ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
|
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(Address of principal executive offices) |
(Zip Code) |
Large accelerated filer |
☐ |
Accelerated filer |
☐ | |||
☒ |
Smaller reporting company |
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Emerging growth company Yes ☐ No |
Page |
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PART I |
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Item 1. | 1 | |||||
Item 1A. | 20 | |||||
Item 1B. | 49 | |||||
Item 1C. | 49 | |||||
Item 2. | 50 | |||||
Item 3. | 51 | |||||
Item 4. | 52 | |||||
PART II |
||||||
Item 5. | 53 | |||||
Item 6. | 60 | |||||
Item 7. | 61 | |||||
Item 7A. | 79 | |||||
Item 8. | 81 | |||||
Item 9. | 125 | |||||
Item 9A. | 126 | |||||
Item 9B. | 126 | |||||
Item 9C. | 126 | |||||
PART III |
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Item 10. | 127 | |||||
Item 11. | 127 | |||||
Item 12. | 127 | |||||
Item 13. | 127 | |||||
Item 14. | 127 | |||||
PART IV |
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Item 15. | 128 | |||||
130 |
• | Focus on growing economic sectors |
• | High level of inherent value - |
• | Strong risk/reward characteristics |
• | Proven management team - start-up companies or companies with unproven technologies or business models or companies with relatively inexperienced management. Our view is that it will take experienced, seasoned veterans to understand and navigate the pitfalls resulting from the Federal Reserve’s actions regarding interest rates and quantitative easing as well as a potentially increasing tax environment and changes to the economy from implementation of value-based payment models. We believe these companies have a better chance of delivering value long-term to investors. |
• | Strong cash flow and business models |
• | Stable and proven businesses - |
• | exposure to healthcare sub-sectors we believe will benefit from implementation of alternative payment models; |
• | exposure to non-healthcare sub-sectors we believe will benefit from a rising interest rate environment and the Federal Reserve’s policies in response to rising rates; |
• | a U.S. base of operations; |
• | an experienced management team executing a long-term growth strategy; |
• | discernable downside protection through recurring revenue or strong tangible asset coverage; |
• | defensible niche product/service; |
• | products and services with distinctive competitive advantages or other barriers to entry; |
• | stable and predictable free cash flows; |
• | existing indebtedness that may be refinanced on attractive terms; |
• | low technology and market risk; |
• | strong customer relationships; and |
• | low to moderate capital expenditure requirements. |
• | thorough review of historical and pro forma financial information, including an analysis of collateral coverage, cash flow and valuation multiples and quality of earnings; |
• | review of capital structure, including leverage and equity amounts, participants and intercreditor arrangements; |
• | analysis of the business of the prospective portfolio company, including drivers of growth, customer and supplier concentrations, fixed versus variable costs and sensitivity analyses (with a focus on downside scenario analysis); |
• | analysis of the industry in which the prospective portfolio company operates, including its competitive position, industry size and growth rates, competitive outlook, barriers to entry, and technological, regulatory and similar considerations; |
• | interviews with management, employees, customers and vendors and analysis of management’s track record, quality, breadth and depth; |
• | anticipated form of any potential restructuring, potential liquidation value and potential for collateral impairment; |
• | preparation or review of material contracts and loan documents; |
• | anticipated timing of covenant breaches and default cure provisions; |
• | research relating to the company’s business, industry, markets, products and services; |
• | background checks on key managers when appropriate; and |
• | third-party research relating to the company’s management, industry, markets, products and services and competitors. |
• | frequent discussions with management and sponsors, including board observation rights where possible; |
• | comparing/analyzing financial performance to the portfolio company’s business plan, as well as our internal projections developed at underwriting; |
• | tracking portfolio company compliance with covenants, as well as other metrics identified at the initial investment stage, such as acquisitions, divestitures, product development and specified management hires; and |
• | periodic review of each asset in the portfolio and more rigorous monitoring of “watch list” positions. |
1. | Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the U.S. Securities and Exchange Commission (“SEC”). An eligible portfolio company is defined in the 1940 Act as any issuer which: |
a. | is organized under the laws of, and has its principal place of business in, the United States; |
b. | is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the 1940 Act; and |
c. | satisfies any of the following: |
i. | does not have any class of securities listed on a national securities exchange or has any class of securities listed on a national securities exchange subject to a $250 million market capitalization maximum; or |
ii. | is controlled by a BDC or a group of companies including a BDC, the BDC actually exercises controlling influence over the management or policies of the eligible portfolio company, and, as a result, the BDC has an affiliated person who is a director of the eligible portfolio company. |
2. | Securities of any eligible portfolio company which we control. |
3. | Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements. |
4. | Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own 60% of the outstanding equity of the eligible portfolio company. |
5. | Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of warrants or rights relating to such securities. |
6. | Cash, cash equivalents, U.S. Government securities or high-quality debt securities maturing in one year or less from the time of investment. |
• | Authorized Employees of the Adviser and Its Affiliates |
• | Service Providers |
• | Courts and Government Officials |
• | pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended (“Exchange Act”), our Chief Executive Officer and Chief Financial Officer must certify the accuracy of the consolidated financial statements contained in our periodic reports; |
• | pursuant to Item 307 of Regulation S-K under the Securities Act, our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls and procedures; |
• | pursuant to Rule 13a-15 of the Exchange Act, our management must prepare an annual report regarding its assessment of our internal control over financial reporting. |
• | pursuant to Item 308 of Regulation S-K under the Securities Act and Rule 13a-15 under the Exchange Act, our periodic reports must disclose whether there were significant changes in our internal controls over financial reporting or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
(i) | derive at least 90% of our gross income for each taxable year from: (a) dividends, interest (including tax-exempt interest), payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including but not limited to gains from options, futures and forward contracts) derived with respect to our business of investing in such stock, securities or foreign currencies; and (b) net income derived from interests in “qualified publicly traded partnerships”; |
(ii) | diversify our holdings so that, at the end of each quarter of our taxable year, (a) at least 50% of the market value of our total assets consists of cash and cash items, U.S. government securities, the securities of other RICs and other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of our total assets and not more than 10% of the outstanding voting securities of such issuer, and (b) not more than 25% of the value of our total assets is invested, including through corporations in which we own a 20% or more voting stock interest, (x) in the securities (other than U.S. government securities and the securities of other RICs) of any one issuer or of two or more issuers that we control, as determined under applicable Code rules, and that are determined to be engaged in the same business or similar or related trades or businesses, or (y) in the securities of one or more “qualified publicly traded partnerships”; and |
(iii) | distribute to our shareholders with respect to each taxable year at least 90% of the sum of our “investment company taxable income” (as that term is defined in the Code, without regard to the deduction for dividends paid—generally taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term capital losses) and any net tax-exempt interest income (the excess of our gross tax-exempt interest over certain disallowed deductions), for such year, in a manner qualifying for the dividends paid deduction. |
Item 1A. |
Risk Factors. |
• | economic slowdown in the U.S. and internationally; |
• | changes in interest rates and/or a lack of availability of credit in the U.S. and internationally; |
• | commodity price volatility; and |
• | changes in law and/or regulation, and uncertainty regarding government and regulatory policy. |
• | sudden electrical or telecommunications outages; |
• | natural disasters such as earthquakes, tornadoes and hurricanes; |
• | disease pandemics; |
• | events arising from local or larger scale political or social matters, including terrorist acts; and |
• | cyber-attacks. |
• | the ability to commence enforcement proceedings against the collateral; |
• | the ability to control the conduct of such proceedings; |
• | the approval of amendments to collateral documents; |
• | releases of liens on the collateral; and |
• | waivers of past defaults under collateral documents. |
• | these companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment; |
• | they typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and changing market conditions, as well as general economic downturns; |
• | they are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us; |
• | generally, little public information exists about these companies, and we are required to rely on our Adviser to obtain adequate information to evaluate the potential returns from investing in these companies; |
• | they generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position. In addition, our executive officers, directors and our Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in these portfolio companies; and |
• | they may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness upon maturity. |
• | a comparison of the portfolio company’s securities to publicly traded securities; |
• | the enterprise value of a portfolio company; |
• | the nature and realizable value of any collateral; |
• | the portfolio company’s ability to make payments and its earnings; |
• | the markets in which the portfolio company does business; and |
• | changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made in the future and other relevant factors. |
• | increase or maintain in whole or in part our equity ownership percentage; |
• | exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or |
• | attempt to preserve or enhance the value of our investment. |
• | we currently intend to limit the number of shares to be repurchased during any calendar year to the number of shares we can repurchase with the proceeds we receive from the sale of shares of our common stock under our distribution reinvestment plan, although at the discretion of the Board, we may also use cash on hand, cash available from borrowings and cash from liquidation of securities investments as of the end of the applicable period to repurchase shares; |
• | we will limit the number of shares to be repurchased in any calendar year to 10% of the weighted average number of shares outstanding in the prior calendar year, or 2.5% in each quarter; |
