The increase in operating expenses during 2016 was comprised primarily of a $1,262,552
increase in bonus and profit sharing expense, due to the Gemcor sale in 2016, and a $137,629 increase in professional fees.
Our largest portfolio company, in terms of fair value, Gemcor II, LLC (Gemcor) sold its assets during March 2016 and, based on our
ownership percentage, we received gross cash proceeds of approximately $14.1 million. The realized gain from the sale, before income taxes, was $14,620,063 and included $1,100,000 that continued to be held in escrow at December 31, 2016.
The escrow holdback is recorded in Other Assets on the accompanying consolidated statement of financial position. The escrow was released during 2017. Related to this asset sale, we accrued $1,270,052 under our Profit Sharing Plan for
the year ended December 31, 2016, that is payable to our executive officers. Recording of the profit sharing expense is primarily based on net realized gains, which may be in years subsequent to when the unrealized appreciation is recognized on
the underlying investments in the financial statements. This may cause a recognition of profit sharing expense in a period later than when the appreciation is recognized, as was the case in 2016. There were no amounts earned pursuant to the Profit
Sharing Plan for the year ended December 31, 2015.
Professional fees were also higher during the year ended
December 31, 2016 versus 2015 because we incurred additional expenses in connection with developing and implementing our long-term growth strategy. These expenses included external legal, tax consulting and other advisory expenses to
support refinement of our strategy, which involved assessing options relative to the complex regulatory environment in which we operate.
Net Realized Gains and Losses on Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2017
|
|
|
December 31,
2016
|
|
|
December 31,
2015
|
|
Net realized gain (loss) on sales and dispositions, before income tax expense (benefit)
|
|
$
|
138,240
|
|
|
$
|
14,138,203
|
|
|
($
|
42,469
|
)
|
During the year ended December 31, 2017, one of our portfolio companies, Athenex Inc. (Athenex)
completed an initial public offering and its common stock became publicly traded on the NASDAQ Global Select Market under the symbol ATNX. We sold our shares in Athenex and recognized a net realized gain, before income taxes, of $638,240
on the sale of the 46,296 Athenex shares.
In addition, during 2017, we realized a loss of $500,000 on our investment in City
Dining Cards (Loupe) when the company ceased operations.
During the first quarter of 2016 our portfolio company, Gemcor II,
LLC, sold its assets, and accordingly, we received gross cash proceeds of approximately $14.1 million, excluding amounts held in escrow, and recognized a realized gain, before income taxes, of $14,620,063. The escrow holdback at
December 31, 2016 was $1,100,000 and is recorded in Other Assets on the accompanying consolidated statement of financial position. The escrow was released during 2017.
In addition, we recorded a realized gain of $168,140 during the year ended December 31, 2016 from the earn out provision in
connection with the 2014 sale of QuaDPharma, LLC to Athenex Inc.
We realized a loss of $650,000 on our investment in Statisfy,
Inc. (Statisfy) during the year ended December 31, 2016 when the company ceased operations.
During the year ended
December 31, 2015, we recognized a net realized gain, before income taxes, of $262,925 on the sale of 301,582 shares of Synacor, Inc. (Synacor). Synacor trades on the NASDAQ Global Market under the symbol SYNC. As of
December 31, 2015, we did not own any shares of Synacor.
We recognized a realized loss of $5,394 on an adjustment to the
BinOptics Corporation (Binoptics) escrow receivable. At December 31, 2015, the Binoptics escrow receivable was $1,504,854 and was received during 2016.
We realized a loss of $300,000 on our investment in CrowdBouncer, Inc. during the year ended December 31, 2015 when the company ceased operations.
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