
|
||
Decrease in accounts payable and other liabilities
|
(482,764
|
)
|
|
(1,237,852
|
)
|
|
||
|
|
|
|
|
||||
Net cash used in operating activities
|
(1,995,904
|
)
|
|
(10,929,592
|
)
|
|
||
|
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
|
||||
Borrowings on revolving credit facility
|
16,131,375
|
|
|
18,200,000
|
|
|
||
Repayment of borrowings on revolving credit facility
|
(10,344,704
|
)
|
|
(29,477,504
|
)
|
|
||
Proceeds from the issuance of unsecured notes
|
—
|
|
|
27,500,000
|
|
|
||
Offering expenses
|
(46,699
|
)
|
|
(1,038,832
|
)
|
|
||
Proceeds from the issuance of common stock and common units
|
46
|
|
|
17
|
|
|
||
Repurchased shares (held in Treasury Stock)
|
(68,911
|
)
|
|
—
|
|
|
||
Distributions to equity holders (net of stock issued under dividend reinvestment plan of $264,765 and $376,780, respectively)
|
(3,974,023
|
)
|
|
(3,834,003
|
)
|
|
||
|
|
|
|
|
||||
Net cash provided by financing activities
|
1,697,084
|
|
|
11,349,678
|
|
|
||
|
|
|
|
|
||||
Net (decrease) increase in cash during the period
|
(298,820
|
)
|
|
420,086
|
|
|
||
|
|
|
|
|
||||
Cash at beginning of period
|
3,069,409
|
|
|
2,171,771
|
|
|
||
|
|
|
|
|
||||
Cash at end of period
|
$
|
2,770,589
|
|
|
$
|
2,591,857
|
|
|
|
|
|
|
|
||||
Non-cash operating activities:
|
|
|
|
|
||||
Amendment fees (1)
|
(66,303
|
)
|
|
59,433
|
|
|
||
|
|
|
|
|
||||
Non-cash financing activities:
|
|
|
|
|
||||
Value of shares issued in connection with dividend reinvestment plan
|
$
|
264,765
|
|
|
$
|
376,780
|
|
|
|
|
|
|
|
||||
Supplemental disclosures of cash flow information:
|
|
|
|
|
||||
Cash paid during the period for interest
|
$
|
1,556,755
|
|
|
$
|
895,515
|
|
|
Portfolio Company
|
|
|
Investment (1) (2)
|
|
Origination Date
|
Outstanding Principal
|
Cost (3)
|
Fair Value
|
|||||
|
|
|
|
|
|
||||||||
Non-Control / Non-Affiliate Investments
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|||||
Aerospace & Defense
|
|
|
|
|
|
|
|
|
|||||
Bridgewater Engine Ownership III, LLC
|
1.4%
|
*
|
Senior Secured Term Loan, due 07/05/2019
|
|
10/03/14
|
1,179,889
|
|
1,163,972
|
|
1,179,889
|
|
||
|
|
|
(14.00%; the greater of 14.00% and LIBOR +8.50%)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Residual Value
|
(4
|
)
|
10/03/14
|
—
|
|
8,699
|
|
27,000
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Regional Engine Leasing, LLC
|
4.8%
|
*
|
Senior Secured Term Loan, due 3/31/2020
|
|
03/31/15
|
4,078,649
|
|
3,964,676
|
|
4,030,796
|
|
||
|
|
|
(11.00%; the greater of 11.00% or LIBOR +4.50%)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Residual Value
|
(4
|
)
|
03/31/15
|
—
|
|
102,421
|
|
141,751
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Automotive
|
|
|
|
|
|
|
|
|
|||||
Fox Rent A Car, Inc.
|
10.9%
|
*
|
Junior Secured Term Loan, due 10/31/2019
|
(13
|
)
|
10/31/14
|
10,000,000
|
|
9,922,377
|
|
9,438,987
|
|
|
|
|
|
(15.46%; LIBOR +12.00% plus 3.00% default interest)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Banking, Finance, Insurance and Real Estate
|
|
|
|
|
|
|
|
|
|||||
Shinnecock CLO 2006-1, Ltd.
|
1.6%
|
*
|
4,200,000 Subordinated Notes, due 07/15/2018
|
(12
|
)
|
03/06/14
|
—
|
|
1,503,129
|
|
1,396,204
|
|
|
|
|
|
(14.9% effective yield)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
WBL SPE I, LLC
|
7.5%
|
*
|
Senior Secured Term Loan, due 02/28/2017
|
|
09/30/13
|
6,500,000
|
|
6,492,757
|
|
6,500,000
|
|
||
|
|
|
(13.00% Cash)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
WBL SPE II, LLC
|
8.2%
|
*
|
Senior Secured Term Loan, due 09/30/2017
|
|
09/30/14
|
7,113,955
|
|
7,024,146
|
|
7,113,955
|
|
||
|
|
|
(14.50% Cash)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
World Business Lenders, LLC
|
0.3%
|
*
|
49,209 Class B Common Equity Units
|
(10
|
)
|
12/23/13
|
—
|
|
200,000
|
|
252,256
|
|
|
|
|
|
(0.31% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Beverage, Food & Tobacco
|
|
|
|
|
|
|
|
|
|||||
Flavors Holdings, Inc.
|
4.4%
|
*
|
Junior Secured Term Loan, due 10/4/2021
|
|
10/07/14
|
4,000,000
|
|
3,872,254
|
|
3,774,000
|
|
||
|
|
|
(11.00%; LIBOR +10.00% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
North Atlantic Trading Company, Inc.
|
4.3%
|
*
|
Junior Secured Term Loan, due 07/13/2020
|
|
01/13/14
|
3,750,000
|
|
3,731,507
|
|
3,733,594
|
|
||
|
|
|
(11.50%; LIBOR +10.25% with 1.25% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Yucatan Foods, L.P.
|
12.5%
|
*
|
Junior Secured Term Loan A, due 03/29/2021
|
|
03/29/16
|
8,339,197
|
|
8,181,854
|
|
8,181,854
|
|
||
|
|
|
(14.50%; 8.00% cash/6.50% PIK)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
Portfolio Company
|
|
|
Investment (1) (2)
|
|
Origination Date
|
Outstanding Principal
|
Cost (3)
|
Fair Value
|
|||||
|
|
|
|
|
|
||||||||
|
|
|
Junior Secured Term Loan B, due 03/29/2021
|
|
03/29/16
|
2,667,908
|
|
2,617,913
|
|
2,617,913
|
|
||
|
|
|
(10.00% PIK; convertible into 5.80% of fully diluted common equity)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
Capital Equipment
|
|
|
|
|
|
|
|
|
|||||
Douglas Machines Corp.
|
5.1%
|
*
|
Junior Secured Term Loan, due 12/31/2018
|
(9
|
)
|
05/07/14
|
4,252,633
|
|
4,170,593
|
|
4,252,633
|
|
|
|
|
|
(12.50% Cash)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Warrants to purchase 204 Shares of Common Stock
|
|
04/06/12
|
—
|
|
12,500
|
|
158,663
|
|
||
|
|
|
(2.00% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Lanco Acquisition, LLC
|
3.8%
|
*
|
Senior Secured Term Loan A, due 06/12/2018
|
|
06/13/14
|
350,500
|
|
345,256
|
|
350,500
|
|
||
|
|
|
(11.50%; LIBOR +11.00% with 0.50% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Senior Secured Term Loan B, due 03/12/2019
|
|
06/13/14
|
2,417,150
|
|
2,362,515
|
|
2,416,000
|
|
||
|
|
|
(15.00%; 12.50% Cash/2.50% PIK)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Revolving Line of Credit, 06/12/2017
|
(6
|
)
|
06/13/14
|
250,000
|
|
250,000
|
|
250,000
|
|
|
|
|
|
(8.50%; LIBOR +8.00% with 0.50% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Warrants to purchase 1,364 Common Equity Units
|
|
06/13/14
|
—
|
|
42,000
|
|
273,700
|
|
||
|
|
|
(12.00% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Chemicals, Plastics & Rubber
|
|
|
|
|
|
|
|
|
|||||
CRS Reprocessing, LLC
|
7.2%
|
*
|
Junior Secured Term Loan, due 03/30/2017
|
(5
|
)
|
05/27/15
|
7,046,769
|
|
6,598,278
|
|
6,183,871
|
|
|
|
|
|
(10.00%; 5.00% Cash / 5.00% PIK)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Consumer Goods - Non-Durable
|
|
|
|
|
|
|
|
|
|||||
Atrium Innovations, Inc.
|
1.1%
|
*
|
Senior Secured Term Loan, due 02/16/2021
|
|
01/29/14
|
977,500
|
|
977,928
|
|
951,841
|
|
||
|
|
|
(4.25%; LIBOR +3.25% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Bradford Soap International, Inc.
|
5.2%
|
*
|
Junior Secured Term Loan, due 10/31/2019
|
|
08/05/15
|
4,500,000
|
|
4,426,803
|
|
4,500,000
|
|
||
|
|
|
(9.72%; LIBOR + 9.25%)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
PD Products, LLC
|
5.1%
|
*
|
Senior Secured Term Loan, due 10/04/2018
|
|
10/04/13
|
4,410,191
|
|
4,328,165
|
|
4,410,191
|
|
||
|
|
|
(12.00%; LIBOR +10.50% with 1.50% LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
High Tech Industries
|
|
|
|
|
|
|
|
|
|||||
Applied Systems, Inc.
