Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Forward-Looking Statements
The information contained
in this section should be read in conjunction with our consolidated financial statements and related notes and schedules thereto
appearing elsewhere in this quarterly report on Form 10-Q, as well as the sections entitled “Selected Financial Data”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated
financial statements and related notes and schedules thereto included in our Annual Report on Form 10-K for the period ended June
30, 2012.
This quarterly report
on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements
are not historical facts, but rather are based on current expectations, estimates and projections about Full Circle Capital Corporation,
our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,”
“expects,” “intends,” “plans,” “will,” “may,” “continue,”
“believes,” “seeks,” “estimates,” “would,” “could,” “should,”
“targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking
statements. These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors,
some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed
or forecasted in the forward-looking statements, including without limitation:
|
•
|
an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;
|
|
•
|
An expiration or contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;
|
|
•
|
interest rate volatility could adversely affect our results, particularly if we elect to use leverage as part of our investment strategy;
|
|
•
|
currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than U.S. dollars; and
|
|
•
|
the risks, uncertainties and other factors we identify in “Risk Factors” in our Annual Report on Form 10-K for the period ended June 30, 2012 and elsewhere in this quarterly report on Form 10-Q and in our filings with the SEC.
|
Although we believe
that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to
be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of
these and other uncertainties, the inclusion of a projection or forward-looking statement in this quarterly report on Form 10-Q
should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties
include those described or identified in “Risk Factors” in our Annual Report on Form 10-K for the period ended June
30, 2012 and elsewhere in this quarterly report on Form 10-Q. You should not place undue reliance on these forward-looking statements,
which apply only as of the date of this quarterly report on Form 10-Q.
Except as otherwise
specified, references to “Full Circle Capital,” “the Company,” “we,” “us” and “our”
refer to Full Circle Capital Corporation.
The following analysis
of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and
the related notes thereto contained elsewhere in this quarterly report on Form 10-Q.
Overview
We are an externally
managed non-diversified closed-end management investment company formed in April 2010, and have elected to be treated as a business
development company under the 1940 Act. Our investment objective is to generate both current income and capital appreciation through
debt and equity investments. We are managed by Full Circle Advisors, and Full Circle Service Company provides the administrative
services necessary for us to operate.
We were formed to continue
and expand the business of Full Circle Partners, LP and Full Circle Fund, Ltd. (collectively, the “Legacy Funds”),
which were formed in 2005 and 2007, respectively. In connection with our initial public offering in August 2010, we acquired a
portfolio of investments (the “Legacy Portfolio”), valued at approximately $72 million, from the Legacy Funds in exchange
for shares of our common stock and senior unsecured notes (the “Distribution Notes”). We invest primarily in senior
secured loans and, to a lesser extent, mezzanine loans and equity securities issued by smaller and lower middle-market companies
that operate in a diverse range of industries. In our lending activities, we focus primarily on portfolio companies with both (i)
tangible and intangible assets available as collateral and security against our loan to help mitigate our risk of loss, and (ii)
cash flow to cover debt service. We believe this provides us with a more attractive risk adjusted return profile, with greater
principal protection and likelihood of repayment.
Our investments generally
range in size from $3 million to $10 million; however, we may make larger or smaller investments from time to time on an opportunistic
basis. We focus primarily on senior secured loans and “stretch” senior secured loans, also referred to as
“unitranche” loans, which combine characteristics of traditional first-lien senior secured loans and second-lien or
subordinated loans. We believe that having a first lien, senior secured position provides us with greater control and security
in the primary collateral of a borrower and helps to mitigate risk against loss of principal should a borrower default. Our stretch
senior secured loans typically possess a greater advance rate against the borrower’s assets and cash flow, and accordingly
carry a higher interest rate and/or greater equity participation, than traditional senior secured loans. This stretch senior secured
loan instrument can provide borrowers with a more efficient and desirable solution than a senior bank line combined with a separate
second lien or mezzanine loan obtained from another source. We also invest in mezzanine, subordinated or unsecured loans. In addition,
we may acquire equity or equity related interests from a borrower along with our debt investment. We attempt to protect against
risk of loss on our debt investments by securing our loans against a significant level of tangible or intangible assets of our
borrowers, which may include accounts receivable and contracts for services, and obtaining a favorable loan-to-value ratio, and
in many cases, securing other financial protections or credit enhancements, such as personal guarantees from the principals of
our borrowers, make well agreements and other forms of collateral, rather than lending predominantly against anticipated cash flows
of our borrowers. We believe this allows us more options and greater likelihood of repayment from refinancing, asset sales of our
borrowers and/or amortization.
