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☑
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2017
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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 of Incorporation)
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46-1396995
(I.R.S. Employer Identification Number)
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767 Third Avenue, 29
th
Floor
New York, NY
(Address of principal executive offices)
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10017
(Zip Code)
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, par value $0.001 per share
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NASDAQ Global Market
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6.125% Notes due 2022
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NASDAQ Global Market
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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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Emerging growth company
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þ
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(Do not check if a smaller reporting Company)
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Page
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Item 1.
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Business
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•
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Company description, including product or service analysis, market position, industry dynamics, customer and supplier analysis, and management evaluation;
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Quantitative and qualitative analysis of historical financial performance and preparation of 5-year financial projections;
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annual and interim (including monthly) financial information;
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completion of a quality of earnings assessment by an accounting firm;
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capitalization tables showing details of equity capital raised and ownership;
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recent presentations to investors or board members covering the portfolio company’s current status and market opportunity;
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detailed business plan, including an executive summary and discussion of market opportunity;
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detailed background on all senior members of management, including background checks by third party;
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detailed forecast for the current and subsequent five fiscal years;
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information on competitors and the prospective portfolio company’s competitive advantage;
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completion of Phase I (and, if necessary, Phase II) environmental assessment;
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marketing information on the prospective portfolio company’s products, if any;
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information on the prospective portfolio company’s intellectual property; and
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information on the prospective portfolio company from its key customers or clients.
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Review of available monthly or quarterly financial statements compared against the prior year’s comparable period and the company’s financial projections;
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Review and discussion, if applicable, of the management discussion and analysis that will accompany its financial results;
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Review of the company’s quarterly results and overall general business performance and assessment of the company’s compliance with all covenants (financial or otherwise), including preparation of a portfolio monitoring report or “PMR” (on a quarterly basis), which will be distributed to the members of the investment committee of our investment adviser;
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Periodic, and often, face-to-face meetings with management team and owners (including private equity firm if applicable); and
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Attendance at company board of directors meetings through formal board seat or board observation rights.
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Investment Rating
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Summary Description
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1
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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.
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2
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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.
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3
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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.
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4
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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 workout. 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.
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5
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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 workout. Investments with a rating of 5 are those for which some loss of return and principal is expected.
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identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies);
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determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes; and
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closes, monitors and administers the investments we make, including the exercise of any voting or consent rights.
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Pre-incentive fee net investment income (investment income – (management fee + other expenses)) = 0.55%
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Incentive fee = (100% x “Catch-Up”) + (the greater of 0%
AND
(20% x (pre-incentive fee net investment income – 2.5%)))
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=
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(100.0% x (pre-incentive fee net investment income – 2.0%)) + 0%
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=
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(100.0% x (2.30% – 2.0%))
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=
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100.0% x 0.30%
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=
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0.30%
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Pre-incentive fee net investment income (investment income – (management fee + other expenses)) = 2.8%
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Pre-incentive fee net investment income exceeds hurdle rate; therefore there is an incentive fee.
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=
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(100% x (2.5% – 2.0%)) + (20% x (2.8% – 2.5%))
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=
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0.50% + (20% x 0.3%)
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=
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0.50% + 0.06%
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=
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0.56%
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(1)
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Represents 8.0% annualized hurdle rate.
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(2)
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Represents 2.00% annualized management fee based on the assumption that our gross assets are not above $350 million. The annual rate at which our management fee is calculated is dependent upon the size of our gross assets, with the management fee being 2.0% on our gross assets up to and including $350 million, 1.75% on gross assets above $350 million and up to and including $1 billion, and 1.5% on gross assets above $1 billion.
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(3)
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Excludes organizational and offering expenses.
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Investment income (including interest, dividends, fees, etc.) = 3.50%
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Hurdle rate(1) = 2.0%
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Management fee(2) = 0.50%
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Other expenses (legal, accounting, custodian, etc.)(3) = 0.20%
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Pre-incentive fee net investment income (investment income – (management fee + other expenses) = 2.80%
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Cumulative incentive compensation accrued and/or paid for preceding 11 calendar quarters = $9,000,000
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20% of cumulative net increase in net assets resulting from operations over current and preceding 11 calendar quarters = $8,000,000
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Investment income (including interest, dividends, fees, etc.) = 3.50%
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Hurdle rate(1) = 2.0%
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Management fee(2) = 0.50%
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Other expenses (legal, accounting, custodian, transfer agent, etc.)(3) = 0.20%
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Pre-incentive fee net investment income (investment income – (management fee + other expenses) = 2.80%
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Cumulative incentive compensation accrued and/or paid for preceding 11 calendar quarters = $9,000,000
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20.0% of cumulative net increase in net assets resulting from operations over current and preceding 11 calendar quarters = $10,000,000
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(1)
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Represents 8.0% annualized hurdle rate.
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(2)
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Represents 2.00% annualized base management fee based on the assumption that our gross assets are not above $350 million. The annual rate at which our management fee is calculated is dependent upon the size of our gross assets, with the management fee being 2.0% on our gross assets up to and including $350 million, 1.75% on gross assets above $350 million and up to and including $1 billion, and 1.5% on gross assets above $1 billion.
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(3)
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Excludes organizational and offering expenses.
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(4)
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The “catch-up” provision is intended to provide our investment adviser with an incentive fee of 20% on all pre-incentive fee net investment income as if a hurdle rate did not apply when our net investment income exceeds 2.5% in any fiscal quarter.
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Year 1:
$20 million investment made in Company A (“Investment A”), and $30 million investment made in Company B (“Investment B”)
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Year 2:
Investment A sold for $50 million and fair market value, or FMV, of Investment B determined to be $32 million
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Year 3:
FMV of Investment B determined to be $25 million
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Year 4:
Investment B sold for $31 million
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Year 1:
None
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Year 2:
Capital gains incentive fee of $6.0 million ($30 million realized capital gains on sale of Investment A multiplied by 20.0%)
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Year 3:
None; $5.0 million (20% multiplied by ($30 million cumulative capital gains less $5 million cumulative capital depreciation)) less $6.0 million (previous capital gains fee paid in Year 2)
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Year 4:
Capital gains incentive fee of $200,000; $6.2 million ($31 million cumulative realized capital gains multiplied by 20%) less $6.0 million (capital gains fee paid in Year 2)
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Year 1:
$20 million investment made in Company A (“Investment A”), $30 million investment made in Company B (“Investment B”) and $25 million investment made in Company C (“Investment C”)
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Year 2:
Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be $25 million
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Year 3:
FMV of Investment B determined to be $27 million and Investment C sold for $30 million
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Year 4:
FMV of Investment B determined to be $24 million
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Year 5:
Investment B sold for $20 million
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Year 1:
None
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Year 2:
Capital gains incentive fee of $5.0 million; 20% multiplied by $25 million ($30 million realized capital gains on Investment A less $5 million unrealized capital depreciation on Investment B)
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Year 3:
Capital gains incentive fee of $1.4 million; $6.4 million (20% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million unrealized capital depreciation on Investment B)) less $5.0 million capital gains fee received in Year 2
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Year 4:
None
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Year 5:
None; $5.0 million of capital gains incentive fee (20% multiplied by $25 million (cumulative realized capital gains of $35 million less realized capital losses of $10 million)) less $6.4 million cumulative capital gains fee paid in Year 2 and Year 3
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our organization;
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calculating our net asset value (including the cost and expenses of independent valuation firms);
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expenses, including travel expense, incurred by HCAP Advisors or payable to third parties performing due diligence on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights;
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interest payable on debt, if any, incurred to finance our investments;
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the costs of all offerings of our stock and other securities, if any;
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the base management fee and any incentive management fee;
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distributions on our shares;
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administration fees payable under our administration agreement;
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the allocated costs incurred by HCAP Advisors in providing managerial assistance to those portfolio companies that request it;
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amounts payable to third parties relating to, or associated with, making investments;
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transfer agent and custodial fees;
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registration fees;
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listing fees;
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taxes;
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independent director fees and expenses;
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costs associated with our reporting and compliance obligations under the 1940 Act and applicable federal and state securities laws;
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directors and officers/errors and omissions liability insurance, and any other insurance premiums;
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direct costs and expenses of administration, including audit and legal costs; and
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all other expenses reasonably incurred by us or our administrator in connection with administering our business, such as the allocable portion of overhead under our administration agreement, including rent and the allocable portions of the cost of our chief financial officer and chief compliance officer and their respective staffs and administrative services provided to the Company by our chief executive officer and other officers.
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Effective
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Approval date
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From
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To
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January 17, 2013
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April 29, 2013
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April 29, 2015
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March 5, 2015
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April 29, 2015
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April 29, 2016
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March 8, 2016
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April 29, 2016
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April 29, 2017
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March 10, 2017
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April 29, 2017
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April 29, 2018
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•
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Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:
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is organized under the laws of, and has its principal place of business in, the United States;
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is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and
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satisfies any of the following:
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▪
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is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million;
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▪
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is controlled by a BDC or a group of companies including a BDC, the BDC actually exercises a controlling influence over the management or policies of the eligible portfolio company, and, as a result thereof, the BDC has an affiliated person who is a director of the eligible portfolio company; or
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▪
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has a market capitalization of less than $250 million or does not have any class of securities listed on a national securities exchange.
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Securities of any eligible portfolio company which we control.
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Securities purchased in a private transaction from a U.S. issuer that is not an investment company (other than a small business investment company wholly owned by us) or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.
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Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company.
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Securities received in exchange for or distributed on or with respect to securities described above, or pursuant to the exercise of warrants or rights relating to such securities.
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Cash, cash equivalents, U.S. Government securities or high-quality debt securities maturing in one year or less from the time of investment.
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continue to qualify as a BDC under the 1940 Act at all times during each taxable year;
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derive in each taxable year at least 90% of our gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities, net income from certain “qualified publicly traded partnerships,” or other income derived with respect to our business of investing in such stock or securities (the “90% Income Test”); and
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diversify our holdings so that at the end of each quarter of the taxable year:
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at least 50% of the value of our assets consists of cash, cash equivalents, U.S. Government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and
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no more than 25% of the value of our assets is invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly traded partnerships” (the “Diversification Tests”).
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Item 1A.
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Risk Factors
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may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;
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typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render small and mid-sized companies more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;
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are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;
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generally have less predictable operating results, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position;
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may from time to time be parties to litigation, and our executive officers, directors and our investment adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies;
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may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity; and
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may be particularly vulnerable to changes in customer preferences and market conditions, depend on a limited number of customers, and face intense competition, including from companies with greater financial, technical, managerial and marketing resources.
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-10%
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-5%
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0%
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5%
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10%
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Corresponding return to stockholder
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(19
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)%
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(11
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)%
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(3
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)%
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4
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%
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12
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%
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The Annual Distribution Requirement for a regulated investment company will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Because we use debt financing, we will be subject to an asset coverage ratio requirement under the 1940 Act. If we are unable to obtain cash from other sources, we could fail to qualify for regulated investment company tax treatment and thus become subject to corporate-level income tax.
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The income source requirement will be satisfied if we obtain at least 90% of our income for each year from dividends, interest, gains from the sale of stock or securities or similar sources.
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The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. To satisfy this requirement, at least 50% of the value of our assets must consist of cash, cash equivalents, U.S. government securities, securities of other regulated investment companies, and other acceptable securities; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other regulated investment companies, of one issuer, of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or of certain “qualified publicly traded partnerships.” Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of regulated investment company status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.
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sudden electrical or telecommunications outages;
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natural disasters such as earthquakes, tornadoes and hurricanes;
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disease pandemics;
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events arising from local or larger scale political or social matters, including terrorist acts; and
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cyber attacks.
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increase or maintain in whole or in part our equity ownership percentage in a portfolio company;
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exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or
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attempt to preserve or enhance the value of our investment.
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significant volatility in the market price and trading volume of securities of BDCs or other companies in our sector, which is not necessarily related to the operating performance of these companies;
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changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs;
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failure to qualify or loss of our qualification, as applicable, as a RIC or BDC;
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changes in earnings or variations in operating results;
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changes in the value of our portfolio of investments;
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changes in accounting guidelines governing valuation of our investments;
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any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;
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departures of key personnel;
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loss of a major funding source;
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operating performance of companies comparable to us;
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litigation and governmental investigations; and
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economic and political conditions or events.
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preferred stock constitutes a “senior security” for purposes of the asset coverage test;
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dividends on any preferred stock we issue generally must be cumulative;
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payments of dividends on and repayments of the liquidation preference of preferred stock must take preference over any dividends or other payments to our common stockholders;
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the holders of shares of preferred stock, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors if and for so long as dividends on the preferred stock are in arrears by two years or more; and
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under the terms of such securities, we may not be permitted to declare a cash distribution on our common stock or purchase our common stock unless our preferred stock (together with all of our other senior securities) has at the time of the declaration of any such distribution or at the time of any such purchase an asset coverage ratio of at least 200% or, if we obtain the required approvals from our independent directors and/or stockholders, 150% (after deducting the amount of such dividend, distribution or purchase price, as the case may be).
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the time remaining to the maturity of these debt securities;
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the outstanding principal amount of debt securities with terms identical to these debt securities;
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the general economic environment;
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the supply of debt securities trading in the secondary market, if any;
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the redemption, repayment or convertible features, if any, of these debt securities;
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the level, direction and volatility of market interest rates generally; and
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market rates of interest higher or lower than rates borne by the debt securities.
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issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the 2022 Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the 2022 Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the 2022 Notes, and (4) securities, indebtedness, or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the 2022 Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act or any successor provisions, whether or not we continue to be subject to such provisions of the 1940 Act, but giving effect, in each case, to any exemptive relief granted to us by the SEC. Currently, these provisions generally prohibit us from incurring additional borrowings, including through the issuance of additional debt securities, unless our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowings , but recently passed legislation may allow us to reduce our asset coverage ratio to 150% and increase our leverage if we obtain certain approvals as described under "--Recent legislation may allow us to incur additional leverage.";
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pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the 2022 Notes, except that we have agreed that, for the period of time during which the 2022 Notes are outstanding, we will not violate Section 18(a)(1)(B) as modified by (i) Section 61(a)(1) of the 1940 Act or any successor provisions and after giving effect to any exemptive relief granted to us by the SEC and (ii) the following two exceptions: (A) we will be permitted to declare a cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act, but only up to such amount as is necessary for us to maintain our status as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986; and (B) this restriction will not be triggered unless and until such time as our asset coverage has not been in compliance with the minimum asset coverage required by Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act (after giving effect to any exemptive relief granted to us by the SEC) for more than six consecutive months. If Section 18(a)(1)(B) as modified by Section 61(a)(1) of the 1940 Act were applicable to us, these provisions would generally prohibit us from declaring any cash dividend or distribution upon any class of our capital stock, or purchasing any such capital stock if our asset coverage, as defined in the 1940 Act, were below 200% at the time of the declaration of the dividend or distribution or the purchase and after deducting the amount of such dividend, distribution or purchase, but recently passed legislation may allow us to reduce our asset coverage ratio to 150% and increase our leverage if we obtain certain approvals as described under "--Recent legislation may allow us to incur additional leverage.
"
;
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sell assets (other than certain limited restrictions on our ability to consolidate, merge, or sell all or substantially all of our assets);
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enter into transactions with affiliates;
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create liens (including liens on the shares of our future subsidiaries) or enter into sale and leaseback transactions;
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make investments; or
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create restrictions on the payment of dividends or other amounts to us from any of our future subsidiaries.