|
0.6%
|
*
|
Junior Secured Term Loan, due 01/24/2022
|
|
01/15/14
|
484,788
|
|
481,957
|
|
483,171
|
|
||
|
|
|
(7.50%; LIBOR + 6.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
GK Holdings, Inc. (Global Knowledge)
|
3.4%
|
*
|
Junior Secured Term Loan, due 1/20/2022
|
|
01/30/15
|
3,000,000
|
|
2,948,763
|
|
2,922,000
|
|
||
|
|
|
(10.50%; LIBOR +9.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
Portfolio Company
|
|
|
Investment (1) (2)
|
|
Origination Date
|
Outstanding Principal
|
Cost (3)
|
Fair Value
|
|||||
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|||||
Mercury Network, LLC
|
2.3%
|
*
|
Senior Secured Term Loan, due 04/24/2020
|
|
05/12/15
|
1,891,304
|
|
1,860,426
|
|
1,843,500
|
|
||
|
|
|
(9.75%; LIBOR +8.75% with 1.00% LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
86,957 Class A Common Equity Units
|
|
05/12/15
|
—
|
|
86,957
|
|
104,000
|
|
||
|
|
|
(0.59% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Optimal Blue, LLC
|
0.9%
|
*
|
100,000 Class A Common Equity Units
|
|
12/18/13
|
—
|
|
100,000
|
|
783,628
|
|
||
|
|
|
(0.38% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Media: Broadcasting & Subscription
|
|
|
|
|
|
|
|
|
|||||
Chemical Information Services, LLC
|
5.0%
|
*
|
Senior Secured Term Loan, due 08/28/2019
|
|
08/28/15
|
4,270,765
|
|
4,231,893
|
|
4,270,765
|
|
||
|
|
|
(12.63%; LIBOR +12.00% with no LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Revolving Line of Credit, due 08/28/2018
|
(6
|
)
|
08/28/15
|
—
|
|
—
|
|
—
|
|
|
|
|
|
(12.63%; LIBOR +12.00% with no LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
Multicultural Radio Broadcasting, Inc.
|
5.6%
|
*
|
Senior Secured Term Loan (Last Out), due 06/27/2019
|
|
09/10/14
|
4,950,050
|
|
4,950,050
|
|
4,835,000
|
|
||
|
|
|
(11.50%; LIBOR +10.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Media: Advertising, Printing & Publishing
|
|
|
|
|
|
|
|
|
|||||
Brite Media LLC
|
6.9%
|
*
|
Senior Secured Term Loan, due 04/24/2019
|
|
04/24/14
|
5,263,658
|
|
5,211,684
|
|
5,230,000
|
|
||
|
|
|
(12.50%; LIBOR +11.75% with 0.75% LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Revolving Line of Credit, due 04/24/2018
|
|
04/24/14
|
666,667
|
|
666,667
|
|
660,000
|
|
||
|
|
|
(12.50%; LIBOR +11.75% with 0.75% LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
100 Class A Common Equity Units
|
|
04/24/14
|
—
|
|
100,000
|
|
41,000
|
|
||
|
|
|
(1.08% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Metals & Mining
|
|
|
|
|
|
|
|
|
|||||
Northeast Metal Works LLC
|
15.0%
|
*
|
Senior Secured Term Loan, due 12/29/2017
|
|
09/29/14
|
11,461,245
|
|
11,559,384
|
|
11,735,000
|
|
||
|
|
|
(14.47%; LIBOR +14.00% with 0.20% LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Revolving Line of Credit, due 12/29/17
|
(6
|
)
|
09/29/14
|
1,175,000
|
|
1,175,000
|
|
1,175,000
|
|
|
|
|
|
(14.47%; LIBOR +14.00% with 0.20% LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
Retailer
|
|
|
|
|
|
|
|
|
|||||
CP Holding Co., Inc. (Choice Pet)
|
6.0%
|
*
|
Senior Secured Term Loan, due 02/28/2018
|
|
05/30/13
|
5,491,699
|
|
5,434,613
|
|
5,206,981
|
|
Portfolio Company
|
|
|
Investment (1) (2)
|
|
Origination Date
|
Outstanding Principal
|
Cost (3)
|
Fair Value
|
|||||
|
|
|
|
|
|
||||||||
|
|
|
(16.25%; 12.00% Cash/4.25% PIK)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
Services: Business
|
|
|
|
|
|
|
|
|
|||||
Language Line, LLC
|
4.6%
|
*
|
Junior Secured Term Loan, due 07/07/2022
|
|
07/01/15
|
3,994,442
|
|
3,940,368
|
|
3,984,456
|
|
||
|
|
|
(10.75%; LIBOR +9.75% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Novitex Acquisition, LLC
|
7.8%
|
*
|
Junior Secured Term Loan, due 07/7/2021
|
|
07/07/14
|
7,000,000
|
|
6,944,216
|
|
6,766,000
|
|
||
|
|
|
(11.75%; LIBOR + 10.50% with 1.25% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Safety Services Acquisition Corp.
|
7.0%
|
*
|
Junior Secured Term Loan, due 07/5/2017
|
|
04/05/12
|
5,935,179
|
|
5,894,519
|
|
5,935,179
|
|
||
|
|
|
(15.0%; 12.50% Cash/2.50% PIK)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
100,000 shares of Series A Preferred Stock
|
|
04/05/12
|
—
|
|
100,000
|
|
96,890
|
|
||
|
|
|
(0.58% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Sitel Worldwide Corporation
|
2.0%
|
*
|
Junior Secured Term Loan, due 09/19/2022
|
|
08/21/15
|
1,750,000
|
|
1,717,608
|
|
1,723,750
|
|
||
|
|
|
(10.50%; LIBOR +9.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
SourceHOV LLC
|
2.6%
|
*
|
Junior Secured Term Loan, due 4/30/2020
|
|
10/29/14
|
4,000,000
|
|
3,877,527
|
|
2,215,000
|
|
||
|
|
|
(11.50%; LIBOR + 10.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Subtotal Non-controlled, Non-affiliated Investments
|
|
|
133,169,138
|
|
133,581,375
|
|
132,146,918
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Affiliated Investments
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Healthcare & Pharmaceuticals
|
|
|
|
|
|
|
|
|
|||||
Infinite Care, LLC
|
9.3%
|
*
|
Senior Secured Term Loan, due 02/28/2019
|
(6
|
)
|
02/29/16
|
6,000,000
|
|
5,968,359
|
|
5,999,673
|
|
|
|
|
|
(12.47%; LIBOR+12.00% with 0.42% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
3,000,000 Class A Common Equity Units
|
|
02/29/16
|
—
|
|
3,000,000
|
|
2,061,450
|
|
||
|
|
|
(27.00% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
WorkWell, LLC
|
5.6%
|
*
|
Senior Secured Term Loan, due 10/21/2020
|
|
10/22/15
|
4,660,938
|
|
4,574,296
|
|
4,605,000
|
|
||
|
|
|
(12.17%; LIBOR + 11.50% with 0.50% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Revolving Line of Credit, due 10/21/2020
|
(6
|
)
|
10/22/15
|
—
|
|
—
|
|
—
|
|
|
|
|
|
(12.17%; LIBOR + 11.50% with 0.50% LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
250,000 Preferred Equity Units
|
|
10/22/15
|
—
|
|
250,000
|
|
247,000
|
|
||
|
|
|
(6.28% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
250,000 Common Equity Units
|
|
10/22/15
|
—
|
|
—
|
|
7,000
|
|
Portfolio Company
|
|
|
Investment (1) (2)
|
|
Origination Date
|
Outstanding Principal
|
Cost (3)
|
Fair Value
|
|||||
|
|
|
|
|
|
||||||||
|
|
|
(0.63% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Retailer
|
|
|
|
|
|
|
|
|
|||||
Peekay Acquisition, LLC
|
0.4%
|
*
|
Senior Secured Term Loan (Last Out), due 02/15/16
|
|
12/31/12
|
2,115,125
|
|
1,995,430
|
|
320,934
|
|
||
|
|
|
(17.00% PIK)
|
(7
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
35,775 shares of Common Stock (Peekay Boutiques, Inc.)
|
(8
|
)
|
12/31/12
|
—
|
|
105,000
|
|
—
|
|
|
|
|
|
(5.95% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Subtotal Affiliated Investments
|
|
|
|
|
|
12,776,063
|
|
15,893,085
|
|
13,241,057
|
|
||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Control Investments
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Aerospace & Defense
|
|
|
|
|
|
|
|
|
|||||
Flight Lease VII, LLC
|
1.1
|
%
|
*
|
1,800 Common Equity Units
|
|
03/18/16
|
—
|
|
909,973
|
|
909,973
|
|
|
|
|
|
(46.15% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Subtotal Control Investments
|
|
|
|
|
|
—
|
|
909,973
|
|
909,973
|
|
||
|
|
|
|
|
|
|
|
|
|||||
Total Investments as of 06/30/2016
|
169.7%
|
*
|
|
|
|
145,945,201
|
|
150,384,433
|
|
146,297,948
|
|
(1)
|
Debt investments and the CLO subordinated notes are income producing investments unless an investment is on non accrual. Equity investments (other than Flight Lease VII, LLC), residual values and warrants are non-income producing. All investments other than Atrium Innovations, Inc., Flight Lease VII, LLC, Shinnecock CLO 2006-1, Ltd., WBL SPE I, LLC, WBL SPE II, LLC and World Business Lenders, LLC are qualifying assets for purposes of Section 55(a) of the Investment Company Act of 1940, as amended. The Company's non-qualifying assets, on a fair value basis, comprise 11.3% of the Company's total assets.