We generally seek to
invest in smaller and lower middle-market companies in areas that we believe have been historically under-serviced, especially
during and after the 2008/2009 credit crisis. These areas include industries that are outside the focus of mainstream institutions
or investors due to required industry-specific knowledge or are too small to attract interest from larger investment funds or other
financial institutions. Because we believe there are fewer banks and specialty finance companies focused on lending to these smaller
and lower middle-market companies, we believe we can negotiate more favorable terms on our debt investments in these companies
than those that would be available for debt investments in comparable larger, more mainstream borrowers. Such favorable terms may
include higher debt yields, lower leverage levels, more significant covenant protection or greater equity grants than typical of
other transactions. We generally seek to avoid competing directly with other capital providers with respect to specific transactions
in order to avoid the less favorable terms we believe are typically associated with such competitive bidding processes.
Critical Accounting Policies
The preparation of
financial statements and related disclosures in conformity with generally accepted accounting principles in the United States (“GAAP”)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported.
Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.
Basis of Consolidation
Under the 1940 Act
rules, the regulations pursuant to Article 6 of Regulation S-X and the American Institute of Certified Public Accountants’
Audit and Accounting Guide for Investment Companies, we are precluded from consolidating any entity other than another investment
company or an operating company which provides substantially all of its services and benefits to us. Our financial statements include
our accounts and the accounts of Full Circle West, Inc. and Art Credit Company, LLC, our only wholly-owned subsidiaries. All intercompany
balances and transactions have been eliminated in consolidation.
Valuation of
Investments in Securities at Fair Value — Definition and Hierarchy
In accordance with
GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit
price”) in an orderly transaction between market participants at the measurement date.
In determining fair
value, Full Circle Capital’s Board of Directors uses various valuation approaches. In accordance with GAAP, a fair value
hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable
inputs by requiring that the most observable inputs be used when available.
Observable inputs are
those that market participants would use in pricing the asset or liability based on market data obtained from sources independent
of the Board of Directors. Unobservable inputs reflect the Board of Directors’ assumptions about the inputs market participants
would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value
hierarchy is categorized into three levels based on the inputs as follows:
Level 1 — Valuations
based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that
are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of
judgment.
Level 2 — Valuations
based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 — Valuations
based on inputs that are unobservable and significant to the overall fair value measurement.
The availability of
valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including,
the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular
to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market,
the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may
be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent
uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had
a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Board of Directors in determining
fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall
into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy
within which the fair value measurement in its entirety falls, is determined based on the lowest level input that is significant
to the fair value measurement.
Fair value is a market-based
measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market
assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would
use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement
date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be
reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.
Valuation Techniques
Senior and Subordinated
Secured Loans
Our portfolio consists
primarily of private debt instruments (“Level 3 debt”). The Company considers its Level 3 debt to be performing if
the borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance or is
otherwise not deemed to be impaired. In determining the fair value of the performing Level 3 debt, the Company’s Board of
Directors considers fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings,
financial condition of the borrower, economic conditions and other relevant factors, both qualitative and quantitative. In the
event that a Level 3 debt instrument is not performing, as defined above, the Company’s Board of Directors will evaluate
the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the Level
3 debt instrument.
This evaluation will be updated
no less than quarterly for Level 3 debt instruments, and more frequently for time periods where there are significant changes in
the investor base or significant changes in the perceived value of the underlying collateral. The collateral value will be analyzed
on an ongoing basis using internal metrics, appraisals, third party valuation agents and other data as may be acquired and analyzed
by Management and the Company’s Board of Directors.
