gecc-10q_20170930.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2017

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _________

 

Commission File Number: 814-01211

 

Great Elm Capital Corp.

(Exact Name of Registrant as Specified in its Charter)

 

 

Maryland

 

81-2621577

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

800 South Street, Suite 230, Waltham MA

 

02453

(Address of principal executive offices)

 

(Zip Code)

 

Registrant's telephone number, including area code: (617) 375-3006

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer x

Accelerated filer x

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company o

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act..      

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

 

As of November 6, 2017, the registrant had 10,668,360 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

Item 2.

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

1

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

12

Item 4.

Controls and Procedures

12

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

13

Item 1A.

Risk Factors

13

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

13

Item 3.

Defaults Upon Senior Securities

13

Item 4.

Mine Safety Disclosures

14

Item 5.

Other Information

14

Item 6.

Exhibits

14

 

Signatures

16

 

Index to Financial Statements

F-1

 

Consolidated Statements of Assets and Liabilities

F-2

 

Condensed Consolidated Statements of Operations (unaudited)

F-3

 

Consolidated Statement of Changes in Net Assets (unaudited)

F-4

 

Condensed Consolidated Statements of Cash Flows (unaudited)

F-5

 

Consolidated Schedules of Investments

F-6

 

Notes to Unaudited Condensed Consolidated Financial Statements

F-17

 

 

 

 

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in our Annual Report on Form 10-K for the fiscal year December 31, 2016 (the “Form 10-K”).

 

The information contained herein may contain “forward-looking statements” based on our current expectations, assumptions and estimates about us and our industry. These forward-looking statements involve risks and uncertainties. Words such as “believe,” “seek,” “estimate,” “expect,” “indicate,” “intend,” “will,” “would,” “may,” “could,” “continue” and other similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results could differ materially from those we express in the forward-looking statements as a result of several factors more fully described in “Risk Factors” and elsewhere in our Form 10-K for the year ended December 31, 2016 and in this Form 10-Q. The forward-looking statements made in this Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update publicly any forward-looking statements for any reason, whether as a result of new information, future events or otherwise, except as required by law.

 

i


 

PART I—FINANCIAL INFORMATION

Unless the context otherwise requires, all references to “GECC,” “we,” “us,” “our,” the “Company” and words of similar import are to Great Elm Capital Corp. and/or its subsidiaries.  We reference materials on our website, www.greatelmcc.com, but nothing on our website shall be deemed incorporated by reference or otherwise contained in this report.  All dollar amounts, other than per share amounts, are disclosed in thousands unless otherwise noted.

Item 1. Financial Statements.

The financial statements listed in the index to financial statements immediately following the signature page to this report are incorporated herein by reference.

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

Overview

We are a business development company (“BDC”) that seeks to generate both current income and capital appreciation through debt and equity investments. Our investment focus is on debt obligations of middle-market companies as well as small businesses.  We invest primarily in senior secured and senior unsecured debt investments, as well as in junior loans and mezzanine debt of middle-market companies and small businesses. We will from time to time make equity investments as part of restructuring credits and in rare instances reserve the right to make equity investments directly.

On September 27, 2016, we and Great Elm Capital Management, Inc. (“GECM”), our external manager, entered into an Investment Management Agreement and an Administration Agreement, and, upon closing the Merger (as discussed below), we began to accrue obligations to our external investment manager under those agreements.

Beginning with our tax year starting October 1, 2016, we have elected to be treated as a Regulated Investment Company (“RIC”) for U.S. federal income tax purposes. As a RIC, we will not be taxed on our income to the extent that we distribute such income each year and satisfy other applicable income tax requirements. To qualify as a RIC, we must, among other things, meet source-of-income and asset diversification requirements and annually distribute to our stockholders generally at least 90% of our investment company taxable income on a timely basis. If we qualify as a RIC, we generally will not have to pay corporate level taxes on any income that we distribute to our stockholders.

Formation Transactions

On June 23, 2016, we entered into a Subscription Agreement, under which:

 

On June 23, 2016, Great Elm Capital Group, Inc. (“GEC”) contributed $30,000 in exchange for 1,966,667 shares of our common stock.

 

On September 27, 2016, before we elected to be a BDC, funds (the “MAST Funds”) managed by MAST Capital Management, LLC (“MAST”) contributed to us the Initial GECC Portfolio (as discussed in our consolidated financial statements) that we valued at $90,000 in exchange for 5,935,800 shares of our common stock.

For financial reporting purposes, we have accounted for the contribution of the Initial GECC Portfolio as an asset acquisition per Topic 805, Business Combinations, of the Accounting Standards Codification (“ASC”).  For tax purposes, we recorded our basis in the Initial GECC Portfolio at the fair market value of the Initial GECC Portfolio as of the date of contribution.

Under the Subscription Agreement, upon consummation of the Merger, we became obligated to reimburse the costs incurred by GEC and the MAST Funds in connection with the Merger and the transactions contemplated by the Subscription Agreement.

Following the closing of the Merger, we entered into a registration rights agreement with GEC and the MAST Funds.

 

1


 

Full Circle Merger

On June 23, 2016, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Full Circle.  On November 3, 2016:

 

We acquired, by operation of the Merger, Full Circle’s portfolio that we valued at $74,658 at November 3, 2016;

 

We became obligated to issue an aggregate of 4,986,585 shares of our common stock to former Full Circle stockholders; and

 

Our exchange agent paid a $5,393 special cash dividend to former Full Circle stockholders.

We accounted for the Merger as a business combination under ASC Topic 805 and Regulation S-X’s purchase accounting guidance. GECC was designated as the acquirer for accounting purposes. The difference between the fair value of Full Circle’s net assets and the consideration was recorded as a purchase accounting loss because the fair value of the assets acquired and liabilities assumed, as of the date of the Merger, was less than that of the merger consideration paid.