|
(2)
|
For each loan, the Company has provided the interest rate in effect on the date presented, as well as the contractual components of that interest rate. In the case of the Company's variable or floating rate loans, the interest rate in effect takes into account the applicable LIBOR rate in effect on the date presented or, if higher, the applicable LIBOR floor.
|
(3)
|
Gross unrealized appreciation, gross unrealized depreciation, and net unrealized depreciation for federal income tax purposes totaled $2.5 million, $6.4 million, and $3.9 million, respectively. The tax cost of investments is $150.2 million.
|
(4)
|
"Residual value" represents the value of the Company’s share in the collateral securing the loan.
|
(5)
|
On May 27, 2015, the Company's investment in CRS Reprocessing, LLC ("CRS") was restructured in a manner that was intended to strengthen the credit profile of the borrower. The restructured investment carried a fixed interest rate of 5.00% and has a principal amount of $7.0 million, which includes all previously unpaid interest amounts. The maturity date of the restructured investment remained unchanged at September 30, 2016. CRS was taken off non-accrual during the three months ended June 30, 2015 and interest income on the restructured loan is currently being accrued. On April 29, 2016, the loan agreement was amended to extend the maturity date from September 30, 2016 to March 30, 2017. In conjunction with the extension, the interest rate increased from 5.0% cash to 10.0% (5.0% cash / 5.0% PIK).
|
(6)
|
Credit facility has an unfunded commitment in addition to the amounts shown in the Schedule of Investments. See Note 8 for further discussion on portion of commitment unfunded at June 30, 2016.
|
(7)
|
The debt investment in Peekay Acquisition, LLC ("Peekay") was not paid off by its February 15, 2016 maturity date. Effective February 1, 2016 the debt investment was placed on non-accrual status. The loan is in default and lenders are working with the company on restructuring its debt.
|
(8)
|
The Company's common equity investment in Peekay Boutiques, Inc. has been classified as an affiliated investment because the Company owns more than 5% of the outstanding voting securities of Peekay Boutiques, Inc. The Company's last out senior secured term loan in Peekay Acquisition, LLC has also been classified as an affiliated investment because Peekay Acquisition, LLC is a wholly owned subsidiary of Peekay Boutiques, Inc.
|
(9)
|
On July 7, 2015, Douglas Machines Corp. refinanced the Company's $1.5 million revolver commitment with another lender; the Company reduced the $4.3 million term loan interest rate from 13.5% to 12.5%, extended the maturity date from April 6, 2017 to December 31, 2018 and it became a junior secured term loan.
|
(10)
|
The Company owns 49,209 of Class B Preferred membership units representing 0.31% of the fully diluted common equity in World Business Lenders, LLC. However, due to the liquidation preference of the Class B units we would receive 0.52% of the proceeds in a liquidation of the company at the June 30, 2016 fair value.
|
(11)
|
The coupon on the loan is subject to a pricing grid based on the ratio of Debt to EBITDA of the portfolio company.
|
(12)
|
The subordinated notes of the CLO are the most junior tranche of securities in the securitization and have the attributes of equity. Our investment in Shinnecock CLO 2006-1 Ltd. is referred to as CLO Equity in other parts of this document.
|
(13)
|
On April 22, 2016, the Company received notice from the senior secured lender to Fox Rent a Car, Inc. ("Fox") that, due to Fox's violation of certain covenants under its senior secured credit facility, it was blocking the junior secured term loan lenders from receiving interest payments until the covenant breaches are cured, waived by the senior secured lenders or the blockage period expires. The loan was on non-accrual status at June 30, 2016.
|
Portfolio Company
|
|
|
Investment (1) (2)
|
|
Origination Date
|
Outstanding Principal
|
Cost (3)
|
Fair Value
|
|||||||
Non-Control / Non-Affiliate Investments
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|||||||
Aerospace & Defense
|
|
|
|
|
|
|
|
|
|||||||
Bridgewater Engine Ownership III, LLC
|
1.4%
|
*
|
Senior Secured Term Loan, due 07/05/2019
|
|
10/03/14
|
1,223,326
|
|
1,206,393
|
|
1,206,897
|
|
||||
|
|
|
(15.00%; the greater of 14.00% or LIBOR +8.50%, plus additional 1.00% PIK)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Residual Value
|
(4
|
)
|
10/03/14
|
—
|
|
8,699
|
|
11,662
|
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Regional Engine Leasing, LLC
|
4.8%
|
*
|
Senior Secured Term Loan, due 3/31/2020
|
|
03/31/15
|
4,214,736
|
|
4,087,270
|
|
4,181,392
|
|
||||
|
|
|
(11.00%; the greater of 11.00% or LIBOR +4.50%)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Residual Value
|
(4
|
)
|
03/31/15
|
—
|
|
102,421
|
|
139,498
|
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Automotive
|
|
|
|
|
|
|
|
|
|||||||
Fox Rent A Car, Inc.
|
10.9%
|
*
|
Junior Secured Term Loan, due 10/31/2019
|
|
10/31/14
|
10,000,000
|
|
9,918,138
|
|
9,788,251
|
|
||||
|
|
|
(12.24%; LIBOR +12.00%)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Banking, Finance, Insurance & Real Estate
|
|
|
|
|
|
|
|
|
|||||||
Shinnecock CLO 2006-1, Ltd.
|
1.8%
|
*
|
CLO Subordinated Notes, due 07/15/2018
|
(16
|
)
|
03/06/14
|
—
|
|
1,567,860
|
|
1,567,860
|
|
|||
|
|
|
(13.20% effective yield)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
WBL SPE I, LLC
|
8.9%
|
*
|
Senior Secured Term Loan, due 02/28/2017
|
|
09/30/13
|
8,000,000
|
|
7,985,883
|
|
8,000,000
|
|
||||
|
|
|
(13.00% Cash)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
WBL SPE II, LLC
|
8.4%
|
*
|
Senior Secured Term Loan, due 12/23/2016
|
|
09/30/14
|
7,503,165
|
|
7,353,852
|
|
7,503,165
|
|
||||
|
|
|
(14.50% Cash)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
World Business Lenders, LLC
|
0.3%
|
*
|
Class B Common Equity Units
|
(14
|
)
|
12/23/13
|
—
|
|
200,000
|
|
270,909
|
|
|||
|
|
|
(0.31% of fully diluted common equity)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Beverage, Food & Tobacco
|
|
|
|
|
|
|
|
|
|||||||
Flavors Holdings, Inc.
|
4.3%
|
*
|
Junior Secured Term Loan, due 10/4/2021
|
|
10/07/14
|
4,000,000
|
|
3,863,890
|
|
3,818,500
|
|
||||
|
|
|
(11.00%; LIBOR +10.00% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
North Atlantic Trading Company, Inc.
|
5.6%
|
*
|
Junior Secured Term Loan, due 07/13/2020
|
|
01/13/14
|
5,000,000
|
|
4,976,182
|
|
4,987,500
|
|
||||
|
|
|
(11.50%; LIBOR +10.25% with 1.25% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
Portfolio Company
|
|
|
Investment (1) (2)
|
|
Origination Date
|
Outstanding Principal
|
Cost (3)
|
Fair Value
|
|||||||
Non-Control / Non-Affiliate Investments
|
|
|
|
|
|
||||||||||
Capital Equipment
|
|
|
|
|
|
|
|
|
|||||||
Douglas Machines Corp.
|
5.0%
|
*
|
Junior Secured Term Loan, due 12/31/2018
|
(13
|
)
|
05/07/14
|
4,315,133
|
|
4,217,912
|
|
4,315,133
|
|
|||
|
|
|
(12.50% Cash)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Common Equity Warrants
|
|
04/06/12
|
—
|
|
12,500
|
|
127,722
|
|
||||
|
|
|
(2.0% of fully diluted common equity)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Lanco Acquisition, LLC
|
3.8%
|
*
|
Senior Secured Term Loan A, due 06/12/2018
|
|
06/13/14
|
592,000
|
|
579,905
|
|
592,000
|
|
||||
|
|
|
(11.50%; LIBOR +11.00% with 0.50% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Senior Secured Term Loan B, due 03/12/2019
|
|
06/13/14
|
2,386,885
|
|
2,322,563
|
|
2,363,404
|
|
||||
|
|
|
(15.00%; 12.50% Cash/2.50% PIK)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Revolving Line of Credit, 06/12/2017
|
(6
|
)
|
06/13/14
|
350,000
|
|
350,000
|
|
350,000
|
|
|||
|
|
|
(8.50%; LIBOR +8.00% with 0.50% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Common Equity Warrants
|
|
06/13/14
|
—
|
|
42,000
|
|
58,857
|
|
||||
|
|
|
(12.00% of fully diluted common equity)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Chemicals, Plastics & Rubber
|
|
|
|
|
|
|
|
|
|||||||
CRS Reprocessing, LLC
|
6.4%
|
*
|
Junior Secured Term Loan, due 09/30/2016
|
(5
|
)
|
05/27/15
|
6,985,636
|
|
6,058,198
|
|
5,760,675
|
|
|||
|
|
|
(5.00% Cash)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Consumer Goods - Non-Durable
|
|
|
|
|
|
|
|
|
|||||||
Atrium Innovations, Inc.
|
1.0%
|
*
|
Senior Secured Term Loan, due 02/16/2021
|
|
01/29/14
|
982,500
|
|
982,971
|
|
911,269
|
|
||||
|
|
|
(4.25%; LIBOR +3.25% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Bradford Soap International, Inc.