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosures
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Fiscal Year Ended
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NAV
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High
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Low
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Premium or Discount of High Sales Price to NAV
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Premium or Discount of Low Sales Price to NAV
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December 31, 2017
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Fourth Quarter
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$12.66
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$13.80
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$10.67
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9.0
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%
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(15.7
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)%
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Third Quarter
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$12.86
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$13.99
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$12.91
|
|
8.8
|
%
|
|
0.4
|
%
|
Second Quarter
|
$13.25
|
|
$13.97
|
|
$12.81
|
|
5.4
|
%
|
|
(3.3
|
)%
|
First Quarter
|
$13.89
|
|
$14.52
|
|
$12.67
|
|
4.5
|
%
|
|
(8.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
||
December 31, 2016
|
|
|
|
|
|
|
|
|
|
||
Fourth Quarter
|
$13.86
|
|
$13.75
|
|
$12.05
|
|
(0.8
|
)%
|
|
(13.1
|
)%
|
Third Quarter
|
$13.75
|
|
$13.09
|
|
$12.13
|
|
(4.8
|
)%
|
|
(11.8
|
)%
|
Second Quarter
|
$13.71
|
|
$13.45
|
|
$12.22
|
|
(1.9
|
)%
|
|
(10.9
|
)%
|
First Quarter
|
$13.90
|
|
$12.17
|
|
$10.02
|
|
(12.4
|
)%
|
|
(27.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
Date Declared
|
|
Record Date
|
|
Payment Date
|
|
Amount Per Share
|
Fiscal 2018
|
|
|
|
|
|
|
February 8, 2018
|
|
April 19, 2018
|
|
April 26, 2018
|
|
$0.0950
|
February 8, 2018
|
|
March 20, 2018
|
|
March 27, 2018
|
|
$0.0950
|
February 8, 2018
|
|
February 21, 2018
|
|
February 28, 2018
|
|
$0.0950
|
November 7, 2017
|
|
January 19, 2018
|
|
January 26, 2018
|
|
$0.1125
|
Total (2018)
|
|
|
|
|
|
$0.3975
|
Fiscal 2017
|
|
|
|
|
|
|
November 7, 2017
|
|
December 22, 2017
|
|
December 29, 2017
|
|
$0.1125
|
November 7, 2017
|
|
November 24, 2017
|
|
November 30, 2017
|
|
$0.1125
|
August 9, 2017
|
|
October 19, 2017
|
|
October 26, 2017
|
|
$0.2125
|
August 9, 2017
|
|
September 21, 2017
|
|
September 28, 2017
|
|
$0.1125
|
August 9, 2017
|
|
August 17, 2017
|
|
August 24, 2017
|
|
$0.1125
|
May 9, 2017
|
|
July 20, 2017
|
|
July 27, 2017
|
|
$0.1125
|
May 9, 2017
|
|
June 15, 2017
|
|
June 22, 2017
|
|
$0.1125
|
May 9, 2017
|
|
May 19, 2017
|
|
May 26, 2017
|
|
$0.1125
|
February 1, 2017
|
|
April 20, 2017
|
|
April 27, 2017
|
|
$0.1125
|
February 1, 2017
|
|
March 16, 2017
|
|
March 23, 2017
|
|
$0.1125
|
February 1, 2017
|
|
February 16, 2017
|
|
February 23, 2017
|
|
$0.1125
|
November 3, 2016
|
|
January 12, 2017
|
|
January 19, 2017
|
|
$0.1125
|
Total (2017)
|
|
|
|
|
|
$1.4500
|
Fiscal 2016
|
|
|
|
|
|
|
November 3, 2016
|
|
December 15, 2016
|
|
December 22, 2016
|
|
$0.1125
|
November 3, 2016
|
|
November 21, 2016
|
|
November 28, 2016
|
|
$0.1125
|
August 4, 2016
|
|
October 13, 2016
|
|
October 20, 2016
|
|
$0.1125
|
August 4, 2016
|
|
September 15, 2016
|
|
September 22, 2016
|
|
$0.1125
|
August 4, 2016
|
|
August 19, 2016
|
|
August 25, 2016
|
|
$0.1125
|
May 4, 2016
|
|
July 14, 2016
|
|
July 21, 2016
|
|
$0.1125
|
May 4, 2016
|
|
June 16, 2016
|
|
June 23, 2016
|
|
$0.1125
|
May 4, 2016
|
|
May 20, 2016
|
|
May 27, 2016
|
|
$0.1125
|
February 3, 2016
|
|
April 21, 2016
|
|
April 28, 2016
|
|
$0.1125
|
February 3, 2016
|
|
March 17, 2016
|
|
March 24, 2016
|
|
$0.1125
|
February 3, 2016
|
|
February 18, 2016
|
|
February 25, 2016
|
|
$0.1125
|
November 3, 2015
|
|
January 14, 2016
|
|
January 21, 2016
|
|
$0.1125
|
Total (2016)
|
|
|
|
|
|
$1.3500
|
Fiscal 2015
|
|
|
|
|
|
|
November 3, 2015
|
|
December 17, 2015
|
|
December 24, 2015
|
|
$0.1125
|
November 3, 2015
|
|
November 20, 2015
|
|
November 27, 2015
|
|
$0.1125
|
August 5, 2015
|
|
October 15, 2015
|
|
October 22, 2015
|
|
$0.1125
|
August 5, 2015
|
|
September 17, 2015
|
|
September 24, 2015
|
|
$0.1125
|
August 5, 2015
|
|
August 20, 2015
|
|
August 27, 2015
|
|
$0.1125
|
May 1, 2015
|
|
July 23, 2015
|
|
July 30, 2015
|
|
$0.1125
|
May 1, 2015
|
|
June 18, 2015
|
|
June 25, 2015
|
|
$0.1125
|
May 1, 2015
|
|
May 21, 2015
|
|
May 28, 2015
|
|
$0.1125
|
February 13, 2015
|
|
April 23, 2015
|
|
April 30, 2015
|
|
$0.1125
|
February 13, 2015
|
|
March 20, 2015
|
|
March 27, 2015
|
|
$0.1125
|
February 13, 2015
|
|
February 23, 2015
|
|
February 27, 2015
|
|
$0.1125
|
November 6, 2014
|
|
January 22, 2015
|
|
January, 29, 2015
|
|
$0.1125
|
Total (2015)
|
|
|
|
|
|
$1.3500
|
Fiscal 2014
|
|
|
|
|
|
|
November 6, 2014
|
|
December 17, 2014
|
|
December 24, 2014
|
|
$0.1125
|
November 6, 2014
|
|
November 24, 2014
|
|
November 28, 2014
|
|
$0.1125
|
August 5, 2014
|
|
October 16, 2014
|
|
October 23, 2014
|
|
$0.1125
|
August 5, 2014
|
|
September 18, 2014
|
|
September 25, 2014
|
|
$0.1125
|
August 5, 2014
|
|
August 25, 2014
|
|
August 29, 2014
|
|
$0.1125
|
March 26, 2014
|
|
July 17, 2014
|
|
July 24, 2014
|
|
$0.1125
|
March 26, 2014
|
|
June 19, 2014
|
|
June 26, 2014
|
|
$0.1125
|
March 26, 2014
|
|
May 22, 2014
|
|
May 29, 2014
|
|
$0.1125
|
February 5, 2014
|
|
April 17, 2014
|
|
April 24, 2014
|
|
$0.1125
|
February 5, 2014
|
|
March 20, 2014
|
|
March 27, 2014
|
|
$0.1125
|
February 5, 2014
|
|
February 20, 2014
|
|
February 27, 2014
|
|
$0.1125
|
November 5, 2013
|
|
January 16, 2014
|
|
January 23, 2014
|
|
$0.1125
|
Total (2014)
|
|
|
|
|
|
$1.3500
|
|
|
|
|
|
|
|
Fiscal 2013
|
|
|
|
|
|
|
November 5, 2013
|
|
December 19, 2013
|
|
December 26, 2013
|
|
$0.1125
|
November 5, 2013
|
|
November 21, 2013
|
|
November 29, 2013
|
|
$0.1125
|
August 2, 2013
|
|
October 17, 2013
|
|
October 24, 2013
|
|
$0.1125
|
August 2, 2013
|
|
September 19, 2013
|
|
September 26, 2013
|
|
$0.1125
|
August 2, 2013
|
|
August 23, 2013
|
|
August 30, 2013
|
|
$0.1125
|
June 6, 2013
|
|
July 11, 2013
|
|
July 18, 2013
|
|
$0.1125
|
June 6, 2013
|
|
June 20, 2013
|
|
June 27, 2013
|
|
$0.0900
|
Total (2013)
|
|
|
|
|
|
$0.7650
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Purchase Price
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plan
|
|
Maximum Remaining Dollar Value that May Yet Be Purchased Under Plan
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|||||
January
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
||
February
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
||
March
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
||
April
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
||
May
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
||
June
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
||
July
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
||
August
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
||
September
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
||
October
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
||
November
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
||
December
|
|
36,614
|
|
|
10.98
|
|
|
36,614
|
|
|
$
|
2,598,098
|
|
|
Total repurchases during 2017
|
|
36,614
|
|
|
$10.98
|
|
36,614
|
|
|
$
|
2,598,098
|
|
*
|
Item 6.
|
Selected Financial Data
|
|
As of and for the
Year Ended December 31,
|
||||||||||||||||||
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest income
|
$
|
18,468,062
|
|
|
$
|
20,738,511
|
|
|
$
|
20,074,063
|
|
|
$
|
14,004,609
|
|
|
$
|
8,699,968
|
|
Other income
|
236,198
|
|
|
154,963
|
|
|
252,833
|
|
|
707,438
|
|
|
60,000
|
|
|||||
Net investment income, after taxes
|
8,236,854
|
|
|
10,052,422
|
|
|
9,651,015
|
|
|
8,265,253
|
|
|
5,831,370
|
|
|||||
Net change in unrealized appreciation (depreciation) on investments
|
1,458,173
|
|
|
(3,528,349
|
)
|
|
(2,182,647
|
)
|
|
464,416
|
|
|
(1,709,209
|
)
|
|||||
Net realized (losses) gains on investments
|
(8,062,441
|
)
|
|
(517,586
|
)
|
|
(1,057,355
|
)
|
|
665,813
|
|
|
—
|
|
|||||
Net increase in net assets resulting from operations
|
1,632,586
|
|
|
6,006,487
|
|
|
6,411,013
|
|
|
9,395,482
|
|
|
4,122,161
|
|
|||||
Other Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Dollar-weighted average annualized yield on debt and other income-producing investments (1)
|
15.3
|
%
|
|
15.4
|
%
|
|
13.9
|
%
|
|
15.1
|
%
|
|
16.7
|
%
|
|||||
Dollar-weighted average annualized yield on total investments (1)
|
13.7
|
%
|
|
14.4
|
%
|
|
13.6
|
%
|
|
14.0
|
%
|
|
16.4
|
%
|
|||||
Number of portfolio companies at period end
|
31
|
|
|
31
|
|
|
33
|
|
|
29
|
|
|
21
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Per Share (2):
|
|
|
|
|
|
|
|
|
|
||||||||||
Net increase in net assets resulting from operations per share (3)
|
|
$0.25
|
|
|
|
$0.96
|
|
|
|
$1.03
|
|
|
|
$1.52
|
|
|
|
$0.93
|
|
Net investment income per share (3)
|
|
$1.28
|
|
|
|
$1.60
|
|
|
|
$1.54
|
|
|
|
$1.34
|
|
|
|
$1.32
|
|
Distributions declared per common share
|
|
$1.45
|
|
|
|
$1.35
|
|
|
|
$1.35
|
|
|
|
$1.35
|
|
|
|
$2.58
|
|
Net asset value per share
|
$12.66
|
|
$13.86
|
|
$14.26
|
|
$14.60
|
|
$14.45
|
||||||||||
Statement of Assets and Liabilities Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Gross investments
|
$
|
115,600,678
|
|
|
$
|
134,101,534
|
|
|
$
|
142,760,426
|
|
|
$
|
115,834,428
|
|
|
$
|
70,552,476
|
|
Cash and restricted cash
|
11,464,437
|
|
|
7,556,978
|
|
|
3,069,409
|
|
|
2,171,771
|
|
|
18,984,162
|
|
|||||
Total assets
|
128,152,840
|
|
|
142,989,647
|
|
|
149,137,859
|
|
|
119,870,004
|
|
|
91,345,251
|
|
|||||
Borrowings
|
44,467,405
|
|
|
53,731,355
|
|
|
57,198,293
|
|
|
26,075,140
|
|
|
—
|
|
|||||
Total liabilities
|
46,371,411
|
|
|
55,867,351
|
|
|
59,723,603
|
|
|
28,997,689
|
|
|
2,490,765
|
|
|||||
Net assets
|
81,781,429
|
|
|
87,122,296
|
|
|
89,414,256
|
|
|
90,872,315
|
|
|
88,854,486
|
|
(1)
|
The dollar-weighted average annualized effective yield on debt and other income-producing investments is computed using the effective interest rates for our debt investments and other income producing investments, including cash and PIK interest as well as the accretion of deferred fees. The individual investment yields are then weighted by the respective fair values of the investments (as of the date presented) in calculating the weighted average effective yield as a percentage of our debt and other income-producing investments. The dollar-weighted average annualized yield on total investments takes the same yields but weights them to determine the weighted average effective yield as a percentage of the Company's total investments. The dollar-weighted average annualized yield on the Company’s investments for a given period will generally be higher than what investors in our common stock would realize in a return over the same period because the dollar-weighted average annualized yield does not reflect the Company’s expenses or any sales load that may be paid by investors.
|
(2)
|
All per share amounts are basic and diluted.
|
(3)
|
The shares outstanding and per share amounts for all periods prior to May 2013 have been adjusted for the conversion rate of 0.9913 shares for each unit.
|
Item 7.
|
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.
|
|
December 31, 2017
|
|
December 31, 2016
|
||||||||||||
|
Cost
|
|
Fair Value
|
|
Cost
|
|
Fair Value
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Senior Secured
|
$
|
61,508,211
|
|
|
$
|
59,010,761
|
|
|
$
|
77,341,917
|
|
|
$
|
76,221,062
|
|
Junior Secured
|
48,217,674
|
|
|
48,098,749
|
|
|
55,460,089
|
|
|
52,541,766
|
|
||||
Equity and Equity Related
|
9,021,290
|
|
|
7,958,168
|
|
|
5,159,856
|
|
|
4,207,964
|
|
||||
Revenue Linked Security
|
393,515
|
|
|
533,000
|
|
|
999,127
|
|
|
992,012
|
|
||||
CLO Equity
|
—
|
|
|
—
|
|
|
138,730
|
|
|
138,730
|
|
||||
Total Investments
|
$
|
119,140,690
|
|
|
$
|
115,600,678
|
|
|
$
|
139,099,719
|
|
|
$
|
134,101,534
|
|
|
2017
|
||||||||||||||||||
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
FY
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
PIK, beginning of period
|
$
|
2,582,253
|
|
|
$
|
3,063,183
|
|
|
$
|
3,503,747
|
|
|
$
|
3,494,981
|
|
|
$
|
2,582,253
|
|
Accrual
|
490,832
|
|
|
440,564
|
|
|
497,647
|
|
|
364,044
|
|
|
1,793,087
|
|
|||||
Payments
|
(9,902
|
)
|
|
—
|
|
|
(228,774
|
)
|
|
(6,389
|
)
|
|
(245,065
|
)
|
|||||
Write-off
|
—
|
|
|
—
|
|
|
(277,639
|
)
|
|
—
|
|
|
(277,639
|
)
|
|||||
PIK, end of period
|
$
|
3,063,183
|
|
|
$
|
3,503,747
|
|
|
$
|
3,494,981
|
|
|
$
|
3,852,636
|
|
|
$
|
3,852,636
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
||||||||||||||||||
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
FY
|
||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||
PIK, beginning of period
|
$
|
1,756,333
|
|
|
$
|
1,473,384
|
|
|
$
|
1,870,747
|
|
|
$
|
2,301,794
|
|
|
$
|
1,756,333
|
|
Accrual
|
153,826
|
|
|
397,363
|
|
|
431,047
|
|
|
516,497
|
|
|
1,498,733
|
|
|||||
Payments
|
(436,775
|
)
|
|
—
|
|
|
—
|
|
|
(96,895
|
)
|
|
(533,670
|
)
|
|||||
PIK, end of period
|
$
|
1,473,384
|
|
|
$
|
1,870,747
|
|
|
$
|
2,301,794
|
|
|
$
|
2,721,396
|
|
|
$
|
2,721,396
|
|
|
|
|
|
|
|
|
|
|
|
•
|
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 workout. Investments with a rating of 4 are those for which 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 workout. Investments with a rating of 5 are those for which some loss of return and principal is expected.
|
|
|
As of December 31, 2017
|
|
As of December 31, 2016
|
||||||||||||||||
Investment Rating
|
|
Fair Value (in millions)
|
|
% of Total
Portfolio
|
|
Number of
Portfolio
Companies
|
|
Fair Value (in millions)
|
|
% of Total
Portfolio
|
|
Number of
Portfolio
Companies
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
1
|
|
$
|
25.6
|
|
|
23.9
|
%
|
|
8
|
|
|
$
|
33.4
|
|
|
26.0
|
%
|
|
9
|
|
2
|
|
48.9
|
|
|
45.6
|
%
|
|
10
|
|
|
70.8
|
|
|
55.0
|
%
|
|
13
|
|
||
3
|
|
20.3
|
|
|
19.0
|
%
|
|
3
|
|
|
14.5
|
|
|
11.2
|
%
|
|
3
|
|
||
4
|
|
6.7
|
|
|
6.3
|
%
|
|
2
|
|
|
10.1
|
|
|
7.8
|
%
|
|
2
|
|
||
5
|
|
5.6
|
|
|
5.2
|
%
|
|
1
|
|
|
—
|
|
*
|
—
|
%
|
*
|
1
|
|
||
|
|
$
|
107.1
|
|
|
100.0
|
%
|
|
24
|
|
|
$
|
128.8
|
|
|
100.0
|
%
|
|
28
|
|
•
|
Interest expense and unused line fees;
|
•
|
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;
|
•
|
fees and expenses associated with independent audits and outside legal costs, and
|
•
|
costs associated with our reporting and compliance obligations under the 1940 Act and other applicable U.S. federal and state securities laws.