Investments in
Private Companies
The Company’s
Board of Directors determines the fair value of its investments in private companies by incorporating valuations that consider
the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information, including
comparable transactions, and performance multiples, among other factors, including third party valuation agents. These nonpublic
investments are included in Level 3 of the fair value hierarchy.
Warrants
The Company’s
Board of Directors ascribes value to warrants based on fair value analyses that may include discounted cash flow analyses, option
pricing models, comparable analyses and other techniques as deemed appropriate.
Fair Value
The Company’s
assets measured at fair value on a recurring basis subject to the requirement of ASC Topic 820 at September 30, 2012 and June 30,
2012, were as follows:
As of September 30, 2012 (Unaudited)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior and Subordinated Loans, at fair value
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
73,927,383
|
|
|
$
|
73,927,383
|
|
US Treasury Securities, at fair value
(1)
|
|
|
24,999,868
|
|
|
|
-
|
|
|
|
-
|
|
|
|
24,999,868
|
|
Investments in private companies, at fair value
|
|
|
-
|
|
|
|
-
|
|
|
|
1,535,416
|
|
|
|
1,535,416
|
|
|
|
$
|
24,999,868
|
|
|
$
|
-
|
|
|
$
|
75,462,799
|
|
|
$
|
100,462,667
|
|
As of June 30, 2012
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior and Subordinated Loans, at fair value
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
70,970,152
|
|
|
$
|
70,970,152
|
|
US Treasury Securities, at fair value
(1)
|
|
|
22,499,881
|
|
|
|
-
|
|
|
|
-
|
|
|
|
22,499,881
|
|
Investments in private companies, at fair value
|
|
|
-
|
|
|
|
-
|
|
|
|
1,376,737
|
|
|
|
1,376,737
|
|
|
|
$
|
22,499,881
|
|
|
$
|
-
|
|
|
$
|
72,346,889
|
|
|
$
|
94,846,770
|
|
(1)
U.S. Treasury Securities
were purchased and temporarily held in connection with complying with RIC diversification requirements under Subchapter M of the
Code.
During the three months ended September
30, 2012 and the year ended June 30, 2012, there were no transfers in or out of levels.
Revenue Recognition
Realized gains or losses
on the sale of investments are calculated using the specific identification method.
Interest income, adjusted
for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment
fees associated with senior and subordinated secured loans are accreted into interest income over the respective terms of the applicable
loans. Upon the prepayment of a senior or subordinated secured loan, any prepayment penalties and unamortized loan origination,
closing and commitment fees are recorded as interest income.
Dividend income is
recorded on the ex-dividend date.
Structuring fees, board
fees, excess deal deposits, prepayment fees and similar fees are recognized as Other Income as earned, usually when paid. Other
fee income, including annual fees and monitoring fees are included in Other Income.
Use of Estimates
The preparation of
the financial statements of Full Circle Capital in conformity with GAAP requires the Company to make estimates and assumptions
that affect the amounts disclosed in the financial statements of Full Circle Capital. Actual results could differ from those estimates.
Recent Accounting Pronouncements
In May 2011, the FASB
issued Accounting Standards Update (“ASU”) 2011-04, Fair Value Measurements (Topic 820),
Amendments to Achieve Common
Fair Value Measurement and Disclosure
Requirements
in U.S. GAAP and IFRSs
(“ASU 2011-04”). ASU 2011-04 results
in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs. ASU 2011-04 is effective for interim and annual
reporting periods beginning after December 15, 2011. The adoption of ASU 2011-04 did not have a significant impact on our financial
condition and results of operations.