|
4.9%
|
*
|
Junior Secured Term Loan, due 10/31/2019
|
|
08/05/15
|
4,500,000
|
|
4,417,447
|
|
4,410,000
|
|
||||
|
|
|
(9.49%; LIBOR + 9.25%)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
PD Products, LLC
|
5.1%
|
*
|
Senior Secured Term Loan, due 10/04/2018
|
|
10/04/13
|
4,535,032
|
|
4,448,660
|
|
4,535,032
|
|
||||
|
|
|
(12.00%; LIBOR +10.50% with 1.50% LIBOR floor)
|
(15
|
)
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|||||||
Healthcare & Pharmaceuticals
|
|
|
|
|
|
|
|
|
|||||||
Infinite Aegis Group, LLC
|
10.1%
|
*
|
Senior Secured Term Loan (First Out), due 07/31/2017
|
(7
|
)
|
03/10/15
|
3,499,708
|
|
3,499,708
|
|
3,499,708
|
|
|||
|
|
|
(15.24%; LIBOR + 12.00% with 0.19% LIBOR floor/3.00% PIK)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Senior Secured Term Loan (Last Out), due 07/31/2017
|
(7
|
)
|
08/01/13
|
4,559,429
|
|
4,487,002
|
|
4,461,130
|
|
Portfolio Company
|
|
|
Investment (1) (2)
|
|
Origination Date
|
Outstanding Principal
|
Cost (3)
|
Fair Value
|
|||||||
Non-Control / Non-Affiliate Investments
|
|
|
|
|
|
||||||||||
|
|
|
(18.24%; LIBOR + 14.65% with 0.19% LIBOR floor/3.00% PIK/0.35% Fee Letter)
|
(8
|
)
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Revolving Line of Credit, 07/31/2017
|
(7
|
)
|
03/10/15
|
1,050,000
|
|
1,050,000
|
|
1,050,000
|
|
|||
|
|
|
(12.24%; LIBOR + 12.00% with 0.19% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Common Equity Warrants
|
|
08/01/13
|
—
|
|
77,522
|
|
—
|
|
||||
|
|
|
(3.00% of fully diluted common equity)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
High Tech Industries
|
|
|
|
|
|
|
|
|
|||||||
Applied Systems, Inc.
|
0.5%
|
*
|
Junior Secured Term Loan, due 01/24/2022
|
|
01/15/14
|
490,141
|
|
487,100
|
|
475,130
|
|
||||
|
|
|
(7.50%; LIBOR + 6.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
GK Holdings, Inc. (Global Knowledge)
|
3.3%
|
*
|
Junior Secured Term Loan, due 1/31/2022
|
|
01/30/15
|
3,000,000
|
|
2,945,515
|
|
2,927,000
|
|
||||
|
|
|
(10.50%; LIBOR +9.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Mercury Network, LLC
|
2.2%
|
*
|
Senior Secured Term Loan, due 04/24/2020
|
|
05/12/15
|
1,900,000
|
|
1,865,860
|
|
1,863,500
|
|
||||
|
|
|
(10.25%; LIBOR +9.25% with 1.00% LIBOR floor)
|
(15
|
)
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Class A Common Equity Units
|
|
05/12/15
|
—
|
|
86,957
|
|
116,579
|
|
||||
|
|
|
(0.59% of fully diluted common equity)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Optimal Blue, LLC
|
0.6%
|
*
|
Class A Common Equity Units
|
|
12/18/13
|
—
|
|
100,000
|
|
526,197
|
|
||||
|
|
|
(0.38% of fully diluted common equity)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Media: Broadcasting & Subscription
|
|
|
|
|
|
|
|
|
|||||||
Chemical Information Services, LLC
|
5.1%
|
*
|
Senior Secured Term Loan, due 08/28/2019
|
|
08/28/15
|
4,577,000
|
|
4,531,790
|
|
4,531,790
|
|
||||
|
|
|
(12.33%; LIBOR +12.00% with no LIBOR floor)
|
(15
|
)
|
|
|
|
|
||||||
|
|
|
Revolving Line of Credit, due 08/28/2018
|
(6
|
)
|
08/28/15
|
—
|
|
—
|
|
—
|
|
|||
|
|
|
(12.33%; LIBOR +12.00% with no LIBOR floor)
|
(15
|
)
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|||||||
Multicultural Radio Broadcasting, Inc.
|
5.4%
|
*
|
Senior Secured Term Loan (Last Out), due 06/27/2019
|
|
09/10/14
|
4,950,050
|
|
4,950,050
|
|
4,825,383
|
|
||||
|
|
|
(11.50%; LIBOR +10.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Media: Advertising, Printing & Publishing
|
|
|
|
|
|
|
|
|
|||||||
Brite Media LLC
|
6.7%
|
*
|
Senior Secured Term Loan, due 04/24/2019
|
|
04/24/14
|
5,400,000
|
|
5,344,004
|
|
5,400,000
|
|
||||
|
|
|
(9.75%; LIBOR +9.00% with 0.75% LIBOR floor)
|
(15
|
)
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
Portfolio Company
|
|
|
Investment (1) (2)
|
|
Origination Date
|
Outstanding Principal
|
Cost (3)
|
Fair Value
|
|||||||
Non-Control / Non-Affiliate Investments
|
|
|
|
|
|
||||||||||
|
|
|
Revolving Line of Credit, due 04/24/2018
|
(6
|
)
|
04/24/14
|
400,000
|
|
400,000
|
|
400,000
|
|
|||
|
|
|
(9.75%; LIBOR +9.00% with 0.75% LIBOR floor)
|
(15
|
)
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Class A Common Equity Units
|
|
04/24/14
|
—
|
|
100,000
|
|
158,341
|
|
||||
|
|
|
(1.08% fully diluted common equity)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Metals & Mining
|
|
|
|
|
|
|
|
|
|||||||
Northeast Metal Works LLC
|
14.7%
|
*
|
Senior Secured Term Loan, due 12/29/2017
|
|
09/29/14
|
11,711,245
|
|
11,719,801
|
|
11,968,844
|
|
||||
|
|
|
(14.24%; LIBOR +14.00% with 0.20% LIBOR floor)
|
(15
|
)
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Revolving Line of Credit, due 12/29/17
|
(6
|
)
|
09/29/14
|
1,175,000
|
|
1,175,000
|
|
1,175,000
|
|
|||
|
|
|
(14.24%; LIBOR +14.00% with 0.20% LIBOR floor)
|
(15
|
)
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|||||||
Retailer
|
|
|
|
|
|
|
|
|
|||||||
CP Holding Co., Inc. (Choice Pet)
|
5.9%
|
*
|
Senior Secured Term Loan, due 02/28/2018
|
|
05/30/13
|
5,375,578
|
|
5,303,683
|
|
5,319,577
|
|
||||
|
|
|
(16.25%; 12.00% Cash/4.25% PIK)
|
(15
|
)
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|||||||
Services: Business
|
|
|
|
|
|
|
|
|
|||||||
Language Line, LLC
|
4.5%
|
*
|
Junior Secured Term Loan, due 07/07/2022
|
|
07/01/15
|
4,000,000
|
|
3,942,875
|
|
3,985,000
|
|
||||
|
|
|
(10.75%; LIBOR +9.75% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Novitex Acquisition, LLC
|
7.5%
|
*
|
Junior Secured Term Loan, due 07/7/2021
|
|
07/07/14
|
7,000,000
|
|
6,940,339
|
|
6,712,947
|
|
||||
|
|
|
(11.75%; LIBOR + 10.50% with 1.25% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Safety Services Acquisition Corp.
|
6.7%
|
*
|
Junior Secured Term Loan, due 07/5/2017
|
|
04/05/12
|
5,860,865
|
|
5,807,253
|
|
5,860,865
|
|
||||
|
|
|
(15.0%; 12.50% Cash/2.50% PIK)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
Series A Preferred Equity
|
|
04/05/12
|
—
|
|
100,000
|
|
165,012
|
|
||||
|
|
|
(0.58% of fully diluted common equity)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Sitel Worldwide Corporation
|
1.9%
|
*
|
Junior Secured Term Loan, due 09/19/2022
|
|
08/21/15
|
1,750,000
|
|
1,715,846
|
|
1,715,000
|
|
||||
|
|
|
(10.50%; LIBOR +9.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
SourceHOV LLC
|
3.9%
|
*
|
Junior Secured Term Loan, due 4/30/2020
|
|
10/29/14
|
4,000,000
|
|
3,865,441
|
|
3,480,000
|
|
||||
|
|
|
(11.50%; LIBOR + 10.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|||||||
Subtotal Non-Control / Non-Affiliate Investments
|
|
|
|
|
|
$
|
135,287,429
|
|
$
|
135,198,490
|
|
$
|
135,516,729
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
(1)
|
Debt investments and the CLO subordinated notes are income producing investments unless an investment is on non accrual. Common equity options, residual values and warrants are non-income producing. All investments other than Atrium Innovations, Inc., Shinnecock CLO 2006-1, Ltd., WBL SPE I, LLC, WBL SPE II, LLC and World Business Lenders, LLC are qualifying assets for purposes of Section 55(a) of the Investment Company Act of 1940, as amended. The Company's non-qualifying assets, on a fair value basis, comprise 12.2% of the Company's total assets.