|
|
Twelve Months Ended December 31,
|
|||||
|
2017
|
2016
|
||||
Applied Systems, Inc. (Senior Secured Term Loan)
|
$
|
—
|
|
$
|
7,878
|
|
Atrium Innovations, Inc. (Senior Secured Term Loan)
|
—
|
|
(3,656
|
)
|
||
Bridgewater Engine Ownership III, LLC (Residual Value)
|
—
|
|
18,301
|
|
||
CRS Reprocessing, LLC (Junior Secured Term Loan)
|
(6,293,866
|
)
|
—
|
|
||
Infinite Aegis Group, LLC (Common Equity Warrants)
|
—
|
|
(77,522
|
)
|
||
Infracon Energy Services Corp. (Unsecured Note)
|
—
|
|
10,775
|
|
||
Lanco Acquisition, LLC (Warrants to Purchase Common Equity)
|
60,000
|
|
—
|
|
||
Mercury Network, LLC (Common Equity Units)
|
301,001
|
|
—
|
|
||
Optimal Blue, LLC (Class A Common Equity Units)
|
—
|
|
683,578
|
|
||
Peekay Acquisition, LLC (Senior Secured Term Loan)
|
(1,995,421
|
)
|
—
|
|
||
Peekay Acquisition, LLC (Common Stock)
|
(105,000
|
)
|
—
|
|
||
Rostra Tool Company (Common Equity Warrants)
|
4,096
|
|
55,226
|
|
||
Shinnecock CLO 2006-1, Ltd. (CLO Subordinated Notes)
|
(33,251
|
)
|
(69,903
|
)
|
||
Solex Fine Foods, LLC Common Equity Units
|
—
|
|
(700,465
|
)
|
||
Solex Fine Foods, LLC (Senior Secured Term Loan)
|
—
|
|
(441,798
|
)
|
||
Net realized losses
|
$
|
(8,062,441
|
)
|
$
|
(517,586
|
)
|
•
|
Interest expense and unused line fees;
|
•
|
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;
|
•
|
fees and expenses associated with independent audits and outside legal costs, and
|
•
|
costs associated with our reporting and compliance obligations under the 1940 Act and other applicable U.S. federal and state securities laws.
|
|
Twelve Months Ended December 31,
|
|||||
|
2016
|
2015
|
||||
Applied Systems, Inc. (Senior Secured Term Loan)
|
$
|
7,878
|
|
$
|
—
|
|
Atrium Innovations, Inc. (Senior Secured Term Loan)
|
(3,656
|
)
|
—
|
|
||
Bridgewater Engine Ownership III, LLC (Residual Value)
|
18,301
|
|
—
|
|
||
CRS Reprocessing, LLC (Junior Secured Term Loan)
|
—
|
|
(674,880
|
)
|
||
Dell International LLC (Senior Secured Term Loan)
|
—
|
|
2,493
|
|
||
FCA US LLC (Senior Secured Term Loan)
|
—
|
|
(1,036
|
)
|
||
Infinite Aegis Group, LLC (Common Equity Warrants)
|
(77,522
|
)
|
—
|
|
||
Infracon Energy Services Corp. (Unsecured Note)
|
10,775
|
|
|
|||
LNB Construction, Inc. (Options to Purchase Common Equity)
|
—
|
|
(104,525
|
)
|
||
Optimal Blue, LLC (Class A Common Equity Units)
|
683,578
|
|
—
|
|
||
Rostra Tool Company (Common Equity Warrants)
|
55,226
|
|
71,810
|
|
||
Shinnecock CLO 2006-1, Ltd. (CLO Subordinated Notes)
|
(69,903
|
)
|
(351,217
|
)
|
||
Solex Fine Foods, LLC Common Equity Units
|
(700,465
|
)
|
—
|
|
||
Solex Fine Foods, LLC (Senior Secured Term Loan)
|
(441,798
|
)
|
—
|
|
||
Net realized gains (losses)
|
$
|
(517,586
|
)
|
$
|
(1,057,355
|
)
|
|
December 31,
|
||||||
|
2017
|
|
2016
|
||||
ASSETS:
|
|
|
|
||||
Non-affiliated/non-control investments, at fair value (cost of
$80,790,705 at 12/31/17 and $120,162,148 at 12/31/16)
|
$
|
82,902,537
|
|
|
$
|
119,032,736
|
|
Affiliated investments, at fair value (cost of $26,365,364 at 12/31/17 and $15,994,294 at 12/31/16)
|
25,983,871
|
|
|
12,137,552
|
|
||
Control investments, at fair value (cost of $11,984,621 at 12/31/17 and $2,943,277 at 12/31/16)
|
6,714,270
|
|
|
2,931,246
|
|
||
Total investments, at fair value (cost of $119,140,690 at 12/31/17 and $139,099,719 at 12/31/16)
|
115,600,678
|
|
|
134,101,534
|
|
||
|
|
|
|
||||
Cash
|
4,233,597
|
|
|
4,472,749
|
|
||
Restricted cash
|
7,230,840
|
|
|
3,084,229
|
|
||
Interest receivable
|
287,408
|
|
|
578,140
|
|
||
Accounts receivable – other
|
37,688
|
|
|
27,135
|
|
||
Deferred offering costs
|
146,446
|
|
|
98,549
|
|
||
Deferred financing costs
|
508,284
|
|
|
542,342
|
|
||
Other assets
|
107,899
|
|
|
84,969
|
|
||
Total assets
|
$
|
128,152,840
|
|
|
$
|
142,989,647
|
|
|
|
|
|
||||
LIABILITIES:
|
|
|
|
||||
Revolving line of credit
|
$
|
16,721,853
|
|
|
$
|
26,946,613
|
|
Unsecured notes (net of deferred offering costs of $1,004,448 at 12/31/17 and $715,258 at 12/31/16).
|
27,745,552
|
|
|
26,784,742
|
|
||
Accrued interest payable
|
139,148
|
|
|
421,534
|
|
||
Accounts payable - base management fees
|
582,912
|
|
|
693,190
|
|
||
Accounts payable - incentive management fees
|
—
|
|
|
202,235
|
|
||
Accounts payable - administrative services
|
397,463
|
|
|
276,214
|
|
||
Accounts payable - accrued expenses
|
782,726
|
|
|
499,907
|
|
||
Other liabilities
|
1,757
|
|
|
42,916
|
|
||
Total liabilities
|
46,371,411
|
|
|
55,867,351
|
|
||
|
|
|
|
||||
Commitments and contingencies (Note 8)
|
|
|
|
||||
|
|
|
|
||||
NET ASSETS:
|
|
|
|
||||
Common stock, $0.001 par value, 100,000,000 shares authorized, 6,519,978 issued and 6,457,588 outstanding at 12/31/17 and 6,313,272 issued and 6,287,496 outstanding at 12/31/16
|
6,520
|
|
|
6,313
|
|
||
Capital in excess of common stock
|
93,043,208
|
|
|
90,433,114
|
|
||
Treasury shares at cost, 62,390 and 25,776 at 12/31/17 and 12/31/16, respectively
|
(724,039
|
)
|
|
(322,137
|
)
|
||
Accumulated realized losses on investments
|
(8,923,961
|
)
|
|
(1,537,506
|
)
|
||
Net unrealized depreciation on investments
|
(3,540,012
|
)
|
|
(4,998,185
|
)
|
||
Undistributed net investment income
|
1,919,713
|
|
|
3,540,697
|
|
||
Total net assets
|
81,781,429
|
|
|
87,122,296
|
|
||
Total liabilities and net assets
|
$
|
128,152,840
|
|
|
$
|
142,989,647
|
|
|
|
|
|
||||
Common stock outstanding
|
6,457,588
|
|
|
6,287,496
|
|
||
|
|
|
|
||||
Net asset value per common share
|
$
|
12.66
|
|
|
$
|
13.86
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Investment Income:
|
|
|
|
|
|
||||||
Interest:
|
|
|
|
|
|
||||||
Cash - non-affiliated/non-control investments
|
$
|
10,811,964
|
|
|
$
|
16,055,958
|
|
|
$
|
16,032,738
|
|
Cash - affiliated investments
|
2,583,523
|
|
|
1,253,098
|
|
|
477,407
|
|
|||
Cash - control investments
|
813,486
|
|
|
133,966
|
|
|
—
|
|
|||
PIK - non-affiliated/non-control investments
|
959,768
|
|
|
1,462,755
|
|
|
1,091,792
|
|
|||
PIK - affiliated investments
|
568,482
|
|
|
—
|
|
|
—
|
|
|||
PIK - control investments
|
264,837
|
|
|
35,978
|
|
|
—
|
|
|||
Amortization of fees, discounts and premiums, net:
|
|
|
|
|
|
||||||
Non-affiliated/non-control investments
|
2,247,071
|
|
|
1,819,960
|
|
|
2,240,199
|
|
|||
Affiliated investments
|
147,859
|
|
|
(24,003
|
)
|
|
231,927
|
|
|||
Control investments
|
71,072
|
|
|
799
|
|
|
—
|
|
|||
Total interest income
|
18,468,062
|
|
|
20,738,511
|
|
|
20,074,063
|
|
|||
Other income
|
236,198
|
|
|
154,963
|
|
|
252,833
|
|
|||
Total investment income
|
18,704,260
|
|
|
20,893,474
|
|
|
20,326,896
|
|
|||
|
|
|
|
|
|
||||||
Expenses:
|
|
|
|
|
|
||||||
Interest expense - revolving line of credit
|
717,465
|
|
|
1,183,431
|
|
|
921,284
|
|
|||
Interest expense - unsecured notes
|
2,022,195
|
|
|
1,925,004
|
|
|
1,785,976
|
|
|||
Interest expense - unused line of credit
|
276,197
|
|
|
146,728
|
|
|
243,800
|
|
|||
Interest expense - deferred financing costs
|
233,993
|
|
|
278,733
|
|
|
264,228
|
|
|||
Interest expense - deferred offering costs
|
198,966
|
|
|
196,872
|
|
|
167,255
|
|
|||
Loss on extinguishment of debt
|
581,734
|
|
|
—
|
|
|
—
|
|
|||
Total interest expense
|
4,030,550
|
|
|
3,730,768
|
|
|
3,382,543
|
|
|||
|
|
|
|
|
|
||||||
Professional fees
|
1,109,774
|
|
|
827,793
|
|
|
747,032
|
|
|||
General and administrative
|
1,148,817
|
|
|
1,021,516
|
|
|
869,391
|
|
|||
Base management fees
|
2,597,120
|
|
|
2,899,416
|
|
|
2,710,993
|
|
|||
Incentive management fees
|
58,005
|
|
|
1,394,382
|
|
|
2,234,551
|
|
|||
Administrative services expense
|
1,394,925
|
|
|
905,586
|
|
|
729,978
|
|
|||
Total expenses
|
10,339,191
|
|
|
10,779,461
|
|
|
10,674,488
|
|
|||
Net Investment Income, before taxes
|
8,365,069
|
|
|
10,114,013
|
|
|
9,652,408
|
|
|||
|
|
|
|
|
|
||||||
Income tax expense
|
63,565
|
|
|
—
|
|
|
—
|
|
|||
Excise tax expense
|
64,650
|
|
|
61,591
|
|
|
1,393
|
|
|||
Net Investment Income, after taxes
|
8,236,854
|
|
|
10,052,422
|
|
|
9,651,015
|
|
|||
|
|
|
|
|
|
||||||
Net realized (losses) gains:
|
|
|
|
|
|
||||||
Non-affiliated / Non-control investments
|
(5,962,020
|
)
|
|
624,677
|
|
|
(1,057,355
|
)
|
|||
Affiliated investments
|
(2,100,421
|
)
|
|
(1,142,263
|
)
|
|
—
|
|
|||
Net realized losses on investments
|
(8,062,441
|
)
|
|
(517,586
|
)
|
|
(1,057,355
|
)
|
|||
Net change in unrealized appreciation (depreciation)
|
|
|
|
|
|
|
|
||||
Non-affiliated / Non-control investments
|
3,377,985
|
|
|
(464,342
|
)
|
|
(1,088,851
|
)
|
|||
Affiliated investments
|
1,601,553
|
|
|
(3,051,977
|
)
|
|
(1,093,796
|
)
|
|||
Control investments
|
(3,521,365
|
)
|
|
(12,030
|
)
|
|
—
|
|
|||
Net change in unrealized appreciation (depreciation) on investments
|
1,458,173
|
|
|
(3,528,349
|
)
|
|
(2,182,647
|
)
|
|||
Total net unrealized and realized (losses) gains on investments
|
(6,604,268
|
)
|
|
(4,045,935
|
)
|
|
(3,240,002
|
)
|
|||
|
|
|
|
|
|
||||||
Net increase in net assets resulting from operations
|
$
|
1,632,586
|
|
|
$
|
6,006,487
|
|
|
$
|
6,411,013
|
|
|
|
|
|
|
|
||||||
Net investment income per share
|
|
$1.28
|
|
|
|
$1.60
|
|
|
|
$1.54
|
|
Net increase in net assets resulting from operations per share
|
|
$0.25
|
|
|
|
$0.96
|
|
|
|
$1.03
|
|
Weighted average shares outstanding (basic and diluted)
|
6,412,215
|
|
|
6,282,360
|
|
|
6,249,346
|
|
|||
Distributions paid per common share
|
|
$1.45
|
|
|
|
$1.35
|
|
|
|
$1.35
|
|
|
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
Increase in net assets from operations:
|
|
|
|
|
|
||||||
Net investment income, after taxes
|
$
|
8,236,854
|
|
|
$
|
10,052,422
|
|
|
$
|
9,651,015
|
|
Net realized losses on investments
|
(8,062,441
|
)
|
|
(517,586
|
)
|
|
(1,057,355
|
)
|
|||
Net change in unrealized appreciation (depreciation) on investments
|
1,458,173
|
|
|
(3,528,349
|
)
|
|
(2,182,647
|
)
|
|||
Net increase in net assets resulting from operations
|
1,632,586
|
|
|
6,006,487
|
|
|
6,411,013
|
|
|||
|
|
|
|
|
|
||||||
Distributions to shareholders:
|
|
|
|
|
|
||||||
Distributions from net investment income
|
(9,310,066
|
)
|
|
(8,481,370
|
)
|
|
(8,066,281
|
)
|
|||
Distributions from capital gains
|
—
|
|
|
—
|
|
|
(369,418
|
)
|
|||
Decrease in net assets resulting from shareholder distributions
|
(9,310,066
|
)
|
|
(8,481,370
|
)
|
|
(8,435,699
|
)
|
|||
|
|
|
|
|
|
||||||
Capital share transactions:
|
|
|
|
|
|
||||||
Issuance of common shares (net of offering costs of $96,891 for 2017, $0
for 2016 and $0 for 2015
|
2,318,427
|
|
|
83
|
|
|
70
|
|
|||
Reinvestment of dividends (1)
|
420,088
|
|
|
504,977
|
|
|
566,557
|
|
|||
Share repurchases
|
(401,902
|
)
|
|
(322,137
|
)
|
|
—
|
|
|||
Net increase in net assets from capital share transactions
|
2,336,613
|
|
|
182,923
|
|
|
566,627
|
|
|||
|
|
|
|
|
|
||||||
Total decrease in net assets
|
(5,340,867
|
)
|
|
(2,291,960
|
)
|
|
(1,458,059
|
)
|
|||
Net assets at beginning of period
|
87,122,296
|
|
|
89,414,256
|
|
|
90,872,315
|
|
|||
Net assets at end of period
|
$
|
81,781,429
|
|
|
$
|
87,122,296
|
|
|
$
|
89,414,256
|
|
|
|
|
|
|
|
||||||
Capital share activity (common shares):
|
|
|
|
|
|
||||||
Shares issued from at the market offering
|
172,774
|
|
|
—
|
|
|
—
|
|
|||
Shares issued from reinvestment of dividends
|
33,932
|
|
|
43,603
|
|
|
46,996
|
|
|||
Shares repurchased
|
(36,614
|
)
|
|
(25,776
|
)
|
|
—
|
|
|||
Net increase in capital share activity (common shares)
|
170,092
|
|
|
17,827
|
|
|
46,996
|
|
|||
|
|
|
|
|
|
(1)
|
Net of par value of shares issued of $34, $44, and $47 and funds received for fractional shares of $77, $83 and $70 for December 31, 2017, 2016 and 2015, respectively.
|
(2)
|
Undistributed net investment income at December 31, 2017, December 31, 2016 and December 31, 2015 was $1.9 million, $3.5 million and $2.0 million, respectively. See Dividends and Distributions Policy in Note 2.