Investments

Our level of investment activity varies substantially from period to period depending on many factors, including, among others, the amount of debt and equity capital available from other sources to middle-market companies, the level of merger and acquisition activity, pricing in the high yield and leveraged loan credit markets, our expectations of future investment opportunities, the general economic environment as well as the competitive environment for the types of investments we make.

As a BDC, our investments and the composition of our portfolio are required to comply with regulatory requirements.

Revenues

We generate revenue primarily from interest on the debt investments that we hold. We also may generate revenue from dividends on the equity investments that we hold, capital gains on the disposition of investments, and lease, fee, and other income. Our investments in fixed income instruments generally have an expected maturity of three to five years, although we have no lower or upper constraint on maturity. Our debt investments generally pay interest quarterly or semi-annually. Payments of principal of our debt investments may be amortized over the stated term of the investment, deferred for several years or due entirely at maturity. In some cases, our debt investments and preferred stock investments may defer payments of cash interest or dividends or pay in kind (“PIK”). In addition, we may generate revenue in the form of prepayment fees, commitment, origination, due diligence fees, end-of-term or exit fees, fees for providing significant managerial assistance, consulting fees and other investment-related income.

Expenses

Our primary operating expenses include the payment of a base management fee, administration fees (including the allocable portion of overhead under the administration agreement), and, depending on our operating results, an incentive fee. The base management fee and incentive fee remunerates GECM for work in identifying, evaluating, negotiating, closing and monitoring our investments. Our administration agreement provides for reimbursement of costs and expenses incurred for office space rental, office equipment and utilities allocable to us under the Administration Agreement, as well as costs and expenses incurred relating to non-investment advisory, administrative or operating services provided by GECM or its affiliates to us. We also bear all other costs and expenses of our operations and transactions. Our expenses include interest on our outstanding indebtedness.

2


 

Critical Accounting Policies

Valuation of Portfolio Investments

We value our portfolio investments at fair value based upon the principles and methods of valuation set forth in policies adopted by our board of directors (our “Board”). Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date.

Investments for which market quotations are readily available are valued at such market quotations unless the quotations are deemed not to represent fair value. We generally obtain market quotations from recognized exchanges, market quotation systems, independent pricing services or one or more broker-dealers or market makers. Short term debt investments with remaining maturities within ninety days are generally valued at amortized cost, which approximates fair value.

Debt and equity securities for which market quotations are not readily available or for which market quotations are deemed not to represent fair value, are valued at fair value using a valuation process consistent with our Board-approved policy.  Our Board approves in good faith the valuation of our portfolio as of the end of each quarter. Due to the inherent uncertainty and subjectivity of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may differ significantly from the values that would have been used had a readily available market value existed for such investments and may differ materially from the values that we may ultimately realize. In addition, changes in the market environment and other events may impact the market quotations used to value some of our investments.

The valuation process approved by our Board with respect to investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value is as follows:

 

The investment professionals of GECM provide recent portfolio company financial statements and other reporting materials to an independent valuation firm (or firms) approved by the Board;

 

Such firms evaluate this information along with relevant observable market data to conduct independent appraisals each quarter, and their preliminary valuation conclusions are documented, discussed, and iterated with senior management of GECM;

 

The fair value of investments comprising in the aggregate less than 5% of our total capitalization may be determined by GECM in good faith in accordance with our valuation policy without the employment of an independent valuation firm.; and

 

Our audit committee recommends, and our Board determines, the fair value of the investments in our portfolio in good faith based on the input of GECM, our independent valuation firms (to the extent applicable) and the business judgment of our audit committee and our Board, respectively.

Those investments for which market quotations are not readily available or for which market quotations are deemed not to represent fair value are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount.  In following these approaches, the types of factors that we may take into account in determining the fair value of our investments include, among other factors: available current market data, including relevant and applicable market trading and transaction comparables; applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral; the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables; and enterprise values.

3


 

We prefer the use of observable inputs and minimize the use of unobservable inputs in our valuation process. Inputs refer broadly to the assumptions that market participants would use in pricing an asset. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the assumptions market participants would use in pricing an asset developed based on the best information available in the circumstances.

Investments are classified by GAAP into the three broad levels as follows:

Level 1

Investments valued using unadjusted quoted prices in active markets for identical assets.

Level 2

Investments valued using other unadjusted observable market inputs, e.g. quoted prices for our securities in markets that are not active or quotes for comparable instruments.

Level 3

Investments that are valued using quotes for our securities or comparable instruments and other observable market data to the extent available, but which also take into consideration one or more unobservable inputs that are significant to the valuation taken as a whole.

All Level 3 investments that comprise more than 5% of the investments of the fund are valued by independent third parties.

Revenue Recognition

Interest and dividend income, including PIK income, is recorded on an accrual basis. Origination, structuring, closing, commitment and other upfront fees, including original issue discounts (“OID”), earned with respect to capital commitments are generally amortized or accreted into interest income over the life of the respective debt investment, as are end-of-term or exit fees receivable upon repayment of a debt investment if such fees are fixed in nature. Other fees, including certain amendment fees, prepayment fees and commitment fees on broken deals, and end-of-term or exit fees that have a contingency feature or are variable in nature are recognized as earned. Prepayment fees and similar income due upon the early repayment of a loan or debt security are recognized when earned and are included in interest income.

We may purchase debt investments at a discount to their face value. Discounts on the acquisition of corporate debt instruments are generally amortized using the effective-interest or constant-yield method, unless there are material questions as to collectability. For debt instruments where we are amortizing OID, when principal payments on the debt instrument are received in an amount in excess of the debt instrument’s amortized cost, the excess principal payments are recorded as interest income.