|
(2)
|
For each loan, the Company has provided the interest rate in effect on the date presented, as well as the contractual components of that interest rate. In the case of the Company's variable or floating rate loans, the interest rate in effect takes into account the applicable LIBOR rate in effect on the date presented or, if higher, the applicable LIBOR floor.
|
(3)
|
Gross unrealized appreciation, gross unrealized depreciation, and net unrealized depreciation for federal income tax purposes totaled $1.9 million, $2.5 million, and $0.6 million, respectively. The tax cost of investments is $143.4 million.
|
(4)
|
"Residual value" represents the value of the Company’s share in the collateral securing the loan.
|
(5)
|
On May 27, 2015, the Company's investment in CRS Reprocessing, LLC ("CRS") was restructured in a manner that was intended to strengthen the credit profile of the borrower. The restructured investment carries a fixed interest rate of 5.00% and has a principal amount of $7.0 million, which includes all previously unpaid interest amounts. The maturity date of the restructured investment remains unchanged at September 30, 2016. CRS was taken off non-accrual during the three months ended June 30, 2015 and interest income on the restructured loan is currently being accrued.
|
(6)
|
Credit facility has an unfunded commitment in addition to the amounts shown in the Schedule of Investments. See Note 9 for further discussion on portion of commitment unfunded at December 31, 2015.
|
(7)
|
As of December 31, 2015, Infinite Aegis Group, LLC ("IA") was four months behind in interest payments and owed the Company $593,993 in interest, fees and expenses. The Company’s investment in Infinite Aegis Group, LLC remained on accrual status, as of December 31, 2015, due to the substantive evidence of a refinancing agreement that was expected to close during the three months ended March 31, 2016. On February 29, 2016, a refinancing occurred, and our $9.1 million debt investment in IA was paid off at par as a result of the purchase of the majority of IA's assets by Infinite Care, LLC ("IC"). We also received $1.4 million in accrued and unpaid interest and fees. In conjunction with the payoff of our investment in IA, we invested $3.0 million into the common equity of IC and provided a $6.0 million senior secured term loan and a $1.0 million senior secured revolver (unfunded at close).
|
(8)
|
The "Fee Letter" represents an agreement with the borrower that will pay us an amount at maturity or when the loan is paid off that makes our effective cash coupon over the life of the investment equal to LIBOR +15.00%.
|
(9)
|
The Peekay Acquisition, LLC (Christals) "Accommodation Fee" is a fee that one of the other lenders to Peekay Acquisition, LLC agreed to pay to the Company during the term of the Company's senior secured term loan investment in Peekay Acquisition, LLC. The amount of the fee is equal to the aggregate principal amount of the outstanding term loan held by the Company multiplied by a per annum rate of 3%. This fee is calculated and treated as if it is interest on the outstanding principal amount of the loan.
|
(10)
|
The Company's common equity investment in Peekay Boutiques, Inc. has been classified as an affiliated investment because the Company owns more than 5% of the outstanding voting securities of Peekay Boutiques, Inc. The Company's senior secured term loan in Peekay Acquisition, LLC has also been classified as an affiliated investment because Peekay Acquisition, LLC is a wholly owned subsidiary of Peekay Boutiques, Inc.
|
(11)
|
Solex Fine Foods, LLC ("Solex") is on non-accrual status at December 31, 2015. The amortized cost balance of $1,626,670 as of December 31, 2015 has not changed since the investment was put on non-accrual status effective November 1, 2014. The outstanding balance of $1,847,856 as of December 31, 2015 includes $164,377 of PIK interest capitalized to the principal balance. The investment was exited in February 2016 for cash consideration of $926,204.
|
(12)
|
Supplemental PIK accrues on Solex each quarter and is determined based on the Senior Debt to EBITDA calculation as of the last day of the immediately preceding quarterly payment period. Since the investment was put on non-accrual status effective November 1, 2014, the PIK has not been accrued and the cost balance remains $1,626,670; however, the outstanding principal balance reflects the accrued PIK.
|
(13)
|
On July 7, 2015, Douglas Machines Corp. refinanced the Company's $1.5 million revolver commitment with another lender; the Company reduced the $4.3 million term loan interest rate from 13.5% to 12.5%, extended the maturity date from April 6, 2017 to December 31, 2018 and it became a junior secured term loan.
|
(14)
|
The Company owns 0.31% of the equity Class B units in WBL. However, due to the liquidation preference of the Class B units we would receive 0.50% of the proceeds in a liquidation of the company at the December 31, 2015 fair value.
|
(15)
|
The coupon on the loan is subject to a pricing grid based on the ratio of Debt to EBITDA of the portfolio company.
|
(16)
|
The subordinated notes of the CLO are the most junior tranche of securities in the securitization and have the attributes of equity. Our investment in Shinnecock CLO 2006-1 Ltd. is referred to as CLO Equity in other parts of this document.
|
(17)
|
The debt investment in Peekay Acquisition, LLC ("Peekay") was not paid off by its February 15, 2016 maturity date. Lenders entered into an amendment with Peekay agreeing to forbear until July 31, 2016, subject to certain financial restructuring steps taken by the company during the forbearance period.
|
Level 1
|
Quoted prices (unadjusted) for identical assets or liabilities in active public markets that the entity has the ability to access as of the measurement date.
|
Level 2
|
Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
|
Level 3
|
Significant unobservable inputs that reflect a reporting entity’s own assumptions about what market participants would use in pricing an asset or liability.
|
•
|
Our valuation process begins with (i) an internally prepared PMR, (ii) an external valuation report prepared by an independent valuation firm, or (iii) both (i) and (ii), for all Level 3 investments.
|
•
|
Preliminary valuation conclusions are documented and discussed with our senior management.
|
•
|
The audit committee of our board of directors reviews and discusses the preliminary valuations.
|
•
|
The board of directors discusses valuations and determines the fair value of each investment in our portfolio in good faith, based upon the input of our senior management, the independent valuation firm report (if reviewed in such quarter), and the audit committee.
|
|
2016
|
|
2015
|
||||||
|
Shares Issued
|
|
Net Proceeds
|
|
Shares Issued
|
|
Net Proceeds
|
||
Total dividend reinvestment plan for the three months ended June 30
|
11,535
|
|
$141,814
|
|
8,901
|
|
|
$114,824
|
|
Total shares repurchased during the three months ended June 30
|
(5,500)
|
|
$(68,911)
|
|
—
|
|
|
—
|
|
Net shares issuance during the three months ended June 30
|
6,035
|
|
$72,903
|
|
8,901
|
|
|
$114,824
|
|
|
|
|
|
|
|
|
|
||
Total dividend reinvestment plan for the six months ended June 30
|
23,629
|
|
$264,765
|
|
30,537
|
|
|
$376,780
|
|
Total shares repurchased during the six months ended June 30
|
(5,500)
|
|
$(68,911)
|
|
—
|
|
|
—
|
|
Net shares issuance during the six months ended June 30
|
18,129
|
|
$195,854
|
|
30,537
|
|
|
$376,780
|
|
Fair Values as of June 30, 2016
|
||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Senior Secured (1)
|
$
|
—
|
|
|
$
|
951,841
|
|
|
$
|
72,133,184
|
|
|
$
|
73,085,025
|
|
Junior Secured
|
—
|
|
|
12,139,971
|
|
|
54,572,437
|
|
|
66,712,408
|
|
||||
CLO Equity
|
—
|
|
|
—
|
|
|
1,396,204
|
|
|
1,396,204
|
|
||||
Equity
|
—
|
|
|
—
|
|
|
5,104,311
|
|
|
5,104,311
|
|
||||
|
$
|
—
|
|
|
$
|
13,091,812
|
|
|
$
|
133,206,136
|
|
|
$
|
146,297,948
|
|
|
Fair Values as of December 31, 2015
|
||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Senior Secured (1)
|
$
|
—
|
|
|
$
|
911,269
|
|
|
$
|
80,220,519
|
|
|
$
|
81,131,788
|
|
Junior Secured
|
—
|
|
|
14,642,630
|
|
|
43,593,371
|
|
|
58,236,001
|
|
||||
CLO Equity
|
—
|
|
|
—
|
|
|
1,567,860
|
|
|
1,567,860
|
|
||||
Equity
|
—
|
|
|
—
|
|
|
1,824,777
|
|
|
1,824,777
|
|
||||
|
$
|
—
|
|
|
$
|
15,553,899
|
|
|
$
|
127,206,527
|
|
|
$
|
142,760,426
|
|
(1)
|
Senior secured category includes both first out and last out term loans. The Company's last out senior secured loans are identified on the Schedule of Investments.