|
|
Year Ended December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
|
|
|
|
|
|
||||||
Cash flows from operating activities:
|
|
|
|
|
|
||||||
Net increase in net assets resulting from operations
|
$
|
1,632,586
|
|
|
$
|
6,006,487
|
|
|
$
|
6,411,013
|
|
Adjustments to reconcile net increase in net assets resulting from operations to net cash used by operating activities:
|
|
|
|
|
|
||||||
Paid in kind income
|
(1,793,087
|
)
|
|
(1,498,733
|
)
|
|
(1,091,792
|
)
|
|||
Paid in kind income collected
|
245,065
|
|
|
533,670
|
|
|
859,585
|
|
|||
Net realized losses (gains) on investments
|
8,062,441
|
|
|
517,586
|
|
|
1,057,355
|
|
|||
Net change in unrealized (appreciation) depreciation of investments
|
(1,458,173
|
)
|
|
3,528,349
|
|
|
2,182,647
|
|
|||
Amortization of fees, discounts and premiums, net
|
(2,466,002
|
)
|
|
(1,796,756
|
)
|
|
(2,472,126
|
)
|
|||
Amortization of deferred financing costs
|
233,993
|
|
|
278,733
|
|
|
264,228
|
|
|||
Amortization of deferred offering costs
|
198,966
|
|
|
196,872
|
|
|
167,255
|
|
|||
Loss on extinguishment of debt
|
581,734
|
|
|
—
|
|
|
—
|
|
|||
Acceleration of offering costs from expired shelf registration statement
|
77,386
|
|
|
—
|
|
|
—
|
|
|||
Purchase of investments (net of loan origination and other fees)
|
(52,184,690
|
)
|
|
(31,012,429
|
)
|
|
(54,464,040
|
)
|
|||
Proceeds from principal payments
|
68,088,632
|
|
|
38,387,205
|
|
|
25,816,815
|
|
|||
Changes in operating assets and liabilities
|
|
|
|
|
|
||||||
Decrease (increase) in interest receivable
|
290,732
|
|
|
534,745
|
|
|
(562,036
|
)
|
|||
(Increase) decrease in accounts receivable - other and other assets
|
(33,483
|
)
|
|
311,152
|
|
|
(55,948
|
)
|
|||
(Decrease) increase in accrued interest payable
|
(282,386
|
)
|
|
9,435
|
|
|
334,736
|
|
|||
Increase (decrease) in accounts payable and other liabilities
|
50,396
|
|
|
(398,749
|
)
|
|
266,733
|
|
|||
Net cash provided by (used in) operating activities
|
21,244,110
|
|
|
15,597,567
|
|
|
(21,285,575
|
)
|
|||
|
|
|
|
|
|
||||||
Cash flows used in financing activities:
|
|
|
|
|
|
||||||
Borrowings on revolving credit facility
|
56,550,000
|
|
|
23,931,375
|
|
|
53,900,000
|
|
|||
Repayment of borrowings on revolving credit facility
|
(66,774,760
|
)
|
|
(26,683,055
|
)
|
|
(50,276,847
|
)
|
|||
Financing costs
|
(199,932
|
)
|
|
(72,436
|
)
|
|
—
|
|
|||
Proceeds from the issuance of unsecured notes
|
28,750,000
|
|
|
—
|
|
|
27,500,000
|
|
|||
Repayment of unsecured notes
|
(27,500,000
|
)
|
|
—
|
|
|
—
|
|
|||
Proceeds from the issuance of common stock and common units
|
2,339,110
|
|
|
83
|
|
|
70
|
|
|||
Repurchased shares (held in Treasury Stock)
|
(401,902
|
)
|
|
(322,137
|
)
|
|
—
|
|
|||
Offering costs
|
(1,209,186
|
)
|
|
12,565
|
|
|
(1,070,868
|
)
|
|||
Distributions to equity holders (net of stock issued under dividend reinvestment plan of $420,088, $504,977, and $566,557, respectively)
|
(8,889,981
|
)
|
|
(7,976,393
|
)
|
|
(7,869,142
|
)
|
|||
Net cash (used in) provided by financing activities
|
(17,336,651
|
)
|
|
(11,109,998
|
)
|
|
22,183,213
|
|
|||
|
|
|
|
|
|
||||||
Net increase in cash during the period
|
3,907,459
|
|
|
4,487,569
|
|
|
897,638
|
|
|||
|
|
|
|
|
|
||||||
Cash at beginning of period
|
7,556,978
|
|
|
3,069,409
|
|
|
2,171,771
|
|
|||
Cash at end of period (1)
|
$
|
11,464,437
|
|
|
$
|
7,556,978
|
|
|
$
|
3,069,409
|
|
|
|
|
|
|
|
||||||
Non-cash operating activities:
|
|
|
|
|
|
||||||
Amendment fees (2)
|
—
|
|
|
(75,000
|
)
|
|
186,854
|
|
|||
|
|
|
|
|
|
||||||
Non-cash financing activities:
|
|
|
|
|
|
||||||
Value of shares issued in connection with dividend reinvestment plan
|
$
|
420,088
|
|
|
$
|
504,977
|
|
|
$
|
566,557
|
|
|
|
|
|
|
|
||||||
Supplemental disclosures of cash flow information:
|
|
|
|
|
|
||||||
Cash paid during the period for interest
|
$
|
3,298,239
|
|
|
$
|
3,245,725
|
|
|
$
|
2,616,324
|
|
Cash paid during the period for taxes
|
$
|
103,797
|
|
|
$
|
48,297
|
|
|
$
|
7,861
|
|
|
(1) Consists of cash and restricted cash of $4,233,597 and $7,230,840 respectively, at December 31, 2017, and $4,472,749 and $3,084,229 respectively, at December 31, 2016, and $595,047 and $2,474,362 respectively at December 31, 2015.
|
|
(2) Includes $75,000 of non-cash amendment fees that were accrued in 2015, but written off related to the impairment of Peekay Acquisition, LLC.
|
Portfolio Company
|
Date
**
|
Industry
|
Investment
(1) (2) (14)
|
|
Principal
|
Cost
|
Fair Value
|
|||
|
|
|
|
|
|
|||||
Non-Control / Non-Affiliate Investments
|
|
|
|
|
|
|||||
AMS Flight Leasing, LLC (loss guaranty provided by IAG Engine Center, LLC) (0.5%) *
|
04/2017
|
Aerospace & Defense
|
Senior Secured Term Loan, due 01/2019 (14.00%)
|
(5) (7)
|
428,456
|
|
242,518
|
|
428,456
|
|
|
|
|
|
|
428,456
|
|
242,518
|
|
428,456
|
|
|
|
|
|
|
|
|
|
|||
Bradford Soap
International, Inc. (5.5%) *
|
08/2015
|
Consumer Goods - Non-Durable
|
Junior Secured Term Loan, due 10/2019 (10.63%; 1M LIBOR + 9.25%)
|
|
4,500,000
|
|
4,457,846
|
|
4,500,000
|
|
|
|
|
|
|
4,500,000
|
|
4,457,846
|
|
4,500,000
|
|
|
|
|
|
|
|
|
|
|||
Bridgewater Engine
Ownership III, LLC (0.2%) *
|
10/2014
|
Aerospace & Defense
|
Senior Secured Term Loan, due 07/2019 (14.00%; the greater of 14.00% and LIBOR +8.50%)
|
|
195,421
|
|
178,639
|
|
195,421
|
|
|
|
|
|
|
195,421
|
|
178,639
|
|
195,421
|
|
|
|
|
|
|
|
|
|
|||
Brite Media LLC (0.1%) *
|
04/2014
|
Media: Advertising, Printing & Publishing
|
Class A Interest (139 Units)
|
|
|
125,000
|
|
70,669
|
|
|
|
|
|
|
|
|
|
125,000
|
|
70,669
|
|
|
|
|
|
|
|
|
|
|||
CP Holding Co. Inc
(Choice Pet) (3.5%) *
|
05/2013
|
Retailer
|
Junior Secured Term Loan, due 06/2020 (12.00%)
|
|
2,899,852
|
|
2,894,941
|
|
2,879,000
|
|
|
|
|
|
|
2,899,852
|
|
2,894,941
|
|
2,879,000
|
|
|
|
|
|
|
|
|
|
|||
DirectMed Parts & Service, LLC (6.8%) *
|
05/2017
|
Healthcare & Pharmaceuticals
|
Senior Secured Term Loan, due 02/2022 (11%; 3M LIBOR +9.50% with 1.00% LIBOR floor)
|
|
5,530,000
|
|
5,442,369
|
|
5,530,000
|
|
|
|
|
Revolver Line of Credit, due 02/2022 (3M LIBOR + 6.50% with 1.00% LIBOR floor)
|
(4)
|
—
|
|
—
|
|
—
|
|
|
|
|
|
|
5,530,000
|
|
5,442,369
|
|
5,530,000
|
|
|
|
|
|
|
|
|
|
|||
Douglas Machines Corp. (5.1%) *
|
05/2014
|
Capital Equipment
|
Junior Secured Term Loan, due 12/2018 (12.50%)
|
|
4,027,633
|
|
3,993,541
|
|
4,027,633
|
|
|
04/2012
|
|
Common Equity Warrants (204 Shares)
|
|
|
12,500
|
|
177,391
|
|
|
|
|
|
|
|
4,027,633
|
|
4,006,041
|
|
4,205,024
|
|
|
|
|
|
|
|
|
|
|||
Flavors Holdings, Inc. (4.7%) *
|
10/2014
|
Beverage, Food & Tobacco
|
Junior Secured Term Loan, due 10/2021 (11.69%; 3M LIBOR +10.00% with 1.00% LIBOR floor)
|
|
4,000,000
|
|
3,900,507
|
|
3,821,500
|
|
|
|
|
|
|
4,000,000
|
|
3,900,507
|
|
3,821,500
|
|
|
|
|
|
|
|
|
|
|||
Flight Lease XIII, LLC (0.4%) *
|
03/2017
|
Aerospace & Defense
|
Common Equity Interest (600 Units)
|
(10)
|
|
300,000
|
|
310,854
|
|
|
|
|
|
|
|
|
|
300,000
|
|
310,854
|
|
|
|
|
|
|
|
|
|
|||
Fox Rent A Car, Inc. (1.1%) *
|
10/2014
|
Automotive
|
Common Equity Warrants (102 shares)
|
|
|
—
|
|
861,425
|
|
|
|
|
|
|
|
|
|
—
|
|
861,425
|
|
|
|
|
|
|
|
|
|
|||
GK Holdings, Inc. (3.6%)*
|
01/2015
|
High Tech Industries
|
Junior Secured Term Loan, due 01/2022 (11.94%; 3M LIBOR +10.25% with 1.00% LIBOR floor)
|
(8)
|
3,000,000
|
|
2,943,370
|
|
2,906,000
|
|
|
|
|
|
|
3,000,000
|
|
2,943,370
|
|
2,906,000
|
|
|
|
|
|
|
|
|
|
Portfolio Company
|
Date
**
|
Industry
|
Investment
(1) (2) (14)
|
|
Principal
|
Cost
|
Fair Value
|
|||
IAG Engine Center, LLC (1.3%) *
|
08/2016
|
Aerospace & Defense
|
Senior Secured Term Loan, due 08/2018 (14.00%)
|
(7)
|
563,395
|
|
471,875
|
|
563,000
|
|
|
|
|
Revenue Linked Security
|
(6) (10)
|
|
393,515
|
|
533,000
|
|
|
|
|
|
|
|
563,395
|
|
865,390
|
|
1,096,000
|
|
|
|
|
|
|
|
|
|
|||
King Engineering Associates, Inc. (9.3%) *
|
04/2017
|
Environmental Industries
|
Senior Secured Term Loan, due 04/2021 (11.37%; 1M LIBOR +10.00%)
|
|
6,576,000
|
|
6,482,233
|
|
6,576,000
|
|
|
|
|
Revolving Line of Credit, due 04/2019 (11.37%; 1M LIBOR +10.00%)
|
(4)
|
—
|
|
—
|
|
—
|
|
|
10/2017
|
|
Class A Interest (86,433 Units)
|
(10)
|
|
521,146
|
|
1,051,555
|
|
|
|
|
|
|
|
6,576,000
|
|
7,003,379
|
|
7,627,555
|
|
|
|
|
|
|
|
|
|
|||
ProAir Holdings Corporation (7.7%) *
|
09/2017
|
Capital Equipment
|
Junior Secured Term Loan, due 12/2022 (12.75%)
|
|
6,500,000
|
|
6,405,784
|
|
6,282,507
|
|
|
|
|
|
|
6,500,000
|
|
6,405,784
|
|
6,282,507
|
|
|
|
|
|
|
|
|
|
|||
Regional Engine
Leasing, LLC (4.4%) *
|
03/2015
|
Aerospace & Defense
|
Senior Secured Term Loan, due 03/2020 (11.00%; the greater of 11.00% or 1M LIBOR +4.50%)
|
|
3,471,326
|
|
3,403,439
|
|
3,471,326
|
|
|
|
|
Residual Value
|
(3)
|
|
102,421
|
|
105,322
|
|
|
|
|
|
|
|
3,471,326
|
|
3,505,860
|
|
3,576,648
|
|
|
|
|
|
|
|
|
|
|||
Safety Services Acquisition Corp. (8.9%) *
|
03/2017
|
Services: Business
|
Senior Secured Term Loan, due 03/2019 (14.5%; 3M LIBOR + 11.00% with a 1.00% floor/2.00% default interest)
|
(8)
|
7,218,750
|
|
7,169,237
|
|
7,179,000
|
|
|
04/2012
|
|
Series A Preferred Interest (100,000 Shares)
|
|
|
100,000
|
|
69,000
|
|
|
|
|
|
|
|
7,218,750
|
|
7,269,237
|
|
7,248,000
|
|
|
|
|
|
|
|
|
|
|||
Shannon Specialty Floors, LLC (4.9%) *
|
04/2017
|
Chemicals, Plastics & Rubber
|
Junior Secured Term Loan, due 04/2021 (11.36%; 3M LIBOR + 10.00% with 1.00% LIBOR floor)
|
(8)
|
4,000,000
|
|
3,948,995
|
|
3,968,000
|
|
|
|
|
|
|
4,000,000
|
|
3,948,995
|
|
3,968,000
|
|
|
|
|
|
|
|
|
|
|||
Sitel Worldwide
Corporation (2.1%) *
|
08/2015
|
Services: Business
|
Junior Secured Term Loan, due 09/2022 (10.88%; 3M LIBOR +9.50% with 1.00% LIBOR floor)
|
(11)
|
1,750,000
|
|
1,723,508
|
|
1,704,609
|
|
|
|
|
|
|
1,750,000
|
|
1,723,508
|
|
1,704,609
|
|
|
|
|
|
|
|
|
|
|||
Surge Busy Bee Holdings, LLC (9.1%) *
|
11/2017
|
Services: Business
|
Senior Secured Term Loan, due 11/2022 (11.38%; 1M LIBOR + 10.00%)
|
|
4,937,500
|
|
4,723,800
|
|
4,723,800
|
|
|
|
|
Senior Secured Term Loan, due 11/2022 (14.00%; 12.00% Cash/2.00% PIK)
|
|
2,500,000
|
|
2,401,389
|
|
2,401,389
|
|
|
|
|
Revolving Line of Credit, due 11/2021 (9.38%, 1M LIBOR+8.00%)
|
(4)
|
150,000
|
|
150,000
|
|
150,000
|
|
|
|
|
Class B Equity Warrants (210 Units)
|
|
|
152,950
|
|
184,372
|
|
|
|
|
|
|
|
7,587,500
|
|
7,428,139
|
|
7,459,561
|
|
|
|
|
|
|
|
|
|
|||
Turning Point Brands, Inc. (2.5%) *
|
02/2017
|
Beverage, Food & Tobacco
|
Junior Secured Term Loan, due 08/2022 (11.00%)
|
(11)
|
2,000,000
|
|
1,982,298
|
|
2,015,000
|
|
|
|
|
|
|
2,000,000
|
|
1,982,298
|
|
2,015,000
|
|
|
|
|
|
|
|
|
|
|||
World Business Lenders, LLC (0.3%) *
|
12/2013
|
Banking, Finance, Insurance & Real Estate
|
Class B Equity Interest (49,209 Units)
|
|
|
200,000
|
|
221,808
|
|
|
|
|
|
|
|
|
|
200,000
|
|
221,808
|
|
|
|
|
|
|
|
|
|
|||
Wetmore Tool and Engineering (4.9%) *
|
03/2017
|
Capital Equipment
|
Junior Secured Term Loan, due 09/2021 (12.5%; 12.00% Cash/0.5% PIK)
|
(8)
|
4,022,206
|
|
3,970,037
|
|
3,981,000
|
|
|
|
|
|
|
4,022,206
|
|
3,970,037
|
|
3,981,000
|
|
|
|
|
|
|
|
|
|
|||
Yucatan Foods, L.P. ( 14.7%) *
|
03/2016
|
Beverage, Food & Tobacco
|
Junior Secured Term Loan A, due 03/2021 (14.50%; 10.00% Cash/4.50% PIK)
|
(8)
|
9,062,282
|
|
8,933,921
|
|
8,995,500
|
|
Portfolio Company
|
Date
**
|
Industry
|
Investment
(1) (2) (14)
|
|
Principal
|
Cost
|
Fair Value
|
|||
|
|
|
Junior Secured Term Loan B, due 03/2021 (10.00% PIK; convertible into 5.80% of fully diluted common equity)
|
(9)
|
3,101,658
|
|
3,062,926
|
|
3,018,000
|
|
|
|
|
|
|
12,163,940
|
|
11,996,847
|
|
12,013,500
|
|
Subtotal Non-Control / Non-Affiliate Investments
|
|
|
80,434,479
|
|
80,790,705
|
|
82,902,537
|
|
||
|
|
|
|
|
|
|
|
|||
Affiliate Investments
|
|
|
|
|
|
|||||
Flight Lease XII, LLC (0.8%) *
|
03/2017
|
Aerospace & Defense
|
Common Equity Interest (1,000 Units)
|
(10)
|
|
500,000
|
|
616,502
|
|
|
|
|
|
|
|
|
|
500,000
|
|
616,502
|
|
|
|
|
|
|
|
|
|
|||
24/7 Software, Inc. (formerly Instant Sales Solutions, Inc.) ( 5.1%) *
|
07/2017
|
High Tech Industries
|
Senior Secured Term Loan, due 07/2022 (13.25%)
|
|
2,887,500
|
|
2,859,272
|
|
2,859,272
|
|
|
|
|
Revolving Line of Credit, due 07/2021 (10.5%, 3M LIBOR+9.00% with a 1.00% LIBOR floor)
|
(4)
|
—
|
|
—
|
|
—
|
|
|
|
|
Common Equity Interest (950 Units)
|
(10)
|
|
950,000
|
|
1,300,000
|
|
|
|
|
|
|
|
2,887,500
|
|
3,809,272
|
|
4,159,272
|
|
|
|
|
|
|
|
|
|
|||
Northeast Metal
Works LLC (15.4%) *
|
09/2014
|
Metals & Mining
|
Senior Secured Term Loan, due 12/2019 (16.50%; 10.50% Cash/6.00% PIK)
|
(13)
|
9,788,725
|
|
9,752,528
|
|
9,652,000
|
|
|
|
|
Revolving Line of Credit, due 12/2019 (13.50%)
|
|
1,500,000
|
|
1,500,000
|
|
1,482,000
|
|
|
05/2017
|
|
Preferred Equity Interest (2,500 Class A Units)
|
(10)
|
|
1,600,000
|
|
1,481,000
|