Net Realized Gains (Losses) and Net Change in Unrealized Appreciation (Depreciation)

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale of an investment and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Realized gains and losses are computed using the first-in, first-out method. Net change in unrealized appreciation or depreciation reflects the net change in portfolio investment values and portfolio investment cost bases during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.

4


 

Portfolio and Investment Activity

The following is a summary of our investment activity since our inception in April 2016:

 

Time Period

 

Acquisitions(1)

 

 

Dispositions(2)

 

 

Weighted Average Interest Rate

End of Period(3)

 

Formation Transactions

 

$

90,494

 

 

$

 

 

 

 

 

Merger

 

 

74,658

 

 

 

 

 

 

 

 

November 4, 2016 through December 31, 2016

 

 

42,006

 

 

 

(41,738

)

 

 

10.00

%

For the period ended December 31, 2016

 

 

207,158

 

 

 

(41,738

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended March  31, 2017

 

 

75,852

 

 

 

(78,758

)

 

 

9.87

%

Quarter ended June 30, 2017

 

 

21,395

 

 

 

(37,570

)

 

 

9.59

%

Quarter ended September 30, 2017

 

 

49,467

 

 

 

(18,884

)

 

 

9.62

%

For the nine months ended September 30, 2017

 

 

146,714

 

 

 

(135,212

)

 

 

 

 

Since inception

 

$

353,872

 

 

$

(176,950

)

 

 

 

 

 

(1)

Includes new deals, additional fundings (inclusive of those on revolving credit facilities), refinancings and PIK income.  Investments in short-term securities, including United States Treasury Bills and money market mutual funds, were excluded.

(2)

Includes scheduled principal payments, prepayments, sales and repayments (inclusive of those on revolving credit facilities).  Investments in short-term securities, including United States Treasury Bills and money market mutual funds, were excluded.

(3)

Weighted average interest rate is based upon the stated coupon rate and par value of outstanding debt securities at the measurement date. Debt securities on non-accrual status are included in the calculation and are treated as having 0.00% as their interest rate for purposes of this calculation.

Portfolio Reconciliation

The following is a reconciliation of the investment portfolio for the nine months ended September 30, 2017 and the period from inception through December 31, 2016:

 

 

 

For the nine months

ended

September 30, 2017

 

 

For the period from

inception through

December 31, 2016

 

Beginning Investment Portfolio

 

$

154,677

 

 

$

 

Portfolio Investments acquired via the Formation Transactions and the Merger

 

 

 

 

 

165,152

 

Portfolio Investments acquired(1)

 

 

146,714

 

 

 

42,006

 

Amortization of premium and accretion of discount, net

 

 

4,181

 

 

 

2,438

 

Portfolio Investments repaid or sold

 

 

(135,212

)

 

 

(41,738

)

Net change in unrealized (appreciation) depreciation on investments (2)

 

 

(20,643

)

 

 

(13,455

)

Net realized gain (loss) on investments

 

 

3,420

 

 

274

 

Ending Investment Portfolio

 

$

153,137

 

 

$

154,677

 

 

(1)

Includes PIK income.

(2)

Does not include any fair value adjustment on PIK interest receivable.

 

Investments in short-term securities, including United States Treasury Bills and money market mutual funds, were excluded.

5


 

During the three and nine months ended September 30, 2017, we recorded net unrealized depreciation of $(12,361) and $(22,382), respectively.  ($1,739) of the unrealized depreciation was related to valuation of PIK interest receivable at September 30, 2017.

During the three and nine months ended September 30, 2017, we recorded net realized gains on investments of $59 and $3,420, respectively.  Included in the net realized gains on investments for the nine months ended September 30, 2017 was our disposition of our investment in JN Medical, which resulted in a $1,007 gain.  We also realized gains of $1,134 on the sale of our Everi Payments bonds, $371 on the partial sale and partial prepayments of our loan to Sonifi, and $341 on the sale of our Chester Downs bonds.

Portfolio Classifications

The following table shows the fair value of our portfolio of investments by asset class as of September 30, 2017:

 

 

 

September 30, 2017

 

 

 

Investments at

Fair Value

 

 

Percentage of

Total Portfolio

 

Investments:

 

 

 

 

 

 

 

 

Debt Instruments

 

$

152,788

 

 

 

99.8

%

Equity Investments

 

 

349

 

 

 

0.2

%

Total Investments at Fair Value

 

$

153,137

 

 

 

100.0

%

Investments in short-term securities, including United States Treasury Bills and money market mutual funds, were excluded.

 

 

Results of Operations for the Three Months Ended September 30, 2017

 

 

 

In Thousands

 

 

Per Share(1)

 

Total Investment Income(2)

 

$

6,466

 

 

$

0.58

 

Interest income

 

 

6,347

 

 

 

0.57

 

Dividend income

 

 

108

 

 

 

0.01

 

Other income

 

 

11

 

 

 

0.00

 

 

 

 

 

 

 

 

 

 

Net Operating Expenses

 

 

2,896

 

 

 

0.26

 

Management fees

 

 

547

 

 

 

0.05

 

Incentive fees

 

 

890

 

 

 

0.08

 

Total investment management fees

 

 

1,437

 

 

 

0.13

 

Administration fees

 

 

287

 

 

 

0.03

 

Directors’ fees

 

 

40

 

 

 

0.00

 

Interest expense

 

 

717

 

 

 

0.06

 

Professional services

 

 

212

 

 

 

0.02

 

Custody fees

 

 

10

 

 

 

0.00

 

Other

 

 

193

 

 

 

0.02

 

Fees waivers and expense reimbursement

 

 

-

 

 

 

0.00

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

$

3,570

 

 

$

0.32

 

 

(1)

The per share amounts are based on a weighted average of 11,342,048 shares for the three months ended September 30, 2017, except where such amounts need to be adjusted to be consistent with the financial highlights of our consolidated financial statements.

