UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 2, 2022
Great Elm Capital Corp.
(Exact name of Registrant as Specified in Its Charter)
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Maryland
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814-01211
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81-2621577
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(State or Other Jurisdiction
of Incorporation)
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(Commission File Number)
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(IRS Employer
Identification No.)
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800 South Street, Suite 230, Waltham, MA
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02453
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s Telephone Number, Including Area Code: (617) 375-3006
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common stock, $0.01 par value
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GECC
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Nasdaq Global Market
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6.75% Notes due 2025
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GECCM
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Nasdaq Global Market
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6.50% Notes due 2024
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GECCN
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Nasdaq Global Market
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5.875% Notes due 2026
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GECCO
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Nasdaq Global Market
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (Sec. 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (Sec. 240.12b-2 of this
chapter).
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Emerging growth company ☐
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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. ☐
Item 2.02. Results of Operations and Financial Condition.
On March 4, 2022, Great Elm Capital Corp. (the “Company”) issued the press release and published the presentation furnished as exhibits 99.1 and 99.2, respectively, to this report reporting its financial results for the three months and year
ended December 31, 2021.
The foregoing information (including exhibits 99.1 and 99.2 hereto) are being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to
the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such filing.
Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.
As disclosed in Item 5.02 of this report, effective upon the filing of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “10-K”) with the Securities and Exchange Commission (“SEC”), Directors Peter Reed,
Randall Revell Horsey and Michael Speller resigned from the Company’s Board of Directors (the “Board”). In addition, on March 4, 2022, the Board appointed Richard Cohen as a Class I director and Matthew A. Drapkin as a Class II Director to fill the
vacancies on the Board created by the resignations of Mr. Speller and Mr. Horsey. As a result, as of March 4, 2022, the Company has two independent directors, two interested directors and one vacancy on its Board, and only two independent directors
on its Audit Committee.
On March 4, 2022, the Company notified The Nasdaq Stock Market (“Nasdaq”) that, as a result of the one vacancy on its Board and one vacancy on its Audit Committee, the Company was not in compliance with Nasdaq Listing Rule 5605(b)(1), which
requires the Board to consist of a majority of independent directors, and Nasdaq Listing Rule 5605(c)(2)(A), which requires the Company’s Audit Committee to be comprised of at least three independent directors. The Company also notified Nasdaq of
the Company’s desire to use the cure periods provided by Nasdaq Listing Rules 5605(b)(1)(A) and 5605(c)(4)(B).
The Board intends to appoint an independent Class III director to fill the vacancy created by Mr. Reed’s resignation from the Board and to be the third independent director on the Company’s Audit Committee as soon as practicable.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On March 2, 2022, Peter Reed notified the Company that he would resign from his position as the Company’s Chief Executive Officer and President and as Chairman of the Board, and each of Randall Revell Horsey and Michael Speller notified the
Company that they would resign from the Board, in each case effective upon the filing of the 10-K with the SEC. The resignations were not the result of any disagreement with the Company.
On March 4, 2022, the Board appointed Matt Kaplan, age 35, as the Company’s Chief Executive Officer and President. Mr. Kaplan has served as a Portfolio Manager for Great Elm Capital Management, Inc. (“GECM”), the Company’s external investment
manager, since October 2020, as well as a Managing Director of Imperial Capital Asset Management, LLC (“ICAM”) focused on investment opportunities across the capital structure. Mr. Kaplan joined ICAM in 2020 after spending four years at Citadel LLC
from 2015-2019 investing in special situations and event-driven credit and equities. Mr. Kaplan previously worked in Research with Imperial Capital US from 2007-2014 and moved to Imperial Capital UK from 2014-2015. Mr. Kaplan earned a BS in
Managerial Economics from the University of California, Davis and holds the Chartered Financial Analyst (“CFA”) designation from the CFA Institute. Mr. Kaplan provides services to GECM under a shared services agreement with ICAM. Affiliates of ICAM
beneficially own more than 5% of the Company’s outstanding common stock.
On March 4, 2022, the Board also appointed Richard Cohen as a Class I director and Matthew A. Drapkin as a Class II Director to fill the vacancies on the Board created by the resignations of Mr. Speller and Mr. Horsey. Mr. Cohen will be eligible
for re-election along with the Company’s other Class I director at the Company’s 2023 Annual Meeting of Stockholders and Mr. Drapkin will be eligible for re-election along with the Company’s other Class II director at the Company’s 2024 Annual
Meeting of Stockholders. Mr. Drapkin will serve as Chairman of the Board of Directors and Mr. Cohen will serve as the Chairman of the Company’s Audit Committee, as the audit committee financial expert and as a member of the Company’s Compensation
Committee.
Mr. Cohen will receive the standard compensation provided to the Company’s non-employee directors, as described in the Company’s proxy statement for the 2021 Annual Meeting of Stockholders. Mr. Drapkin will not receive compensation in his role
as a director and will be an “interested person” as defined under Section 2(a)(19) of the Investment Company Act of 1940, as amended, due to his roles as a director of Great Elm Group, Inc. (“GEG”), the parent company of GECM, and the Chief
Executive Officer & Portfolio Manager of Northern Right Capital Management, L.P., a beneficial owner of more than 5% of GEG’s common stock and an owner of GEG’s 5.00% convertible senior PIK notes due 2030.
The Company will enter into its standard form of indemnification agreement with Mr. Cohen and Mr. Drapkin.
Item 8.01. Other Events.