|
|
|
|
|
|
|
11,288,725
|
|
12,852,528
|
|
12,615,000
|
|
|
|
|
|
|
|
|
|
|||
V-Tek, Inc. (5.8%) *
|
03/2017
|
Capital Equipment
|
Senior Secured Term Loan, due 03/2022 (12.5%; 3M LIBOR + 11.00%)
|
|
3,500,000
|
|
3,406,474
|
|
3,500,000
|
|
|
|
|
Senior Secured Revolver, due 03/2021 (8.00%; 3M LIBOR + 06.50%)
|
(4)
|
886,097
|
|
886,097
|
|
886,097
|
|
|
|
|
Common Equity Interest (90 Units)
|
(10)
|
|
150,000
|
|
351,000
|
|
|
|
|
|
|
|
4,386,097
|
|
4,442,571
|
|
4,737,097
|
|
|
|
|
|
|
|
|
|
|||
WorkWell, LLC ( 4.7%) *
|
10/2015
|
Healthcare & Pharmaceuticals
|
Senior Secured Term Loan, due 10/2020 (13.00%; 3M LIBOR + 11.50% with 0.50% LIBOR floor)
|
|
4,569,699
|
|
4,510,993
|
|
3,856,000
|
|
|
|
|
Preferred Equity Interest (250,000 Units)
|
|
|
250,000
|
|
—
|
|
|
|
|
|
Common Equity Interest (250,000 Units)
|
|
|
—
|
|
—
|
|
|
|
|
|
|
|
4,569,699
|
|
4,760,993
|
|
3,856,000
|
|
Subtotal Affiliate Investments
|
|
|
23,132,021
|
|
26,365,364
|
|
25,983,871
|
|
||
|
|
|
|
|
|
|
|
|||
Control Investments
|
|
|
|
|
|
|||||
Flight Lease VII (1.0%) *
|
03/2016
|
Aerospace & Defense
|
Common Equity Interest (1,800 Units)
|
|
|
857,273
|
|
829,849
|
|
|
|
|
|
|
|
|
|
857,273
|
|
829,849
|
|
|
|
|
|
|
|
|
|
|||
Flight Lease XI, LLC (0.4%) *
|
12/2016
|
Aerospace & Defense
|
Common Equity Interest (400 Units)
|
(10)
|
|
200,000
|
|
327,421
|
|
|
|
|
|
|
|
|
|
200,000
|
|
327,421
|
|
|
|
|
|
|
|
|
|
|||
Infinite Care, LLC (6.8%) *
|
02/2016
|
Healthcare & Pharmaceuticals
|
Senior Secured Term Loan, due 02/2019 (13.38%; 1M LIBOR+6.00% with a 0.42% LIBOR floor/6.00% PIK)
|
|
6,360,914
|
|
5,862,348
|
|
3,492,000
|
|
|
|
|
Revolving Line of Credit, due 02/2019 (13.38%, 1M LIBOR+12.00% with a 0.42% LIBOR floor)
|
|
2,065,000
|
|
2,065,000
|
|
2,065,000
|
|
|
|
|
Class A Interest (3,000,000 Units)
|
(12)
|
|
3,000,000
|
|
—
|
|
|
|
|
|
|
|
8,425,914
|
|
10,927,348
|
|
5,557,000
|
|
Subtotal Control Investments
|
|
|
8,425,914
|
|
11,984,621
|
|
6,714,270
|
|
||
|
|
|
|
|
||||||
Total Investments at 12/31/17 (141.4%) *
|
|
|
|
111,992,414
|
|
119,140,690
|
|
115,600,678
|
|
(1)
|
Debt investments and the CLO subordinated notes are income producing investments unless an investment is on non accrual. Common equity, residual values and warrants are non-income producing.
|
(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)
|
"Residual value" represents the value of the Company’s share in the collateral securing the loan.
|
(4)
|
Credit facility has an unfunded commitment in addition to the amounts shown in the Consolidated Schedule of Investments. See Note 8 in the Notes to Consolidated Financial Statements for further discussion on portion of commitment unfunded at December 31, 2017.
|
(5)
|
The Company restructured the investment in IAG Engine Center, LLC on June 20, 2017. Specifically, AMS Flight Leasing, LLC was formed to facilitate the purchase of an aircraft engine from IAG Engine Center, LLC for $1.4 million. Per the terms of the agreement, the proceeds of the aircraft engine sale were used by IAG Engine Center, LLC to pay down the Company’s existing debt investment in IAG Engine Center, LLC. Concurrently, the Company also entered in a separate debt investment with AMS Flight Leasing, LLC for $1.1 million, which is separately presented on the Consolidated Schedule of Investments in Unaffiliated Issuers.
|
(6)
|
The revenue linked security entitles the Company to participate in the proceeds of inventory sales pursuant to a consignment agreement between IAG Engine Center, LLC and an affiliated entity of IAG Engine Center, LLC, AMS Flight Funding, LLC. The IAG Engine Center, LLC consignment sales since origination of this security have been slower to materialize than originally planned resulting in lower than expected revenue linked security payments to date. As a result, this investment was placed on non-accrual status during the three months ended March 31, 2017. The revenue linked security payments materialized meaningfully in Q4 2017 and the investment was taken off of non-accrual status.
|
(7)
|
IAG Engine Center, LLC has provided up to $1.4 million of credit enhancement to AMS Flight Leasing, LLC.
|
(8)
|
The coupon on the loan is subject to a pricing grid based on certain leverage ratios of the portfolio company.
|
(9)
|
The loan is convertible any time, at the Company's discretion, into 5.8% of the fully diluted common equity of the borrower.
|
(10)
|
The investment is held by HCAP Equity Holdings, LLC, the Company's taxable blocker subsidiary.
|
(11)
|
This portfolio company investment is a level 2 asset. Portfolio company investments without this footnote are level 3 assets whose values were determined using significant unobservable inputs.
|
(12)
|
Infinite Care LLC ("ICC") is in default under the terms of its credit agreement and was on non-accrual status as of December 31, 2017. ICC was current on its interest payments to the Company through December 31, 2017; however, it failed to repay the Company’s protective loan advances at various dates in the fourth quarter of 2017. ICC was previously in breach of its minimum EBITDA, minimum fixed charge and total leverage covenants, but these breaches were waived by the Company through December 31, 2017 in connection with its entry into an agreement, dated as of January 13, 2017, with ICC relating thereto. In October 2017, the Company exercised its rights under a stock pledge of ICC. The Company formed a wholly owned subsidiary, HCAP ICC, LLC, to exercise its proxy right under the pledge agreement and take control of ICC’s board of directors. In January 2018, HCAP took control of ICC's equity after accelerating the debt and auctioning ICC’s equity in a public sale. The Company bid a portion of its outstanding debt to gain control of ICC in connection with the public sale process. Upon the completion of the sale process in January 2018, the Company converted $2.0 million of its debt investment in ICC into shares of ICC’s preferred stock.
ICC had $13.1 million in cash receipts in 2017, and also had $60 thousand dollars in cash, among other current and long-term assets and current liabilities, and long-term liabilities consisting only of the $8.4 million debt principal it owed the Company (which included $361 thousand dollars of payment-in-kind interest due to the Company at the maturity of its debt investments in ICC) and no other debt as of December 31, 2017.
The Company has performed additional diligence procedures on certain balance sheet and income statement accounts of ICC to ensure that the inputs used in connection with its determination of the fair value of its debt investments in ICC at December 31, 2017 were accurate and reliable. The Company determined the fair value of its investments in ICC using a methodology consistent with its valuation policy and with the same methodology it uses in connection with the valuation of its other portfolio company investments. Specifically, the Company utilized comparable investments in the marketplace and determined that a revenue multiple - with cash receipts determined to be the most appropriate proxy therefor based on ICC’s business and circumstances - was the most appropriate metric upon which to base the valuation for this portfolio company. The Company engaged a third party expert to assist it in connection with its determination of fair value of its investments in ICC as of December 31, 2017.
The Company is currently in conversations with the investment committee of its investment adviser and its board of directors about the appropriate next steps for ICC. In that regard, the Company is considering (1) selling ICC as-is, (2) investing in underperforming areas of ICC’s business prior to selling ICC or (3) investing further in the business with the intent of continuing to hold its investments in ICC.
|
(13)
|
The interest rate on the revolver is 11% prior to following the interim advance term; 13.5% from the first amendment effective date to February 28, 2018; 14.25% from March 1, 2018 through May 31, 2018 and 15% from June 1, 2018 until expiration of the interim advance. The interest rate on the term loan is 11% prior to and following the interim advance term; 10.5% cash pay plus 6% PIK from the first amendment date trough February 28, 2018; 10.5% cash pay plus 6.25% PIK from March 1, 2018 to May 31, 2018; 10.5% cash play plus 6.5% PIK from June 1, 2018 until expiration of the interim advance.
|
(14)
|
The Company's non-qualifying assets, on a fair value basis, comprise approximately 2% of the Company's total assets.
|
Type
|
Amortized Cost
|
|
Fair Value
|
|
% of Fair Value
|
|
% of Net Assets
|
||||
Senior Secured Debt
|
61,508,211
|
|
|
59,010,761
|
|
|
51.0
|
%
|
|
72.2
|
%
|
Junior Secured Debt
|
48,217,674
|
|
|
48,098,749
|
|
|
41.6
|
%
|
|
58.8
|
%
|
Equity
|
9,021,290
|
|
|
7,958,168
|
|
|
6.9
|
%
|
|
9.7
|
%
|
Revenue Linked Security
|
393,515
|
|
|
533,000
|
|
|
0.5
|
%
|
|
0.7
|
%
|
Total
|
119,140,690
|
|
|
115,600,678
|
|
|
100.0
|
%
|
|
141.4
|
%
|
Rate Type
|
Amortized Cost
|
|
Fair Value
|
|
% of Fair Value
|
|
% of Net Assets
|
||||
Fixed Rate
|
48,471,030
|
|
|
48,584,757
|
|
|
45.4
|
%
|
|
59.4
|
%
|
Floating rate
|
61,254,855
|
|
|
58,524,753
|
|
|
54.6
|
%
|
|
71.6
|
%
|
Total
|
109,725,885
|
|
|
107,109,510
|
|
|
100.0
|
%
|
|
131.0
|
%
|
Industry
|
Amortized Cost
|
|
Fair Value
|
|
% of Fair Value
|
|
% of Net Assets
|
||||
Aerospace & Defense
|
6,649,680
|
|
|
7,381,151
|
|
|
6.4
|
%
|
|
9.0
|
%
|
Automobile
|
—
|
|
|
861,425
|
|
|
0.8
|
%
|
|
1.1
|
%
|
Banking, Finance, Insurance & Real Estate
|
200,000
|
|
|
221,808
|
|
|
0.2
|
%
|
|
0.3
|
%
|
Beverage, Food & Tobacco
|
17,879,652
|
|
|
17,850,000
|
|
|
15.4
|
%
|
|
21.8
|
%
|
Capital Equipment
|
18,824,433
|
|
|
19,205,628
|
|
|
16.6
|
%
|
|
23.5
|
%
|
Chemicals, Plastics and Rubber
|
3,948,995
|
|
|
3,968,000
|
|
|
3.4
|
%
|
|
4.9
|
%
|
Consumer Goods - Non-Durable
|
4,457,846
|
|
|
4,500,000
|
|
|
3.9
|
%
|
|
5.5
|
%
|
Environmental Industries
|
7,003,379
|
|
|
7,627,555
|
|
|
6.6
|
%
|
|
9.3
|
%
|
Healthcare & Pharmaceuticals
|
21,130,710
|
|
|
14,943,000
|
|
|
12.9
|
%
|
|
18.3
|
%
|
High Tech Industries
|
6,752,642
|
|
|
7,065,272
|
|
|
6.1
|
%
|
|
8.6
|
%
|
Media: Broadcasting & Subscription
|
125,000
|
|
|
70,669
|
|
|
0.1
|
%
|
|
0.1
|
%
|
Metals & Mining
|
12,852,528
|
|
|
12,615,000
|
|
|
10.9
|
%
|
|
15.4
|
%
|
Retailer
|
2,894,941
|
|
|
2,879,000
|
|
|
2.5
|
%
|
|
3.5
|
%
|
Services: Business
|
16,420,884
|
|
|
16,412,170
|
|
|
14.2
|
%
|
|
20.1
|
%
|
Total
|
119,140,690
|
|
|
115,600,678
|
|
|
100.0
|
%
|
|
141.4
|
%
|
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
|
0.7%
|
*
|
Senior Secured Term Loan, due 07/05/2019
|
|
10/03/14
|
592,484
|
|
559,461
|
|
592,484
|
|
||
|
|
|
(14.00%; the greater of 14.00% or LIBOR +8.50%)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Regional Engine Leasing, LLC
|
4.7%
|
*
|
Senior Secured Term Loan, due 03/31/2020
|
|
03/31/15
|
3,938,747
|
|
3,838,923
|
|
3,938,747
|
|
||
|
|
|
(11.00%; the greater of 11.00% or LIBOR +4.50%)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Residual Value
|
(4
|
)
|
03/31/15
|
—
|
|
102,421
|
|
158,628
|
|
|
|
|
|
|
|
|
|
|
|
|||||
IAG Engine Center, LLC
|
2.5%
|
*
|
Senior Secured Term Loan, due 08/29/2018
|
(17
|
)
|
08/29/16
|
1,855,000
|
|
1,177,857
|
|
1,177,857
|
|
|
|
|
|
(14.00% Cash)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Revenue Linked Security
|
(9) (16)
|
|
|
—
|
|
999,127
|
|
992,012
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Automotive
|
|
|
|
|
|
|
|
|
|||||
Fox Rent A Car, Inc.
|
13.0%
|
*
|
Senior Secured Term Loan, due 09/30/2017
|
(13
|
)
|
10/31/14
|
10,000,000
|
|
10,117,435
|
|
10,722,000
|
|
|
|
|
|
(12.62%; LIBOR +12.00%)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Warrants to purchase 50.5 shares of common stock
|
|
|
—
|
|
—
|
|
586,000
|
|
||
|
|
|
|
|
|
|
|
|
|||||
Banking, Finance, Insurance and Real Estate
|
|
|
|
|
|
|
|
|
|||||
Shinnecock CLO 2006-1, Ltd.
|
0.2%
|
*
|
4,200,000 Subordinated Notes, due 07/15/2018
|
(12
|
)
|
03/06/14
|
—
|
|
138,730
|
|
138,730
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
WBL SPE I, LLC
|
1.9%
|
*
|
Senior Secured Term Loan, due 02/28/2017
|
|
09/30/13
|
1,696,694
|
|
1,696,233
|
|
1,696,694
|
|
||
|
|
|
(13.00% Cash)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
WBL SPE II, LLC
|
9.4%
|
*
|
Senior Secured Term Loan, due 09/30/2017
|
|
09/30/14
|
8,209,027
|
|
8,129,659
|
|
8,209,027
|
|
||
|
|
|
(14.50% Cash)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
World Business Lenders, LLC
|
0.3%
|
*
|
49,209 Class B Common Equity Units
|
(10
|
)
|
12/23/13
|
—
|
|
200,000
|
|
237,895
|
|
|
|
|
|
(0.31% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Beverage, Food & Tobacco
|
|
|
|
|
|
|
|
|
|||||
Flavors Holdings, Inc.