In February 2011, the
FASB issued ASU 2011-02, Receivables (Topic 310):
A Creditor's Determination of Whether a Restructuring is a Troubled Debt Restructuring
(“ASU 2011-02”). ASU 2011-02 clarifies which loan modifications constitute troubled debt restructurings. It is intended
to assist creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled
debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings. In evaluating
whether a restructuring constitutes a troubled debt restructuring, a creditor must separately conclude that both of the following
exist: (a) the restructuring constitutes a concession; and (b) the debtor is experiencing financial difficulties. ASU 2011-02 provides
guidance to clarify whether the creditor has granted a concession and whether a debtor is experiencing financial difficulties.
The new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to
restructurings occurring on or after the beginning of the fiscal year of adoption. The adoption of ASU 2011-02 did not have a significant
impact on our financial condition and results of operations.
Current Market Conditions and Market
Opportunity
We believe that
the current credit environment provides favorable opportunities to achieve attractive risk-adjusted returns on the types of senior
secured loans and other investments we may target. In particular, we believe that, despite an overall fall off in loan demand due
to the depressed economic conditions, demand for financing from smaller to lower middle-market companies is largely outpacing the
availability of lenders that have traditionally served this market. We believe that bank consolidations, the failure of a number
of alternative lending vehicles due to poor underwriting practices and an overall tightening of underwriting standards has significantly
reduced the number and activity level of potential lenders.
We believe there has
long been a combination of demand for capital and an underserved market for capital addressing smaller and lower middle-market
borrowers. We believe there is robust demand for continued growth capital as well as demand from very significant refinancing requirements
of many borrowers as debt facilities come due, given the lack of willing and qualified capital providers. We believe
these market conditions have been further exacerbated in the current environment due to:
|
o
|
larger lenders exiting this market to focus on larger investment opportunities which are more appropriate for their operating cost structures;
|
|
o
|
the elimination of many specialized lenders from the market due to lack of capital as a result of, for instance, the closing off of the securitization market or their own poor performance, and
|
|
o
|
the need for certain capital providers to reduce lending activities due to their reduced access to capital and the overall deleveraging of the financial market.
|
With the decreased
availability of debt capital for smaller to lower middle-market borrowers, combined with the significant demand for refinancing,
we believe there are increased lending opportunities for us. As always, we remain cautious in selecting new investment opportunities,
and will only deploy capital in deals which are consistent with our disciplined philosophy of pursuing superior risk-adjusted returns.
Waiver and Expense Reimbursement
Our
investment adviser agreed to waive the portion of the base management fee that exceeded 1.50% of Full Circle Capital’s gross
assets, as adjusted, until August 31, 2011 when such waiver expired. In addition, our investment adviser agreed to reimburse the
Company for any operating expenses, excluding interest expenses, investment advisory and management fees, and organizational and
offering expenses, in excess of 2% of our net assets for the first twelve months following the completion of the initial public
offering, which occurred on August 31, 2010 (the “Expense Reimbursement Agreement”). This agreement was extended through
September 30, 2011 and expired on such date.
Portfolio Composition and Investment
Activity
Our portfolio of investments
consists primarily of senior secured loans and, to a lesser extent, mezzanine loans and equity securities issued by smaller and
lower middle-market companies. Our investment objective is to generate both current income and capital appreciation
through debt and equity investments.
The following is a summary
of our quarterly investment activity since the completion of our initial public offering. Such amounts are not inclusive of our
holdings of United States Treasury Bills.