• | unless you tender all of your shares, you must tender at least 25% of the shares you have purchased and must maintain a minimum balance of $2,500 subsequent to submitting a portion of your shares for repurchase by us; and |
• | to the extent that the number of shares tendered for repurchase exceeds the number of shares we are able to repurchase, we will repurchase shares as nearly as may be pro-rata, except as permitted by Rule 13e-4 of the Exchange Act, not on a first-come, first- served basis. Further, we will have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under federal law or Delaware law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. These limits may prevent us from accommodating all repurchase requests made in any year. The Board may amend, suspend or terminate the repurchase program upon 30 days’ notice. We will notify you of such developments (1) in our quarterly reports or (2) by means of a separate mailing to you, accompanied by disclosure in a current or periodic report under the Exchange Act. In addition, although we have adopted a share repurchase program, we will have discretion to not repurchase your shares, to suspend the plan and to cease repurchases. Further, the plan has many limitations and should not be relied upon as a method to sell shares promptly or at a desired price. |
Item 1B. |
Unresolved Staff Comments |
Item 1C. |
Cybersecurity |
Item 2. |
Properties |
Item 3. |
Legal Proceedings |
Item 4. |
Mine Safety Disclosures |
Item 5. |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Title of Class |
Amount Authorized |
Amount Held by Us or for Our Account |
Amount Outstanding Exclusive of Amount Under Column |
|||||||||
|
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|
• |
if the stockholder paid Social Security taxes and, therefore, could be eligible to receive Social Security disability benefits, then the Applicable Governmental Agency is the Social Security Administration, or the agency charged with the responsibility for administering Social Security disability benefits at that time if other than the Social Security Administration; |
• |
if the stockholder did not pay Social Security taxes and, therefore, could not be eligible to receive Social Security disability benefits, but the stockholder could be eligible to receive disability benefits under the Civil Service Retirement System (the “CSRS”), then the Applicable Governmental Agency is the U.S. Office of Personnel Management or the agency charged with the responsibility for administering CSRS benefits at that time if other than the U.S. Office of Personnel Management; or |
• |
if the stockholder did not pay Social Security taxes and, therefore, could not be eligible to receive Social Security benefits, but suffered a disability that resulted in the stockholder’s discharge from military service under conditions that were other than dishonorable and, therefore, could be eligible to receive military disability benefits, then the Applicable Governmental Agency is the Department of Veterans Affairs or the agency charged with the responsibility for administering military benefits at that time if other than the Department of Veterans Affairs. |
Date |
Total Number of Shares Purchased |
Average Price Paid Per Share |
Total Number of Shares Purchased as Part of Publicly Announced Program |
|||||||||
October 8, 2014 |
652,174 |
$ |
9.20 |
0 |
||||||||
March 31, 2016 |
3,232 |
8.55 |
3,232 |
|||||||||
December 31, 2016 |
4,169 |
9.24 |
4,169 |
|||||||||
March 31, 2017 |
58,893 |
9.59 |
58,893 |
|||||||||
June 30, 2017 |
23,441 |
9.59 |
23,441 |
|||||||||
September 30, 2017 |
37,284 |
9.36 |
37,284 |
|||||||||
December 31, 2017 |
10,820 |
9.52 |
10,820 |
|||||||||
March 31, 2018 |
73,736 |
9.89 |
73,736 |
|||||||||
June 30, 2018 |
142,605 |
9.69 |
142,605 |
September 30, 2018 |
73,877 | 9.61 | 73,877 | |||||||||
December 31, 2018 |
183,934 | 8.75 | 183,934 | |||||||||
March 31, 2019 |
125,146 | 8.51 | 125,146 | |||||||||
June 30, 2019 |
71,112 | 8.69 | 71,112 | |||||||||
September 30, 2019 |
127,126 | 8.58 | 127,126 | |||||||||
December 31, 2019 |
131,082 | 8.41 | 131,082 | |||||||||
March 31, 2020 |
49,418 | 4.88 | 49,418 | |||||||||
June 30, 2020 |
45,916 | 5.87 | 45,916 | |||||||||
September 30, 2020 |
51,384 | 6.09 | 51,384 | |||||||||
December 31, 2020 |
77,523 | 6.16 | 77,523 | |||||||||
March 31, 2021 |
263,285 | 6.31 | 263,285 | |||||||||
June 30, 2021 |
214,460 | 6.38 | 214,460 | |||||||||
September 30, 2021 |
119,019 | 6.55 | 119,019 | |||||||||
December 31, 2021 |
131,229 | 6.36 | 131,229 | |||||||||
March 31, 2022 |
85,999 | 6.40 | 85,999 | |||||||||
June 30, 2022 |
102,662 | 6.02 | 102,662 | |||||||||
September 30, 2022 |
195,785 | 5.94 | 195,785 | |||||||||
December 31, 2022 |
94,263 | 5.73 | 94,263 | |||||||||
March 31, 2023 |
181,298 | 5.47 | 181,298 | |||||||||
June 30, 2023 |
179,159 | 5.26 | 179,159 | |||||||||
September 30, 2023 |
118,580 | 5.27 | 118,580 | |||||||||
December 31, 2023 |
99,756 | 5.22 | 99,756 |
Payable Date |
Dividend/ Share (1) |
Total Dividend (1) |
Dividends Reinvested (2)(3) |
|||||||||
12/31/2023 (3) |
$ | 0.090 | $ | 837,847 | $ | — | ||||||
9/30/2023 |
0.090 | 842,040 | 277,313 | |||||||||
6/30/2023 |
0.090 | 847,993 | 275,845 | |||||||||
3/31/2023 |
0.090 | 859,401 | 280,881 | |||||||||
1/24/2023 (2) |
— | — | 293,686 | |||||||||
Total |
$ |
0.360 |
$ |
3,387,281 |
$ |
1,127,725 |
1 |
Of the total dividends shown, $1,757,477 was classified as a return of capital. |
2 |
The December 2022 Dividend was reinvested in January 2023, see total December 2022 Dividend in table below. |
3 |
The December 2023 Dividend was reinvested in January 2024. |
Payable Date |
Dividend/ Share (1) |
Total Dividend (1) |
Dividends Reinvested (2)(3) |
|||||||||
12/31/2022 (3) |
$ | 0.090 | $ | 870,980 | $ | — | ||||||
9/30/2022 |
0.090 | 874,461 | 303,070 | |||||||||
6/30/2022 |
0.090 | 887,710 | 298,766 | |||||||||
3/31/2022 |
0.090 | 892,680 | 301,212 | |||||||||
1/2/2022 (2) |
— | — | 306,152 | |||||||||
Total |
$ |
0.360 |
$ |
3,525,831 |
$ |
1,209,200 |
1 |
Of the total dividends shown, $1,999,373 was classified as a return of capital. |
2 |
The December 2021 Dividend was reinvested in January 2022, see total December 2021 Dividend in table below. |
3 |
The December 2022 Dividend was reinvested in January 2023. |
Payable Date |
Dividend/ Share (1) |
Total Dividend (1) |
Dividends Reinvested (2)(3) |
|||||||||
12/31/2021 (3) |
$ | 0.090 | $ | 896,061 | $ | — | ||||||
9/30/2021 |
0.090 | 903,359 | 320,218 | |||||||||
6/30/2021 |
0.090 | 909,619 | 322,287 | |||||||||
3/31/2021 |
0.090 | 924,140 | 331,405 | |||||||||
1/2/2021 (2) |
— | — | 345,331 | |||||||||
Total |
$ |
0.360 |
$ |
3,633,179 |
$ |
1,319,241 |
1 |
For the current period, there were no dividends classified as a return of capital. |
2 |
The December 2020 Dividend was reinvested in January 2021, see total December 2020 Dividend in table below. |
3 |
The December 2021 Dividend was reinvested in January 2022. |
Payable Date |
Dividend/ Share (1) |
Total Dividend (1) |
Dividends Reinvested (2)(3) |
|||||||||
12/31/2020 (3) |
$ | 0.090 | $ | 942,766 | $ | — | ||||||
9/30/2020 |
0.090 | 944,487 | 347,961 | |||||||||
4/27/2020 |
0.060 | 633,540 | 241,202 | |||||||||
3/27/2020 |
0.060 | 629,128 | 237,068 | |||||||||
2/27/2020 |
0.060 | 631,127 | 245,478 | |||||||||
1/30/2020 |
0.060 | 628,352 | 396,837 | |||||||||
1/2/2020 (2) |
— | — | 396,214 | |||||||||
Total |
$ |
0.420 |
$ |
4,409,400 |
$ |
1,864,760 |
1 |
For the current period, there were no dividends classified as a return of capital. |
2 |
The December 2019 Dividend was reinvested in January 2020, see total December 2019 Dividend in table below. |
3 |
The December 2020 Dividend was reinvested in January 2021 |
Payable Date |
Dividend/ Share (1) |
Total Dividend (1) |
Dividends Reinvested (2)(3) |
|||||||||
1/02/2020 |
$ | 0.060 | $ | 625,526 | $ | — | ||||||
11/28/2019 |
0.060 | 630,505 | 398,908 | |||||||||
10/30/2019 |
0.060 | 627,684 | 397,044 | |||||||||
10/02/2019 |
0.060 | 632,534 | 397,215 | |||||||||
8/28/2019 |
0.060 | 628,890 | 398,232 | |||||||||
7/31/2019 |
0.060 | 626,130 | 395,900 | |||||||||
6/26/2019 |
0.060 | 624,201 | 396,249 | |||||||||
5/30/2019 |
0.060 | 625,758 | 398,933 | |||||||||
5/01/2019 |
0.060 | 623,117 | 396,582 | |||||||||
3/27/2019 |
0.060 | 620,420 | 392,542 | |||||||||
2/27/2019 |
0.060 | 625,257 | 397,969 | |||||||||
1/30/2019 |
0.060 | 622,648 | 397,645 | |||||||||
1/03/2019 (2) |
— | — | 456,444 | |||||||||
Total |
$ |
0.720 |
$ |
7,512,670 |
$ |
4,823,663 |
1 |
For the current period, there were no dividends classified as a return of capital. |
2 |
The December 2018 Dividend was reinvested in January 2019, see total December 2018 Dividend in table below. |
3 |
The December 2019 Dividend was reinvested in January 2020. |
Payable Date |
Dividend/ Share |
Total Dividend (1) |
Dividends Reinvested (2) |
|||||||||
1/03/2019 |
$ | 0.069 | $ | 721,979 | $ | — | ||||||
11/28/2018 |
0.055 | 579,638 | 370,940 | |||||||||
10/31/2018 |
0.069 | 721,071 | 461,560 | |||||||||
9/26/2018 |
0.055 | 578,884 | 369,031 | |||||||||
8/29/2018 |
0.055 | 576,777 | 367,935 | |||||||||
8/01/2018 |
0.069 | 717,708 | 459,995 | |||||||||
6/27/2018 |
0.055 | 579,962 | 367,710 | |||||||||
5/30/2018 |
0.055 | 577,847 | 368,895 | |||||||||
5/02/2018 |
0.069 | 719,079 | 459,922 | |||||||||
3/28/2018 |
0.055 | 577,343 | 367,026 | |||||||||
2/28/2018 |
0.055 | 566,708 | 368,154 | |||||||||
1/31/2018 |
0.069 | 683,782 | 451,968 | |||||||||
Total |
$ |
0.730 |
$ |
7,600,778 |
$ |
4,413,136 |
1 |
For the current period, there were no dividends classified as a return of capital. |
2 |
The December 2018 Dividend was reinvested in January 2019. |
Payable Date |
Dividend/ Share (1) |
Total Dividend (1) |
Dividends Reinvested (2)(3) |
|||||||||
12/27/2017 |
$ | 0.055 | $ | 532,460 | $ | 351,929 | ||||||
11/29/2017 |
0.055 | 517,804 | 341,262 | |||||||||
11/1/2017 |
0.069 | 636,662 | 417,795 | |||||||||
9/27/2017 |
0.055 | 505,439 | 331,096 | |||||||||
8/30/2017 |
0.055 | 497,727 | 328,315 | |||||||||
8/2/2017 |
0.069 | 610,689 | 403,364 | |||||||||
6/28/2017 |
0.055 | 481,256 | 318,649 | |||||||||
5/31/2017 |
0.069 | 580,257 | 385,226 | |||||||||
4/26/2017 |
0.055 | 445,910 | 295,916 | |||||||||
3/29/2017 |
0.055 | 431,714 | 286,868 | |||||||||
3/1/2017 |
0.055 | 418,078 | 277,772 | |||||||||
2/1/2017 |
0.069 | 499,353 | 332,190 | |||||||||
Total |
$ |
0.716 |
$ |
6,157,349 |
$ |
4,070,382 |
1 |
For the current period, there were no dividends classified as a return of capital. |
Payable Date |
Dividend/ Share |
Total Dividend (1) |
Dividends Reinvested |
|||||||||
12/28/2016 |
$ | 0.055 | $ | 382,152 | $ | 255,650 | ||||||
11/30/2016 |
0.055 | 368,541 | 247,396 | |||||||||
11/2/2016 |
0.069 | 430,784 | 292,800 | |||||||||
9/30/2016 |
0.055 | 321,955 | 220,312 | |||||||||
8/31/2016 |
0.069 | 377,172 | 261,451 | |||||||||
7/30/2016 |
0.055 | 277,907 | 200,860 | |||||||||
6/29/2016 (2) |
0.055 | 255,731 | 190,535 | |||||||||
6/1/2016 (3) |
0.067 | 280,557 | 216,628 | |||||||||
4/29/2016 |
0.058 | 228,769 | 177,275 | |||||||||
3/31/2016 |
0.058 | 196,318 | 161,095 | |||||||||
2/29/2016 |
0.058 | 178,122 | 152,304 | |||||||||
1/29/2016 |
0.058 | 166,836 | 146,197 | |||||||||
Total |
$ |
0.712 |
$ |
3,464,844 |
$ |
2,522,2503 |
1 |
For the current period, there were no dividends classified as a return of capital. |
2 |
On May 12, 2016, the Board approved a $0.002 per share monthly increase to the dividend, which was normalized to the weekly distribution schedule starting in June 2016. |
3 |
Beginning in May 2016, we began declaring dividends weekly. |
Payable Date |
Dividend/ Share |
Total Dividend (1) |
Dividends Reinvested |
|||||||||
12/31/2015 |
$ | 0.058 | $ | 155,396 | $ | 139,260 | ||||||
11/30/2015 |
0.058 | 147,122 | 137,008 | |||||||||
10/30/2015 |
0.058 | 141,377 | 134,845 | |||||||||
9/30/2015 |
0.058 | 134,498 | 130,315 | |||||||||
8/31/2015 |
0.058 | 128,773 | 124,959 | |||||||||
7/31/2015 |
0.058 | 125,195 | 122,496 | |||||||||
6/30/2015 |