|
4.3%
|
*
|
Junior Secured Term Loan, due 10/4/2021
|
|
10/07/14
|
4,000,000
|
|
3,881,124
|
|
3,771,500
|
|
|
|
|
(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
|
|
3,733,284
|
|
3,740,625
|
|
||
|
|
|
(11.50%; LIBOR +10.25% with 1.25% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Yucatan Foods, L.P.
|
13.1%
|
*
|
Junior Secured Term Loan A, due 03/29/2021
|
|
03/29/16
|
8,618,621
|
|
8,475,023
|
|
8,592,500
|
|
||
|
|
|
(14.50%; 8.00% cash/6.50% PIK)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Junior Secured Term Loan B, due 03/29/2021
|
|
03/29/16
|
2,806,068
|
|
2,761,801
|
|
2,820,000
|
|
||
|
|
|
(10.00% PIK; convertible into 5.80% of fully diluted common equity)
|
(15
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
Capital Equipment
|
|
|
|
|
|
|
|
|
|||||
Douglas Machines Corp.
|
5.0%
|
*
|
Junior Secured Term Loan, due 12/31/2018
|
|
05/07/14
|
4,177,633
|
|
4,111,228
|
|
4,177,633
|
|
||
|
|
|
(12.50% Cash)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Warrants to purchase 204 Shares of Common Stock
|
|
04/06/12
|
—
|
|
12,500
|
|
153,266
|
|
||
|
|
|
(2.00% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Lanco Acquisition, LLC
|
3.5%
|
*
|
Senior Secured Term Loan A, due 06/12/2018
|
|
06/13/14
|
226,618
|
|
223,738
|
|
226,618
|
|
||
|
|
|
(11.62%; LIBOR +11.00% with 0.50% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Senior Secured Term Loan B, due 03/12/2019
|
|
06/13/14
|
2,448,137
|
|
2,403,485
|
|
2,448,137
|
|
||
|
|
|
(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
|
|
|
|
|
|
(8.62%; LIBOR +8.00% with 0.50% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Warrants to purchase 1,482 Common Equity Units
|
|
06/13/14
|
—
|
|
42,000
|
|
163,932
|
|
||
|
|
|
(12.00% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Chemicals, Plastics & Rubber
|
|
|
|
|
|
|
|
|
|||||
CRS Reprocessing, LLC
|
5.3%
|
*
|
Junior Secured Term Loan, due 09/30/2017
|
(5
|
)
|
05/27/15
|
7,136,824
|
|
6,598,278
|
|
4,659,199
|
|
|
|
|
|
(5.00% Cash)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Consumer Goods - Non-Durable
|
|
|
|
|
|
|
|
|
|||||
Bradford Soap International, Inc.
|
5.2%
|
*
|
Junior Secured Term Loan, due 10/31/2019
|
|
08/05/15
|
4,500,000
|
|
4,436,639
|
|
4,489,143
|
|
||
|
|
|
(9.87%; LIBOR + 9.25%)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
High Tech Industries
|
|
|
|
|
|
|
|
|
|||||
GK Holdings, Inc. (Global Knowledge)
|
3.3%
|
*
|
Junior Secured Term Loan, due 1/20/2022
|
|
01/30/15
|
3,000,000
|
|
2,952,193
|
|
2,922,000
|
|
||
|
|
|
(10.50%; LIBOR +9.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Mercury Network, LLC
|
2.4%
|
*
|
Senior Secured Term Loan, due 08/24/2021
|
|
05/12/15
|
1,887,138
|
|
1,858,766
|
|
1,887,138
|
|
|
|
|
(10.50%; LIBOR +9.50% with 1.00% LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
86,957 Class A Common Equity Units
|
|
05/12/15
|
—
|
|
86,957
|
|
164,616
|
|
||
|
|
|
(0.50% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Media: Broadcasting & Subscription
|
|
|
|
|
|
|
|
|
|||||
Chemical Information Services, LLC
|
4.3%
|
*
|
Senior Secured Term Loan, due 08/28/2019
|
|
08/28/15
|
3,775,425
|
|
3,743,423
|
|
3,775,425
|
|
||
|
|
|
(12.85%; LIBOR +12.00%)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Revolving Line of Credit, due 08/28/2018
|
(6
|
)
|
08/28/15
|
—
|
|
—
|
|
—
|
|
|
|
|
|
(12.85%; LIBOR +12.00%)
|
(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
|
|
4,852,000
|
|
||
|
|
|
(11.50%; LIBOR +10.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Media: Advertising, Printing & Publishing
|
|
|
|
|
|
|
|
|
|||||
Brite Media LLC
|
6.6%
|
*
|
Senior Secured Term Loan, due 04/24/2019
|
|
04/24/14
|
5,019,225
|
|
4,979,129
|
|
5,005,500
|
|
||
|
|
|
(13.18%; LIBOR +11.75% with 0.75% LIBOR floor plus 0.50% PIK)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Revolving Line of Credit, due 04/24/2018
|
|
04/24/14
|
666,667
|
|
666,667
|
|
666,667
|
|
||
|
|
|
(12.68%; LIBOR +11.75% with 0.75% LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
139 Class A Common Equity Units
|
|
04/24/14
|
—
|
|
125,000
|
|
78,657
|
|
||
|
|
|
(1.45% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Metals & Mining
|
|
|
|
|
|
|
|
|
|||||
Northeast Metal Works LLC
|
14.8%
|
*
|
Senior Secured Term Loan, due 12/29/2017
|
|
09/29/14
|
11,348,552
|
|
11,541,520
|
|
11,678,261
|
|
||
|
|
|
(17.62%; LIBOR +14.00% with 0.20% LIBOR floor plus 3.00% PIK)
|
(11) (14)
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Revolving Line of Credit, due 12/29/17
|
(6
|
)
|
09/29/14
|
1,189,239
|
|
1,189,239
|
|
1,189,239
|
|
|
|
|
|
(17.62%; LIBOR +14.00% with 0.20% LIBOR floor plus 3.00% PIK)
|
(11) (14)
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
Retailer
|
|
|
|
|
|
|
|
|
|||||
CP Holding Co., Inc. (Choice Pet)
|
6.2%
|
*
|
Senior Secured Term Loan, due 02/28/2018
|
|
05/30/13
|
5,611,638
|
|
5,569,739
|
|
5,397,440
|
|
||
|
|
|
(16.25%; 12.00% Cash/4.25% PIK)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
Services: Business
|
|
|
|
|
|
|
|
|
|||||
Novitex Acquisition, LLC
|
8.0%
|
*
|
Junior Secured Term Loan, due 07/7/2021
|
|
07/07/14
|
7,000,000
|
|
6,916,408
|
|
7,000,000
|
|
||
|
|
|
(12.25%; LIBOR + 11.00% with 1.25% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Safety Services Acquisition Corp.
|
7.0%
|
*
|
Junior Secured Term Loan, due 07/5/2017
|
|
04/05/12
|
6,011,262
|
|
5,984,252
|
|
6,011,000
|
|
|
|
|
(15.0%; 12.50% Cash/2.50% PIK)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
100,000 shares of Series A Preferred Stock
|
|
04/05/12
|
—
|
|
100,000
|
|
104,000
|
|
||
|
|
|
(0.59% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Sitel Worldwide Corporation
|
1.9%
|
*
|
Junior Secured Term Loan, due 09/19/2022
|
|
08/21/15
|
1,750,000
|
|
1,719,469
|
|
1,694,000
|
|
||
|
|
|
(10.50%; LIBOR +9.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
SourceHOV LLC
|
3.1%
|
*
|
Junior Secured Term Loan, due 4/30/2020
|
|
10/29/14
|
4,000,000
|
|
3,890,390
|
|
2,664,166
|
|
||
|
|
|
(11.50%; LIBOR + 10.50% with 1.00% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Subtotal Non-controlled, Non-affiliated Investments
|
|
|
120,415,049
|
|
120,162,148
|
|
119,032,736
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Affiliated Investments
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Healthcare & Pharmaceuticals
|
|
|
|
|
|
|
|
|
|||||
Infinite Care, LLC
|
8.5%
|
*
|
Senior Secured Term Loan, due 02/28/2019
|
|
02/29/16
|
6,000,000
|
|
5,920,025
|
|
5,916,570
|
|
||
|
|
|
(12.62%; LIBOR+12.00% with 0.42% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
Revolving Line of Credit, due 02/28/2019
|
(6
|
)
|
02/29/16
|
200,000
|
|
200,000
|
|
200,000
|
|
|
|
|
|
(12.62%; LIBOR+12.00% with 0.42% LIBOR floor)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
3,000,000 Class A Common Equity Units
|
|
02/29/16
|
—
|
|
3,000,000
|
|
1,266,500
|
|
||
|
|
|
(27.00% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
WorkWell, LLC
|
5.4%
|
*
|
Senior Secured Term Loan, due 10/21/2020
|
|
10/22/15
|
4,601,563
|
|
4,523,847
|
|
4,546,000
|
|
||
|
|
|
(12.43%; LIBOR + 11.50% with 0.50% LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Revolving Line of Credit, due 10/21/2020
|
(6
|
)
|
10/22/15
|
—
|
|
—
|
|
—
|
|
|
|
|
|
(12.43%; LIBOR + 11.50% with 0.50% LIBOR floor)
|
(11
|
)
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
250,000 Preferred Equity Units
|
|
10/22/15
|
—
|
|
250,000
|
|
170,000
|
|
||
|
|
|
(6.16% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
250,000 Common Equity Units
|
|
10/22/15
|
—
|
|
—
|
|
523
|
|
||
|
|
|
(0.12% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Retailer
|
|
|
|
|
|
|
|
|
|||||
Peekay Acquisition, LLC
|
0.0%
|
*
|
Senior Secured Term Loan (Last Out), due 02/15/16
|
|
12/31/12
|
2,304,615
|
|
1,995,422
|
|
37,959
|
|
||
|
|
|
(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
|
|
|
|
|
|
13,106,178
|
|
15,994,294
|
|
12,137,552
|
|
||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Control Investments
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Aerospace & Defense
|
|
|
|
|
|
|
|
|
|||||
Flight Lease VII, LLC
|
1.1
|
%
|
*
|
1,800 Common Equity Units
|
|
03/18/16
|
—
|
|
935,978
|
|
923,947
|
|
|
|
|
|
(46.15% on a fully diluted basis)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
Flight Engine Leasing III, LLC
|
2.3
|
%
|
|
Senior Secured Term Loan, due 12/13/2018
|
|
12/13/16
|
1,825,000
|
|
1,807,299
|
|
1,807,299
|
|
|
|
|
|
(13.00%; the greater of 13.00% or LIBOR plus 7.50%)
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|||||
|
|
|
400 Common Equity Units
|
(16) (18)
|
12/13/16
|
—
|
|
200,000
|
|
200,000
|
|
||
|
|
|
(33.33% of fully diluted common equity)
|
|
|
|
|
|
|||||
Subtotal Control Investments
|
|
|
|
|
|
1,825,000
|
|
2,943,277
|
|
2,931,246
|
|
||
|
|
|
|
|
|
|
|
|
|||||
Total Investments as of 12/31/2016
|
153.8%
|
*
|
|
|
|
135,346,227
|
|
139,099,719
|
|
134,101,534
|
|
(1)
|
Debt investments, the revenue linked security 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 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 7.16% 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 $3.3 million, $7.5 million, and $4.2 million, respectively. The tax cost of investments is $138.4 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 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 and began accruing interest during the three months ended June 30, 2015. 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). The loan was placed on non-accrual status during the three months ended September 30, 2016. On October 31, 2016 the maturity date was extended from March 30, 2017 to September 30, 2017 and the interest rate was reduced from 10.00% (5.00% cash/5.00%PIK) to 5.00% cash. No income was accrued during the six months ended December 31, 2016. However, cash interest of $181,247, which represents the total amount of interest due to the Company as of December 31, 2016, was collected and recognized as income during this period.
|
(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 December 31, 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)
|
The revenue linked security entitles the Company to participate in the proceeds of inventory sales pursuant to a consignment agreement between IAG Engine Center, LLC ("IAG") and an affiliated entity of IAG, AMS Flight Funding, LLC.
|
(10)
|
The Company owns 49,209 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 December 31, 2016 fair value.
|
(11)
|
The coupon on the loan is subject to a pricing grid based on certain leverage ratios 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. The CLO has begun its redemption process and as of October 15, 2016 had paid down all of its secured liabilities. The fair value of the investment as of December 31, 2016 is based on our expected liquidation proceeds and not on an effective yield basis.
|
(13)
|
The loan was placed on non-accrual status during the second quarter of 2016, after 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 were cured, waived by the senior secured lenders or the blockage period expires. During the third quarter of 2016, Fox refinanced its senior credit facility and our loan was brought current. On October 26, 2016, our credit agreement was amended and restated to convert the loan from a junior secured term loan to a senior secured term loan secured by all assets of the Company other than the vehicle fleet. The Company earned a $0.8 million amendment fee which is due at the earlier of maturity or loan repayment. The maturity date was changed from October 31, 2019 to September 29, 2017 and amortization of $0.2 million a month on the total loan amount will commence on March 31, 2017. The interest rate reverted back to the original level of LIBOR plus 12.00%. Also as part of the new agreement, the Company is entitled to receive additional fees and equity warrants in the borrower if our loan is not paid off at certain future milestone dates. The investment was taken off of non-accrual status during the third quarter of 2016 following the receipt of all past due interest. The Company earned warrants to buy 50.5 shares of common stock in Fox on 12/31/16 since the loan was not paid off as of that date.
|
(14)
|
This loan was in violation of financial covenants pursuant to its loan agreement. As a result, the Company implemented a 3% PIK default rate on August 9, 2016. The default rate was in effect as of December 31, 2016.
|
(15)
|
The loan is convertible any time, at the Company's discretion, into 5.8% of the fully diluted common equity of the borrower.
|
(16)
|
The investment is held by HCAP Equity Holdings, LLC, the Company's taxable blocker subsidiary.
|
(17)
|
The borrower failed to make a required principal payment on January 31, 2017 causing an event of default to occur under the credit agreement. The default had not been cured as of the filing date of this document.
|
(18)
|
The Company's equity investment is in Flight Engine Leasing XI, LLC. This entity owns 100% of the membership interests in our borrower, Flight Engine Leasing III, LLC.
|
|
*
|
HCAP acquired HCC LLC through a merger (the “Merger”) whereby HCC LLC merged with and into HCAP, and the holders of membership interests in HCC LLC received shares of HCAP common stock in exchange for their interests in HCC LLC. As a result of the Merger, the outstanding limited liability company interests in HCC LLC were converted into a number of shares of HCAP common stock equal to (i) $33.7 million (
i.e.
