Original Issue Discount
Investments may include original issue
discount or OID income. This occurs when the Corporation purchases a warrant and a note from a portfolio company simultaneously, which requires an allocation of a portion of the purchase price to the warrant and reduces the note or debt
instrument by an equal amount in the form of a note discount or OID. The note is reported net of the OID and the OID is accreted into interest income over the life of the loan. The Corporation recognized $29,462 and $21,085 in OID income for nine
months ended September 30, 2018 and 2017, respectively. OID income is estimated to be approximately $10,000 for the remainder of 2018.
Deferred Debenture Costs
SBA debenture origination and commitment costs, which are netted against the debenture
obligation (See Note 6 SBA Debentures), will be amortized ratably over the terms of the SBA debentures. Amortization expense was $20,550 for each of the nine months ended September 30, 2018 and 2017. Amortization expense on
currently outstanding debentures for the next five years is estimated to average approximately $23,000 per year.
SBA Debentures
The Corporation had $8,000,000 in outstanding SBA debentures at September 30, 2018 and December 31, 2017 with a weighted average interest rate of 3.54%. The debentures are presented net of deferred debenture costs (See Note
6 SBA Debentures). The $8,000,000 in outstanding SBA leverage matures from 2022 through 2025.
In the event of a future
default of such SBA obligations, the Corporation has consented to the exercise, by the SBA, of all rights of the SBA under 13 C.F.R. 107.1810(i) SBA remedies for automatic events of default and has agreed to take all actions that the SBA
may so require. These actions may include the Corporations automatic consent to the appointment of the SBA, or its designee, as receiver under Section 311(c) of the Small Business Investment Act of 1958.
Net Assets per Share
Net assets per share are based on the number of shares of common stock outstanding. The Corporation
does not have any common stock equivalents outstanding.
Supplemental Cash Flow Information
Income taxes (refunded)
paid during the nine months ended September 30, 2018 and 2017 were ($17,006) and $590,940, respectively. Interest paid during each of the nine months ended September 30, 2018 and 2017 was $282,875. The Corporation converted $279,319 and
$262,105 of interest receivable into investments during the nine months ended September 30, 2018 and 2017, respectively.
Accounting Estimates
The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Stockholders Equity (Net Assets)
At
September 30, 2018 and December 31, 2017, there were 500,000 shares of $10.00 par value preferred stock authorized and unissued.
On October 25, 2018, the Board of Directors extended the repurchase authorization for up to 1,000,000 shares of the Corporations
outstanding common stock on the open market through October 25, 2019 at prices no greater than the then current net asset value. No shares were repurchased during the nine months ended September 30, 2018. At September 30, 2018, the
total treasury shares held was 541,046 shares with a total cost of $1,469,105.
Profit Sharing and Stock Option Plan
In 2001, the stockholders of the Corporation authorized the establishment of an Employee Stock Option Plan (the Option Plan), that provides for the award of stock options to purchase up to 200,000 common shares to eligible
employees. In 2002, the Corporation placed the Option Plan on inactive status as it developed a new profit sharing plan for the Corporations employees in connection with the formation of its SBIC subsidiary. As of September 30, 2018, no
stock options had been
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