(2)

Total investment income includes PIK income of $332 for the three months ended September 30, 2017.

6


 

Total Investment Income

 

 

 

In Thousands

 

 

Per Share(1)

 

Total Investment Income

 

$

6,466

 

 

$

0.58

 

Interest income

 

 

6,347

 

 

 

0.57

 

Dividend income

 

 

108

 

 

 

0.01

 

Other income

 

 

11

 

 

 

0.00

 

 

(1)

Amounts are based on a weighted average of 11,342,048 shares for the three months ended September 30, 2017.

 

Interest income includes net accretion of OID and market discount of $1,487 and total investment income included PIK income of $332.

We also generated $11 of fee income, which is included in other income and is typically not recurring in nature.  

Expenses

 

 

 

In Thousands

 

 

Per Share(1)

 

Net Operating Expenses

 

$

2,896

 

 

$

0.26

 

Management fees

 

 

547

 

 

 

0.05

 

Incentive fees

 

 

890

 

 

 

0.08

 

Total investment management fees

 

 

1,437

 

 

 

0.13

 

Administration fees

 

 

287

 

 

 

0.03

 

Directors’ fees

 

 

40

 

 

 

0.00

 

Interest expense

 

 

717

 

 

 

0.06

 

Professional services

 

 

212

 

 

 

0.02

 

Custody fees

 

 

10

 

 

 

0.00

 

Other

 

 

193

 

 

 

0.02

 

Fees waivers and expense reimbursement

 

 

-

 

 

 

-

 

 

(1)

Amounts are based on a weighted average of 11,342,048 shares for the three months ended September 30, 2017.

 

Total expenses for the three months ended September 30, 2017 were $2,896.

Total investment management fees were $1,437, with $547 of management fees and $890 of incentive fees accrued during the period.  We deferred incentive fees per our investment management agreement.

Total administration fees were $287, which include direct costs deemed reimbursable under our administration agreement and fees paid for sub-administration services.  

Interest expense for the period was $717, and includes interest on our 2020 Notes and GECCL Notes for the period subsequent to their issuance.  See — Notes Payable for further information.

Net Investment Income

Net investment income for the three months ended September 30, 2017 was $3,570.

Net Realized Gains (Losses) on Investments

During the three months ended September 30, 2017, we recorded net realized gains of $59, primarily in connection with principal amortization of loans that were acquired at a discount.

7


 

Net Change in Unrealized Appreciation (Depreciation) on Investments

Net change in unrealized appreciation (depreciation) on investments was $(12,361) for the three months ended September 30, 2017. The following table summarizes the significant changes in unrealized appreciation (depreciation) of our investment portfolio, for the three months ended September 30, 2017 by portfolio company.

 

 

 

 

 

 

 

June 30, 2017

 

 

September 30, 2017

 

Portfolio Company

 

Change in Unrealized

Appreciation

(Depreciation)

 

 

Cost

 

 

Fair Value

 

 

Unrealized

Appreciation

(Depreciation)

 

 

Cost

 

 

Fair Value

 

 

Unrealized

Appreciation

(Depreciation)

 

Avanti Communications

   Group plc (1)

 

$

(12,530

)

 

$

67,818

 

 

$

47,226

 

 

$

(20,592

)

 

$

68,241

 

 

$

36,858

 

 

$

(31,383

)

PE Facility Solutions, LLC

 

 

1,333

 

 

 

19,502

 

 

 

17,493

 

 

 

(2,009

)

 

 

18,217

 

 

 

17,541

 

 

 

(676

)

Commercial Barge Line Company

 

 

(651

)

 

 

1,757

 

 

 

1,737

 

 

 

(20

)

 

 

6,097

 

 

 

5,426

 

 

 

(671

)

Other(2)

 

 

(513

)

 

 

137,487

 

 

 

138,632

 

 

 

(855

)

 

 

146,949

 

 

 

145,581

 

 

 

(1,368

)

Totals

 

$

(12,361

)

 

$

229,047

 

 

$

205,571

 

 

$

(23,476

)

 

$

239,504

 

 

$

205,406

 

 

$

(34,098

)

 

(1)

Recognition of accretion of discount increased our cost basis during the period.  We did not fund any incremental investment during the period.

(2)

Other represents all remaining investments.

 

 

Results of Operations for the Nine Months Ended September 30, 2017

 

 

 

In Thousands

 

 

Per Share(1)

 

Total Investment Income(2)

 

$

20,018

 

 

$

1.67

 

Interest income

 

 

19,311

 

 

 

1.61

 

Dividend income

 

 

239

 

 

 

0.02

 

Other income

 

 

468

 

 

 

0.04

 

 

 

 

 

 

 

 

 

 

Net Operating Expenses

 

 

8,876

 

 

 

0.74

 

Management fees

 

 

1,686

 

 

 

0.14

 

Incentive fees

 

 

2,784

 

 

 

0.23

 

Total Investment management fees

 

 

4,470

 

 

 

0.37

 

Administration fees

 

 

1,054

 

 

 

0.09

 

Directors’ fees

 

 

88

 

 

 

0.01

 

Interest expense

 

 

1,979

 

 

 

0.16

 

Professional services

 

 

719

 

 

 

0.06

 

Custody fees

 

 

34

 

 

 

0.00

 

Other

 

 

462

 

 

 

0.04

 

Fees waivers and expense reimbursement

 

 

70

 

 

 

0.01

 

 

 

 

 

 

 

 

 

 

Net Investment Income

 

$

11,142

 

 

$

0.93

 

 

(1)

Amounts are based on a weighted average of 11,988,368 shares for the nine months ended September 30, 2017 except where such amounts need to be adjusted to be consistent with the financial highlights of our consolidated financial statements.

(2)

Total investment income includes PIK income of $4,588 for the nine months ended September 30, 2017.