, the net asset value of HCC LLC as of December 31, 2012), plus the proceeds of sales of membership interests by HCC LLC since December 31, 2012, plus the reclassification of mezzanine equity to members capital, and minus distributions of pre-December 31, 2012 earnings made by HCC LLC after December 31, 2012, divided by (ii) $15.00 per share of the common stock of HCAP. In connection with the Merger, the number of membership interests of HCC LLC underlying each outstanding warrant of HCC LLC, and the exercise price thereof, were converted into HCAP’s common stock equivalent (based on the merger conversion formula). In addition, the exercise prices of the warrants were subject to upward (but not downward) adjustment as the public offering price of HCAP’s shares of common stock in the initial public offering described below was higher than the then-current exercise price of the warrants.
|
|
|
|
|
*
|
HCAP assumed and succeeded to all of the assets and liabilities of HCC LLC, including its obligations under the revolving credit facility with JMP Group LLC.
|
|
|
|
|
*
|
On May 7, 2013, HCAP closed its initial public offering of 3,400,000 shares of its common stock at a price of $15.00 per share, raising $51.0 million in gross proceeds, or $50.4 million after deducting underwriting discounts and commissions.
|
|
|
|
|
*
|
On May 17, 2013, HCAP closed on the initial public offering underwriters’ overallotment option of 433,333 shares of its common stock at $15.00 per share, raising additional gross proceeds of $6.5 million, or $6.1 million after deducting underwriting discounts and commissions.
|
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 generally begins with each investment initially being valued by the Company's management or the investment professionals of our investment adviser, and/or, if applicable, by an independent valuation firm.
|
•
|
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.
|
|
Year Ended December 31, 2017
|
||||
|
Shares
|
|
Proceeds
|
||
Shares issued
|
172,774
|
|
$
|
2,318,427
|
|
Dividends reinvested
|
33,932
|
|
420,088
|
|
|
Shares repurchased
|
(36,614)
|
|
(401,902)
|
||
Total for the year ended December 31, 2017
|
170,092
|
|
$
|
2,336,613
|
|
|
Year Ended December 31, 2016
|
||||
|
Shares
|
|
Proceeds
|
||
Dividends reinvested
|
43,603
|
|
$
|
504,977
|
|
Shares repurchased
|
(25,776)
|
|
(322,137)
|
||
Total for the year ended December 31, 2016
|
17,827
|
|
$
|
182,840
|
|
|
Year Ended December 31, 2015
|
|||||
|
Shares
|
|
Proceeds
|
|||
Dividends reinvested
|
46,996
|
|
|
$
|
566,557
|
|
Shares repurchased
|
—
|
|
|
—
|
|
|
Total for the year ended December 31, 2015
|
46,996
|
|
|
$
|
566,557
|
|
|
Fair Values as of December 31, 2017
|
||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Senior Secured
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
59,010,761
|
|
|
$
|
59,010,761
|
|
Junior Secured
|
—
|
|
|
3,719,609
|
|
|
44,379,140
|
|
|
48,098,749
|
|
||||
Equity and Equity Related Securities
|
—
|
|
|
—
|
|
|
7,958,168
|
|
|
7,958,168
|
|
||||
Revenue Linked Security
|
—
|
|
|
—
|
|
|
533,000
|
|
|
533,000
|
|
||||
|
$
|
—
|
|
|
$
|
3,719,609
|
|
|
$
|
111,881,069
|
|
|
$
|
115,600,678
|
|
|
Fair Values as of December 31, 2016
|
||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Financial assets:
|
|
|
|
|
|
|
|
||||||||
Senior Secured (1)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
76,221,062
|
|
|
$
|
76,221,062
|
|
Junior Secured
|
—
|
|
|
8,098,791
|
|
|
44,442,975
|
|
|
52,541,766
|
|
||||
CLO Equity
|
—
|
|
|
—
|
|
|
138,730
|
|
|
138,730
|
|
||||
Equity and Equity Related Securities
|
—
|
|
|
—
|
|
|
4,207,964
|
|
|
4,207,964
|
|
||||
Revenue Linked Security
|
—
|
|
|
—
|
|
|
992,012
|
|
|
992,012
|
|
||||
|
$
|
—
|
|
|
$
|
8,098,791
|
|
|
$
|
126,002,743
|
|
|
$
|
134,101,534
|
|
(1)
|
Senior secured category for December 31, 2016 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
December 31, 2017 |
|
Valuation Technique (1)
|
|
Significant Unobservable
Input |
|
Range
|
|
Weighted Average
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Senior Secured
|
|
$
|
59,010,761
|
|
|
Bond Yield
|
|
Risk adjusted discount factor
|
|
6.0% - 30.2%
|
|
10.6%
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Market
|
|
EBITDA multiple
|
|
2.2x - 6.7x
|
|
5.5x
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
10.0% - 23.1%
|
|
15.6%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Junior Secured
|
|
$
|
44,379,140
|
|
|
Bond Yield
|
|
Risk adjusted discount factor
|
|
4.1% - 17.5%
|
|
12.6%
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Market
|
|
EBITDA multiple
|
|
0.9x - 10.9x
|
|
7.4x
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
9.0% - 17.8%
|
|
15.1%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Equity and Equity Related Securities
|
|
$
|
7,958,168
|
|
|
Market
|
|
EBITDA multiple
|
|
3.6x - 6.9x
|
|
5.5x
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
10.0% - 25.0%
|
|
14.6%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Revenue Linked Security
|
|
$
|
533,000
|
|
|
Income
|
|
Weighted average cost of capital
|
|
36.6%
|
|
36.6%
|
|
|
|
|
|
|
|
|
|
|
|
Type of Investment
|
|
Fair Value at
December 31, 2016 |
|
Valuation Technique (1)
|
|
Significant Unobservable
Input |
|
Range
|
|
Weighted Average
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Senior Secured (2)
|
|
$
|
76,221,062
|
|
|
Bond Yield
|
|
Risk adjusted discount factor
|
|
6.1% - 30.0%
|
|
13.5%
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Market
|
|
EBITDA multiple
|
|
0.8x - 9.7x
|
|
5.0x
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
10.0% - 23.0%
|
|
17.4%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Junior Secured
|
|
$
|
44,442,975
|
|
|
Bond Yield
|
|
Risk adjusted discount factor
|
|
4.2% - 26.0%
|
|
13.6%
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Market
|
|
EBITDA multiple
|
|
5.9x - 8.7x
|
|
7.3x
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
13.0% - 25.0%
|
|
17.5%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
||
Equity and Equity Related Securities
|
|
$
|
4,207,964
|
|
|
Market
|
|
EBITDA multiple
|
|
4.1x - 9.7x
|
|
6.4x
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
Income
|
|
Weighted average cost of capital
|
|
10.0% - 23.0%
|
|
18.3%
|
||
|
|
|
|
|
|
|
|
|
|
|
||
CLO Equity
|
|
$
|
138,730
|
|
|
Estimated Liquidation Value
|
|
Discount applied to loans
|
|
50%
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
||
Revenue Linked Security
|
|
$
|
992,012
|
|
|
Income
|
|
Weighted average cost of capital
|
|
50%
|
|
50%
|
(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 and weighted average cost of capital. 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 historically utilized the bond yield technique. The significant unobservable inputs used in the fair value measurement under this technique were risk adjusted discount factors. The Company also utilized 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. As of December 31, 2016, the CLO had been called and was almost entirely liquidated. The fair value of the investment at December 31, 2016 was based on the estimated liquidation value of the loans remaining in the CLO as of this date.
|
(2)
|
Senior secured category includes both first out and last out loans. The Company's last out senior secured loans are identified on the Consolidated Schedule of Investments.
|
|
Year ended December 31, 2017
|
||||||||||||||||||||||
|
Senior Secured
|
|
Junior Secured
|
|
CLO Equity
|
|
Equity and Equity Related Securities
|
|
Revenue- Linked Security
|
|
December 31, 2017
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fair value of portfolio, beginning of period
|
$
|
76,221,062
|
|
|
$
|
44,442,975
|
|
|
$
|
138,730
|
|
|
$
|
4,207,964
|
|
|
$
|
992,012
|
|
|
$
|
126,002,743
|
|
New/Add-on investments
|
33,058,389
|
|
|
17,952,428
|
|
|
—
|
|
|
4,267,737
|
|
|
—
|
|
|
55,278,554
|
|
||||||
Principal payments received
|
(52,116,306
|
)
|
|
(7,735,662
|
)
|
|
(76,947
|
)
|
|
(662,304
|
)
|
|
(605,612
|
)
|
|
(61,196,831
|
)
|
||||||
Loan origination fees received
|
(2,121,900
|
)
|
|
(332,872
|
)
|
|
—
|
|
|
(4,096
|
)
|
|
—
|
|
|
(2,458,868
|
)
|
||||||
Payment in kind interest earned
|
995,318
|
|
|
797,769
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,793,087
|
|
||||||
Accretion of deferred loan origination fees/discounts
|
2,071,919
|
|
|
263,719
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,335,638
|
|
||||||
Transfer to (from) level 3
|
—
|
|
|
(2,015,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,015,000
|
)
|
||||||
Transfer (to) from investment type
|
4,300,000
|
|
|
(4,300,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Transfer (to) from other receivables
|
—
|
|
|
—
|
|
|
(28,532
|
)
|
|
—
|
|
|
—
|
|
|
(28,532
|
)
|
||||||
Net realized losses on investments
|
(1,995,421
|
)
|
|
(6,293,866
|
)
|
|
(33,251
|
)
|
|
260,097
|
|
|
—
|
|
|
(8,062,441
|
)
|
||||||
Change in unrealized appreciation (depreciation) on investments
|
(1,402,300
|
)
|
|
1,599,649
|
|
|
—
|
|
|
(111,230
|
)
|
|
146,600
|
|
|
232,719
|
|
||||||
Fair value of portfolio, end of period
|
$
|
59,010,761
|
|
|
$
|
44,379,140
|
|
|
$
|
—
|
|
|
$
|
7,958,168
|
|
|
$
|
533,000
|
|
|
$
|
111,881,069
|
|
Net unrealized depreciation relating to Level 3 assets still held at December 31, 2017
|
$
|
(2,812,484
|
)
|
|
$
|
(115,197
|
)
|
|
$
|
—
|
|
|
$
|
(16,639
|
)
|
|
$
|
146,600
|
|
|
(2,797,720
|
)
|
|
Year ended December 31, 2016
|
||||||||||||||||||||||
|
Senior Secured
(1)
|
|
Junior Secured
|
|
CLO Equity
|
|
Equity and Equity Related Securities
|
|
Revenue- Linked Security
|
|
December 31, 2016
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Fair value of portfolio, beginning of period
|
$
|
80,220,519
|
|
|
$
|
43,593,371
|
|
|
$
|
1,567,860
|
|
|
$
|
1,824,777
|
|
|
$
|
—
|
|
|
$
|
127,206,527
|
|
New/Add-on investments
|
16,594,084
|
|
|
10,800,000
|
|
|
—
|
|
|
4,125,000
|
|
|
895,962
|
|
|
32,415,046
|
|
||||||
Principal payments received
|
(29,875,918
|
)
|
|
(137,500
|
)
|
|
(1,359,227
|
)
|
|
(810,578
|
)
|
|
—
|
|
|
(32,183,223
|
)
|
||||||
Loan origination fees received
|
(1,096,399
|
)
|
|
(251,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,347,399
|
)
|
||||||
Payment in kind interest earned
|
523,371
|
|
|
836,219
|
|
|
—
|
|
|
35,978
|
|
|
103,165
|
|
|
1,498,733
|
|
||||||
Accretion of deferred loan origination fees/discounts
|
883,413
|
|
|
817,971
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,701,384
|
|
||||||
Transfer (to) from level 3
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Transfer (to) from investment type
|
10,722,000
|
|
|
(10,722,000
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net realized losses on investments
|
(700,465
|
)
|
|
—
|
|
|
(69,903
|
)
|
|
182,559
|
|
|
—
|
|
|
(587,809
|
)
|
||||||
Change in unrealized appreciation (depreciation) on investments
|
(1,049,543
|
)
|
|
(494,086
|
)
|
|
—
|
|
|
(1,149,772
|
)
|
|
(7,115
|
)
|
|
(2,700,516
|
)
|
||||||
Fair value of portfolio, end of period
|
$
|
76,221,062
|
|
|
$
|
44,442,975
|
|
|
$
|
138,730
|
|
|
$
|
4,207,964
|
|
|
$
|
992,012
|
|
|
$
|
126,002,743
|
|
Net unrealized depreciation relating to Level 3 assets still held at December 31, 2016
|
$
|
(1,689,509
|
)
|
|
$
|
(494,084
|
)
|
|
$
|
—
|
|
|
$
|
(1,239,932
|
)
|
|
$
|
(7,115
|
)
|
|
$
|
(3,430,640
|
)
|
(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.
|
|
As of December 31, 2017
|
|
As of December 31, 2016
|
||||||||||||
|
Unfunded Commitment
|
|
Extended Fair Value of Unfunded Commitment
|
|
Unfunded Commitment
|
|
Extended Fair Value of Unfunded Commitment
|
||||||||
24/7 Software, Inc.
|
$
|
300,000
|
|
|
$
|
297,067
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Chemical Information Services, LLC
|
—
|
|
|
—
|
|
|
285,000
|
|
|
285,000
|
|
||||
Direct Med Parts & Service, LLC
|
1,000,000
|
|
|
1,000,000
|
|
|
—
|
|
|
—
|
|
||||
Infinite Care, LLC
|
—
|
|
|
—
|
|
|
800,000
|
|
|
789,235
|
|
||||
King Engineering Associates, Inc.
|
300,000
|
|
|
300,000
|
|
|
—
|
|
|
—
|
|
||||
Lanco Acquisition, LLC
|
—
|
|
|
—
|
|
|
450,000
|
|
|
450,000
|
|
||||
Northeast Metal Works LLC
|
—
|
|
|
—
|
|
|
310,761
|
|
|
310,761
|
|
||||
Surge Busy Bee Holdings, LLC
|
300,000
|
|
|
287,652
|
|
|
—
|
|
|
—
|
|
||||
WorkWell, LLC
|
—
|
|
|
—
|
|
|
300,000
|
|
|
296,378
|
|
||||
V-Tek, Inc.
|
1,113,903
|
|
|
1,113,903
|
|
|
—
|
|
|
—
|
|
||||
Total
|
$
|
3,013,903
|
|
|
$
|
2,998,622
|
|
|
$
|
2,145,761
|
|
|
$
|
2,131,374
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2017
|
|
Year Ended
December 31, 2016
|
|
Year Ended
December 31, 2015
|
||||||
|
|
|
|
|
|
||||||
Net increase in net assets resulting from operations
|
$
|
1,632,586
|
|
|
$
|
6,006,487
|
|
|
$
|
6,411,013
|
|
Weighted average shares outstanding (basic and diluted)
|
6,412,215
|
|
|
6,282,360
|
|
|
6,249,346
|
|
|||
Net increase in net assets resulting from operations per share
|
$
|
0.25
|
|
|
$
|
0.96
|
|
|
$
|
1.03
|
|
|
Year Ended December 31, 2017
|
|
Year Ended December 31, 2016
|
|
Year Ended December 31, 2015
|
||||||
Net increase in net assets resulting from operations
|
$
|
1,632,586
|
|
|
$
|
6,006,487
|
|
|
$
|
6,411,013
|
|
Net change in unrealized depreciation (appreciation) on investments
|
(1,458,173
|
)
|
|
3,528,349
|
|
|
2,182,647
|
|
|||
Incentive fees on net unrealized depreciation on investments
|
—
|
|
|
—
|
|
|
(92,883
|
)
|
|||
Book/tax difference due to acceleration of loan fees on modified investments
|
(399,791
|
)
|
|
(21,183
|
)
|
|
70,415
|
|
|||
Book/tax difference due to interest income on certain investments
|
299,656
|
|
|
(197,831
|
)
|
|
(298,798
|
)
|
|||
Interest income in HCAP Equity Holdings LLC
|
(420,493
|
)
|
|
—
|
|
|
—
|
|
|||
Operating expenses in HCAP Equity Holdings LLC
|
245,271
|
|
|
—
|
|
|
—
|
|
|||
Book/tax difference due to capital losses
|
766,206
|
|
|
148,716
|
|
|
1,060,320
|
|
|||
Book/tax difference due to partnership income on certain equity investments
|
—
|
|
|
(17,853
|
)
|
|
(83,052
|
)
|
|||
Excise and income taxes not deductible
|
128,215
|
|
|
61,591
|
|
|
1,393
|
|
|||
Capital loss carryforward
|
7,296,235
|
|
|
368,870
|
|
|
—
|
|
|||
Taxable/Distributable Income
|
$
|
8,089,712
|
|
|
$
|
9,877,146
|
|
|
$
|
9,251,055
|
|
|
As of December 31,
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Ordinary income
|
$
|
1,108,620
|
|
|
$
|
2,795,424
|
|
|
$
|
1,183,219
|
|
Realized capital gains
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,509
|
|
|
|
|
||||||||
|
2017
|
2016
|
2015
|
2014
|
2013
|
|||||
|
|
|
|
|
|
|||||
Per share data:
|
|
|
|
|
|
|||||
Net asset value at beginning of period
|
$13.86
|
$14.26
|
$14.60
|
$14.45
|
$16.89
|
|||||
Net investment income, after taxes (1)
|
1.28
|
|
1.60
|
|
1.54
|
|
1.34
|
|
1.32
|
|
Realized (losses) gains on investments (1)
|
(1.26
|
)
|
(0.08
|
)
|
(0.17
|
)
|
0.10
|
|
—
|
|
Net change in unrealized appreciation (depreciation) on investments
|
0.23
|
|
(0.56
|
)
|
(0.34
|
)
|
0.06
|
|
(0.39
|
)
|
Net increase in net assets from operations
|
0.25
|
|
0.96
|
|
1.03
|
|
1.50
|
|
0.93
|
|
Distributions from net investment income
|
(1.45
|
)
|
(1.35
|
)
|
(1.29
|
)
|
(1.35
|
)
|
(2.48
|
)
|
Distributions from capital gains
|
—
|
|
—
|
|
(0.06
|
)
|
—
|
|
(0.10
|
)
|
Total Distributions
|
(1.45
|
)
|
(1.35
|
)
|
(1.35
|
)
|
(1.35
|
)
|
(2.58
|
)
|
Effect of shares issued, net of offering expenses
|
—
|
|
(0.01
|
)
|
(0.02
|
)
|
—
|
|
(0.79
|
)
|
Net asset value at end of period
|
$12.66
|
$13.86
|
$14.26
|
$14.60
|
$14.45
|
|||||
Net assets at end of period
|
81,781,429
|
|
87,122,296
|
|
89,414,256
|
90,872,315
|
88,854,486
|
|||
Shares outstanding at end of period
|
6,457,588
|
6,287,496
|
6,269,669
|
6,222,673
|
6,148,227
|
|||||
Weighted average shares outstanding (basic) (2)
|
6,412,215
|
6,282,360
|
6,249,346
|
6,185,061
|
4,429,639
|
|||||
Per share market value at end of period
|
$10.96
|
$13.75
|
$11.73
|
$11.54
|
$15.02
|
|||||
|
|
|
|
|
|
|||||
Ratios and Supplemental data:
|
|
|
|
|
|
|||||
Net Asset Value Total Return (3)
|
2.62
|
%
|
9.17
|
%
|
9.20
|
%
|
11.85
|
%
|
1.18
|
%
|
Market Price Total Return (4)
|
(10.45
|
)%
|
31.66
|
%
|
13.64
|
%
|
(14.95
|
)%
|
5.78
|
%
|
Average Net Assets
|
$85,071,701
|
$87,281,555
|
$89,888,327
|
$89,846,742
|
$64,066,052
|
|||||
Ratio of expenses to average Net assets (5)
|
12.30
|
%
|
12.42
|
%
|
11.88
|
%
|
7.13
|
%
|
4.57
|
%
|
Ratio of net investment income to average Net assets
|
9.68
|
%
|
11.52
|
%
|
10.74
|
%
|
9.20
|
%
|
9.10
|
%
|
(1)
|
Based on weighted average number of common shares outstanding for the period.