|
Type of Investment
|
|
Fair Value at June 30, 2016
|
|
Valuation Technique (1)
|
|
Significant Unobservable
Input |
|
Range
|
|
Weighted Average
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Senior Secured (2)
|
|
$
|
72,133,184
|
|
|
Bond Yield
|
|
Risk adjusted discount factor
|
|
8.5% - 30.0%
|
|
12.3%
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Market
|
|
EBITDA multiple
|
|
0.7x - 9.2x
|
|
5.3x
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
10.0% - 21.0%
|
|
17.2%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Junior Secured
|
|
$
|
54,572,437
|
|
|
Bond Yield
|
|
Risk adjusted discount factor
|
|
5.9% - 23.8%
|
|
12.5%
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Market
|
|
EBITDA multiple
|
|
5.9x - 8.3x
|
|
6.9x
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
7.1% - 25.0%
|
|
16.3%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Equity
|
|
$
|
5,104,311
|
|
|
Market
|
|
EBITDA multiple
|
|
4.1x - 8.3x
|
|
5.1x
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
10.0% - 20.0%
|
|
19.1%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
CLO equity
|
|
$
|
1,396,204
|
|
|
Bond Yield
|
|
Risk adjusted discount factor
|
|
14.9%
|
|
14.9%
|
|
|
|
|
|
|
|
|
|
|
|
Type of Investment
|
|
Fair Value at
December 31, 2015 |
|
Valuation Technique (1)
|
|
Significant Unobservable
Input |
|
Range
|
|
Weighted Average
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Senior Secured (2)
|
|
$
|
80,220,519
|
|
|
Bond Yield
|
|
Risk adjusted discount factor
|
|
9.1% - 30.0%
|
|
13.7%
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Market
|
|
EBITDA multiple
|
|
2.2x - 9.2x
|
|
4.7x
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
2.2% - 20.6%
|
|
10.2%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Junior Secured
|
|
$
|
43,593,371
|
|
|
Bond Yield
|
|
Risk adjusted discount factor
|
|
4.9% - 21.8%
|
|
12.8%
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Market
|
|
EBITDA multiple
|
|
1.8x - 8.3x
|
|
5.7x
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
4.0% - 19.5%
|
|
8.3%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Equity
|
|
$
|
1,824,777
|
|
|
Market
|
|
EBITDA multiple
|
|
2.6x - 16.6x
|
|
8.8x
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
10.0% - 20.6%
|
|
14.1%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
CLO equity
|
|
$
|
1,567,860
|
|
|
Bond Yield
|
|
Risk adjusted discount factor
|
|
13.2%
|
|
13.2%
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
When estimating the fair value of its debt investments, the Company typically utilizes the bond yield technique. The significant unobservable inputs used in the fair value measurement under this technique are risk adjusted discount factors. However, the Company also takes into consideration the market technique and income technique in order to determine whether the fair value of the debt investment is within the estimated enterprise value of the portfolio company. The significant unobservable inputs used under these techniques are EBITDA multiples, weighted average cost of capital and expected principal recovery. Under the bond yield technique, significant increases (decreases) in the risk adjusted discount factors would result in a significantly lower (higher) fair value measurement.
When estimating the fair value of its equity investments, the Company utilizes the (i) market technique and (ii) income technique. The significant unobservable inputs used in the fair value measurement of the Company’s equity investments are EBITDA multiples and weighted average cost of capital (“WACC”). Significant increases (decreases) in EBITDA multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in WACC inputs in isolation would result in a significantly lower (higher) fair value measurement.
When estimating the value of its CLO equity investment, the Company typically utilizes the bond yield technique. The significant unobservable inputs used in the fair value measurement under this technique are risk adjusted discount factors. The Company also utilizes the performance and covenant compliance information as provided by the independent trustee along with other risk factors including default risk, prepayment rates, interest rate risk and credit spread risk when valuing this investment.
|
(2)
|
Senior secured category includes both first out and last out loans. The Company's last out senior secured loans are identified on the Schedule of Investments.
|
|
Six Months Ended June 30, 2016
|
|||||||||||||||||||
|
Senior Secured (1)
|
|
Junior Secured
|
|
CLO Equity
|
|
Equity
|
|
|
Total Level 3 Assets
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Fair value of portfolio, beginning of period
|
$
|
80,220,519
|
|
|
$
|
43,593,371
|
|
|
$
|
1,567,860
|
|
|
$
|
1,824,777
|
|
|
|
$
|
127,206,527
|
|
New investments
|
8,766,667
|
|
|
10,800,000
|
|
|
—
|
|
|
3,900,000
|
|
|
|
23,466,667
|
|
|||||
Principal payments received
|
(15,883,340
|
)
|
|
(62,500
|
)
|
|
(64,732
|
)
|
|
—
|
|
|
|
(16,010,572
|
)
|
|||||
Loan origination fees received
|
(14,937
|
)
|
|
(216,000
|
)
|
|
—
|
|
|
—
|
|
|
|
(230,937
|
)
|
|||||
Payment in kind interest earned
|
198,664
|
|
|
342,552
|
|
|
—
|
|
|
9,973
|
|
|
|
551,189
|
|
|||||
Accretion of deferred loan origination fees/discounts
|
296,304
|
|
|
544,827
|
|
|
—
|
|
|
—
|
|
|
|
841,131
|
|
|||||
Net realized losses on investments
|
(700,465
|
)
|
|
—
|
|
|
—
|
|
|
(519,320
|
)
|
|
|
(1,219,785
|
)
|
|||||
Change in unrealized appreciation (depreciation) on investments (2)
|
(750,228
|
)
|
|
(429,813
|
)
|
|
(106,924
|
)
|
|
(111,119
|
)
|
|
|
(1,398,084
|
)
|
|||||
Fair value of portfolio, end of period
|
$
|
72,133,184
|
|
|
$
|
54,572,437
|
|
|
$
|
1,396,204
|
|
|
$
|
5,104,311
|
|
|
|
$
|
133,206,136
|
|
(1
|
)
|
Senior secured category includes both first out and last out loans. The Company's last out senior secured loans are identified on the Schedule of Investments.
|
(2
|
)
|
The net change in unrealized appreciation (depreciation) of Level 3 investments held at June 30, 2016, was ($2,643,741). Net realized gains/losses and net change in unrealized appreciation/depreciation are reflected on the Statement of Operations.
|
|
Year ended December 31, 2015
|
||||||||||||||||||||||
|
Senior Secured (1)
|
|
Junior Secured
|
|
CLO Equity
|
|
Equity
|
|
Revenue-Linked Security
|
|
Total Level 3 Assets
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fair value of portfolio, beginning of period
|
$
|
56,053,970
|
|
|
$
|
43,744,802
|
|
|
$
|
2,299,854
|
|
|
$
|
1,375,670
|
|
|
$
|
1,111,001
|
|
|
$
|
104,585,297
|
|
New investments
|
36,866,906
|
|
|
11,440,000
|
|
|
—
|
|
|
448,077
|
|
|
—
|
|
|
48,754,983
|
|
||||||
Principal payments received
|
(8,083,579
|
)
|
|
(16,108,274
|
)
|
|
(315,133
|
)
|
|
(89,225
|
)
|
|
(1,060,166
|
)
|
|
(25,656,377
|
)
|
||||||
Loan origination fees received
|
(937,190
|
)
|
|
(122,500
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,059,690
|
)
|
||||||
Payment in kind interest earned
|
603,852
|
|
|
304,697
|
|
|
—
|
|
|
—
|
|
|
183,243
|
|
|
1,091,792
|
|
||||||
Accretion of deferred loan origination fees/discounts
|
812,213
|
|
|
1,628,575
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,440,788
|
|
||||||
Transfer (to) from investment type
|
(4,315,133
|
)
|
|
4,315,133
|
|
|
|
|
—
|
|
|
|
|
—
|
|
||||||||
Net realized losses on investments
|
—
|
|
|
(674,880
|
)
|
|
(351,217
|
)
|
|
(104,525
|
)
|
|
—
|
|
|
(1,130,622
|
)
|
||||||
Change in unrealized appreciation (depreciation) on investments (2)
|
(780,520
|
)
|
|
(934,182
|
)
|
|
(65,644
|
)
|
|
194,780
|
|
|
(234,078
|
)
|
|
(1,819,644
|
)
|
||||||
Fair value of portfolio, end of period
|
$
|
80,220,519
|
|
|
$
|
43,593,371
|
|
|
$
|
1,567,860
|
|
|
$
|
1,824,777
|
|
|
$
|
—
|
|
|
$
|
127,206,527
|
|
(1
|
)
|
Senior secured category includes both first out and last out loans. The Company's last out senior secured loans are identified on the Schedule of Investments.
|
(2
|
)
|
The net change in unrealized appreciation/(depreciation) of Level 3 investments held at December 31, 2015, was $(690,397). Net realized gains/(losses) and net change in unrealized appreciation/(depreciation) are reflected on the Statement of Operations.