0.058 | 117,215 | 115,203 | |||||||||
5/29/2015 |
0.058 | 114,540 | 112,647 | |||||||||
4/30/2015 |
0.058 | 108,525 | 107,595 | |||||||||
3/31/2015 |
0.058 | 104,842 | 104,543 | |||||||||
2/27/2015 |
0.058 | 100,082 | 100,044 | |||||||||
1/30/2015 |
0.050 | 69,054 | 69,022 | |||||||||
Total |
$ |
0.688 |
$ |
1,446,619 |
$ |
1,397,937 |
1 |
Of the total dividends shown, $262,760 was classified as a return of capital. |
Item 6. |
[Reserved] |
Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
• | our future operating results; |
• | changes in healthcare technologies, finance and regulations adversely affecting our portfolio companies or financing model; |
• | changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes to the value of our assets; |
• | our business prospects and the prospects of the companies in which we may invest; |
• | the impact of the investments that we expect to make; |
• | the impact of increased competition; |
• | our contractual arrangements and relationships with third parties; |
• | the dependence of our future success on the general economy and its impact on the industries in which we may invest; |
• | the ability of our portfolio companies to achieve their objectives; |
• | impact and effects of the recent outbreak of COVID-19 or a future pandemic or epidemic on the future financial performance of the Company; |
• | the relative and absolute performance of our Adviser; |
• | our current and expected financings and investments; |
• | our ability to make distributions to our stockholders; |
• | the adequacy of our cash resources, financing sources and working capital; |
• | the timing and amount of cash flows, distributions and dividends, if any, from our portfolio companies; |
• | our use of financial leverage; |
• | the ability of the Adviser to locate suitable investments for us and to monitor and administer our investments; |
• | the ability of the Adviser or its affiliates to attract and retain highly talented professionals; |
• | our ability to maintain our qualification as a regulated investment company, or RIC, and as a BDC; |
• | the impact on our business of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations issued thereunder; |
• | the effect of changes to tax legislation and our tax position; and |
• | the tax status of the enterprises in which we may invest. |
• | our organization (expenses initially paid by the Adviser until sufficient equity proceeds are raised); |
• | calculating our net asset value and net asset value per share (including the costs and expenses of independent valuation firms); |
• | fees and expenses, including travel expenses, incurred by the Adviser or payable to third parties in performing due diligence on prospective portfolio companies, monitoring our investments and, if necessary, enforcing our rights; |
• | interest payable on debt, if any, incurred to finance our investments; |
• | the costs of this and all future offerings of common shares and other securities, and other incurrence of debt; |
• | the base management fee and any incentive fee; |
• | distributions on our shares; |
• | administration fees payable to the Adviser under the Administration Agreement; |
• | transfer agent and custody fees and expenses; |
• | the actual costs incurred by the Adviser as our administrator in providing managerial assistance to those portfolio companies that request it; |
• | amounts payable to third parties relating to, or associated with, evaluating, making and disposing of investments; |
• | brokerage fees and commissions; |
• | registration fees; |
• | listing fees; |
• | taxes; |
• | director fees and expenses; |
• | costs associated with our reporting and compliance obligations under the 1940 Act and applicable U.S. federal and state securities laws; |
• | the costs of any reports, proxy statements or other notices to our stockholders, including printing costs; |
• | costs of holding stockholder meetings; |
• | our fidelity bond; |
• | directors and officers/errors and omissions liability insurance, and any other insurance premiums; |
• | litigation, indemnification and other non-recurring or extraordinary expenses; |
• | direct costs and expenses of administration and operation, including audit and legal costs; |
• | fees and expenses associated with marketing efforts, including deal sourcing fees and marketing to financial sponsors; |
• | dues, fees and charges of any trade association of which we are a member; and |
• | all other expenses reasonably incurred by us or the Adviser in connection with administering our business. |
Quarter Ended |
Yearly Cumulative Other Expenses |
Yearly Expense Limitation |
Yearly Cumulative Expense Reimbursement |
Quarterly Recoupable/ (Recouped) Amount |
Recoupment Eligibility Expiration |
|||||||||||||||
December 31, 2023 |
$ | 902,219 | $ | 481,443 | $ | 420,776 | $ | 140,233 | December 31, 2026 | |||||||||||
September 30, 2023 |
630,924 | 350,382 | 280,543 | 96,669 | September 30, 2026 | |||||||||||||||
June 30, 2023 |
420,066 | 236,192 | 183,874 | 102,016 | June 30, 2026 | |||||||||||||||
March 31, 2023 |
208,486 | 126,628 | 81,858 | 81.858 | March 31, 2026 |
Quarter Ended |
Yearly Cumulative Other Expenses |
Yearly Expense Limitation |
Yearly Cumulative Expense Reimbursement |
Quarterly Recoupable/ (Recouped) Amount |
Recoupment Eligibility Expiration |
|||||||||||||||
December 31, 2022 |
$ | 913,273 | $ | 535,679 | $ | 377,594 | $ | 92,216 | December 31, 2025 | |||||||||||
September 30, 2022 |
678,333 | 392,955 | 285,378 | 124,667 | September 30, 2025 | |||||||||||||||
June 30, 2022 |
434,019 | 273,308 | 160,711 | 98,950 | June 30, 2025 | |||||||||||||||
March 31, 2022 |
211,896 | 150,135 | 61,761 | 61,761 | March 31, 2025 |
Quarter Ended |
Yearly Cumulative Other Expenses |
Yearly Expense Limitation |
Yearly Cumulative Expense Reimbursement |
Quarterly Recoupable/ (Recouped) Amount |
Recoupment Eligibility Expiration |
|||||||||||||||
December 31, 2021 |
$ | 892,640 | $ | 597,379 | $ | 295,261 | $ | 94,762 | December 31, 2024 | |||||||||||
September 30, 2021 |
664,052 | 463,553 | 200,499 | 68,134 | September 30, 2024 | |||||||||||||||
June 30, 2021 |
436,866 | 304,501 | 132,365 | 68,919 | June 30, 2024 | |||||||||||||||
March 31, 2021 |
220,126 | 156,680 | 63,446 | 63,446 | March 31, 2024 |
Net Investment Activity |
December 31, 2023 |
December 31, 2022 |
December 31, 2021 |
|||||||||
Purchases |
$ | 4,569,498 | $ | 9,519,074 | $ | 8,119,981 | ||||||
Proceeds from Securities Sold Short |
— | — | — | |||||||||
Payment-in-kind |
131,372 | 193,003 | 100,908 | |||||||||
Purchases of Securities Sold Short |
— | — | — | |||||||||
Sales and Principal Repayments |
(8,576,616 | ) | (11,143,514 | ) | (17,408,129 | ) | ||||||
Net Portfolio Activity |
$ | (3,875,746 | ) | $ | (1,431,437 | ) | $ | (9,187,240 | ) | |||
For the Year Ended December 31, 2023 |
For the Year Ended December 31, 2022 |
For the Year Ended December 31, 2021 |
||||||||||||||||||||||
New Investment Activity by Asset Class |
Purchases |
Percentage |
Purchases |
Percentage |
Purchases |
Percentage |
||||||||||||||||||
Senior Secured Loans—First Lien |
$ | 3,504,498 | 76.7 | % | $ | 3,485,000 | 36.6 | % | $ | 5,335,151 | 65.7 | % | ||||||||||||
Senior Secured Loans—Second Lien |
— | 0.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
Corporate Bonds – Senior Unsecured |
482,500 | 10.6 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
Equities |
582,500 | 12.7 | % | 34,088 | 0.4 | % | 1,013,533 | 12.5 | % | |||||||||||||||
LLC Interests |
— | 0.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
Mortgage-Backed-Securities |
— | 0.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
Closed-End Mutual Funds |
— | 0.0 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||
Preferred Stocks |
— | 63.0 | % | 5,999,986 | 63.0 | % | 1,750,000 | 21.6 | % | |||||||||||||||
Warrants |
— | 0.0 | % | — | 0.0 | % | 21,297 | 0.2 | % | |||||||||||||||
Total Investments |
$ |
4,569,498 |
100.0 |
% |
$ |
9,519,074 |
100.0 |
% |
$ |
8,119,981 |
100.0 |
% | ||||||||||||
December 31, 2023 |
||||||||||||
Portfolio Composition by Investment Type |
Amortized Cost (1) |
Fair Value |
Percentage of Portfolio (at fair value) |
|||||||||
Senior Secured Loans — First Lien |
$ | 10,580,813 | $ | 10,130,961 | 20.5 | % | ||||||
Senior Secured Loans — Second Lien |
1,500,056 | 127,556 | 0.3 | % | ||||||||
Asset-Backed Securities |
218,665 | 84 | 0.0 | % | ||||||||
LLC Interests |
10,734,196 | 10,370,499 | 21.0 | % | ||||||||
Corporate Bonds |
1,380,892 | 727,523 | 1.5 | % | ||||||||
Common Stocks |
9,924,122 | 15,961,319 | 32.3 | % | ||||||||
Preferred Stock |
11,829,987 | 11,822,375 | 23.9 | % | ||||||||
Warrants |
74,284 | 272,969 | 0.6 | % | ||||||||
Total Invested Assets |
$ |
45,998,823 |
$ |
49,413,286 |
100 |
% | ||||||
(1) |
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments. |
December 31, 2022 |
||||||||||||
Portfolio Composition by Investment Type |
Amortized Cost (1) |
Fair Value |
Percentage of Portfolio (at fair value) |
|||||||||
Senior Secured Loans — First Lien |
$ | 14,645,107 | $ | 11,575,822 | 21.7 | % | ||||||
Senior Secured Loans — Second Lien |
2,976,056 | 2,652,371 | 5.0 | % | ||||||||
Asset-Backed Securities |
388,541 | 7,036 | 0.0 | % | ||||||||
LLC Interests |
3,666,112 | 4,689,242 | 8.8 | % | ||||||||
Corporate Bonds |
3,358,783 | 2,704,917 | 5.1 | % | ||||||||
Common Stocks |
17,100,444 | 19,514,684 | 36.6 | % | ||||||||
Preferred Stock |
11,829,986 | 11,967,910 | 22.5 | % | ||||||||
Warrants |
74,284 | 181,733 | 0.3 | % | ||||||||
Total Invested Assets |
$ |
54,039,313 |
$ |
53,293,715 |
100 |
% | ||||||
(1) |
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments. |
December 31, 2023 |
December 31, 2022 |
|||||||
Number of Investments |
35 | 39 | ||||||
% Variable Rate (based on fair value) |
76 | % | 71 | % | ||||
% Non-Income Producing Equity or Other Investments (based on fair value) |
28 | % | 27 | % | ||||
Weighted Average Cost Price of Investments (as a % of par or stated value) |
98.09 | % | 94.17 | % | ||||
Weighted Average Credit Rating of Investments that were Rated |
Ca | Caa1 | ||||||
% of Fixed Income Investments on Non-Accrual (based on fair value) |
6.4 | % | 0.0 | % |
December 31, 2023 |
December 31, 2022 |
|||||||||||||||
Portfolio Composition by Strategy |
Fair Value |
Percentage of Portfolio |
Fair Value |
Percentage of Portfolio |
||||||||||||
Broadly Syndicated – Private |
$ | 5,934,810 | 12.0 | % | $ | 6,183,456 | 11.6 | % | ||||||||
Broadly Syndicated – Public |
245,327 | 0.5 | % | 2,561,915 | 4.8 | % | ||||||||||
Middle-Market |
40,427,162 | 81.9 | % | 42,133,492 | 74.4 | % | ||||||||||
Opportunistic/Other |
2,805,987 | 5.7 | % | 2,414,852 | 5.1 | % | ||||||||||
Total Invested Assets |
$ |
49,413,286 |
100.0 |
% |
$ |
53,293,715 |
100.0 |
% | ||||||||
December 31, 2023 |
December 31, 2022 |
|||||||||||||||
Industry Classifications |
Fair Value |
Percentage of Portfolio |
Fair Value |
Percentage of Portfolio |
||||||||||||
Bioplastics |
$ | 2,000,000 | 4.0 | % | $ | — | 0.1 | % | ||||||||
Chemicals |
42,500 | 0.1 | % | 42,500 | 0.1 | % | ||||||||||
Consumer Discretionary |
488,665 | 1.0 | % | — | 0.0 | % | ||||||||||
Consumer Products |
3,016,752 | 6.1 | % | 3,088,750 | 5.8 | % | ||||||||||
Energy |
2,504,104 | 5.1 | % | 1,752,941 | 3.3 | % | ||||||||||
Financials |
4,722,584 | 9.6 | % | 3,180,161 | 6.0 | % | ||||||||||
Healthcare |
17,228,699 | 34.9 | % | 26,101,074 | 49.0 | % | ||||||||||
Media/Telecommunications |
245,327 | 0.5 | % | 310,563 | 0.6 | % | ||||||||||
Real Estate Investment Trusts (REITs) |
805,987 | 1.6 | % | 1,018,779 | 1.9 | % | ||||||||||
Real Estate |
12,423,858 | 25.1 | % | 11,613,222 | 21.8 | % | ||||||||||
Service |
— | 0.0 | % | 2,268 | 0.0 | % | ||||||||||
Telecommunication Services |
5,934,810 | 12.0 | % | 6,183,457 | 11.6 | % | ||||||||||
Total Invested Assets |
$ |
49,413,286 |
100.0 |
% |
$ |
53,293,715 |
100.0 |
% | ||||||||
Period Ended |
Advisory Fees Waived and Subject to Recoupment (1) |
Administrator fees Waived and Subject to Recoupment (1) |
Recoupment Eligibility Expiration |