|
(2)
|
The shares outstanding and per share amounts for the periods prior to May 2013 have been adjusted for the conversion rate of 0.99 shares for each unit. See Note 1.
|
(3)
|
This measure of total investment return 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)
|
This measure of 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 (plus 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 total investment return does not reflect any sales load that may be paid by investors.
|
(5)
|
Had our investment adviser not agreed to waive its incentive fee for the period from our initial public offering through March 31, 2014 to the extent required to support a minimum dividend yield of 9%, our ratio of expenses to average net assets would have increased by 36 basis point in 2014.
|
|
|
Quarter Ended
|
||||||||||||
(in thousands, except per share data)
|
|
3/31/2017
|
|
|
6/30/2017
|
|
|
9/30/2017
|
|
|
12/31/2017
|
|
||
Total investment income
|
|
4,670
|
|
|
5,083
|
|
|
$
|
4,815
|
|
|
$
|
4,136
|
|
Net investment income
|
|
2,238
|
|
|
2,515
|
|
|
1,560
|
|
|
1,925
|
|
||
Net increase (decrease) in net assets resulting from operations
|
|
2,334
|
|
|
(1,860
|
)
|
|
(333
|
)
|
|
1,492
|
|
||
Net increase (decrease) in net assets resulting from operations per share (basic and diluted)
|
|
$0.37
|
|
$(0.29)
|
|
$(0.05)
|
|
$0.23
|
|
|
Quarter Ended
|
||||||||||||
(in thousands, except per share data)
|
|
3/31/2016
|
|
|
6/30/2016
|
|
|
9/30/2016
|
|
|
12/31/2016
|
|
||
Total investment income
|
|
5,473
|
|
|
4,729
|
|
|
$
|
5,494
|
|
|
$
|
5,197
|
|
Net investment income
|
|
2,571
|
|
|
2,069
|
|
|
2,979
|
|
|
2,433
|
|
||
Net (decrease) increase in net assets resulting from operations
|
|
(133
|
)
|
|
993
|
|
|
2,370
|
|
|
2,777
|
|
||
Net (decrease) increase in net assets resulting from operations per share (basic and diluted)
|
|
$(0.02)
|
|
$0.16
|
|
$0.38
|
|
$0.44
|
Item 9.
|
Changes in and Disagreements with Independent Registered Public Accounting Firm on Accounting and Financial Disclosure
|
*
|
Members of senior management, with the participation and input of the Audit Committee and the Board of Directors, have and will increase communication with, and training of employees regarding:
|
Item 9B.
|
Other Information.
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accountant Fees and Services
|
Item 15.
|
Exhibits, Financial Statement Schedules
|
|
Page
|
|
|
|
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:
|
|
|
3.1
|
|
|
|
3.2
|
|
|
|
4.1
|
|
|
|
4.2
|
|
|
|
4.3
|
|
|
|
4.4
|
|
|
|
4.5
|
|
|
|
4.6
|
|
|
|
10.1
|
|
|
|
10.2
|
|
|
|
10.3
|
|
|
|
10.4
|
|
|
|
10.5
|
|
|
|
10.6
|
|
|
|
|
|
10.7
|
|
|
|
|
|
31.2
|
|
|
|
32.1
|
|
|
|
32.2
|
Portfolio Company
|
Type of Investment (4) (5) (10)
|
|
Net Realized Loss
|
Net Change in Unrealized Appreciation (Depreciation)
|
Amount of Dividends or Interest Credited to Income (1)
|
December 31, 2016 Value
|
Gross Additions (2)
|
Gross Reductions (3)
|
December 31, 2017 Value
|
|||||||||||||||
Non-Majority Owned Control Investments
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Flight Engine Leasing III LLC
|
Senior Secured Term Loan, due 12/2018 (13.00%; the greater of 13.00% of LIBOR + 7.50%
|
|
$
|
—
|
|
$
|
—
|
|
$
|
119,821
|
|
$
|
1,807,299
|
|
$
|
17,701
|
|
$
|
(1,825,000
|
)
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Flight Lease XI, LLC
|
Common Equity Interest (400 Units)
|
(7) (11)
|
|
—
|
|
127,421
|
|
149,154
|
|
200,000
|
|
127,421
|
|
—
|
|
327,421
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Flight Lease VII, LLC
|
Common Equity Interest (1,800 Units)
|
(11
|
)
|
—
|
|
(15,393
|
)
|
155,859
|
|
923,947
|
|
—
|
|
(94,098
|
)
|
829,849
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Infinite Care, LLC
|
Senior Secured Term Loan, due 2/2019 (13.38%; 1M LIBOR + 6.00% with a 0.42% LIBOR floor plus 6.00% PIK
|
(8) (13)
|
|
—
|
|
(2,366,893
|
)
|
653,687
|
|
5,916,570
|
|
318,209
|
|
(2,742,779
|
)
|
3,492,000
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Revolving Line of Credit, due 2/2019 (13.38%; 1M LIBOR + 12.00% with a 0.42% LIBOR floor
|
|
—
|
|
—
|
|
70,875
|
|
200,000
|
|
1,865,000
|
|
—
|
|
2,065,000
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Class A Common Equity Units (3,000,000 Units)
|
|
—
|
|
(1,266,500
|
)
|
—
|
|
1,266,500
|
|
—
|
|
(1,266,500
|
)
|
—
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total Non-Majority Owned Control Investments
|
|
$
|
—
|
|
$
|
(3,521,365
|
)
|
$
|
1,149,396
|
|
$
|
10,314,316
|
|
$
|
2,328,331
|
|
$
|
(5,928,377
|
)
|
$
|
6,714,270
|
|
||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Non-Control Affiliate Investments
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Flight Lease XII, LLC
|
Common Equity Interest (1,000 Units)
|
(7) (11)
|
|
$
|
—
|
|
$
|
116,502
|
|
$
|
—
|
|
$
|
—
|
|
$
|
616,502
|
|
$
|
—
|
|
$
|
616,502
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
24/7 Software, Inc.(formerly Instant Sales Solutions, Inc.)
|
Senior Secured Term Loan, due 7/2022 (13.25%)
|
(6) (14)
|
|
—
|
|
—
|
|
198,005
|
|
—
|
|
2,971,772
|
|
(112,500
|
)
|
2,859,272
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Revolving Line of Credit, due 07/2021 (10.5%; 3M LIBOR + 9.00% with a 1.00% LIBOR floor
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Common Equity Interest (950 Units)
|
(7
|
)
|
—
|
|
350,000
|
|
—
|
|
—
|
|
1,300,000
|
|
—
|
|
1,300,000
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Northeast Metal Works LLC
|
Senior Secured Term Loan, due 12/2019 (16.50%; 10.50% Cash plus 6.00% PIK
|
(9) (15)
|
|
—
|
|
(237,269
|
)
|
1,760,994
|
|
11,678,261
|
|
530,621
|
|
(2,556,882
|
)
|
9,652,000
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Revolving Line of Credit, due 12/2019 (13.50%)
|
|
—
|
|
(18,000
|
)
|
215,961
|
|
1,189,239
|
|
1,295,751
|
|
(1,002,990
|
)
|
1,482,000
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Preferred Equity Interest (2,500 Class A Units)
|
(7
|
)
|
—
|
|
(119,000
|
)
|
—
|
|
—
|
|
1,600,000
|
|
(119,000
|
)
|
1,481,000
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Peekay Acquisition, LLC
|
Senior Secured Term Loan, due 2/2016 (17.00% PIK)
|
|
(1,995,421
|
)
|
1,957,463
|
|
—
|
|
37,959
|
|
1,957,462
|
|
(1,995,421
|
)
|
—
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Common Equity Interest (Peekay Boutiques, Inc.) (35,000 Units)
|
|
(105,000
|
)
|
105,000
|
|
—
|
|
—
|
|
105,000
|
|
(105,000
|
)
|
—
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
V-Tek, Inc.
|
Senior Secured Term Loan, due 03/2022 (12.5%; 3M LIBOR + 11.00%)
|
(12
|
)
|
—
|
|
93,526
|
|
343,208
|
|
—
|
|
3,500,000
|
|
—
|
|
3,500,000
|
|
(1)
|
Represents the total amount of interest and fees credited to income for the portion of the year an investment was included in Affiliate categories.
|
(2)
|
Gross additions include increase in the cost basis of investments resulting from new portfolio investment and accrued PIK interest.
|
(3)
|
Gross reductions include decreases in the total cost basis of investments resulting from principal or PIK repayments or sales.
|
(4)
|
Debt investments and the CLO subordinated notes are income producing investments unless an investment is on non accrual. Common equity, residual values and warrants are non-income producing.
|
(5)
|
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.
|
(6)
|
Credit facility has an unfunded commitment in addition to the amounts shown in the Consolidated Schedule of Investments. See Note 8 in the Notes to Consolidated Financial Statements for further discussion on portion of commitment unfunded at December 31, 2017.
|
(7)
|
The investment is held by HCAP Equity Holdings, LLC, the Company's taxable blocker subsidiary.
|
(8)
|
Infinite Care LLC ("ICC") is in default under the terms of its credit agreement. In October 2017, the Company exercised its rights under a stock pledge of the borrower. The Company formed a wholly owned subsidiary, HCAP ICC, LLC, to exercise its proxy right under the pledge agreement and take control of the board of ICC. The loan was placed on non-accrual status in Q4 2017. In January 2018, HCAP took control of the borrower's equity after accelerating the debt and auctioning the borrower’s equity in a public sale. The Company bid a portion of its outstanding debt to gain control of the company. Upon completion of this process the Company converted $2.0 million of its debt investment in the borrower to preferred equity.
|
(9)
|
The interest rate on the revolver is 11% prior to following the interim advance term; 13.5% from the first amendment effective date to February 28, 2018; 14.25% from March 1, 2018 through May 31, 2018 and 15% from June 1, 2018 until expiration of the interim advance. The interest rate on the term loan is 11% prior to and following the interim advance term; 10.5% cash pay plus 6% PIK from the first amendment date trough February 28, 2018; 10.5% cash pay plus 6.25% PIK from March 1, 2018 to May 31, 2018; 10.5% cash play plus 6.5% PIK from 6/1/18 until expiration of the interim advance.
|
(10)
|
The Company's non-qualifying assets, on a fair value basis, comprise approximately 2% of the Company's total assets.
|
(11)
|
Industry: Aerospace & Defense
|
(12)
|
Industry: Capital Equipment
|
(13)
|
Industry: Healthcare & Pharmaceuticals
|
(14)
|
Industry: High Tech Industries
|
(15)
|
Industry: Metals & Mining
|
Type
|
Amortized Cost
|
|
Fair Value
|
|
% of Fair Value
|
|
% of Net Assets
|
||||
Senior Secured Debt
|
30,842,712
|
|
|
27,792,369
|
|
|
24.0
|
%
|
|
34.0
|
%
|
Equity
|
7,507,273
|
|
|
4,905,772
|
|
|
4.2
|
%
|
|
6.0
|
%
|
Total
|
38,349,985
|
|
|
32,698,141
|
|
|
28.2
|
%
|
|
40.0
|
%
|
Rate Type
|
Amortized Cost
|
|
Fair Value
|
|
% of Fair Value
|
|
% of Net Assets
|
||||
Fixed Rate
|
14,111,800
|
|
|
13,993,272
|
|
|
12.1
|
%
|
|
17.1
|
%
|
Floating rate
|
16,730,912
|
|
|
13,799,097
|
|
|
11.9
|
%
|
|
16.9
|
%
|
Total
|
30,842,712
|
|
|
27,792,369
|
|
|
24.0
|
%
|
|
34.0
|
%
|
Industry
|
Amortized Cost
|
|
Fair Value
|
|
% of Fair Value
|
|
% of Net Assets
|
||||
Aerospace & Defense
|
1,557,273
|
|
|
1,773,772
|
|
|
1.5
|
%
|
|
2.2
|
%
|
Capital Equipment
|
4,442,571
|
|
|
4,737,097
|
|
|
4.1
|
%
|
|
5.8
|
%
|
Healthcare & Pharmaceuticals
|
15,688,341
|
|
|
9,413,000
|
|
|
8.1
|
%
|
|
11.5
|
%
|
High Tech Industries
|
3,809,272
|
|
|
4,159,272
|
|
|
3.6
|
%
|
|
5.1
|
%
|
Metals & Mining
|
12,852,528
|
|
|
12,615,000
|
|
|
10.9
|
%
|
|
15.4
|
%
|
Total
|
38,349,985
|
|
|
32,698,141
|
|
|
28.2
|
%
|
|
40.0
|
%
|
(1)
|
Represents the total amount of interest and fees credited to income for the portion of the year an investment was included in Affiliate categories.
|
(2)
|
Gross additions include increase 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 or sales. Gross reductions also include net increases in unrealized depreciation or net decreases in unrealized appreciation.
|
|
HARVEST CAPITAL CREDIT CORPORATION
|
|
|
Date: April 2, 2018
|
/s/ Joseph A. Jolson
|
|
Joseph A. Jolson
Chief Executive Officer
|
|
|
Date: April 2, 2018
|
/s/ Joseph A. Jolson
|
|
Joseph A. Jolson
Chief Executive Officer and
Director (Principal Executive Officer)
|
|
|
Date: April 2, 2018
|
/s/ Craig R. Kitchin
|
|
Craig R. Kitchin
Chief Financial Officer
and Secretary
(Principal Financial and Accounting Officer)
|
|
|
Date: April 2, 2018
|
/s/ Richard P. Buckanavage
|
|
Richard P. Buckanavage
Director
|
|
|
Date: April 2, 2018
|
/s/ Dorian B. Klein
|
|
Dorian B. Klein
Director
|
|
|
Date: April 2, 2018
|
/s/ Jack G. Levin
|
|
Jack G. Levin
Director
|
|
|
Date: April 2, 2018
|
/s/ Richard A. Sebastiao
|
|
Richard A. Sebastiao
Director
|
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
|
HCAP ICC, LLC
,
a Delaware limited liability company
|
N/A
|
N/A
|
100%
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|||||
|
For the Year Ended December 31,
|
|||||||||
|
2017
|
2016
|
2015
|
2014
|
2013
|
|||||
Fixed charges:
|
|
|
|
|
|
|||||
Interest expense
|
4,030,550
|
|
3,730,768
|
|
3,382,543
|
|
923,350
|
|
1,028,841
|
|
Total Fixed charges
|
4,030,550
|
|
3,730,768
|
|
3,382,543
|
|
923,350
|
|
1,028,841
|
|
|
|
|
|
|
|
|||||
Earnings available for fixed charges:
|
|
|
|
|
|
|||||
Pre-tax income
|
1,760,801
|
|
6,068,078
|
|
6,412,406
|
|
9,439,209
|
|
4,122,161
|
|
Add: Fixed charges
|
4,030,550
|
|
3,730,768
|
|
3,382,543
|
|
923,350
|
|
1,028,841
|
|
Total Earnings available for fixed charges
|
5,791,351
|
|
9,798,846
|
|
9,794,949
|
|
10,318,832
|
|
5,151,002
|
|
|
|
|
|
|
|
|||||
Earnings to fixed charges
|
1.44
|
|
2.63
|
|
2.90
|
|
11.22
|
|
5.01
|
|
|
(1)
|
|
By:
|
/s/ Joseph A. Jolson
|
|
|
Joseph A. Jolson
Chief Executive Officer
|
|
By:
|
/s/ Craig R. Kitchin
|
|
|
Craig R. Kitchin
Chief Financial Officer
|
|
|
|
/s/ Joseph A. Jolson
|
|
|
Name:
|
Joseph A. Jolson
|
|
|
Date:
|
April 2, 2018
|
|
|
|
/s/ Craig R. Kitchin
|
|
|
Name:
|
Craig R. Kitchin
|
|
|
Date:
|
April 2, 2018
|
|