|
|
As of June 30, 2016
|
|
As of December 31, 2015
|
||||||||
|
Unfunded Commitment
|
|
Extended Fair Value of unfunded commitment
|
|
Unfunded Commitment
|
|
Extended Fair Value of unfunded commitment
|
||||
Brite Media LLC
|
—
|
|
|
—
|
|
|
$266,667
|
|
$266,667
|
||
Chemical Information Services, LLC
|
285,000
|
|
|
285,000
|
|
|
285,000
|
|
|
282,185
|
|
Infinite Care, LLC
|
1,000,000
|
|
|
999,946
|
|
|
—
|
|
|
—
|
|
Lanco Acquisition, LLC
|
450,000
|
|
|
450,000
|
|
|
350,000
|
|
|
350,000
|
|
Northeast Metal Works LLC
|
325,000
|
|
|
325,000
|
|
|
325,000
|
|
|
325,000
|
|
WorkWell, LLC
|
300,000
|
|
|
296,400
|
|
|
300,000
|
|
|
300,000
|
|
Total Unfunded Revolver Commitments
|
2,360,000
|
|
|
2,356,346
|
|
|
1,526,667
|
|
|
1,523,852
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net increase (decrease) in net assets resulting from operations
|
$
|
992,668
|
|
|
$
|
3,191,309
|
|
|
$
|
859,666
|
|
|
$
|
3,474,839
|
|
Weighted average shares outstanding (basic and diluted)
|
6,286,014
|
|
|
6,248,539
|
|
|
6,280,428
|
|
|
6,238,844
|
|
||||
Net increase (decrease) in net assets resulting from operations per share (basic and diluted)
|
|
$0.16
|
|
|
$0.51
|
|
|
$0.14
|
|
|
|
$0.56
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Per share data:
|
|
|
|
|
|
|
|
|
||||||||
Net asset value at beginning of period
|
|
|
$13.90
|
|
|
|
$14.30
|
|
|
|
$14.26
|
|
|
|
$14.60
|
|
Net investment income (1)
|
|
0.33
|
|
|
0.33
|
|
|
0.74
|
|
|
0.65
|
|
||||
Realized gains (losses) on investments (1)
|
|
0.01
|
|
|
(0.11
|
)
|
|
(0.19
|
)
|
|
(0.11
|
)
|
||||
Net change in unrealized appreciation (depreciation) on investments
|
|
(0.19
|
)
|
|
0.29
|
|
|
(0.42
|
)
|
|
0.01
|
|
||||
Net increase in net assets from operations
|
|
0.15
|
|
|
0.51
|
|
|
0.13
|
|
|
0.55
|
|
||||
Distributions to stockholders (2)
|
|
(0.34
|
)
|
|
(0.34
|
)
|
|
(0.68
|
)
|
|
(0.68
|
)
|
||||
Net asset value at end of period
|
|
|
$13.71
|
|
|
|
$14.47
|
|
|
|
$13.71
|
|
|
|
$14.47
|
|
Net assets at end of period
|
|
86,231,043
|
|
|
90,513,175
|
|
86,231,043
|
|
|
90,513,175
|
||||||
Shares outstanding at end of period
|
|
6,287,798
|
|
|
6,253,210
|
|
6,287,798
|
|
|
6,253,210
|
||||||
Weighted average shares outstanding (basic and diluted)
|
|
6,286,014
|
|
|
6,248,539
|
|
6,280,428
|
|
|
6,238,844
|
||||||
Per share closing price at end of period
|
|
$12.78
|
|
$14.04
|
|
$12.78
|
|
$14.04
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Ratios and Supplemental data:
|
|
|
|
|
|
|
|
|
||||||||
Total return based on change in NAV (not annualized) (3)
|
|
1.37
|
%
|
|
3.83
|
%
|
|
2.13
|
%
|
|
4.57
|
%
|
||||
Total investment return (not annualized) (4)
|
|
7.92
|
%
|
|
10.99
|
%
|
|
15.73
|
%
|
|
28.37
|
%
|
||||
Average Net Assets
|
|
$86,758,930
|
|
$89,601,448
|
|
$87,644,039
|
|
$90,152,886
|
||||||||
Ratio of expenses to average net assets (annualized)
|
|
12.26
|
%
|
|
11.69
|
%
|
|
12.69
|
%
|
|
10.47
|
%
|
||||
Ratio of net investment income to average net assets (annualized)
|
|
9.54
|
%
|
|
9.16
|
%
|
|
10.59
|
%
|
|
9.01
|
%
|
(1)
|
Based on weighted average number of common shares outstanding for the period.
|
(2)
|
Distributions for the three months ended June 30, 2016 were in excess of net investment income in the amount of $51,917. Dividends were less than net investment income in the amount of $402,085 for the six months ended June 30, 2016. Distributions for the three months and six months ended June 30, 2015 were in excess of net investment income in the amount of $57,295 and $147,424, respectively. See Dividends and Distributions Policy in Note 2.
|
(3)
|
Total return based on change in net asset value measures the changes in net asset value over the period indicated, taking into account dividends as reinvested. The return is calculated by taking the difference between the net asset value per share at the end of the period (plus assumed reinvestment of dividends and distributions at prices obtained under the Company's dividend reinvestment plan) and the net asset value per share at the beginning of the period, and dividing that difference by the net asset value per share at the beginning of the period. This return primarily differs from the total investment return in that it does not take into account changes in the market price of the Company's stock.
|
(4)
|
Total investment return measures the changes in market value over the period indicated, taking into account dividends as reinvested. The return is calculated based on an assumed purchase of stock at the market price on the first day of the period (and assumed reinvestment of dividends and distributions at prices obtained under the Company's dividend reinvestment plan) and an assumed sale at the market price on the last day of the period. The difference between the sale and purchases is then divided by the purchase prices. The return does not reflect any sales load that may be paid by investors.
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Portfolio Company
|
Investment
|
Amount of Interest Credited to Income (1)
|
|
December 31, 2015 Value
|
|
Gross Additions (2)
|
|
Gross Reductions (3)
|
|
June 30, 2016 Value
|
||||||||||
Non-Majority Owned Control Investments
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Flight Lease VII, LLC
|
1,800 Common Equity Units
|
$
|
41,128
|
|
|
$
|
—
|
|
|
$
|
909,973
|
|
|
$
|
—
|
|
|
$
|
909,973
|
|
|
(46.15% on a fully diluted basis)
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Non-Majority Owned Control Investments
|
|
$
|
41,128
|
|
|
$
|
—
|
|
|
$
|
909,973
|
|
|
$
|
—
|
|
|
$
|
909,973
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Non-Control Affiliate Investments
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Infinite Care, LLC
|
Senior Secured Term Loan, due 02/28/2019
|
255,129
|
|
|
—
|
|
|
5,999,673
|
|
|
—
|
|
|
5,999,673
|
|
|||||
|
(12.47%; LIBOR+12.00% with 0.42% LIBOR floor)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
3,000,000 Class A Common Equity Units
|
—
|
|
|
—
|
|
|
3,000,000
|
|
|
(938,550
|
)
|
|
2,061,450
|
|
|||||
|
(27.00% on a fully diluted basis)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Peekay Acquisition, LLC (Non-accrual)
|
Senior Secured Term Loan (Last Out), due 02/15/16
|
31,000
|
|
|
1,442,394
|
|
|
95,000
|
|
|
(1,216,460
|
)
|
|
320,934
|
|
|||||
|
(17.00% PIK)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
35,775 shares of Common Stock (Peekay Boutiques, Inc.)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
(5.95% on a fully diluted basis)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Solex Fine Foods, LLC (non-accrual)
|
Senior Secured Term Loan (Last Out), due 12/28/2016
|
$
|
—
|
|
|
$
|
926,204
|
|
|
$
|
944,534
|
|
|
$
|
(1,870,738
|
)
|
|
$
|
—
|
|
|
(18.63%; LIBOR +12.48% Cash/3.09% PIK/2.81% Supplemental PIK)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Common Equity Units
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
290,284
|
|
|
$
|
(290,284
|
)
|
|
$
|
—
|
|
|
(6.57% on a fully diluted basis)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Common Equity Warrants
|
—
|
|
|
—
|
|
|
151,514
|
|
|
(151,514
|
)
|
|
—
|
|
|||||
|
(6.40% on a fully diluted basis)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
Portfolio Company
|
Investment
|
Amount of Interest
Credited to Income (1)
|
|
December 31, 2014
Value
|
|
Gross Additions (2)
|
|
Gross Reductions (3)
|
|
December 31, 2015
Value
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Affiliate Investments
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Peekay Acquisition, LLC (Christals)
|
Senior Secured Term Loan (Last Out), due 2/15/16
|
$
|
365,000
|
|
|
$
|
1,977,630
|
|
|
$
|
154,140
|
|
|
$
|
(689,376
|
)
|
|
$
|
1,442,394
|
|
|
(18.00%; 15.00% Cash/3.00% Accommodation Fee paid in Cash)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Common Equity (Peekay Boutiques, Inc.)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
(5.95% of fully diluted common shares)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Solex Fine Foods, LLC
|
Senior Secured Term Loan, due 12/28/2016
|
—
|
|
|
1,348,000
|
|
|
—
|
|
|
(421,796
|
)
|
|
926,204
|
|
|||||
|
(18.63%; LIBOR + 12.48% Cash / 3.09% PIK / 2.81% Supplemental PIK)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Common Equity Units
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
(6.57% of fully diluted common equity)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Common Equity Warrants
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
(6.4% of fully diluted common equity)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
WorkWell, LLC
|
Senior Secured Term Loan, due 10/21/2020
|
112,407
|
|
|
—
|
|
|
4,654,787
|
|
|
(29,688
|
)
|
|
4,625,099
|
|
|||||
|
(12.00%; LIBOR + 11.50% with a 0.50% LIBOR floor)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Revolving Line of Credit, due 10/21/2020
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
|
(12.00%; LIBOR + 11.50% with a 0.50% LIBOR floor)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Common Equity Units
|
—
|
|
|
—
|
|
|
250,000
|
|
|
—
|
|
|
250,000
|
|
|||||
|
(6.3% of fully diluted common equity)
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total Affiliate Investments
|
$
|
477,407
|
|
|
$
|
3,325,630
|
|
|
$
|
5,058,927
|
|
|
$
|
(1,140,860
|
)
|
|
7,243,697
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(1) Represents the total amount of interest credited to income for the portion of the period an investment was included in the Affiliate category.
|
||||||||||||||||||||
(2) Gross additions include increases in the cost basis of investments resulting from new portfolio investment and accrued PIK interest. Gross additions also include net increases in unrealized appreciation or net decreases in unrealized depreciation.