On March 4, 2022, the Company announced that its first quarter 2022 distribution of $0.60 per share in cash is payable on March 30, 2022 to stockholders of record as of March 15, 2022. In addition, on March 4, 2022, the Company announced that
the Board approved a $0.45 per share cash distribution for the quarter ending June 30, 2022. The record and payment dates for the distribution for the quarter ending June 30, 2022 are expected to be set in the second quarter, pursuant to authority
granted by the Board.
On March 4, 2022, the Company issued the press releases attached as Exhibits 99.3 and 99.4 to this report announcing the director and officer appointments noted under Item 5.02 above.
In addition, on March 4, 2022, the Company issued the press release attached as Exhibit 99.5 announcing the filing of a registration statement for a rights offering to its stockholders.
Finally, on March 4, 2022, the Company issued the press release attached as Exhibit 99.6 to this report announcing a planned joint venture with Utica Leaseco, LLC (“Utica”) to co-invest in proprietary equipment financing transactions sourced by
Utica.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
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Exhibit
Number
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Description
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Earnings Press Release, dated March 4, 2022
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Presentation, dated March 4, 2022
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New Board Leadership Press Release, dated March 4, 2022
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CEO Transition Press Release, dated March 4, 2022
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Rights Offering Press Release, dated March 4, 2022
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Utica Joint Venture Press Release, dated March 4, 2022
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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 hereunto duly authorized.
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GREAT ELM CAPITAL CORP.
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Date: March 4, 2022
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/s/ Keri A. Davis
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By:
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Keri A. Davis
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Title:
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Chief Financial Officer
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Exhibit 99.1
GREAT ELM CAPITAL CORP. ANNOUNCES FOURTH QUARTER AND FULL YEAR 2021 FINANCIAL RESULTS
Company to Host Quarterly Conference Call and Webcast at 11:00 AM ET Today
WALTHAM, Mass., March 4, 2022 – Great Elm Capital Corp. (“we,” “us,” “our,” the “Company” or “GECC”) (NASDAQ: GECC), a business development company, today announced its financial results for the fourth quarter and year
ended December 31, 2021. Effective February 28, 2022, GECC implemented a 6-for-1 reverse split of its outstanding common stock and all per share amounts below are presented on a split adjusted basis unless otherwise noted.
Today GECC Announces
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It is seeking to raise capital to fund its specialty finance strategy.
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New board leadership with the appointment of two new board members, including a new chairman, with extensive investment, financial, and operational experience.
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A CEO transition with Matt Kaplan assuming the CEO role to execute on a strategy anchored in growing GECC’s specialty finance platform alongside a less concentrated, performing credit portfolio.
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Our Board of Directors has approved a quarterly dividend of $0.45 per share for the second quarter of 2022, equating to a 10.8% annualized yield on pro forma NAV per share.
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Great Elm Capital Management, Inc., GECC’s external investment advisor, has indicated that it intends to waive all accrued incentive fees as of March 31, 2022, provided GECC’s shareholders approve a proposal to reset the incentive fee
total return hurdle. As of December 31, 2021 there were approximately $4.9 million, or $1.08 per share, of accrued fees held on GECC’s balance sheet.
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If that waiver is obtained, we would expect to recognize the reversal of these accrued fees during the period ending March 31, 2022, contingent upon approval of the new incentive fee hurdles by GECC’s stockholders, resulting in a
corresponding increase in income and increase in net asset value in such period (subject to any offsetting additional expenses or losses).
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Financial and Operating Highlights
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Net investment income (“NII”) for the quarter ended December 31, 2021 was $7.1 million, or $1.58 per share.
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NII for the quarter ended December 31, 2021 was positively impacted by the reversal of approximately $5.2 million of previously accrued incentive fees associated with our investments in the secured debt of Avanti that have been deemed
unlikely to be collected.
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Net assets were approximately $74.6 million on December 31, 2021, as compared to $99.4 million on September 30, 2021, and $79.6 million on December 31, 2020.
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Net assets for the quarter ended December 31, 2021 were negatively impacted by approximately $26.6 million of unrealized depreciation from investments in Avanti.
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NAV per share was $16.63 as of December 31, 2021, as compared to $22.17 as of September 30, 2021, and $20.74 as of December 31, 2020.
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As of December 31, 2021, GECC’s asset coverage ratio was approximately 151.1%, compared to 163.8% as of September 30, 2021, and 167.1% as of December 31, 2020.
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On February 3, 2022, we acquired a majority ownership interest in Sterling Commercial Credit (“Sterling”), a provider of asset-based loans to middle market companies throughout the United States.
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On February 18, 2021, GECC entered into a joint venture with Utica Leaseco, LLC (“Utica”), an established equipment finance company, for the purpose of co-investing in proprietary equipment financings originated by Utica.
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Management Commentary
“Our investment in Avanti has negatively impacted our portfolio value,” said Matt Kaplan, GECC’s newly appointed Chief Executive Officer. “We recognize the negative consequences of this investment and are ready to
re-set GECC. The strategic plan to move forward is supported by our board and large shareholders. We have made significant strides to grow our portfolio of specialty finance solutions with the ability to service the lending needs of small businesses
at varying stages of their development.”
Michael Keller, President of Great Elm Specialty Finance, said “Post quarter end, we grew our specialty finance business with the acquisition of a majority ownership stake in Sterling Commercial Credit and agreed to a
joint venture with Utica. Coupled with portfolio companies Prestige Capital Finance and Lenders Funding, Sterling Commercial Credit and the JV with Utica should broaden GECC’s product offerings to its customers and provide proprietary, attractive,
risk-adjusted returns for shareholders.”