|||||||||
December 31, 2017 |
$ | 413,916 | $ | 75,906 | Expired | |||||||
September 30, 2017 |
305,288 | 69,308 | Expired | |||||||||
June 30, 2017 |
389,733 | 77,947 | Expired | |||||||||
March 31, 2017 |
390,969 | 78,194 | Expired | |||||||||
December 31, 2016 |
366,861 | 73,372 | Expired | |||||||||
September 30, 2016 |
343,320 | 68,664 | Expired | |||||||||
June 30, 2016 |
74,421 | 14,884 | Expired | |||||||||
Total |
$ |
2,284,508 |
$ |
458,275 |
||||||||
(1) |
The Adviser has permanently waived the recoupment of any advisory fees or administration fees calculated on the portion of gross assets attributable to the receivable from Adviser balance on the Consolidated Statements of Assets and Liabilities. |
For the Year Ended December 31, 2023 |
For the Year Ended December 31, 2021 |
For the Year Ended December 31, 2021 |
||||||||||
Audit and tax fees |
$ | 166,039 | $ | 167,864 | $ | 168,254 | ||||||
Legal fees |
43,949 | 53,658 | 72,441 | |||||||||
Custodian and accounting service fees |
311,664 | 311,050 | 307,438 | |||||||||
Reports to stockholders |
134,324 | 82,721 | 75,060 | |||||||||
Stock transfer fee |
167,547 | 209,866 | 208,251 | |||||||||
Directors’ fees |
15,194 | 18,170 | 17,781 | |||||||||
Other expenses |
63,502 | 69,944 | 43,415 | |||||||||
Total |
$ |
902,219 |
$ |
913,273 |
$ |
892,640 |
||||||
For the Year Ended December 31, 2023 |
For the Year Ended December 31, 2022 |
For the Year Ended December 31, 2021 |
||||||||||
Income |
$ | 3,332,223 | $ | 3,692,613 | $ | 4,097,859 | ||||||
Expenses |
(1,678,309 | ) | (1,902,995 | ) | (2,174,432 | ) | ||||||
Net Realized Gain/(Loss) |
(4,345,706 | ) | 329,081 | (3,479,546 | ) | |||||||
Net Unrealized Appreciation (Depreciation) |
4,132,719 | (6,183,873 | ) | 7,262,262 | ||||||||
Net increase from amounts committed by affiliates |
— | — | — | |||||||||
Total |
$ |
1,453,947 |
$ |
(4,065,174 |
) |
$ |
5,706,143 |
|||||
Payable Date |
Dividend/ Share (1) |
Total Dividend (1) |
Dividends Reinvested (2) (3) |
|||||||||
12/31/2023 (3) |
$ | 0.090 | $ | 837,847 | $ | — | ||||||
9/30/2023 |
0.090 | 842,040 | 277,313 | |||||||||
6/30/2023 |
0.090 | 847,993 | 275,845 | |||||||||
3/31/2023 |
0.090 | 859,401 | 280,881 | |||||||||
1/24/2023 (2) |
— | — | 293,686 | |||||||||
Total |
$ |
0.360 |
$ |
3,387,281 |
$ |
1,127,725 |
||||||
1 |
Of the total dividends shown, $1,757,477 was classified as a return of capital. |
2 |
The December 2022 Dividend was reinvested in January 2023, see total December 2022 Dividend in table below. |
3 |
The December 2023 Dividend was reinvested in January 2024. |
Payable Date |
Dividend/ Share (1) |
Total Dividend (1) |
Dividends Reinvested (2) (3) |
|||||||||
12/31/2022 (3) |
$ | 0.090 | $ | 870,980 | $ | — | ||||||
9/30/2022 |
0.090 | 874,461 | 303,070 | |||||||||
6/30/2022 |
0.090 | 887,710 | 298,766 | |||||||||
3/31/2022 |
0.090 | 892,680 | 301,212 | |||||||||
1/2/2022 (2) |
— | — | 306,152 | |||||||||
Total |
$ |
0.360 |
$ |
3,525,831 |
$ |
1,209,200 |
||||||
1 |
Of the total dividends shown, $1,961,318 was classified as a return of capital. |
2 |
The December 2021 Dividend was reinvested in January 2022, see total December 2021 Dividend in table below. |
3 |
The December 2022 Dividend was reinvested in January 2023. |
Payable Date |
Dividend/ Share (1) |
Total Dividend (1) |
Dividends Reinvested (2) (3) |
|||||||||
12/31/2021 (3) |
$ | 0.090 | $ | 896,061 | $ | — | ||||||
9/30/2021 |
0.090 | 903,359 | 320,218 | |||||||||
6/30/2021 |
0.090 | 909,619 | 322,287 | |||||||||
3/31/2021 |
0.090 | 924,140 | 331,405 | |||||||||
1/2/2021 (2) |
— | — | 345,331 | |||||||||
Total |
$ |
0.360 |
$ |
3,633,179 |
$ |
1,319,241 |
||||||
1 |
For the current period, there were no dividends classified as a return of capital. |
2 |
The December 2020 Dividend was reinvested in January 2021, see total December 2020 Dividend in table below. |
3 |
The December 2021 Dividend was reinvested in January 2022. |
Payable Date |
Dividend/ Share (1) |
Total Dividend (1) |
Dividends Reinvested (2) (3) |
|||||||||
12/31/2020 (3) |
$ | 0.090 | $ | 942,766 | $ | — | ||||||
9/30/2020 |
0.090 | 944,487 | 347,961 | |||||||||
4/27/2020 |
0.060 | 633,540 | 241,202 | |||||||||
3/27/2020 |
0.060 | 629,128 | 237,068 | |||||||||
2/27/2020 |
0.060 | 631,127 | 245,478 | |||||||||
1/30/2020 |
0.060 | 628,352 | 396,837 | |||||||||
1/2/2020 (2) |
— | — | 396,214 | |||||||||
Total |
$ |
0.420 |
$ |
4,409,400 |
$ |
1,864,760 |
||||||
1 |
For the current period, there were no dividends classified as a return of capital. |
2 |
The December 2019 Dividend was reinvested in January 2020, see total December 2019 Dividend in table below. |
3 |
The December 2020 Dividend was reinvested in January 2021 |
• | We entered into the Investment Advisory Agreement with the Adviser. James Dondero, our president, controls the Adviser by virtue of his control of its general partner, NexPoint Advisors GP, LLC. |
• | Pursuant to an expense limitation agreement, the Adviser has agreed to waive fees or, if necessary, reimburse us to limit certain expenses to 1.0% of the quarter-end value of our gross assets. |
• | The Adviser provides us with the office facilities and administrative services necessary to conduct our day-to-day |
• | The dealer manager, NexPoint Securities, Inc., is an affiliate of the Adviser. |
• | Prior to July 21, 2023, the Adviser controlled 2,549,002 total shares of common stock of the Company, including reinvestment of dividends, for a net amount of approximately $13.4 million as of July 21, 2023. On July 21, 2023, pursuant to the terms of a Stock Purchase Agreement, Liberty CLO Holdco Ltd. (“Liberty”) purchased a total of 2,549,002 shares of the Company, representing 27.05% of the Company’s currently issued and outstanding common stock as of July 21, 2023. In aggregate, as of December 31, 2023, Liberty controls 2,549,002 total shares of common stock of the Company, including reinvestment of dividends, for a net amount of approximately $13.6 million. |
• | Cumulatively since inception, the Adviser has paid $2,275,000 to voluntarily reimburse the Company for certain unrealized losses on investments. Had these payments not been made, the NAV as of December 31, 2023, would have been lower. These payments are not recoupable by the Adviser. |
• | The valuation process begins with each portfolio company or investment being initially valued by investment professionals of the Adviser responsible for credit monitoring or independent third-party valuation firms. |
• | Preliminary valuation conclusions are then documented and discussed with a committee comprised of certain senior management employees of the Adviser (the “Valuation Committee”). |
• | The Audit and Qualified Legal Compliance Committee of the Board, in assistance of Board valuation oversight, reviews portfolio valuation, including oversight of valuations determined by the Adviser and the Valuation Committee pursuant to the policies and procedures approved by the Board. |
• | At least once each quarter, the valuations for approximately one quarter of the portfolio investments that have been fair valued are reviewed by an independent valuation firm such that, over the course of a year, each material portfolio investment that has been fair valued shall have been reviewed by an independent valuation firm at least once. |
• | Based on this information, the Adviser discusses valuations and determines the fair value of each investment in our portfolio in good faith pursuant to board-approved policies and procedures. |
Instrument |
Type |
Fair Value |
||||
Grayson Investor Corp. |
Asset-Backed Securities | $ | 84 | |||
American Banknote Corp. |
Common Stocks | 3,536,250 | ||||
IQHQ, Inc. |
Common Stocks | 2,533,000 | ||||
MidWave Wireless, Inc. (fka Terrestar Corp.) |
Common Stocks | 4,732,181 | ||||
MPM Holdings, Inc. |
Common Stocks | 42,500 | ||||
NexPoint Capital REIT, LLC |
LLC Interests | 7,014,774 | ||||
SFR WLIF III, LLC |
LLC Interests | 338,973 | ||||
US Gaming, LLC |
LLC Interests | 3,016,752 | ||||
Apnimed, Inc. |
Preferred Stocks | 1,644,435 | ||||
Apnimed, Inc. |
Preferred Stocks | 928,197 | ||||
Sapience Therapeutics, Inc. |
Preferred Stocks | 4,452,382 | ||||
Sapience Therapeutics, Inc. |
Preferred Stocks | 3,611,111 | ||||
CCS Medical, Inc. |
Senior Secured Loans | 3,000,000 | ||||
MidWave Wireless, Inc. (fka Terrestar Corp.) |
Senior Secured Loans | 912,118 | ||||
MidWave Wireless, Inc. (fka Terrestar Corp.) |
Senior Secured Loans | 215,938 | ||||
MidWave Wireless, Inc. (fka Terrestar Corp.) |
Senior Secured Loans | 35,994 | ||||
MidWave Wireless, Inc. (fka Terrestar Corp.) |
Senior Secured Loans | 38,579 | ||||
NexPoint Capital REIT, LLC |
Senior Secured Loans | 463,314 | ||||
PlantSwitch, Inc. |
Senior Secured Loans | 2,000,000 |
Instrument |
Type |
Fair Value |
||||
Grayson Investor Corp. |
Asset-Backed Securities | $ | 7,023 | |||
PAMCO CLO 1997-1A B |
Asset-Backed Securities | 13 | ||||
American Banknote Corp. |
Common Stocks | 1,732,500 | ||||
IQHQ, Inc. |
Common Stocks | 2,359,000 | ||||
Terrestar Corp. |
Common Stocks | 5,114,214 | ||||
Wayne Services Legacy Inc. |
Common Stocks | 2,269 | ||||
NexPoint Capital REIT, LLC |
LLC Interests | 1,176,024 | ||||
SFR WLIF III, LLC |
LLC Interests | 424,468 | ||||
US Gaming, LLC |
LLC Interests | 3,088,750 | ||||
Apnimed, Inc. |
Preferred Stocks | 1,499,989 | ||||
Apnimed, Inc. |
Preferred Stocks | 799,994 | ||||
Sapience Therapeutics, Inc. |
Preferred Stocks | 4,549,525 | ||||
Sapience Therapeutics, Inc. |
Preferred Stocks | 3,677,777 | ||||
CCS Medical, Inc. |
Senior Secured Loans | 3,000,000 | ||||
Terrestar Corp. |
Senior Secured Loans | 810,953 | ||||
Terrestar Corp. |
Senior Secured Loans | 191,988 | ||||
Terrestar Corp. |
Senior Secured Loans | 34,300 | ||||
Terrestar Corp. |
Senior Secured Loans | 32,002 |
Item 7A. |
Quantitative and Qualitative Disclosures About Market Risk |
Change in interest rates | Increase (decrease) in interest income |
(Increase) decrease in interest expense |
Increase (decrease) in NII |
|||||||||
Down 25 basis points |
$ | — | $ | — | $ | — | ||||||
Up 50 basis points |
27,991 | — | 27,991 | |||||||||
Up 100 basis points |
55,982 | — | 55,982 | |||||||||
Up 200 basis points |
111,965 | — | 111,965 | |||||||||
Up 300 basis points |
167,947 | — | 167,947 |
Item 8. |
Financial Statements and Supplementary Data |
December 31, 2023 |
December 31, 2022 (Unconsolidated) |
|||||||
Assets |
| |||||||
Unaffiliated investments, at fair value (cost of $ |
$ | $ | ||||||
Affiliated investments, at fair value (cost of $ (1) |
||||||||
Cash and cash equivalents |
||||||||
Receivable for investments sold |
||||||||
Dividends and interest receivable |
||||||||
Receivable from Adviser (2) |
||||||||
Prepaid expenses |
||||||||
Deferred tax asset (3) |
||||||||
|
|
|
|
|||||
Total assets |
||||||||
|
|
|
|
|||||
Liabilities |
| |||||||
Payable for investments purchased |
||||||||
Payable to Adviser (2) |
||||||||
Accrued expenses and other liabilities |
||||||||
Distributions payable |
||||||||
|
|
|
|
|||||
Total liabilities |
||||||||
|
|
|
|
|||||
Commitments and contingencies (4) |
||||||||
Net assets |
| |||||||
Preferred stock, $ |
||||||||
Common stock, $ |
||||||||
Paid-in capital in excess of par |
||||||||
Distributable earnings (accumulated loss) |
( |
) |
( |
) | ||||
|
|
|
|
|||||
Total net assets |
$ | $ | ||||||
|
|
|
|
|||||
Net asset value per share of common stock |
$ | $ | ||||||
|
|
|
|
(1) |
See Note 9 for a discussion of affiliated investments. |
(2) |
See Note 4 for a discussion of related party transactions and arrangements. |
(3) |
See Note 5 for a discussion of the deferred tax asset. |
(4) |
See Note 4 and Note 7 for a discussion of the commitments and contingencies of the Company (as defined in Note 1). |
For the Year Ended December 31, |
||||||||||||
2023 |
2022 (Unconsolidated) |
2021 (Unconsolidated) |
||||||||||
Investment income: |
| |||||||||||
Interest |
$ | $ | $ | |||||||||
Interest paid-in-kind |
||||||||||||
Dividend income from unaffiliated investments |
||||||||||||
Dividend income from affiliated investments (1) |