8


 

Total Investment Income

 

 

 

In Thousands

 

 

Per Share(1)

 

Total Investment Income

 

$

20,018

 

 

$

1.67

 

Interest income

 

 

19,311

 

 

 

1.61

 

Dividend income

 

 

239

 

 

 

0.02

 

Other income

 

 

468

 

 

 

0.04

 

 

(1)

Amounts are based on a weighted average of 11,988,368 shares for the nine months ended September 30, 2017.

 

Interest income includes net accretion of OID and market discount of $4,181 and total investment income included PIK income of $4,588.  

We also generated $468 of fee income, which is included in other income and is typically not recurring in nature.  

Expenses

 

 

 

In Thousands

 

 

Per Share(1)

 

Net Operating Expenses

 

$

8,876

 

 

$

0.74

 

Management fees

 

 

1,686

 

 

 

0.14

 

Incentive fees

 

 

2,784

 

 

 

0.23

 

Total investment management fees

 

 

4,470

 

 

 

0.37

 

Administration fees

 

 

1,054

 

 

 

0.09

 

Directors’ fees

 

 

88

 

 

 

0.01

 

Interest expense

 

 

1,979

 

 

 

0.16

 

Professional services

 

 

719

 

 

 

0.06

 

Custody fees

 

 

34

 

 

 

0.00

 

Other

 

 

462

 

 

 

0.04

 

Fees waivers and expense reimbursement

 

 

70

 

 

 

0.01

 

 

(1)

Amounts are based on a weighted average of 11,988,368 shares for the nine months ended September 30, 2017.

 

Total expenses for nine months ended September 30, 2017 were $8,806, prior to giving effect to the impact of our reversal of the administration fee waiver accrual.

Total investment management fees were $4,470, with $1,686 of management fees and $2,784 of incentive fees accrued during the period.  We deferred incentive fees per our investment management agreement.

Total administration fees were $1,054, which includes direct costs reimbursable under our administration agreement and fees paid for sub-administration services.  In the quarter ended June 30, 2017, we reversed the previously accrued administration fee waiver based on our updated expenses accrued from November 4, 2016. This reversal had the effect of increasing our total expenses for that quarter. The final cap on costs will be determined after completion of the year ending November 4, 2017.

Interest expense for the period was $1,979 for the nine months ended September 30, 2017, and includes interest on our 2020 Notes and GECCL Notes for the period subsequent to their issuance.  See —Notes Payable for further information.

Net Investment Income

Net investment income for the nine months ended September 30, 2017 was $11,142.

9


 

Net Realized Gains (Losses) on Investments

During the nine months ended September 30, 2017, we recorded net realized gains of $3,420, primarily in connection with our disposition of our investment in JN Medical, which resulted in a $1,007 gain, and sales of our position in Everi Payments, which resulted in realized gains of $1,134.  We also realized gains of $341 on the sale of our Chester Downs bonds, $371 on the partial sale and partial prepayments of our loan to Sonifi, and $281 on the sale of our Trilogy International bonds.

Net Change in Unrealized Appreciation (Depreciation) on Investments

Net change in unrealized appreciation (depreciation) on investments was ($22,382) for the nine months ended September 30, 2017. The following table summarizes the significant changes in unrealized appreciation (depreciation) of our investment portfolio, for the nine months ended September 30, 2017 by portfolio company.

 

 

 

 

 

 

 

December 31, 2016

 

 

September 30, 2017

 

Portfolio Company

 

Change in Unrealized

Appreciation

(Depreciation)

 

 

Cost

 

 

Fair Value

 

 

Unrealized

Appreciation

(Depreciation)

 

 

Cost

 

 

Fair Value

 

 

Unrealized

Appreciation

(Depreciation)

 

Avanti Communications

   Group plc

 

$

(19,845

)

 

$

55,298

 

 

$

42,021

 

 

$

(13,277

)

 

$

68,241

 

 

$

36,858

 

 

$

(31,383

)

OPS Acquisitions Limited and

   Ocean Protection

   Services Limited

 

 

(1,790

)

 

 

4,255

 

 

 

4,286

 

 

 

31

 

 

 

4,240

 

 

 

2,481

 

 

 

(1,759

)

Sonifi Solutions, Inc.

 

 

1,094

 

 

 

5,933

 

 

 

6,715

 

 

 

782

 

 

 

6,088

 

 

 

7,964

 

 

 

1,876

 

PE Facility Solutions, LLC

 

 

(676

)

 

 

 

 

 

 

 

 

 

 

 

18,217

 

 

 

17,541

 

 

 

(676

)

Other(1)

 

 

(1,165

)

 

 

102,646

 

 

 

101,655

 

 

 

(991

)

 

 

142,718

 

 

 

140,562

 

 

 

(2,156

)

Totals

 

$

(22,382

)

 

$

168,132

 

 

$

154,677

 

 

$

(13,455

)

 

$

239,504

 

 

$

205,406

 

 

$

(34,098

)

 

(1)

Other represents all remaining investments.

Liquidity and Capital Resources

At September 30, 2017, we had approximately $8,018 of cash and cash equivalents, none of which was restricted in nature.  At September 30, 2017, we also had $52,269 invested in a money market fund that is classified as an investment rather than cash and cash equivalents.

At September 30, 2017, we had investments in debt securities of 20 companies, totaling approximately $152,788 at fair value and equity investments in seven companies, totaling approximately $349 at fair value. $4,588 of cumulative accrued PIK income is included in carrying value of our investments.

In the normal course of business, we may enter into investment agreements under which we commit to make an investment in a portfolio company at some future date or over a specified period of time. As of September 30, 2017, we had approximately $7,088 in unfunded loan commitments, subject to our approval in certain instances, to provide debt financing to certain of our portfolio companies.  There were no unrealized gains or losses on these commitments as of September 30, 2017.  We had sufficient cash and other liquid assets on our September 30, 2017 balance sheet to satisfy the unfunded commitments.