Financial Highlights – Per Share Data(1)
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Q4/20201
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Q1/20211
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Q2/20211
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Q3/20211
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Q4/20211
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Earnings Per Share (“EPS”)
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($2.60)
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$3.22
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$0.63
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($0.79)
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($4.95)
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Net Investment Income (“NII”) Per Share
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$0.44
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$0.39
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$0.54
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$0.39
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$1.58
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Net Realized Gains / (Losses) Per Share
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$0.21
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($0.84)
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$(0.60)
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$0.42
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($1.26)
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Net Unrealized Gains / (Losses) Per Share
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($3.25)
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$3.67
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$0.69
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($1.60)
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($5.27)
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Net Asset Value Per Share at Period End
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$20.74
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$23.36
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$23.40
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$22.17
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$16.63
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Distributions Paid / Declared Per Share
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$1.49
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$0.60
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$0.60
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$0.60
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$0.60
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Portfolio and Investment Activity
As of December 31, 2021, GECC held total investments of $212.1 million at fair value, as follows:
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45 debt investments, totaling approximately $149.8 million and representing 70.6% of the fair market value of our total investments. Secured debt investments comprised a substantial majority of the fair market value of our debt
investments.
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5 income generating equity investments, totaling approximately $45.7 million, representing 21.5% of the fair market value of our total investments.
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9 other equity investments, totaling approximately $13.6 million and representing 6.4% of the fair market value of our total investments.
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Special Purpose Acquisition Company (SPAC) instruments totaling approximately $3.1 million, which consist of SPAC common stock and warrants, representing approximately 1.4% of the fair market value of our total investments.
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-2-
As of December 31, 2021, the weighted average current yield on our debt portfolio was 10.8%. Floating rate instruments comprised approximately 45.3% of the fair market value of debt investments.
During the quarter ended December 31, 2021, we deployed approximately $34.2 million into 23 investments(2) at a weighted average current
yield of 8.2%.
During the quarter ended December 31, 2021, we monetized, in part or in full, 26 investments for approximately $34.1 million(3) excluding
SPACs, at a weighted average current yield of 7.4%. We also monetized $6.2 million of SPAC securities during the period, bolstering our liquidity profile.
Financial Review
Total investment income for the quarter ended December 31, 2021 was approximately $6.4 million, or $1.42 per share. Net expenses for the quarter ended December 31, 2021 were approximately $0.8 million, or $0.16 per
share. Total expenses were positively impacted by certain one-time items, primarily related to the reversal of approximately $5.2 million of previously accrued incentive fees associated with our investments in the secured debt of Avanti that have
been deemed unlikely to be collected.
Net realized losses for the quarter ended December 31, 2021 were approximately ($5.7) million, or ($1.26) per share. Net unrealized depreciation from investments for the quarter ended December 31, 2021 was
approximately ($23.6) million, or ($5.27) per share. Net unrealized depreciation from investments was negatively impacted by approximately $26.6 million related to our investments in Avanti. Investments in Avanti’s 1.5 lien term loan and 2nd lien
notes, totaling approximately $3.9 million of fair value as of December 31, 2021 and $26.5 million of fair value as of September 30, 2021, were placed on nonaccrual as of October 1, 2021. As of December 31, 2021, the fair value of our investments in
Avanti was approximately $8.1 million or 3.8% of portfolio fair value.
Liquidity and Capital Resources
As of December 31, 2021, our cash balance was approximately $9.1 million, exclusive of holdings of United States Treasury Bills.
Total debt outstanding (par value) as of December 31, 2021 was $145.9 million, comprised of our 6.50% senior notes due June 2024 (NASDAQ: GECCN), our 6.75% senior notes due January 2025 (NASDAQ: GECCM), and our 5.875%
senior notes due June 2026 (NASDAQ: GECCO). We also have $25.0 million revolving credit facility due May 2024, which was undrawn as of December 31, 2021.
Subsequent Events
On January 27, 2022, we announced that our Board of Directors approved a 6-for-1 reverse stock split of our outstanding common stock. On February 28, 2022, the reverse stock split of our outstanding common stock became
effective. As a result, every six shares of our issued and outstanding common stock were converted into one share of issued and outstanding common stock. Fractional shares to be received as a result of the reverse stock split were redeemed for cash
at $2.98 per share on a pre-split basis ($17.88 pro forma for the reverse split), the closing market price February 25, 2022. Pro forma, our fully diluted share count is 4.6 million and our NAV per share is $16.63.
-3-
On February 3, 2022, we acquired a majority ownership interest in Sterling, a provider of asset-based loans to middle market companies throughout the United States, for total consideration of approximately $7.5 million
which consisted of $4.9 million of cash and $2.6 million of our common stock issued at NAV. In connection with the acquisition, we also provided subordinated debt to Sterling to fund growth initiatives. The majority of the proceeds from the
transaction were retained by Sterling to help support the growth of the business. Founder and CEO Edwin Small will continue to lead the business and will maintain an equity interest. Michael Keller, President of Great Elm Specialty Finance, became
Chairman of Sterling’s Board of Managers.
On February 18, 2022, the Company entered into a joint venture with Utica Leaseco. LLC (“Utica”) for the purpose of co-investing in proprietary equipment financing originated by Utica. Utica has been providing
customized equipment loan and lease options for businesses of all sizes throughout the continental U.S. since 2005. This transaction remains subject to the approval of Utica’s senior lender.
Leadership Update
Today we announce the following leadership changes: GECC names Matt Kaplan as CEO, as Peter Reed resigns his position with the Company. Mr. Kaplan has served as the Portfolio Manager for GECC since October 2020 and has
an extensive background in credit investing, both on the buy and sell sides. In addition to Mr. Kaplan’s appointment as CEO, the Company announced that Matthew Drapkin, CEO & Portfolio Manager of Northern Right Capital, has been named Chairman of
the Board, effective immediately. Joining Mr. Drapkin on the Board of Directors as a new appointment is Richard Cohen, President of Richard M. Cohen Consultants, as Audit Chair. Board Members concluding service with the company include Peter Reed,
Michael Speller, and Revell Horsey.