||||||||||||
Other fee income |
||||||||||||
|
|
|
|
|
|
|||||||
Total investment income |
||||||||||||
Expenses: |
| |||||||||||
Investment advisory fees (2) |
||||||||||||
Custodian and accounting service fees |
||||||||||||
Administration fees (2) |
||||||||||||
Stock transfer fee |
||||||||||||
Audit and tax fees |
||||||||||||
Reports to stockholders |
||||||||||||
Other expenses |
||||||||||||
Legal fees |
||||||||||||
Directors’ fees (2) |
||||||||||||
|
|
|
|
|
|
|||||||
Total expenses |
||||||||||||
Expenses (waived) or recouped by the Adviser (2) |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Net expenses |
||||||||||||
|
|
|
|
|
|
|||||||
Net investment income before income taxes |
||||||||||||
Income tax expense (3) |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Net investment income |
||||||||||||
|
|
|
|
|
|
|||||||
Net realized and unrealized gains (losses) on investments: |
| |||||||||||
Net realized gain (loss) on: |
| |||||||||||
Unaffiliated investments |
( |
) | ( |
) | ||||||||
Affiliated investments (1) |
||||||||||||
Net change in unrealized appreciation (depreciation) on: |
| |||||||||||
Unaffiliated investments |
( |
) | ||||||||||
Affiliated investments (1) |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Net realized and unrealized gains (losses) |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Net increase (decrease) in net assets resulting from operations |
( |
) | ||||||||||
|
|
|
|
|
|
|||||||
Per share information - basic and diluted per common share |
| |||||||||||
Net investment income: |
$ | $ | $ | |||||||||
Earnings (loss) per share: |
$ | $ | ( |
) | $ | |||||||
Weighted average shares outstanding: |
(1) |
See Note 9 for a discussion of affiliated investments. |
(2) |
See Note 4 for a discussion of related party transactions and arrangements. |
(3) |
See Note 5 for a discussion of income tax expense. |
Common Stock |
||||||||||||||||||||
Shares |
Par Amount |
Paid in Capital in Excess of Par |
Distributable Earnings |
Total Net Assets |
||||||||||||||||
Balance at December 31, 2020 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Increase (decrease) in net assets resulting from operations |
||||||||||||||||||||
Net investment income |
— | — | — | |||||||||||||||||
Net realized gain (loss) on investments |
— | — | — | ( |
) | ( |
) | |||||||||||||
Net change in unrealized appreciation (depreciation) on investments |
— | — | — | |||||||||||||||||
Shareholder distributions: |
||||||||||||||||||||
Issuance of common stock |
— | — | — | — | — | |||||||||||||||
Repurchase of common stock |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||
Reinvestment of common stock |
— | |||||||||||||||||||
Distributions to stockholders |
— | — | — | ( |
) | ( |
) | |||||||||||||
Total increase (decrease) for the year ended December 31, 2021 |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||||||
Tax reclassification of stockholders’ equity in accordance with GAAP |
— | — | ( |
) | — | |||||||||||||||
Balance at December 31, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Distributions to stockholders per share |
— | $ | — | $ | — | $ | $ | |||||||||||||
Common Stock |
||||||||||||||||||||
Shares |
Par Amount |
Paid in Capital in Excess of Par |
Distributable Earnings |
Total Net Assets |
||||||||||||||||
Balance at December 31, 2021 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Increase (decrease) in net assets resulting from operations |
||||||||||||||||||||
Net investment income |
— | — | — | |||||||||||||||||
Net realized gain (loss) on investments |
— | — | — | |||||||||||||||||
Net change in unrealized appreciation (depreciation) on investments |
— | — | — | ( |
) | ( |
) | |||||||||||||
Shareholder distributions: |
||||||||||||||||||||
Issuance of common stock |
— | — | — | — | — | |||||||||||||||
Repurchase of common stock |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||
Reinvestment of common stock |
— | |||||||||||||||||||
Distributions to stockholders |
— | — | — | ( |
) | ( |
) | |||||||||||||
Distributions to stockholders from return of capital |
— | — | ( |
) | — | ( |
) | |||||||||||||
Total increase (decrease) for the year ended December 31, 2022 |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
Tax reclassification of stockholders’ equity in accordance with GAAP |
— | — | ( |
) | — | |||||||||||||||
Balance at December 31, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Distributions to stockholders per share |
— | $ | — | $ | — | $ | $ | |||||||||||||
Common Stock |
||||||||||||||||||||
Shares |
Par Amount |
Paid in Capital in Excess of Par |
Distributable Earnings |
Total Net Assets |
||||||||||||||||
Balance at December 31, 2022 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
Increase (decrease) in net assets resulting from operations |
| |||||||||||||||||||
Net investment income |
— | — | — | |||||||||||||||||
Net realized gain (loss) on investments |
— | — | — | ( |
) | ( |
) | |||||||||||||
Net change in unrealized appreciation (depreciation) on investments |
— | — | — | |||||||||||||||||
Shareholder distributions: |
| |||||||||||||||||||
Issuance of common stock |
— | — | — | — | — | |||||||||||||||
Repurchase of common stock |
( |
) | ( |
) | ( |
) | — | ( |
) | |||||||||||
Reinvestment of common stock |
— | |||||||||||||||||||
Distributions to stockholders |
— | — | — | ( |
) | ( |
) | |||||||||||||
Distributions to stockholders from return of capital |
— | — | ( |
) | — | ( |
) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total increase (decrease) for the year ended December 31, 2023 |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Tax reclassification of stockholders’ equity in accordance with GAAP |
— | — | ( |
) | — | |||||||||||||||
Balance at December 31, 2023 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Distributions to stockholders per share |
— | $ | — | $ | — | $ | $ | |||||||||||||
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
||||||||||||
2023 |
2022 (Unconsolidated) |
2021 (Unconsolidated) |
||||||||||
Cash flows provided by (used in) operating activities |
||||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | $ | ( |
) | $ | |||||||
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities: |
||||||||||||
Purchases of investment securities |
( |
) | ( |
) | ( |
) | ||||||
Payment-in-kind |
( |
) | ( |
) | ( |
) | ||||||
Proceeds from sales and principal repayments of investment securities |
||||||||||||
Net realized gain (loss) on investments |
( |
) | ||||||||||
Net realized (gain) loss on Affiliated investments |
( |
) | ( |
) | ( |
) | ||||||
Net change in unrealized (appreciation) depreciation on investments |
( |
) | ( |
) | ||||||||
Amortization of premium/discount, net |
( |
) | ( |
) | ( |
) | ||||||
Change in operating assets and liabilities: |
| |||||||||||
(Increase) decrease in receivable for investments sold |
( |
) | ( |
) | ||||||||
(Increase) decrease in dividends and interest receivable |
( |
) | ( |
) | ||||||||
(Increase) decrease in receivable from Adviser |
( |
) | ||||||||||
(Increase) decrease in prepaid expenses |
( |
) | ( |
) | ||||||||
Increase (decrease) in payable for investments purchased |
( |
) | ||||||||||
Increase (decrease) in payable to Adviser |
( |
) | ( |
) | ( |
) | ||||||
(Increase) decrease in deferred tax asset |
( |
) | ||||||||||
Increase (decrease) in accrued expenses and other liabilities |
( |
) | ( |
) | ||||||||
|
|
|
|
|
|
|||||||
Net cash flows provided by (used in) operating activities |
||||||||||||
|
|
|
|
|
|
|||||||
Cash flows provided by (used in) financing activities |
||||||||||||
Repurchase of common stock, net of payable |
( |
) | ( |
) | ( |
) | ||||||
Distributions paid in cash |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Net cash flows (used in) financing activities |
( |
) | ( |
) | ( |
) | ||||||
|
|
|
|
|
|
|||||||
Net increase (decrease) in cash and cash equivalents |
( |
) |
( |
) |
||||||||
|
|
|
|
|
|
|||||||
Cash and cash equivalents |
||||||||||||
Beginning of the year |
||||||||||||
|
|
|
|
|
|
|||||||
End of the year |
$ | $ | $ | |||||||||
|
|
|
|
|
|
|||||||
Supplemental disclosure and non-cash financing activities |
||||||||||||
Paid-in-kind |
$ | $ | $ | |||||||||
Reinvestment of distributions paid |
$ | $ | $ | |||||||||
Local and excise taxes paid |
$ | $ | $ |
Portfolio Company (1)(2) |
Interest Rate |
Base Rate Floor |
Maturity Date |
Principal Amount |
Amortized Cost (3) |
Fair Value |
||||||||||||||||||
Senior Secured Loans – 20.6% (4) |
||||||||||||||||||||||||
Bioplastics – 4.0% |
||||||||||||||||||||||||
PlantSwitch, Inc. Convertible Promissory Note (First Lien Term Loan) (5) (6) |
$ | $ | $ | |||||||||||||||||||||
|
|
|||||||||||||||||||||||
Healthcare – 13.2% |
||||||||||||||||||||||||
Auris Luxembourg III S.a.r.l. (First Lien Term Loan) (7) (8) |
SOFR + |
% | ||||||||||||||||||||||
Carestream Health, Inc. (First Lien Term Loan) (9) |
SOFR + |
% | ||||||||||||||||||||||
CCS Medical, Inc (First Lien Term Loan) (5) (6) |
||||||||||||||||||||||||
Covenant Surgical Partners, Inc. (First Lien Delayed Draw Term Loan) (9) |
SOFR + |
% | ||||||||||||||||||||||
Covenant Surgical Partners, Inc. (First Lien Term Loan) (9) |
SOFR + |
% | ||||||||||||||||||||||
Sound Inpatient Physicians (Second Lien Term Loan) (9) |
SOFR + |
% | ||||||||||||||||||||||
|
|
|||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Real Estate – 0.9% |
||||||||||||||||||||||||
NexPoint Capital REIT, LLC (First Lien Term Loan) (5) (6) (10) |
PRIME + |
% | ||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Telecommunication Services – 2.4% |
||||||||||||||||||||||||
MidWave Wireless, Inc. (fka Terrestar Corp.) (First Lien Term Loan F) (5) (6) |
% | |||||||||||||||||||||||
MidWave Wireless, Inc. (fka Terrestar Corp.) (First Lien Term Loan E) (5) (6) |
% | |||||||||||||||||||||||
MidWave Wireless, Inc. (fka Terrestar Corp.) (First Lien Term Loan G) (5) (6) |
% | |||||||||||||||||||||||
MidWave Wireless, Inc. (fka Terrestar Corp.) (First Lien Term Loan H) (5) (6) |
% | |||||||||||||||||||||||
|
|
|||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Total Senior Secured Loans |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Asset-Backed Securities – 0.0% |
||||||||||||||||||||||||
Financials – 0.0% |
||||||||||||||||||||||||
Grayson Investor Corp. (7) (5) (6) (11) (12) (13) |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Total Asset-Backed Securities |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Corporate Bonds – 1.5% |
||||||||||||||||||||||||
Consumer Discretionary – 1.0% |
||||||||||||||||||||||||
Vista Outdoor, Inc. |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Media/Telecommunications – 0.5% |
||||||||||||||||||||||||
iHeartCommunications, Inc. (7) |
||||||||||||||||||||||||
iHeartCommunications, Inc. (7) |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Total Corporate Bonds |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Shares |
||||||||||||||||||||||||
Common Stocks – 32.0% |
||||||||||||||||||||||||
Chemicals – 0.1% |
||||||||||||||||||||||||
MPM Holdings, Inc. (5) (6) (14) |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Energy – 4.5% |
||||||||||||||||||||||||
Quarternorth Energy, Inc. |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Financials – 7.1% |
||||||||||||||||||||||||
American Banknote Corp. (5) (6) (14) |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Real Estate – 9.2% |
||||||||||||||||||||||||
Nexpoint Real Estate Finance, Inc. (10) |
||||||||||||||||||||||||
IQHQ, Inc. (5) (6) |
||||||||||||||||||||||||
|
|
|||||||||||||||||||||||
|
|
|||||||||||||||||||||||
Real Estate Investment Trust (REIT) – 1.6% |
||||||||||||||||||||||||
NexPoint Residential Trust, Inc. (7) (10) |
||||||||||||||||||||||||
|
|
Telecommunication Services – 9.5% |
||||||||||||||||
MidWave Wireless, Inc. (fka Terrestar Corp.) (5) (6) (14) |
||||||||||||||||
|
|
|||||||||||||||
Total Common Stocks |
||||||||||||||||
|
|
|||||||||||||||
LLC Interests – 20.8% |
||||||||||||||||
Consumer Products – 6.1% |
||||||||||||||||