For the nine months ended September 30, 2017, cash provided by operating activities, consisting primarily of net purchases of investments and the items described in “Results of Operations,” was approximately $56,894, reflecting the purchases and repayments of investments, net investment income resulting from operations, offset by non-cash income related to OID and PIK income, changes in working capital and accrued interest receivable. Net cash used for purchases and sales of investments was approximately $11,502, reflecting principal repayments and sales of $135,212, offset by additional investments of $146,714. Such amounts included draws and repayments on revolving credit facilities.  Our Board previously set our distribution rate at $0.083 per share per month and we intend to re-evaluate our dividend rate from time to time.

10


 

 

 

Total

 

 

Less than 1 year

 

 

1-3 years

 

 

3-5 years

 

 

More than 5 years

 

Contractual Obligations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2020 Notes

 

$

33,645

 

 

$

33,645

 

 

$

-

 

 

$

-

 

 

$

-

 

GECCL Notes

 

 

32,631

 

 

 

-

 

 

 

-

 

 

 

32,631

 

 

 

-

 

Total

 

$

66,276

 

 

$

33,645

 

 

$

-

 

 

$

32,631

 

 

$

-

 

 

Stock Buyback Program

We implemented a stock buyback program pursuant to Rule 10b5‑1 and Rule 10b-18 under the Exchange Act to repurchase our shares in an aggregate amount of up to $15,000 through May 2018 at market prices at any time our shares trade below 90% of NAV, subject to our compliance with our liquidity, covenant, leverage and regulatory requirements.  Our Board has increased the overall size of the stock buyback program by a further $35,000.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.

Notes Payable

On November 3, 2016, we assumed approximately $33,646 in aggregate principal amount of Full Circle’s 8.25% Notes due June 30, 2020 (the “2020 Notes”).  The 2020 Notes were our unsecured obligations and ranked senior in right of payment to our existing and future indebtedness that is expressly subordinated in right of payment to the 2020 Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness (including existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries or financing vehicles. Interest on the 2020 Notes was paid quarterly in arrears at a rate of 8.25% per annum. The 2020 Notes had a maturity date of June 30, 2020. On October 20, 2017, we redeemed the 2020 Notes completely at their par value plus accrued and unpaid interest.

On September 18, 2017, we sold $28,375 in aggregate principal amount of 6.50% notes due 2022 (the "GECCL Notes"). On September 29, 2017, we sold an additional $4,256 of the GECCL Notes upon full exercise of the underwriters’ over-allotment option.  As a result of the issuance of these Notes, the aggregate principal balance of Notes outstanding is $32,631.

The GECCL Notes are our unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness. The GECCL Notes will be effectively subordinated, or junior in right of payment, to any future secured indebtedness that we may incur and structurally subordinated to all future indebtedness and other obligations of our subsidiaries. We will pay interest on the GECCL Notes on January 31, April 30, July 31 and October 31 of each year, beginning October 31, 2017. The GECCL Notes will mature on September 18, 2022 and can be called on, or after, September 18, 2019. Holders of the GECCL Notes will not have the option to have the GECCL Notes repaid prior to the stated maturity date. The GECCL Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

Recent Developments

On October 20, 2017, the 2020 Notes that were assumed in the Merger were redeemed in full.

In October 2017, the loans to Geo Specialty Chemicals, Inc. were extended to now mature on April 30, 2019.

In October 2017, the DIP loan to Optima Specialty Steel, Inc. was extended to now mature on November 30, 2017.

In October 2017, we purchased an additional $3.0 million par value of International Wire Group, Inc bonds at a price of approximately 91.5% of par value.

11


 

Our Board declared the monthly distributions for the first quarter of 2018 at an annual rate of approximately 8.05% of our September 30, 2017 NAV, which equates to $0.083 per month. The schedule of distribution payments is as follows:

 

Month

 

Rate

 

 

Record Date

 

Payable Date

January

 

$

0.083

 

 

January 31, 2018

 

February 15, 2018

February

 

$

0.083

 

 

February 28, 2018

 

March 15, 2018

March

 

$

0.083

 

 

March 30, 2018

 

April 16, 2018

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in interest rates. As of September 30, 2017, 9 debt investments in our portfolio bore interest at a fixed rate, and the remaining 15 debt investments were at variable rates, representing approximately $76,000 and $76,826 in debt at fair value, respectively. The variable rates are based upon LIBOR.

To illustrate the potential impact of a change in the underlying interest rate on our net investment income, we have assumed a 1%, 2%, and 3% increase and 1%, 2%, and 3% decrease in the underlying LIBOR rate, and no other change in our portfolio as of September 30, 2017. We have also assumed that we have no outstanding floating rate borrowings. The below table illustrates the effect such assumed rate changes would have had on net investment income for the nine months ended September 30, 2017.

 

LIBOR Increase (Decrease)

 

 

Increase (decrease) of Net

Investment Income

 

 

3.00

%

 

$

2,417

 

 

2.00

%

 

$

1,631

 

 

1.00

%

 

$

845

 

 

-1.00

%

 

$

(267

)

 

-2.00

%

 

$

(312

)

 

-3.00

%

 

$

(312

)

 

This analysis does not adjust for changes in the credit quality, size and composition of our portfolio, and other business developments that could affect the net increase in net assets resulting from operations. Accordingly, no assurance can be given that actual results would not differ materially from the results under this hypothetical analysis.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of September 30, 2017, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

12


 

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we or GECM may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies.  See Note 6 to our unaudited consolidated financial statements.

Item 1A. Risk Factors.

Investing in our common stock involves a number of significant risks.  There have been no material changes from the risk factors previously disclosed in our Form 10-K.

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

None.