Distributions
On November 5, 2021, we announced that our Board of Directors approved a quarterly dividend of $0.60 per share (on a post-split basis) for the quarter ending March 31, 2022. The first quarter distribution will be payable on March 30, 2022 to
stockholders of record as of March 15, 2022.
In addition, our Board of Directors has approved a $0.45 per share cash distribution for the quarter ending June 30, 2022. Annualized, the distribution equates to an 11.9% dividend yield on our closing market price on
March 3, 2022 of $15.9 and a 10.8% dividend yield on our pro forma NAV of $16.63 per share. The record and payment dates for the distribution are expected to be set in the second quarter, pursuant to authority granted by our Board of Directors.
Conference Call and Webcast
GECC will discuss these results in a conference call on Friday, March 4, 2022, at 11:00 a.m. ET.
Conference Call Details
Date/Time: Friday, March 4, 2022 – 11:00 a.m. ET
Participant Dial-In Numbers:
(United States): 844-820-8297
(International): 661-378-9758
To access the call, please dial-in approximately five minutes before the start time and, when asked, provide the operator with passcode “GECC”. An accompanying slide presentation will be available in .pdf format via the “Investor Relations”
section of Great Elm Capital Corp.’s website at http://www.investor.greatelmcc.com/events-and-presentations/presentations after the issuance of the earnings release.
-4-
Webcast
The call and presentation will also be simultaneously webcast over the Internet via the Investor Relations section of GECC’s website or by clicking on the conference call link:
https://edge.media-server.com/mmc/p/8728zwhu%20.
About Great Elm Capital Corp.
Great Elm Capital Corp. is an externally managed, business development company that seeks to generate current income and capital appreciation by investing in debt and income generating equity securities, including
investments in specialty finance businesses.
Cautionary Statement Regarding Forward-Looking Statements
Statements in this communication that are not historical facts are “forward-looking” statements within the meaning of the federal securities laws. These statements are often, but not always, made through the use of
words or phrases such as “expect,” “anticipate,” “should,” “will,” “estimate,” “designed,” “seek,” “continue,” “upside,” “potential” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to
risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the
forward-looking statements are: conditions in the credit markets, the price of GECC common stock, the performance of GECC’s portfolio and investment manager and risks associated with the economic impact of the COVID-19 pandemic on GECC and its
portfolio companies. Information concerning these and other factors can be found in GECC’s Annual Report on Form 10-K and other reports filed with the SEC. GECC assumes no obligation to, and expressly disclaims any duty to, update any forward-looking
statements contained in this communication or to conform prior statements to actual results or revised expectations except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of
the date hereof.
This press release does not constitute an offer of any securities for sale.
Endnotes:
(1) The per share figures are based on a weighted average outstanding share count for the
respective period, pro forma for the 6-for-1 reverse stock split effective on February 28, 2022.
(2) This includes new deals, additional fundings (inclusive of those on revolving credit
facilities), refinancings and capitalized PIK income. Amounts included herein do not include investments in short-term securities, including United States Treasury Bills.
(3) This includes scheduled principal payments, prepayments, sales and repayments (inclusive
of those on revolving credit facilities). Amounts included herein do not include investments in short-term securities, including United States Treasury Bills.
Media & Investor Contact:
Investor Relations
+1 (617) 375-3006
investorrelations@greatelmcap.com
-5-
GREAT ELM CAPITAL CORP.
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (unaudited)
Dollar amounts in thousands (except per share amounts)
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December 31, 2021
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December 31, 2020
|
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Assets
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|||||||||
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Investments
|
|||||||||
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Non-affiliated, non-controlled investments, at fair value (amortized cost of $175,800 and $147,494, respectively)
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$
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164,203
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$
|
112,116
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|||||
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Non-affiliated, non-controlled short-term investments, at fair value (amortized cost of $199,995 and $74,997, respectively)
|
199,995
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74,998
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|||||||
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Affiliated investments, at fair value (amortized cost of $129,936 and $109,840, respectively)
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10,861
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29,289
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|||||||
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Controlled investments, at fair value (amortized cost of $32,649 and $7,630, respectively)
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37,085
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10,243
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|||||||
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Total investments
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412,144
|
226,646
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|||||||
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Cash and cash equivalents
|
9,132
|
52,582
|
|||||||
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Restricted cash
|
13
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600
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|||||||
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Receivable for investments sold
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766
|
-
|
|||||||
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Interest receivable
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1,811
|
2,423
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|||||||
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Dividends receivable
|
1,540
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-
|
|||||||
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Due from portfolio company
|
136
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837
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|||||||
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Due from affiliates
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17
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-
|
|||||||
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Deferred financing costs
|
376
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-
|
|||||||