US Gaming, LLC (5) (6) (14) |
$ | $ | ||||||||||||||
|
|
|||||||||||||||
Real Estate – 14.8% |
||||||||||||||||
NexPoint Capital REIT, LLC (5) (6) (10) |
||||||||||||||||
SFR WLIF III, LLC (5) (6) (10) |
||||||||||||||||
|
|
|||||||||||||||
|
|
|||||||||||||||
Total LLC Interests |
||||||||||||||||
|
|
|||||||||||||||
Preferred Dividend Rate |
||||||||||||||||
Preferred Stocks – 23.7% |
||||||||||||||||
Financials – 2.4% |
||||||||||||||||
777 Partners, LLC |
% | |||||||||||||||
United Fidelity Bank FSB |
% | |||||||||||||||
|
|
|||||||||||||||
|
|
|||||||||||||||
Healthcare – 21.4% |
||||||||||||||||
Apnimed, Inc. (5) (6) |
% | |||||||||||||||
Apnimed, Inc. (Series C-2) (5) (6) |
% | |||||||||||||||
Sapience Therapeutics, Inc. (Series B |
||||||||||||||||
Preferred Shares) (5) (6) (15) |
% | |||||||||||||||
Sapience Therapeutics, Inc. (Series B-1 |
||||||||||||||||
Preferred Shares) (5) (6) (15) |
% | |||||||||||||||
|
|
|||||||||||||||
|
|
|||||||||||||||
Total Preferred Stocks |
||||||||||||||||
|
|
|||||||||||||||
Warrants – 0.5% |
||||||||||||||||
Energy – 0.5% |
||||||||||||||||
QuarterNorth Tranche 1 (14) |
||||||||||||||||
QuarterNorth Tranche 2 (14) |
||||||||||||||||
|
|
|||||||||||||||
|
|
|||||||||||||||
Media/Telecommunications – 0.0% |
||||||||||||||||
iHeartMedia, Inc. (7) (14) |
||||||||||||||||
|
|
|||||||||||||||
Total Warrants |
||||||||||||||||
|
|
|||||||||||||||
Total Investments- 99.2% |
$ |
$ |
||||||||||||||
|
|
|
|
|||||||||||||
Cash Equivalents –2.3% (16) |
$ | |||||||||||||||
Other Assets & Liabilities, net- (1.5%) |
$ | ( |
) | |||||||||||||
|
|
|||||||||||||||
Net Assets- 100.0% |
$ |
|||||||||||||||
|
|
(1) |
Unless otherwise noted, the Company did not “control” and was not an “affiliated person” of any of its portfolio companies, each as defined in the Investment Company Act of 1940, as amended (the “1940 Act”). In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned |
(2) |
All investments are denominated in United States Dollars. |
(3) |
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments. |
(4) |
Senior secured loans in which the Company invests generally pay interest at rates which are periodically determined by reference to a base lending rate plus a spread (unless otherwise identified, all senior secured loans carry a variable rate of interest). These base lending rates are generally (i) the Prime Rate offered by one or more major United States banks, (ii) the lending rate offered by the Federal Reserve Bank such as the Secured Overnight Financing Rate (“SOFR”) or (iii) the coupon rate. Rate shown represents the actual rate at December 31, 2023. Senior secured loans, while exempt from registration under the Securities Act of 1933 (the “1933 Act”), contain certain restrictions on resale and cannot be sold publicly. Senior secured floating rate loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturity shown. |
(5) |
Represents fair value as determined by the Adviser pursuant to the policies and procedures approved by the Board of Directors (the “Board”). The Board has designated the Adviser as “valuation designee” for the Company pursuant to Rule 2a-5 of the 1940 Act. The Adviser considers fair valued securities to be securities for which market quotations are not readily available and these securities may be valued using a combination of observable and unobservable inputs. Securities with a total aggregate value of $ |
(6) |
Classified as Level 3 within the three-tier fair value hierarchy. Please see Note 2 for an explanation of this hierarchy, as well as a list of unobservable inputs used in the valuation of these instruments. |
(7) |
The investment is not a qualifying asset under Section 55 of the 1940 Act. A business development company, such as the Company (“BDC”), may not acquire any asset other than a qualifying asset, unless at the time the acquisition is made, qualifying assets represent at least |
(8) |
The interest rate on these investments is subject to a base rate of 6-Month SOFR which at December 31, 2023 was |
(9) |
The interest rate on these investments is subject to a base rate of 3-Month SOFR, which at December 31, 2023 was |
(10) |
Represents an affiliated issuer. Assets with a total aggregate market value of $ |
(11) |
Securities exempt from registration under Rule 144A of the Securities Act. These securities may only be resold in transactions exempt from registration to qualified institutional buyers. As of December 31, 2023, these securities amounted to $ |
(12) |
The investment is considered to be the equity tranche of the issuer. |
(13) |
Securities of collateralized loan obligations where an affiliate of the Adviser serves as collateral manager. |
(14) |
Non-income producing security. |
(15) |
All or a portion of this security is held through BDC Sapience Holdco, LLC (See Note 1) |
(16) |
State Street U.S. Government Money Market Fund. |
PIK |
Payment-in-Kind |
Portfolio Company (1)(2) |
Interest Rate |
Base Rate Floor |
Maturity Date |
Principal Amount |
Amortized Cost (3) |
Fair Value |
||||||||||||||||
Senior Secured Loans – 26.5% (4) |
||||||||||||||||||||||
Healthcare – 24.5% |
||||||||||||||||||||||
Auris Luxembourg III S.a.r.l. (First Lien Term Loan) (5) (6) |
L + |
% | $ | $ | $ | |||||||||||||||||
Carestream Health, Inc. (First Lien Term Loan) (7) |
L + |
% | ||||||||||||||||||||
CCS Medical, Inc (First Lien Term Loan) (7) (8) (9) |
||||||||||||||||||||||
CNT Holdings I Corp (Second Lien Term Loan) (7) |
L + |
% | ||||||||||||||||||||
Covenant Surgical Partners, Inc. (First Lien Delayed Draw Term Loan) |
||||||||||||||||||||||
Covenant Surgical Partners, Inc. (First Lien Term Loan) (10) |
L + |
% | ||||||||||||||||||||
Envision Healthcare Corp. (First Lien Term Loan) (10) |
L + |
% | ||||||||||||||||||||
RxBenefits, Inc. (First Lien Term Loan) (6) |
L + |
% | ||||||||||||||||||||
Sound Inpatient Physicians (Second Lien Term Loan) (10) |
L + |
% | ||||||||||||||||||||
Wellpath Holdings, Inc. (First Lien Term Loan) (7) |
L + |
% | ||||||||||||||||||||
Telecommunication Services – 2.0% |
||||||||||||||||||||||
TerreStar Corp. (First Lien Term Loan H) (8) (9) |
||||||||||||||||||||||
TerreStar Corp. (First Lien Term Loan F) (8) (9) |
||||||||||||||||||||||
TerreStar Corp. (First Lien Term Loan E) (8) (9) |
||||||||||||||||||||||
TerreStar Corp. (First Lien Term Loan G) (8) (9) |
||||||||||||||||||||||
Total Senior Secured Loans |
||||||||||||||||||||||
Asset-Backed Securities – 0.0% |
||||||||||||||||||||||
Financials – 0.0% |
||||||||||||||||||||||
Grayson Investor Corp. (5) (8) (9) (11) (12) (13) |
||||||||||||||||||||||
PAMCO CLO 1997-1A B (5) (8) (9) (11) (13) (14) |
||||||||||||||||||||||
Total Asset-Backed Securities |
||||||||||||||||||||||
Corporate Bonds – 5.0% |
||||||||||||||||||||||
Healthcare – 4.5% |
||||||||||||||||||||||
Hadrian Merger Sub, Inc. (11) |
||||||||||||||||||||||
Media/Telecommunications – 0.5% |
||||||||||||||||||||||
iHeartCommunications, Inc. (5) |
||||||||||||||||||||||
iHeartCommunications, Inc. (5) |
||||||||||||||||||||||
Total Corporate Bonds |
||||||||||||||||||||||
Shares |
||||||||||||||||||||||
Common Stocks – 36.3% |
||||||||||||||||||||||
Chemicals – 0.1% |
||||||||||||||||||||||
MPM Holdings, Inc. (15) |
||||||||||||||||||||||
Energy – 3.0% |
||||||||||||||||||||||
Quarternorth Energy, Inc. |
||||||||||||||||||||||
Financials – 3.2% |
||||||||||||||||||||||
American Banknote Corp. (8) (9) (15) |
||||||||||||||||||||||
Real Estate – 18.6% |
||||||||||||||||||||||
Nexpoint Real Estate Finance, Inc. (16) |
||||||||||||||||||||||
IQHQ, Inc. (8) (9) |
||||||||||||||||||||||
Real Estate Investment Trust (REIT) – 1.9% |
||||||||||||||||||||||
NexPoint Residential Trust, Inc. (5) (16) |
||||||||||||||||||||||
Service – 0.0% |
||||||||||||||||||||
Wayne Services Legacy Inc. (8) (9) (15) |
$ | $ | ||||||||||||||||||
Telecommunication Services – 9.5% |
||||||||||||||||||||
TerreStar Corp. (8) (9) (15) |
||||||||||||||||||||
Total Common Stocks |
||||||||||||||||||||
LLC Interests – 8.7% |
||||||||||||||||||||
Consumer Products – 5.7% |
||||||||||||||||||||
US Gaming, LLC (8) (9) (15) |
||||||||||||||||||||
Real Estate – 3.0% |
||||||||||||||||||||
SFR WLIF III, LLC (8) (9) (16) |
||||||||||||||||||||
NexPoint Capital REIT, LLC (8) (9) (16) |
||||||||||||||||||||
Total LLC Interests |
||||||||||||||||||||
Preferred Dividend Rate |
||||||||||||||||||||
Preferred Stocks – 22.3% |
||||||||||||||||||||
Financials – 2.7% |
||||||||||||||||||||
777 Partners, LLC |
% | |||||||||||||||||||
United Fidelity Bank FSB |
% | |||||||||||||||||||
Healthcare – 19.6% |
||||||||||||||||||||
Apnimed, Inc. (8) (9) |
% | |||||||||||||||||||
Apnimed, Inc. (Series C-2) (8) (9) |
% | |||||||||||||||||||
Sapience Therapeutics, Inc. (Series B Preferred Shares) (8) (9) |
% | |||||||||||||||||||
Sapience Therapeutics, Inc. (Series B-1 Preferred Shares) (8) (9) |
||||||||||||||||||||
Total Preferred Stocks |
||||||||||||||||||||
Warrants – 0.4% |
||||||||||||||||||||
Energy – 0.3% |
||||||||||||||||||||
QuarterNorth Tranche 1 (15) |
||||||||||||||||||||
QuarterNorth Tranche 2 (15) |
||||||||||||||||||||
Media/Telecommunications – 0.1% |
||||||||||||||||||||
iHeartMedia, Inc. (5) (15) |
||||||||||||||||||||
Total Warrants |
||||||||||||||||||||
Total Investments- 99.2% |
$ |
$ |
||||||||||||||||||
Cash Equivalents –2.6% (17) |
$ | |||||||||||||||||||
Other Assets & Liabilities, net- (1.8%) |
$ | ( |
) | |||||||||||||||||
Net Assets- 100.0% |
$ |
|||||||||||||||||||
(1) |
Unless otherwise noted, the Company did not “control” and was not an “affiliated person” of any of its portfolio companies, each as defined in the Investment Company Act of 1940, as amended (the “1940 Act”). In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned |
(2) |
All investments are denominated in United States Dollars. |
(3) |
Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments. |
(4) |
Senior secured loans in which the Company invests generally pay interest at rates which are periodically determined by reference to a base lending rate plus a spread (unless otherwise identified, all senior secured loans carry a variable rate of interest). These base lending rates are generally (i) the Prime Rate offered by one or more major United States banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate (“LIBOR”) or (iii) the coupon rate. Rate shown represents the actual rate at December 31, 2022. Senior secured loans, while exempt from registration under the Securities Act of 1933 (the “1933 Act”), contain certain restrictions on resale and cannot be sold publicly. Senior secured floating rate loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturity shown. |
(5) |
The investment is not a qualifying asset under Section 55 of the 1940 Act. A business development company, such as the Company (“BDC”), may not acquire any asset other than a qualifying asset, unless at the time the acquisition is made, qualifying assets represent at least Non-qualifying assets represented |
(6) |
The interest rate on these investments is subject to a base rate of 6-Month LIBOR, which at December 31, 2022 was |
(7) |
The interest rate on these investments is subject to a base rate of 3-Month LIBOR, which at December 31, 2022 was |
(8) |
Represents fair value as determined by the Adviser pursuant to the policies and procedures approved by the Board of Directors (the “Board”). The Board has designated the Adviser as “valuation designee” for the Company pursuant to Rule 2a-5 of the 1940 Act. The Adviser considers fair valued securities to be securities for which market quotations are not readily available and these securities may be valued using a combination of observable and unobservable inputs. Securities with a total aggregate value of $ |
(9) |
Classified as Level 3 within the three-tier fair value hierarchy. Please see Note 2 for an explanation of this hierarchy, as well as a list of unobservable inputs used in the valuation of these instruments. |
(10) |
The interest rate on these investments is subject to a base rate of 1-Month LIBOR, which at December 31, 2022 was |
(11) |