Issuer Purchases of Equity Securities

In the prospectus for the Merger, we announced that we would initiate a stock buyback program in an aggregate amount of $15,000. This program expires in May 2018.  For the nine months ended September 30, 2017, we purchased 2,061,049 shares under our stock buyback program and our tender offer, at a weighted average price of $11.23 per share. As of November 6, 2017 we have cumulatively purchased 1,357,079 shares under our stock buyback program at a weighted average price of $10.98 per share, resulting in $14,900 of cumulative cash paid, under the program since November 4, 2016.

 

Month

 

Total Number of

Shares Purchased

 

 

Average Price Per

Share

 

 

Total Number of

Shares Purchased

as Part of Publicly

Announced Plans

or Program

 

 

Maximum Number

(or Approximate

Dollar Value) of

Shares that May

Yet Be Purchased

Under the Plans or

Programs

(Amounts in dollars)

 

November 2016

 

 

16,030

 

 

$

10.79

 

 

 

16,030

 

 

$

14,826,985

 

December 2016

 

 

82,142

 

 

$

10.72

 

 

 

82,142

 

 

$

13,946,200

 

Total 2016

 

 

98,172

 

 

$

10.73

 

 

 

98,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

January 2017

 

 

132,434

 

 

$

11.48

 

 

 

132,434

 

 

$

12,425,611

 

February 2017

 

 

72,678

 

 

$

11.26

 

 

 

72,678

 

 

$

11,607,509

 

March 2017

 

 

40,617

 

 

$

11.09

 

 

 

40,617

 

 

$

11,157,069

 

April 2017

 

 

16,846

 

 

$

11.38

 

 

 

16,846

 

 

$

10,965,351

 

May 2017 (1)

 

 

944,535

 

 

$

11.44

 

 

 

944,535

 

 

$

10,158,672

 

June 2017

 

 

15,215

 

 

$

10.42

 

 

 

15,215

 

 

$

10,000,132

 

July 2017

 

 

47,961

 

 

$

10.73

 

 

 

47,961

 

 

$

9,485,675

 

August 2017

 

 

37,666

 

 

$

10.78

 

 

 

37,666

 

 

$

9,079,535

 

September 2017

 

 

753,097

 

 

$

11.00

 

 

 

753,097

 

 

$

792,684

 

Total 2017

 

 

2,061,049

 

 

$

11.23

 

 

 

2,061,049

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

2,159,221

 

 

$

11.21

 

 

 

2,159,221

 

 

$

792,684

 

 

(1)

Share amounts in this line include the repurchase of 869,565 shares on May 12, 2017 in the $10,000 tender offer we announced on March 30, 2017 that expired on May 5, 2017.

 

Item 3. Defaults Upon Senior Securities.

Not applicable

13


 

Item 4. Mine Safety Disclosures.

Not applicable

Item 5. Other Information.

Not applicable

Item 6. Exhibits.

Unless otherwise indicated, all references are to exhibits to the applicable filing by Great Elm Capital Corp. (the “Registrant”) under File No. 814-01211 with the Securities and Exchange Commission.

 

Exhibit

Number

 

Description

 

 

 

  1.1

 

Underwriting Agreement, dated as of September 13, 2017 (incorporated by reference to Exhibit 1.1 to Form 8-K/A filed on September 21, 2017).

 

 

 

  2.1

 

Agreement and Plan of Merger, dated as of June 23, 2016, by and between Full Circle Capital Corporation (“Full Circle”) and the Registrant (incorporated by reference to the Rule 425 filing on June 27, 2016)

 

 

 

  2.2

 

Subscription Agreement, dated as of June 23, 2016, by and among the Registrant, Great Elm Capital Group, Inc. and the investment funds signatory thereto (incorporated by reference to the Rule 425 filing on June 27, 2016)

 

 

 

  3.1

 

Amended and Restated Charter of the Registrant (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on November 7, 2016)

 

 

 

  3.2

 

Bylaws of the Registrant (incorporated by reference to Exhibit 2 to the Form N-14 (File No. 333-212817) filed on August 1, 2016)

 

 

 

  4.1

 

Form of certificate for the Registrant’s common stock (incorporated by reference to Exhibit 99.5 to the Registration Statement on Form N-14 (File No. 333-212817) filed on August 1, 2016)

 

 

 

  4.2

 

8.25% Senior Note due 2020 (incorporated by reference to Exhibit 3.3 to the Form 8-K filed on November 7, 2016)

 

 

 

  4.3

 

Indenture, dated as of June 3, 2013, by and between the Registrant and U.S. Bank National Association, as trustee (the “Trustee”) (incorporated by reference to Full Circle’s Amendment No. 1 to Form N-2 (File No. 333-188280) filed on June 11, 2013).

 

 

 

  4.4

 

First Supplemental Indenture, dated as of June 3, 2013, by and between Full Circle and the Trustee (incorporated by reference to Full Circle’s Amendment No. 2 Form N-2 (File No. 333-188280) filed on June 19, 2013)

 

 

 

  4.5

 

Second Supplemental Indenture, dated as of November 3, 2016 by and among Full Circle, the Registrant and the Trustee. (incorporated by reference to Exhibit 4.5 to the Form 10-K filed on March 30, 2017).

 

 

 

  4.6

 

Indenture, dated as of September 18, 2017, by and between the registrant and American Stock Transfer and Trust Company (incorporated by reference to Exhibit 4.1 to Form 8-K/A filed on September 21, 2017).

 

 

 

  4.7

 

First Supplemental Indenture, dated as of September 18, 2017, by and between the registrant and American Stock Transfer and Trust Company (incorporated by reference to Exhibit 4.2 to Form 8-K/A filed on September 21, 2017).

 

 

 

  4.8

 

Global Note, dated September 18, 2017 (incorporated by reference to Exhibit 4.3 to Form 8-K filed on September 19, 2017, as amended September 21, 2017).