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Prepaid expenses and other assets
|
379
|
240
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|||||||
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Total assets
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$
|
426,314
|
$
|
283,328
|
|||||
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Liabilities
|
|||||||||
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Notes payable (including unamortized discount of $3,935 and $3,065, respectively)
|
$
|
141,998
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$
|
115,661
|
|||||
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Payable for investments purchased
|
203,575
|
75,511
|
|||||||
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Interest payable
|
29
|
328
|
|||||||
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Distributions payable
|
-
|
1,911
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|||||||
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Accrued incentive fees payable
|
4,854
|
9,176
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|||||||
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Due to affiliates
|
1,012
|
764
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|||||||
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Accrued expenses and other liabilities
|
290
|
362
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|||||||
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Total liabilities
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$
|
351,758
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$
|
203,713
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|||||
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Commitments and contingencies
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$
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-
|
$
|
-
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|||||
|
Net Assets
|
|||||||||
|
Common stock, par value $0.01 per share (100,000,000 shares authorized,
4,484,278 shares issued and outstanding and 3,838,242 shares issued and outstanding, respectively) |
(1)
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$
|
45
|
$
|
38
|
||||
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Additional paid-in capital
|
245,531
|
230,696
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|||||||
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Accumulated losses
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(171,020
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)
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(151,119
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)
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|||||
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Total net assets
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$
|
74,556
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$
|
79,615
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|||||
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Total liabilities and net assets
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$
|
426,314
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$
|
283,328
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|||||
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Net asset value per share
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(1)
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$
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16.63
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$
|
20.74
|
||||
-6-
GREAT ELM CAPITAL CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Dollar amounts in thousands (except per share amounts)
|
For the Year Ended December 31,
|
||||||||||||
|
2021
|
2020
|
2019
|
||||||||||
|
Investment Income:
|
||||||||||||
|
Interest income from:
|
||||||||||||
|
Non-affiliated, non-controlled investments
|
$
|
13,100
|
$
|
12,740
|
$
|
17,087
|
||||||
|
Non-affiliated, non-controlled investments (PIK)
|
387
|
22
|
-
|
|||||||||
|
Affiliated investments
|
910
|
981
|
858
|
|||||||||
|
Affiliated investments (PIK)
|
4,874
|
5,218
|
4,158
|
|||||||||
|
Controlled investments
|
646
|
249
|
1,411
|
|||||||||
|
Controlled investments (PIK)
|
-
|
-
|
684
|
|||||||||
|
Total interest income
|
19,917
|
19,210
|
24,198
|
|||||||||
|
Dividend income from:
|
||||||||||||
|
Non-affiliated, non-controlled investments
|
1,713
|
867
|
470
|
|||||||||
|
Controlled investments
|
2,634
|
2,240
|
1,600
|
|||||||||
|
Total dividend income
|
4,347
|
3,107
|
2,070
|
|||||||||
|
Other income from:
|
||||||||||||
|
Non-affiliated, non-controlled investments
|
683
|
125
|
142
|
|||||||||
|
Non-affiliated, non-controlled investments (PIK)
|
-
|
368
|
-
|
|||||||||
|
Affiliated investments
|
-
|
-
|
2
|
|||||||||
|
Affiliated investments (PIK)
|
282
|
75
|
565
|
|||||||||
|
Controlled investments
|
25
|
12
|
61
|
|||||||||
|
Total other income
|
990
|
580
|
770
|
|||||||||
|
Total investment income
|
$
|
25,254
|
$
|
22,897
|
$
|
27,038
|
||||||
|
Expenses:
|
||||||||||||
|
Management fees
|
$
|
3,182
|
$
|
2,511
|
$
|
2,953
|
||||||
|
Incentive fees
|
(4,323
|
)
|
1,020
|
2,735
|
||||||||
|
Administration fees
|
673
|
729
|
987
|
|||||||||
|
Custody fees
|
54
|
51
|
57
|
|||||||||
|
Directors’ fees
|
233
|
198
|
200
|
|||||||||
|
Professional services
|
1,937
|
1,441
|
833
|
|||||||||
|
Interest expense
|
10,428
|
9,126
|
7,636
|
|||||||||
|
Other expenses
|
737
|
655
|
491
|
|||||||||
|
Total expenses
|
12,921
|
15,731
|
15,892
|
|||||||||
|
Net investment income before taxes
|
$
|
12,333
|
$
|
7,166
|
$
|
11,146
|
||||||
|
Excise tax
|
$
|
48
|
$
|
17
|
$
|
209
|
||||||
|
Net investment income
|
$
|
12,285
|
$
|
7,149
|
$
|
10,937
|
||||||
|
Net realized and unrealized gains (losses):
|
||||||||||||
|
Net realized gain (loss) on investment transactions from:
|
||||||||||||
|
Non-affiliated, non-controlled investments
|
$
|
(5,770
|
)
|
$
|
(9,604
|
)
|
$
|
1,146
|
||||
|
Affiliated investments
|
(4,162
|
)
|
-
|
-
|
||||||||
|
Controlled investments
|
293
|
(1,382
|
)
|
154
|
||||||||
|
Realized gain on repurchase of debt
|
-
|
1,237
|
-
|
|||||||||
|
Total net realized gain (loss)
|
(9,639
|
)
|
(9,749
|
)
|
1,300
|
|||||||
|
Net change in unrealized appreciation (depreciation) on investment transactions from:
|
||||||||||||
|
Non-affiliated, non-controlled investments
|
19,019
|
(14,520
|
)
|
(11,316
|
)
|
|||||||
|
Affiliated investments
|
(33,763
|
)
|
(18,455
|
)
|
(7,907
|
)
|
||||||
|
Controlled investments
|
1,823
|
3,619
|
(561
|
)
|
||||||||
|
Total net change in unrealized appreciation (depreciation)
|
(12,921
|
)
|
(29,356
|
)
|
(19,784
|
)
|
||||||
|
Net realized and unrealized gains (losses)
|
$
|
(22,560
|
)
|
$
|
(39,105
|
)
|
$
|
(18,484
|
)
|
|||
|
Net increase (decrease) in net assets resulting from operations
|
$
|
(10,275
|
)
|
$
|
(31,956
|
)
|
$
|
(7,547
|
)
|
|||
|
Net investment income per share (basic and diluted)(1)
|
$
|
3.02
|
$
|
3.22
|
$
|
6.40
|
||||||
|
Earnings per share (basic and diluted)(1)
|
$
|
(2.52
|
)
|
$
|
(14.41
|
)
|
$
|
(4.42
|
)
|
|||
|
Weighted average shares outstanding (basic and diluted)(1)
|
4,073,454
|
2,218,244
|
1,708,263
|
|||||||||
| (1) |
Authorized, issued and outstanding shares of common stock, weighted average shares outstanding and per share amounts have been adjusted for the periods shown to reflect the six-for-one reverse stock split effected on February 28, 2022 on a
retroactive basis.