Securities exempt from registration under Rule 144A of the Securities Act. These securities may only be resold in transactions exempt from registration to qualified institutional buyers. As of December 31, 2022, these securities amounted to $ |
(12) |
The investment is considered to be the equity tranche of the issuer. |
(13) |
Securities of collateralized loan obligations where an affiliate of the Adviser serves as collateral manager. |
(14) |
The issuer is in default of its payment obligation, or is in danger of default. |
(15) |
Non-income producing security. |
(16) |
Represents an affiliated issuer. Assets with a total aggregate market value of $ |
(17) |
State Street U.S. Government Money Market Fund. |
PIK |
Payment-in-Kind |
• | The valuation process begins with each portfolio company or investment being initially valued by investment professionals of the Adviser responsible for credit monitoring or independent third party valuation firms. |
• | Preliminary valuation conclusions are then documented and discussed with a committee comprised of certain senior management employees of the Adviser (the “Valuation Committee”) established by the Adviser to assist the Adviser in discharging its responsibilities as valuation designee. |
• | At least once each quarter, the valuations for approximately one quarter of the portfolio investments that have been fair valued are reviewed by an independent valuation firm such that, over the course of a year, each material portfolio investment that has been fair valued shall have been reviewed by an independent valuation firm at least once. |
• | Based on this information, the Adviser discusses valuations and determines the fair value of each investment in the portfolio in good faith pursuant to board-approved policies and procedures. |
Instrument |
Type |
Fair value |
||||
Grayson Investor Corp. |
Asset-Backed Securities |
$ | |
|||
American Banknote Corp. |
||||||
IQHQ, Inc. |
||||||
MPM Holdings, Inc. |
||||||
MidWave Wireless, Inc. (fka Terrestar Corp.) |
||||||
NexPoint Capital REIT, LLC |
||||||
SFR WLIF III, LLC |
US Gaming, LLC |
||||||
Apnimed, Inc. |
||||||
Apnimed, Inc. |
||||||
Sapience Therapeutics, Inc. |
||||||
Sapience Therapeutics, Inc. |
||||||
CCS Medical, Inc |
||||||
MidWave Wireless, Inc. (fka Terrestar Corp.) |
||||||
MidWave Wireless, Inc. (fka Terrestar Corp.) |
||||||
MidWave Wireless, Inc. (fka Terrestar Corp.) |
||||||
MidWave Wireless, Inc. (fka Terrestar Corp.) |
||||||
NexPoint Capital REIT, LLC |
||||||
PlantSwitch, Inc. |
Instrument |
Type |
Fair value |
||||
Grayson Investor Corp. |
Asset-Backed Securities |
$ | |
|||
PAMCO CLO 1997-1A B |
||||||
American Banknote Corp. |
||||||
IQHQ, Inc. |
||||||
Terrestar Corp. |
||||||
Wayne Services Legacy, Inc. |
||||||
NexPoint Capital REIT, LLC |
||||||
SFR WLIF III, LLC |
||||||
US Gaming, LLC |
||||||
Apnimed, Inc. |
||||||
Apnimed, Inc. |
||||||
Sapience Therapeutics, Inc. |
||||||
Sapience Therapeutics, Inc. |
||||||
CCS Medical, Inc. |
||||||
Terrestar Corp. |
||||||
Terrestar Corp. |
||||||
Terrestar Corp. |
||||||
Terrestar Corp. |
December 31, 2023 |
||||||||||||||||
Investments |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
Assets |
||||||||||||||||
Senior Secured Loans |
||||||||||||||||
Healthcare |
$ | $ | $ | $ | ||||||||||||
Telecommunication Services |
||||||||||||||||
Bioplastics |
||||||||||||||||
Real Estate |
||||||||||||||||
Asset-Backed Securities |
||||||||||||||||
Financials |
||||||||||||||||
Corporate Bonds |
||||||||||||||||
Consumer Discretionary |
||||||||||||||||
Media/Telecommunications |
||||||||||||||||
Common Stocks |
||||||||||||||||
Chemicals |
||||||||||||||||
Energy |
||||||||||||||||
Financials |
||||||||||||||||
Real Estate |
||||||||||||||||
Real Estate Investment Trust (REITs) |
||||||||||||||||
Telecommunication Services |
||||||||||||||||
LLC Interests |
||||||||||||||||
Consumer Products |
||||||||||||||||
Real Estate |
||||||||||||||||
Preferred Stocks |
||||||||||||||||
Financials |
||||||||||||||||
Healthcare |
||||||||||||||||
Warrants |
||||||||||||||||
Energy |
||||||||||||||||
Media/Telecommunications |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Assets |
$ |
$ |
$ |
$ |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments |
$ |
$ |
$ |
$ |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
December 31, 2022 |
||||||||||||||||
Investments |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
Assets |
||||||||||||||||
Senior Secured Loans |
||||||||||||||||
Healthcare |
$ | $ | $ | $ | ||||||||||||
Telecommunication Services |
||||||||||||||||
Asset-Backed Securities |
||||||||||||||||
Financials |
||||||||||||||||
Corporate Bonds |
||||||||||||||||
Healthcare |
||||||||||||||||
Media/Telecommunications |
||||||||||||||||
Common Stocks |
||||||||||||||||
Chemicals |
||||||||||||||||
Energy |
||||||||||||||||
Financials |
||||||||||||||||
Real Estate |
||||||||||||||||
Real Estate Investment Trust (REITs) |
||||||||||||||||
Service |
||||||||||||||||
Telecommunication Services |
||||||||||||||||
LLC Interests |
||||||||||||||||
Consumer Products |
||||||||||||||||
Real Estate |
||||||||||||||||
Preferred Stocks |
||||||||||||||||
Financials |
||||||||||||||||
Healthcare |
||||||||||||||||
Warrants |
||||||||||||||||
Energy |
||||||||||||||||
Media/Telecommunications |
||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Assets |
$ |
$ |
$ |
$ |
||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total Investments |
$ |
$ |
$ |
$ |
||||||||||||
|
|
|
|
|
|
|
|
Investments: |
Balance as of December 31, 2022 |
Transfers into Level 3 |
Transfers out of Level 3 |
Net amortization (accretion) of premium/ (discount) |
Distribution to Return Capital |
Net realized gains/ (losses) |
Net change in unrealized gains/ (losses) |
Purchases/ PIK |
(Sales and redemptions) (1) |
Balance as of December 31, 2023 |
Change in unrealized gain/(loss) on Level 3 securities still held at period end |
|||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||||||||||||||
Senior Secured Loans |
||||||||||||||||||||||||||||||||||||||||||||
Bioplastics |
$ | $ | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
Healthcare |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Real Estate |
||||||||||||||||||||||||||||||||||||||||||||
Telecommunication Services |
||||||||||||||||||||||||||||||||||||||||||||
Asset-Backed Securities |
||||||||||||||||||||||||||||||||||||||||||||
Financials |
( |
) |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||
Common Stocks |
||||||||||||||||||||||||||||||||||||||||||||
Chemicals |
||||||||||||||||||||||||||||||||||||||||||||
Financials |
||||||||||||||||||||||||||||||||||||||||||||
Real Estate |
||||||||||||||||||||||||||||||||||||||||||||
Service |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Telecommunication Services |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
LLC Interests |
||||||||||||||||||||||||||||||||||||||||||||
Consumer Products |
( |
) | ||||||||||||||||||||||||||||||||||||||||||
Real Estate |
( |
) |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||
Preferred Stocks |
||||||||||||||||||||||||||||||||||||||||||||
Healthcare |
( |
) | ||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total |
$ | $ | $ | $ | $ | ( |
) |
$ | ( |
) | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | Includes sales to subreit at cost which generate no realized gain. |
Investments: |
Balance as of December 31, 2021 |
Transfers into Level 3 |
Transfer out of Level 3 |
Net amortization (accretion) of premium/ (discount) |
Distribution to Return Capital |
Net realized gains/ (losses) |
Net change in unrealized gains/ (losses) |
Purchases/ PIK |
(Sales and redemptions) |
Balance as of December 31, 2022 |
Change in unrealized gain/(loss) on Level 3 securities still held at period end |
|||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||||||||||||||
Senior Secured Loans |
||||||||||||||||||||||||||||||||||||||||||||
Telecommunication Services |
$ | $ | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | $ | ( |
) | |||||||||||||||||||||||||||||
Healthcare |
( |
) | ||||||||||||||||||||||||||||||||||||||||||
Asset-Backed Securities |
||||||||||||||||||||||||||||||||||||||||||||
Financials |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||
Common Stocks |
||||||||||||||||||||||||||||||||||||||||||||
Financials |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Real Estate |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Service |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Telecommunication Services |
||||||||||||||||||||||||||||||||||||||||||||
LLC Interests |
||||||||||||||||||||||||||||||||||||||||||||
Consumer Products |
||||||||||||||||||||||||||||||||||||||||||||
Real Estate |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||||||||||
Preferred Stocks |
||||||||||||||||||||||||||||||||||||||||||||
Healthcare |
||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total |
$ | $ | $ | $ | $ | $ | ( |
) | $ | $ | $ | ( |
) | $ | $ | |||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment |
Fair value at December 31, 2023 |
Valuation Technique |
Unobservable Inputs |
Range of Input Value(s) (arithmetic average) | ||||||
LLC Interests |
$ | |
|
| ||||||
Preferred Stocks |
|
|
$ | |||||||
Common Stocks |
|
|
$ $ | |||||||
N/A | $ | |||||||||
Senior Secured Loans |
|
|
$ | |||||||
Asset-Backed Securities |
N/A | |||||||||
|
|
|||||||||
Total |
$ |
|||||||||
|
|
Investment |
Fair value at December 31, 2022 |
Valuation technique |
Unobservable inputs |
Range of input value(s) (weighted average) | ||||||
LLC Interest |
$ | |
|
| ||||||
Preferred Stocks |
|
|
$ | |||||||
Common Stocks |
Value |
Price/MHz-PoP N/A |
( $ $ $ | |||||||
Senior Secured Loans |
||||||||||
Asset-Backed Securities |
||||||||||
|
|
|||||||||
Total |
$ |
|||||||||
|
|
For the year ended December 31, |
||||||||||||
2023 |
2022 |
2021 |
||||||||||
Net increase (decrease) in net assets resulting from operations |
$ | $ | ( |
) | $ | |||||||
Weighted average common shares outstanding |
||||||||||||
Earnings (loss) per common share-basic and diluted |
$ | $ | ( |
) | $ |
Fair value |
Percentage |
|||||||
Assets |
||||||||
Healthcare |
$ | % | ||||||
Real Estate |
% | |||||||
Telecommunication Services |
% | |||||||
Financials |
% | |||||||
Consumer Products |
% | |||||||
Energy |
% | |||||||
Bioplastics |
% | |||||||
Real Estate Investment Trusts (REITs) |
% | |||||||
Consumer Discretionary |
% | |||||||
Media/Telecommunications |
% | |||||||
Chemicals |
% | |||||||
Total Assets |
$ |
% | ||||||
Fair value |
Percentage |
|||||||
Assets |
||||||||
Healthcare |
$ | % | ||||||
Real Estate |
% | |||||||
Telecommunication Services |
% | |||||||
Consumer Products |
% | |||||||
Financials |
% | |||||||
Energy |
% | |||||||
Real Estate Investment Trusts (REITs) |
% | |||||||
Media/Telecommunications |
% | |||||||
Chemicals |
% | |||||||
Service |
% | |||||||
Total Assets |
$ |
% | ||||||
Amortized Cost |
Fair value |
Percentage of Portfolio (at Fair Value) |
||||||||||
Assets |
||||||||||||
Senior Secured Loans - First Lien |
$ | $ | % | |||||||||
Senior Secured Loans - Second Lien |
% | |||||||||||
Asset-Backed Securities |
% | |||||||||||
Corporate Bonds |
% | |||||||||||
Common Stocks |
% | |||||||||||
LLC Interests |
% | |||||||||||
Preferred Stocks |
% | |||||||||||
Warrants |
% | |||||||||||
Total Assets |
$ |
$ |
% | |||||||||
Amortized Cost |
Fair value |
Percentage of Portfolio (at Fair Value) |
||||||||||
Assets |
||||||||||||
Senior Secured Loans - First Lien |
$ | $ | % | |||||||||
Senior Secured Loans - Second Lien |
% | |||||||||||
Asset-Backed Securities |
% | |||||||||||
Corporate Bonds |
% | |||||||||||
Common Stocks |
% | |||||||||||
LLC Interests |
% | |||||||||||
Preferred Stocks |
% | |||||||||||
Warrants |
% | |||||||||||
Total Assets |
$ |
$ |
% | |||||||||
Geography |
Fair value |
Percentage |
||||||
Assets |
||||||||
Cayman Islands (1) |
$ | % | ||||||
Luxembourg (1) |
% | |||||||
United States |
% | |||||||
Total Assets |
$ |
% |
Geography |
Fair value |
Percentage |
||||||