|
||||||||||||||||||||
(3) Gross reductions include decreases in the total cost basis of investments resulting from principal or PIK repayments of sales. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
•
|
our future operating results, including the performance of our existing investments;
|
•
|
the introduction, withdrawal, success and timing of business initiatives and strategies;
|
•
|
changes in political, economic or industry conditions, the interest rate environment or financial and capital markets, which could result in changes in the value of our assets;
|
•
|
the relative and absolute investment performance and operations of our investment adviser;
|
•
|
the impact of increased competition;
|
•
|
the impact of investments we intend to make and future acquisitions and divestitures;
|
•
|
our ability to turn potential investment opportunities into transactions and thereafter into completed and successful investments;
|
•
|
the unfavorable resolution of any future legal proceedings;
|
•
|
our business prospects and the prospects of our portfolio companies;
|
•
|
our regulatory structure and tax status;
|
•
|
the adequacy of our cash resources and working capital;
|
•
|
the timing of cash flows, if any, from the operations of our portfolio companies;
|
•
|
the impact of interest rate volatility on our results, particularly because we use leverage as part of our investment strategy;
|
•
|
the ability of our portfolio companies to achieve their objective;
|
•
|
the impact of legislative and regulatory actions and reforms and regulatory, supervisory or enforcement actions of government agencies relating to us or our investment adviser;
|
•
|
our contractual arrangements and relationships with third parties;
|
•
|
our ability to access capital and any future financings by us;
|
•
|
the ability of our investment adviser to attract and retain highly talented professionals; and
|
•
|
the impact of changes to tax legislation and, generally, our tax position.
|
|
As of June 30, 2016
|
|
As of December 31, 2015
|
||||||||||||
|
Cost
|
|
Fair Value
|
|
Cost
|
|
Fair Value
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Senior Secured (1)
|
$
|
74,537,217
|
|
|
$
|
73,085,025
|
|
|
$
|
81,879,369
|
|
|
$
|
81,131,788
|
|
Junior Secured
|
69,326,537
|
|
|
66,712,408
|
|
|
59,156,136
|
|
|
58,236,001
|
|
||||
Equity
|
5,017,550
|
|
|
5,104,311
|
|
|
1,626,897
|
|
|
1,824,777
|
|
||||
CLO Equity
|
1,503,129
|
|
|
1,396,204
|
|
|
1,567,860
|
|
|
1,567,860
|
|
||||
Total Investments
|
$
|
150,384,433
|
|
|
$
|
146,297,948
|
|
|
$
|
144,230,262
|
|
|
$
|
142,760,426
|
|
(1)
|
Senior secured category includes both first out and last out loans. The Company's last out senior secured loans are identified on the Schedule of Investments.
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
|
|
|
|
|
|
||||||||
PIK, beginning of period
|
$
|
1,473,382
|
|
|
$
|
1,811,519
|
|
|
$
|
1,756,332
|
|
|
$
|
1,524,126
|
|
Accrual
|
397,364
|
|
|
314,992
|
|
|
551,189
|
|
|
621,118
|
|
||||
Payments
|
—
|
|
|
(51,117
|
)
|
|
(436,775
|
)
|
|
(69,850
|
)
|
||||
PIK, end of period
|
$
|
1,870,746
|
|
|
$
|
2,075,394
|
|
|
$
|
1,870,746
|
|
|
$
|
2,075,394
|
|
|
|
|
|
|
|
|
|
•
|
Investment Rating 1 is used for investments that are performing above expectations, and whose risks remain favorable compared to the expected risk at the time of the original investment.
|
•
|
Investment Rating 2 is used for investments that are performing within expectations and whose risks remain neutral compared to the expected risk at the time of the original investment. All new loans are initially rated 2.
|
•
|
Investment Rating 3 is used for investments that are performing below expectations and that require closer monitoring, but where no loss of return or principal is expected. Portfolio companies with a rating of 3 may be out of compliance with financial covenants.
|
•
|
Investment Rating 4 is used for investments that are performing substantially below expectations and whose risks have increased substantially since the original investment. These investments are often in work out. Investments with a rating of 4 are those for which there is an increased possibility of some loss of return but no loss of principal is expected.
|
•
|
Investment Rating 5 is used for investments that are performing substantially below expectations and whose risks have increased substantially since the original investment. These investments are almost always in work out. Investments with a rating of 5 are those for which some loss of return and principal is expected.
|
|
|
As of June 30, 2016
|
|
As of December 31, 2015
|
||||||||||||||||
Investment Rating
|
|
Fair Value
|
|
% of Total
Portfolio
|
|
Number of
Debt Investments
|
|
Fair Value
|
|
% of Total
Portfolio
|
|
Number of
Debt Investments
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
1
|
|
$
|
40.4
|
|
|
28.9
|
%
|
|
8
|
|
|
$
|
31.5
|
|
|
22.6
|
%
|
|
5
|
|
2
|
|
70.1
|
|
|
50.2
|
%
|
|
16
|
|
|
87.7
|
|
|
62.9
|
%
|
|
19
|
|
||
3
|
|
17.5
|
|
|
12.5
|
%
|
|
3
|
|
|
12.1
|
|
|
8.7
|
%
|
|
3
|
|
||
4
|
|
11.4
|
|
|
8.2
|
%
|
|
2
|
|
|
7.2
|
|
|
5.2
|
%
|
|
2
|
|
||
5
|
|
0.3
|
|
|
0.2
|
%
|
|
1
|
|
|
0.9
|
|
|
0.6
|
%
|
|
1
|
|
||
|
|
$
|
139.7
|
|
|
100.0
|
%
|
|
30
|
|
|
$
|
139.4
|
|
|
100.0
|
%
|
|
30
|
|
•
|
Interest expense and unused line fees;
|
•
|
professional fees and expenses associated with independent audits and outside legal costs;
|
•
|
the cost of calculating our net asset value, including the cost of any third-party valuation services;
|
•
|
the cost of effecting sales and repurchases of shares of our common stock and other securities;
|
•
|
fees payable to third parties relating to making investments, including out-of-pocket fees and expenses associated with performing due diligence and reviews of prospective investments;
|
•
|
transfer agent and custodial fees;
|
•
|
out-of-pocket fees and expenses associated with marketing efforts;
|
•
|
federal and state registration fees and any stock exchange listing fees;
|
•
|
U.S. federal, state and local taxes;
|
•
|
independent directors’ fees and expenses;
|
•
|
brokerage commissions;
|
•
|
fidelity bond, directors’ and officers’ liability insurance and other insurance premiums;
|
•
|
costs associated with our reporting and compliance obligations under the 1940 Act and other applicable U.S. federal and state securities laws; and
|
•
|
other expenses incurred in connection with administering our business.
|
Item 1A.
|
Risk Factors
|
Exhibit
Number
|
|
Description
|
3.1
|
|
Restated Certificate of Incorporation of Harvest Capital Credit Corporation (the “Company”) (incorporated by reference to the registrant’s Registration Statement on Form N-2, File No. 333-185672, filed on April 24, 2013).
|
|
|
|
3.2
|
|
Bylaws of the Company (incorporated by reference to the registrant’s Registration Statement on Form N-2, File No. 333-185672, filed on March 26, 2013).
|
|
|
|
10.1
|
|
Forth Amendment to Loan and Security Agreement and Joinder and Limited Waiver and Consent, dated as of August 4, 2016, by and among Harvest Capital Credit Corporation, HCAP Equity Holdings, LLC, Pacific Western Bank (successor-by-merger to CapitalSource Bank), as agent and a lender, and each of the other lenders from time to time party thereto. *
|
|
|
|
10.2
|
|
Pledge Agreement, dated as of August 4, 2016, by Harvest Capital Credit Corporation in favor of Pacific Western Bank, as agent. *
|
|
|
|
31.1
|
|
Chief Executive Officer Certification Pursuant to Exchange Act Rule 13a-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
31.2
|
|
Chief Financial Officer Certification Pursuant to Exchange Act Rule 13a-14 (a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
32.1
|
|
Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
32.2
|
|
Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
HARVEST CAPITAL CREDIT CORPORATION
|
|
|
Date: August 9, 2016
|
/s/ Richard P. Buckanavage
|
|
Richard P. Buckanavage
Chief Executive Officer and President
|
|
|
|
/s/ Craig R. Kitchin
|
|
Craig R. Kitchin
Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer)
|
a.
|
amend and restate
clause (g)
thereof in its entirety to read as follows:
|
b.
|
amend and restate
clause (k)
thereof in its entirety to read as follows:
|
c.
|
amend and restate
clause (p)
thereof in its entirety to read as follows:
|
Name and
Address of Pledgor |
Pledged Entity
|
Class of Stock, Membership Interests or Partnership Interests
|
Certificate
Number(s) |
Number of Shares, Membership Interests or Partnership Interests
|
Harvest Capital Credit Corporation
767 Third Avenue, 25
th
Floor
New York, New York 10017
Attn: Richard P. Buckanavage, President and CEO
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HCAP EQUITY HOLDINGS, LLC
,
a Delaware limited liability company
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N/A
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N/A
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100%
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Name and
Address of Pledgor |
Pledged Entity
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Class of Stock, Membership Interests or Partnership Interests
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Certificate
Number(s) |
Number of Shares, Membership Interests or Partnership Interests
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[__________]
[__________]
[__________]
Attn: [__________]
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[__________]
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[__________]
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[__________]
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[__________]
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By:
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/s/ Richard P. Buckanavage
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Richard P. Buckanavage
Chief Executive Officer
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By:
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/s/ Craig R. Kitchin
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Craig R. Kitchin
Chief Financial Officer
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/s/ Richard P. Buckanavage
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Name:
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Richard P. Buckanavage
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Date:
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August 9, 2016
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/s/ Craig R. Kitchin
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Name:
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Craig R. Kitchin
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Date:
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August 9, 2016
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