|
-7-
Exhibit 99.2
Exhibit 99.3
GREAT ELM CAPITAL CORP. ANNOUNCES NEW BOARD LEADERSHIP
New members will enhance board’s focus on portfolio performance and value for shareholders
WALTHAM, Mass., March 4, 2022 (GLOBE NEWSWIRE) – Great Elm Capital Corp. (“we,” “us,” “our,” the “Company” or “GECC”) (NASDAQ: GECC), a business development company, today announced various enhancements to its
leadership with the appointment of two new members to its board of directors (the “Board”), including a new Board chairman, who will each help support the Company’s growth objectives. GECC expects to name an additional independent director shortly.
“We are delighted to welcome such a strong group of new Board members who bring diverse expertise and insight to our work in specialty finance and credit investing,” said Matt Kaplan, newly appointed CEO of GECC. “We have worked diligently to
ensure GECC’s board represents a variety of financial backgrounds, and the newest board members, together with existing Board members Mark Kuperschmid and Erik Falk, exemplify leadership qualities that align with our strategic vision.”
The new board members are:
| • |
Matthew Drapkin, who will serve as Chairman of the Board and will not receive any compensation for his service on the Board. Mr. Drapkin is Chief Executive Officer & Portfolio Manager at
Northern Right Capital, an alternative asset manager focused on small and mid-cap public companies, which is one of GECC’s largest shareholders. Northern Right Capital has extensive public company board experience, having successfully
created value for shareholders in numerous engagements on public company boards across a variety of asset classes. Before founding Northern Right Capital Management in December 2009, Mr. Drapkin had
extensive investment experience, including his work as head of research, special situations, and private equity at ENSO Capital, a New York-based hedge fund. From 2003 to 2008, Mr. Drapkin worked at MacAndrews & Forbes,
participating in more than $3 billion of transactions, including Scientific Games, Deluxe Entertainment Services, AM General, and Scantron. Prior to MacAndrews, Mr. Drapkin served as general manager of two of Conde Nast publication’s
wholly-owned Internet sites, Epicurious.com and Concierge.com, and headed Conde Nast’s internet venture investment effort. Mr. Drapkin began his career at Goldman, Sachs and Co. Mr. Drapkin holds a
J.D. from Columbia Law School, an M.B.A. from Columbia Business School, and a B.A. in American History from Princeton University.
|
| • |
Richard Cohen will serve as a Board Member, Audit Committee Chair, and a Member of the Nominating and Governance and Compensation Committees. Richard Cohen has been president of Richard M. Cohen
Consultants since 1996, a company providing financial consulting services to both public and private companies. He has served as a Director of Ondas Holdings (NASDAQ: ONDS) since 2018, Direct Digital (NASDAQ: DRCT) since November 2021,
and Smart For Life, Inc. (NASDAQ: SMFL) since February 2022. From March 2012 to July 2015, he was the Founder and Managing Partner of Chord Advisors, a firm providing outsourced CFO services to both public and private companies. From
May 2012 to August 2013, he was the Interim CEO and member of the Board of Directors of CorMedix Inc. (NYSE: CRMD). From July 2008 to August 2012, Mr. Cohen was a member of the Audit Committee of Rodman and Renshaw, an investment banking
firm. From July 2001 to August 2012, he was a partner with Novation Capital until its sale to a private equity firm. Mr. Cohen hold a BS with honors from the University of Pennsylvania (Wharton), an MBA from Stanford University and a
CPA from New York State (inactive).
|
Mr. Drapkin added, “On behalf of the board, I want to express our gratitude to Peter Reed, Michael Speller and Revell Horsey who have concluded their service as board members of GECC.”
Leadership Update
In addition to the new Board appointments, GECC has appointed Matt Kaplan as CEO of the Company, replacing Peter Reed. Mr. Kaplan has served as a Portfolio Manager at Great Elm Capital Management, the Company’s
external investment advisor, since October 2020, and has an extensive background in credit investing.
About Great Elm Capital Corp.
Great Elm Capital Corp. is an externally managed, business development company that seeks to generate current income and capital appreciation by investing in debt and income generating equity securities, including
investments in specialty finance businesses.
Cautionary Statement Regarding Forward-Looking Statements
Statements in this communication that are not historical facts are “forward-looking” statements within the meaning of the federal securities laws. These statements are often, but not always, made through the use of
words or phrases such as “expect,” “anticipate,” “should,” “will,” “estimate,” “designed,” “seek,” “continue,” “upside,” “potential” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to
risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the
forward-looking statements are: conditions in the credit markets, the price of GECC common stock, the performance of GECC’s portfolio and investment manager and risks associated with the economic impact of the COVID-19 pandemic on GECC and its
portfolio companies. Information concerning these and other factors can be found in GECC’s Annual Report on Form 10-K and other reports filed with the SEC. GECC assumes no obligation to, and expressly disclaims any duty to, update any
forward-looking statements contained in this communication or to conform prior statements to actual results or revised expectations except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements
that speak only as of the date hereof.