Assets |
||||||||
Cayman Islands (1) |
$ | % | ||||||
Luxembourg (1) |
% | |||||||
United States |
% | |||||||
Total Assets |
$ |
% | ||||||
(1) |
Investment denominated in USD. |
Period ended |
Yearly cumulative other expense |
Yearly expense limitation |
Yearly cumulative expense reimbursement |
Quarterly recoupable/ (recouped) amount |
Recoupment eligibility expiration |
|||||||||||||||
December 31, 2023 |
$ | $ | $ | $ | ||||||||||||||||
September 30, 2023 |
||||||||||||||||||||
June 30, 2023 |
||||||||||||||||||||
March 31, 2023 |
Period ended |
Yearly cumulative other expense |
Yearly expense limitation |
Yearly cumulative expense reimbursement |
Quarterly recoupable/ (recouped) amount |
Recoupment eligibility expiration |
|||||||||||||||
December 31, 2022 |
$ | $ | $ | $ | ||||||||||||||||
September 30, 2022 |
||||||||||||||||||||
June 30, 2022 |
||||||||||||||||||||
March 31, 2022 |
Period ended |
Yearly cumulative other expense |
Yearly expense limitation |
Yearly cumulative expense reimbursement |
Quarterly recoupable/ (recouped) amount |
Recoupment eligibility expiration |
|||||||||||||||
December 31, 2021 |
$ | $ | $ | $ | ||||||||||||||||
September 30, 2021 |
||||||||||||||||||||
June 30, 2021 |
||||||||||||||||||||
March 31, 2021 |
2023 |
2022 |
2021 |
||||||||||
Paid in capital excess of par value |
$ | ( |
) |
$ | ( |
) | $ | |||||
Distributions in excess of net investment income (1) |
( |
) |
( |
) | ||||||||
Accumulated realized gains (1) |
( |
) |
(1) |
Amounts are included in distributable earnings (accumulated loss) on the Consolidated Statements of Assets and Liabilities. |
2023 |
2022 |
2021 |
||||||||||
Undistributed ordinary income |
$ | $ | $ | |||||||||
Net tax appreciation/(depreciation) |
( |
) | ||||||||||
Undistributed capital gains |
||||||||||||
Other temporary differences |
( |
) | ( |
) | ( |
) |
Paid Distributions attributable to: |
2023 |
2022 |
2021 |
|||||||||
Ordinary income |
$ | $ | $ | |||||||||
Return of capital |
||||||||||||
Long term gain |
Gross appreciation | Gross (depreciation) | Net appreciation/ (depreciation) |
Cost | |||||||||||||
December 31, 2023 |
$ | $ | ( |
) | $ | $ | ||||||||||
December 31, 2022 |
( |
) | ( |
) | ||||||||||||
December 31, 2021 |
( |
) |
Affiliated investments |
Shares at December 31, 2022 |
Fair value as of December 31, 2022 |
Purchases |
Sales (1) |
Realized gains (losses) |
Change in unrealized appreciation (depreciation) |
Fair value as of December 31, 2023 |
Shares at December 31, 2023 |
Affiliated Dividend income |
|||||||||||||||||||||||||||
NexPoint Residential Trust, Inc. |
$ | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
NexPoint Capital REIT, LLC (Common Stocks) |
( |
) | ( |
) | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
NexPoint Capital REIT, LLC (Senior Loans) |
||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
NexPoint Real Estate Finance, Inc. |
( |
) | ||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
SFR WLIF III, LLC |
( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total affiliated investments |
$ | $ | $ | ( |
) | $ | $ | $ | $ | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
The sales figures reported above include dividends from the return of capital. Additionally, some of the sales transactions were made to the subreit at cost, thereby not generating any realized gain or loss. |
For the Year Ended December 31, 2023 |
For the Year Ended December 31, 2022 |
For the Year Ended December 31, 2021 |
For the Year Ended December 31, 2020 |
For the Year Ended December 31, 2019 |
||||||||||||||||
Common shares per share operating performance: |
| |||||||||||||||||||
Net asset value, beginning of period |
$ | $ | $ | $ | $ | |||||||||||||||
Income from investment operations: |
| |||||||||||||||||||
Net investment income (1) |
||||||||||||||||||||
Net realized and unrealized gain (loss) |
( |
) | ( |
) | ( |
) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total from investment operations |
( |
) | ( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Less distribution declared to common shareholders: |
| |||||||||||||||||||
From net investment income |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
From net realized gains |
( |
) | ||||||||||||||||||
From return of capital |
( |
) | ( |
) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total distributions declared to common shareholders |
( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Capital share transaction |
| |||||||||||||||||||
Issuance of common stock (2) |
||||||||||||||||||||
Shares tendered (1) |
(3) |
(3) |
(3) |
(3) | ||||||||||||||||
Net asset value, end of period |
$ | $ | $ | $ | $ | |||||||||||||||
Net asset value total return (4) |
% | ( |
)% | % | ( |
)% | % | |||||||||||||
Ratio and supplemental data: |
| |||||||||||||||||||
Net assets, end of period (in 000’s) |
$ | $ | $ | $ | $ | |||||||||||||||
Shares outstanding, end of period |
||||||||||||||||||||
Common share information at end of period: |
| |||||||||||||||||||
Ratios based on weighted average net assets of common shares: |
| |||||||||||||||||||
Gross operating expenses |
% | % | % | % | % | |||||||||||||||
Fees and expenses waived or reimbursed |
( |
)% | ( |
)% | ( |
)% | ( |
)% | ( |
)% | ||||||||||
Net operating expenses |
% | % | % | % | % | |||||||||||||||
Net investment income (loss) before fees waived or reimbursed |
% | % | % | % | % | |||||||||||||||
Net investment income (loss) after fees waived or reimbursed |
% | % | % | % | % | |||||||||||||||
Ratio of interest and credit facility expenses to average net assets |
% | % | % | % | % | |||||||||||||||
Portfolio turnover rate |
% | % | % | % | % | |||||||||||||||
Asset coverage ratio |
% | % | % | % | % | |||||||||||||||
Weighted average commission rate paid (5) |
$ | $ | $ | $ | $ |
(1) |
Per share data was calculated using weighted average shares outstanding during the period. |
(2) |
The continuous issuance of common stock may cause an incremental increase in net asset value per share due to the sale of shares at the then prevailing public offering price and the receipt of net proceeds per share by the Company in excess of net asset value per share on each subscription closing date. The per share data was derived by computing (i) the sum of (A) the number of shares issued in connection with subscriptions and/or distribution reinvestment on each share transaction date times (B) the differences between the net proceeds per share and the net asset value per share on each share transaction date, divided by (ii) the total shares outstanding at the end of the period. The Company’s continuous public offering ended on February 14, 2018. |
(3) |
Amount rounds to less than $ |
(4) |
Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, and assume no sales charge. Distributions, if any, are assumed for purposes of this calculation to be reinvested at prices obtained under the Company’s Dividend Reinvestment Plan. Had the Adviser not absorbed a portion of expenses, total returns would have been lower. |
(5) |
Represents the total dollar amount of commissions paid on portfolio transactions divided by total number of portfolio shares purchased and sold for which commissions were charged. |
Quarter ended | ||||||||||||||||
December 31, 2023 |
September 30, 2023 |
June 30, 2023 |
March 31, 2023 |
|||||||||||||
Total investment income |
$ | $ | $ | $ | ||||||||||||
Total investment income per common share |
||||||||||||||||
Net investment income |
||||||||||||||||
Net investment income per common share |
||||||||||||||||
Net realized and unrealized gain (loss) |
( |
) | ( |
) | ||||||||||||
Net realized and unrealized gain (loss) per common share |
( |
) | ( |
) | ||||||||||||
Net increase (decrease) in net assets resulting from operations |
( |
) | ( |
) | ||||||||||||
Basic and diluted earnings (loss) per common share |
( |
) | ( |
) | ||||||||||||
Net asset value per common share at end of quarter |
||||||||||||||||
Quarter ended | ||||||||||||||||
December 31, 2022 |
September 30, 2022 |
June 30, 2022 |
March 31, 2022 |
|||||||||||||
Total investment income |
$ | $ | $ | $ | ||||||||||||
Total investment income per common share |
||||||||||||||||
Net investment income |
||||||||||||||||
Net investment income per common share |
||||||||||||||||
Net realized and unrealized gain (loss) |
( |
) | ( |
) | ||||||||||||
Net realized and unrealized gain (loss) per common share |
( |
) | ( |
) | ||||||||||||
Net increase (decrease) in net assets resulting from operations |
( |
) | ( |
) | ||||||||||||
Basic and diluted earnings (loss) per common share |
( |
) | ( |
) | ||||||||||||
Net asset value per common share at end of quarter |
Consolidated Statements of Asset and Liabilities (including the Consolidated Schedules of Investments) |
Consolidated Statements of Operations, Changes in Net Assets, and Cash Flows | |
|
| |
As of December 31, 2023 and 2022* |
For the years ended December 31, 2023, 2022*, and 2021* |
• | Evaluating the appropriateness of the valuation techniques used and testing the significant unobservable inputs by comparing them to external sources. |
• | Evaluating the appropriateness of significant changes in valuation techniques or significant unobservable inputs used in the valuations. |
• | Testing the accuracy of the underlying data used by the Company in its analysis. |
• | Comparing the significant assumptions used by management to current industry and economic trends. |
• | Performing sensitivity analysis of significant assumptions to evaluate changes in the fair value estimate. |
• | Utilizing our fair value specialists to develop an independent estimate of the fair value in instances where the selection of valuation techniques or significant unobservable inputs were more subjective and compared our estimates to management’s estimates. |
• | Utilizing our fair value specialists to develop an independent fair value range for certain investments and comparison of management’s estimate to each of the independently developed fair value ranges. |
• | Developing the independent fair value range involved testing the data used in the models and developing significant unobservable inputs in order to evaluate the reasonableness of management’s fair value estimate for a portion of the Level 3 investments. |
• | For investments where management’s process for determining the fair value was tested, professionals with specialized skill and knowledge were used to assist in evaluating the reasonableness of comparative yields and discount rates used by management for certain investments. |
• | Evaluating management’s ability to reasonably estimate fair value by comparing management’s historical estimates to subsequent transactions, taking into account changes in market or investment specific conditions, where applicable. |
Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. |
Controls and Procedures |
Item 9B |
Other Information |
Item 9C |
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections |
Item 10. |
Directors, Executive Officers and Corporate Governance |
Item 11. |
Executive Compensation |
Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
Item 14. |
Principal Accountant Fees and Services |
Item 15: |
Exhibits |
* | Filed herewith |
Item 16. |
Form 10–K Summary |
NEXPOINT CAPITAL, INC. | ||||||
Date: March 28, 2024 | By: | /s/ Frank Waterhouse | ||||
Name: | Frank Waterhouse | |||||
Title: | Treasurer, Chief Accounting Officer and Principal Financial Officer |
Signature |
Title |
Date | ||
/s/ James D. Dondero James D. Dondero |
President (Principal Executive Officer) |
March 28, 2024 | ||
/s/ Frank Waterhouse Frank Waterhouse |
Chief Financial Officer (Treasurer, Principal Accounting Officer and Principal Financial Officer) |
March 28, 2024 | ||
/s/ Dr. Bob Froehlich Dr. Bob Froehlich |
Director | March 28, 2024 | ||
/s/ John Honis John Honis |
Director | March 28, 2024 | ||
/s/ Ethan Powell Ethan K. Powell |
Director | March 28, 2024 | ||
/s/ Bryan A. Ward Bryan A. Ward |
Director | March 28, 2024 | ||
/s/ Pamela Corrie Pamela Corrie |
Director | March 28, 2024 |