 

 

 

  4.9

 

Global Note, dated September 19, 2017 (incorporated by reference to Exhibit 4.3 to Form 8-K filed on September 29, 2017).

 

 

 

  9.1

 

Amended and Restated Registration Rights Agreement, dated as of November 4, 2016, by and among the Registrant and the holders named therein (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on November 7, 2016)

 

 

 

14


 

10.1

 

Investment Management Agreement, dated as of September 27, 2016, by and between the Registrant and Great Elm Capital Management, Inc. (“GECM”) (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on November 7, 2016)

 

 

 

10.2

 

Administration Agreement, dated as of September 27, 2016, by and between the Registrant and GECM (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on November 7, 2016)

 

 

 

10.3

 

Custodian Agreement, dated as of October 27, 2016 by and between the Registrant and State Street Bank & Trust Company (incorporated by reference to Exhibit 10.3 to the Form 10-K filed on March 30, 2017).

  

 

 

10.4

 

Form of Indemnification Agreement (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on November 7, 2016)

 

 

 

14.1

 

Code of Ethics (incorporated by reference to Exhibit 14.1 to the Form 10-K filed on March 30, 2017)

 

 

 

14.2

 

Code of Ethics of GECM (incorporated by reference to Exhibit 14.2 to the Form 10-K filed on March 30, 2017)

 

 

 

31.1*

 

Certification of the Registrant’s Chief Executive Officer (“CEO”)

 

 

 

31.2*

 

Certification of the Registrant’s Chief Financial Officer (“CFO”)

 

 

 

32.1*

 

Certification of the Registrant’s CEO and CFO

 

*

Filed herewith

15


 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized as of November 6, 2017.

 

 

 

GREAT ELM CAPITAL CORP.

 

 

 

 

 

 

By:

/s/ Peter A. Reed

 

 

Name:

Peter A. Reed

 

 

Title:

Chief Executive Officer

 

 

 

 

 

 

By:

/s/ Michael J. Sell

 

 

Name:

Michael J. Sell

 

 

Title:

Chief Financial Officer

 

 

 

16


 

GREAT ELM CAPITAL CORP.

INDEX TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2017

 

Consolidated Statement of Assets and Liabilities as of September 30, 2017 (unaudited) and December 31, 2016

 

F-2

Consolidated Statement of Operations for the three and nine months ended September 30, 2017(unaudited)

 

F-3

Consolidated Statement of Changes in Net Assets for the nine months ended September 30, 2017 (unaudited)

 

F-4

Consolidated Statement of Cash Flows for the nine months ended September 30, 2017 (unaudited)

 

F-5

Consolidated Schedule of Investments as of September 30, 2017 (unaudited) and December 31, 2016

 

F-6

Notes to Consolidated Financial Statements (unaudited)

 

F-17

 

 

 

F-1


 

GREAT ELM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

Dollar amounts in thousands (except per share amounts)

 

 

 

September 30, 2017

 

 

December 31, 2016

 

Assets

 

(unaudited)

 

 

 

 

 

Non-affiliated, non-controlled investments, at fair value

   (amortized cost of $164,758 and $163,809, respectively)

 

$

133,100

 

 

$

150,323

 

Non-affiliated, non-controlled short term investments, at fair value

   (amortized cost of $52,269 and $0, respectively)

 

 

52,269

 

 

 

 

Affiliated investments, at fair value

   (amortized cost of $4,240 and $4,255, respectively)

 

 

2,481

 

 

 

4,286

 

Controlled investments, at fair value

   (amortized cost of $18,237 and $68, respectively)

 

 

17,556

 

 

 

68

 

Total investments

 

 

205,406

 

 

 

154,677

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

8,018

 

 

 

66,782

 

Receivable for investments sold

 

 

 

 

 

9,406

 

Interest receivable

 

 

3,648

 

 

 

4,338

 

Dividends receivable

 

 

34

 

 

 

 

Principal receivable

 

 

 

 

 

786

 

Due from portfolio company

 

 

184

 

 

 

312

 

Deposit at broker

 

 

267

 

 

 

56

 

Due from affiliates

 

 

610

 

 

 

80

 

Prepaid expenses and other assets

 

 

128

 

 

 

107

 

Total assets

 

$

218,295

 

 

$

236,544

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Notes payable 8.25% due June 30, 2020 (including unamortized premium

   of $698 and $888 at September 30, 2017 and December 31, 2016, respectively)

 

$

34,344

 

 

$

34,534

 

Notes payable 6.50% due September 18, 2022 (including unamortized discount

   of $1,509 and $0 at September 30, 2017 and December 31, 2016, respectively)

 

$

31,122

 

 

$

 

Payable for investments purchased

 

 

12,853

 

 

 

21,817

 

Interest payable

 

 

77

 

 

 

 

Distributions payable

 

 

891

 

 

 

2,123

 

Due to affiliates

 

 

4,626

 

 

 

3,423

 

Accrued expenses and other liabilities

 

 

967

 

 

 

1,663

 

Offering costs payable

 

 

610

 

 

 

 

Total liabilities

 

$

85,490

 

 

$

63,560

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 6)

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

Net Assets

 

 

 

 

 

 

 

 

Common stock, par value $0.01 per share (100,000,000 shares authorized,

   10,729,831 and 12,790,880 shares issued and outstanding at

   September 30, 2017 and December 31, 2016, respectively)

 

$

107

 

 

$

128

 

Additional paid-in capital

 

 

195,877

 

 

 

219,317

 

Accumulated net realized losses

 

 

(30,921

)

 

 

(34,341

)

Undistributed net investment income

 

 

3,579

 

 

 

1,335

 

Net unrealized depreciation on investments

 

 

(35,837

)

 

 

(13,455

)

Total net assets

 

$

132,805

 

 

$

172,984