This press release does not constitute an offer of any securities for sale.
Media & Investor Contact:
Investor Relations
+1 (617) 375-3006
investorrelations@greatelmcap.com
- 2 -
Exhibit 99.4
GREAT ELM CAPITAL CORP. ANNOUNCES CEO TRANSITION
WALTHAM, Mass., March 4, 2022 (GLOBE NEWSWIRE) – Great Elm Capital Corp. (“we,” “us,” “our,” the “Company” or “GECC”) (NASDAQ: GECC), a business development company, today announced that Peter Reed has resigned as
Chief Executive Officer and stepped down from its board of the directors (the “Board”). The Board has unanimously appointed Matt Kaplan as CEO effective immediately.
Mr. Kaplan assumes the CEO position at GECC after a career built in credit investing. He has served as a Portfolio Manager at Great Elm Capital Management (“GECM”), GECC’s external investment advisor, since October 2020, during which time he
has led GECM’s investment team while repositioning GECC’s portfolio toward income generating and performing investments in leveraged credit and specialty finance. Matt also serves as Managing Director for Imperial Capital Asset Management, LLC
(“ICAM”), a registered investment advisor which manages various hedge funds, investment partnerships and a private equity fund. Funds managed by ICAM comprise one of the largest shareholders of GECC. Prior to ICAM, Matt was with Citadel
Enterprise investing in special situations and event-driven credit and equities. Mr. Kaplan began his career as a Desk Analyst with Imperial Capital, LLC before moving to Imperial Capital (International), LLP in London to cover European special
situations. Mr. Kaplan earned a BS in Managerial Economics from the University of California, Davis and holds the Chartered Financial Analyst (“CFA”) designation from the CFA Institute.
GECC Board Chair Matthew Drapkin stated: “Matt is a proven and effective investment leader who has the Board’s full support to lead GECC and to drive its growth strategy in specialty finance and credit investments.
We are committed to restoring value to our shareholders by finding opportunities across the credit spectrum that will be held to the highest standards of investment review. Matt’s experience working with performing, stressed and distressed
companies in both buy-side and sell-side settings make him uniquely qualified to lead the Company.”
Mr. Kaplan added, “I am very excited about the future of GECC. We have a tremendous opportunity as a business development company to gear our portfolio toward performing investments. I look forward to working with
our team to implement our ambitious growth plan in leveraged credit and specialty finance.”
Board Updates
In addition to Mr. Kaplan’s appointment as CEO, the Company announced that Matthew Drapkin, CEO & Portfolio Manager at Northern Right Capital, has been named Chairman of the Board, effective immediately. Joining
Mr. Drapkin on the Board of Directors as a new appointment is Richard Cohen, President of Richard M. Cohen Consultants, as Audit Chair. The Company expects to name an additional independent director shortly.
About Great Elm Capital Corp.
Great Elm Capital Corp. is an externally managed, business development company that seeks to generate current income and capital appreciation by investing in debt and income generating equity securities, including
investments in specialty finance businesses.
Cautionary Statement Regarding Forward-Looking Statements
Statements in this communication that are not historical facts are “forward-looking” statements within the meaning of the federal securities laws. These statements are often, but not always, made through the use of
words or phrases such as “expect,” “anticipate,” “should,” “will,” “estimate,” “designed,” “seek,” “continue,” “upside,” “potential” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to
risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the
forward-looking statements are: conditions in the credit markets, the price of GECC common stock, the performance of GECC’s portfolio and investment manager and risks associated with the economic impact of the COVID-19 pandemic on GECC and its
portfolio companies. Information concerning these and other factors can be found in GECC’s Annual Report on Form 10-K and other reports filed with the SEC. GECC assumes no obligation to, and expressly disclaims any duty to, update any
forward-looking statements contained in this communication or to conform prior statements to actual results or revised expectations except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements
that speak only as of the date hereof.
This press release does not constitute an offer of any securities for sale.
Media & Investor Contact:
Investor Relations
+1 (617) 375-3006
investorrelations@greatelmcap.com
- 2 -
Exhibit 99.5
GREAT ELM CAPITAL CORP. ANNOUNCES APPROVAL OF
$50 MILLION RIGHTS OFFERING
WALTHAM, Mass., March 4, 2022 (GLOBE NEWSWIRE) - Great Elm Capital Corp. (“GECC”) (NASDAQ: GECC) announced today that its Board of Directors has approved a non-transferable rights offering to purchase shares of GECC’s common stock and has filed
a registration statement with the Securities and Exchange Commission (“SEC”) related to the proposed rights offering.
The proposed $50 million rights offering consists of non-transferable rights issued to all existing stockholders to purchase common stock on a pro rata basis. The record date, number of new shares of common stock per subscription right and
subscription price for the shares of common stock to be issued pursuant to the offering will be determined at a later date in connection with commencing the offering. Record date stockholders who fully
exercise their rights would be entitled to subscribe, subject to certain limitations and subject to allotment, for additional shares of common stock that were not subscribed for by other holders of record.
Great Elm Group, Inc. and certain of GECC’s other stockholders (collectively, the “Participating Shareholders”) have indicated that they intend to fully exercise their rights and over-subscribe. Any over-subscription by the Participating
Shareholders would be effected only after pro rata allocation of over-subscription shares to record date holders (other than the Participating Shareholders) who fully exercise their rights. Accordingly, there can be no assurance that the
Participating Shareholders will acquire any shares of GECC’s common stock through their exercise of the over-subscription privilege.
GECC intends to use the net proceeds from the offering primarily to make opportunistic investments, in accordance with its investment objectives and policies, including investments in specialty finance businesses, and for general corporate
purposes.
The rights are non-transferable and will not be listed for trading on the Nasdaq Global Market or any other stock exchange. The rights may not be purchased or sold, and there will not be any market for trading the rights. The shares of GECC’s
common stock to be issued pursuant to the offering will be listed for trading on the Nasdaq Global Market under the symbol “GECC.”
Oppenheimer & Co. Inc. and Imperial Capital, LLC are acting as dealer managers for the offering.
A registration statement relating to the proposed rights offering has been filed with the SEC, but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement
becomes effective. The proposed offering will be made only by means of a preliminary prospectus. Copies of the preliminary prospectus relating to the proposed offering, when available, may be obtained from: Oppenheimer
& Co. Inc., 85 Broad Street, 26th Floor, New York, NY 10004, Attn: Syndicate Prospectus Department, telephone (212) 667-8055 or email: EquityProspectus@opco.com or Imperial Capital, LLC, Attention:
Prospectus Department, 10100 Santa Monica Blvd., Suite 2400, Los Angeles, CA 90067 or by phone: 310-246-3700.
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities described herein, nor will there be any sale of the securities in any state or jurisdiction in which such an offer, solicitation or
sale would be unlawful prior to registration or qualification under the securities law of any such jurisdiction. The proposed offering is subject to market conditions, and there can be no assurance as to whether or when the proposed offering may be
completed, or as to the actual size or terms of the proposed offering.
About Great Elm Capital Corp.
Great Elm Capital Corp. is an externally managed, business development company that seeks to generate current income and capital appreciation by investing in debt and income generating equity securities, including investments in specialty
finance businesses.
Cautionary Statement Regarding Forward-Looking Statements
Statements in this communication that are not historical facts are “forward-looking” statements within the meaning of the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as
“expect,” “anticipate,” “should,” “will,” “estimate,” “designed,” “seek,” “continue,” “upside,” “potential” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and
other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are:
conditions in the credit markets, the price of GECC common stock, the performance of GECC’s portfolio and investment manager and risks associated with the economic impact of the COVID-19 pandemic on GECC and its portfolio companies. Information
concerning these and other factors can be found in GECC’s Annual Report on Form 10-K and other reports filed with the SEC. GECC assumes no obligation to, and expressly disclaims any duty to, update any forward-looking statements contained in this
communication or to conform prior statements to actual results or revised expectations except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.
Media & Investor Contact:
Investor Relations
+1 (617) 375-3006
investorrelations@greatelmcap.com
- 2 -
Exhibit 99.6
GREAT ELM CAPITAL CORP. CONTINUES SPECIALTY FINANCE EXPANSION, LAUNCHES A JOINT VENTURE WITH UTICA LEASECO, LLC
WALTHAM, Mass., March 4, 2022 (GLOBE NEWSWIRE) - Great Elm Capital Corp. (“we,” “us,” “our,” or “GECC”) (NASDAQ: GECC), a business development company, today announced that it has launched Great Elm Utica, LLC (“GEU”), a joint venture between
GECC and Utica Leaseco, LLC (“Utica”), to co-invest in proprietary equipment financing transactions sourced by Utica.
Founded in 2005, Utica provides customized equipment loan and lease options for businesses of all sizes throughout the continental U.S. With unique knowledge of equipment values and creative structuring, Utica specializes in helping
credit-challenged companies unlock the equity in their equipment. Utica’s management team has over 100 years of combined experience in lending, financial services, and equipment finance.
The transaction remains subject to the approval of Utica’s senior lender.
Management Commentary
Michael Keller, President of Great Elm Specialty Finance, stated, “We are pleased to announce this joint venture with Utica, which enhances our ability to offer one-stop-shop financing alternatives for small and mid-sized businesses. We look
forward to working with the Utica team to grow GEU as we continue to expand GECC’s specialty finance platform.”
David Levy, Co-Founder and CEO of Utica and President of GEU, noted, “We are excited to enter into this joint venture with GECC and believe that this vehicle will allow us to offer additional products to middle market businesses, and, with
GECC’s access to capital, execute on larger equipment financing transactions.”
About Utica Leaseco and Utica Equipment Finance, LLC
Founded in 2005, Utica is a leading provider of lending, financial services, and equipment finance.
About Great Elm Capital Corp.
Great Elm Capital Corp. is an externally managed business development company that seeks to generate current income and capital appreciation by investing in debt and income generating equity securities, including investments in specialty
finance businesses. Additional information can be found at www.greatelmcc.com.
Cautionary Statement Regarding Forward-Looking Statements
Statements in this communication that are not historical facts are “forward-looking” statements within the meaning of the federal securities laws. These statements are often, but not always, made through the use of words or phrases such as
“expect,” “anticipate,” “should,” “will,” “estimate,” “designed,” “seek,” “continue,” “upside,” “potential” and similar expressions. All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties
and other factors that could cause actual results to differ materially from the results expressed in the statements. Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements
are: conditions in the credit markets, the price of GECC common stock, the performance of GECC’s portfolio and investment manager and risks associated with the economic impact of the COVID-19 pandemic on GECC and its portfolio companies.
Information concerning these and other factors can be found in GECC’s Annual Report on Form 10-K and other reports filed with the SEC. GECC assumes no obligation to, and expressly disclaims any duty to, update any forward-looking statements
contained in this communication or to conform prior statements to actual results or revised expectations except as required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the
date hereof.
Media & Investor Contact:
Investor Relations
+1 (617) 375-3006
investorrelations@greatelmcap.com
- 2 -