Time Period
|
|
Acquisitions
(1)
(dollars in millions)
|
|
|
Dispositions
(2)
(dollars in millions)
|
|
|
Weighted
Average Interest
Rate of Portfolio
at End of Period
|
|
Legacy Portfolio Acquisition (August 31, 2010)
|
|
$
|
72.3
|
|
|
$
|
N/A
|
|
|
|
12.10
|
%
|
August 31, 2010 through September 30, 2010
|
|
|
0.4
|
|
|
|
1.4
|
|
|
|
12.16
|
%
|
October 1, 2010 through December 31, 2010
|
|
|
3.7
|
|
|
|
10.1
|
|
|
|
12.09
|
%
|
January 1, 2011 through March 31, 2011
|
|
|
4.0
|
|
|
|
19.9
|
|
|
|
12.39
|
%
|
April 1, 2011 through June 30, 2011
|
|
|
9.6
|
|
|
|
1.2
|
|
|
|
12.68
|
%
|
July 1, 2011 through September 30, 2011
|
|
|
27.7
|
|
|
|
15.9
|
|
|
|
12.89
|
%
|
October 1, 2011 through December 31, 2011
|
|
|
5.9
|
|
|
|
9.4
|
|
|
|
13.04
|
%
|
January 1, 2012 through March 31, 2012
|
|
|
6.7
|
|
|
|
5.7
|
|
|
|
12.98
|
%
|
April 1, 2012 through June 30, 2012
|
|
|
15.0
|
|
|
|
7.1
|
|
|
|
12.93
|
%
|
July 1, 2012 through September 30, 2012
|
|
|
11.4
|
|
|
|
8.1
|
|
|
|
12.84
|
%
|
Since inception
|
|
$
|
156.7
|
|
|
$
|
78.8
|
|
|
|
N/A
|
|
|
(1)
|
Includes new deals, additional fundings, refinancings (inclusive of those on revolving credit facilities) and payment in kind “PIK” interest
|
|
(2)
|
Includes scheduled principal payments, prepayments, sales and repayments (inclusive of those on revolving credit facilities)
|
Portfolio Activity
for the Quarter Ended September 30, 2012
The primary investment
activities for the three months ended September 30, 2012, were fundings and repayments under the revolving credit facilities and
the funding of the following loan facilities:
|
·
|
On September 7, 2012 the Company originated a $3,250,000 credit facility, comprised of a $1,000,000
senior secured term loan and a $2,250,000 senior secured revolving credit facility, both bearing interest at LIBOR plus 12.25%
to Global Energy Efficiency Holdings Inc. (“GEE”). GEE provides energy efficiency products, installation and maintenance
services to small and medium sized businesses in multiple food sales and service industries.
|
|
·
|
On September 27, 2012, the Company funded an additional $600,000 to iMedX, Inc. as part of the
Company’s existing senior secured term loan.
|
The following is a reconciliation of the
investment portfolio for the three months ended September 30, 2012, and for the year ended June 30, 2012:
|
|
Three Months Ended
September 30, 2012
|
|
|
Year Ended June 30, 2012
|
|
Beginning Investment Portfolio
|
|
$
|
94,846,770
|
|
|
$
|
82,794,117
|
|
Portfolio Investments Acquired
|
|
|
11,437,760
|
|
|
|
55,279,880
|
|
Treasury and Money Market Purchases
(1)
|
|
|
25,000,604
|
|
|
|
120,000,601
|
|
Amortization of fixed income premiums and discounts
|
|
|
112,444
|
|
|
|
522,732
|
|
Portfolio Investments Repaid
|
|
|
(8,091,557
|
)
|
|
|
(38,164,798
|
)
|
Sales of Treasury and Money Market securities
(1)
|
|
|
(22,500,000
|
)
|
|
|
(123,499,273
|
)
|
Payment in Kind
|
|
|
-
|
|
|
|
68,842
|
|
Net Unrealized Appreciation (Depreciation)
|
|
|
517,313
|
|
|
|
(1,979,965
|
)
|
Net Realized Gains (Losses)
|
|
|
(860,667
|
)
|
|
|
(175,366
|
)
|
Ending Investment Portfolio
|
|
$
|
100,462,667
|
|
|
$
|
94,846,770
|
|
(1)
U.S. Treasury Securities
were purchased and temporarily held in connection with complying with RIC diversification requirements under Subchapter M of the
Code.
During the three months
ended September 30, 2012, we recorded net unrealized appreciation of $517,313. This consisted of $133,634 of net unrealized appreciation
on debt investments and $383,679 of net unrealized appreciation on equity investments.
Portfolio Classifications
The following table
shows the fair value of our portfolio of investments by asset class as of September 30, 2012, and June 30, 2012, excluding United
States Treasury Bills of approximately $25.0 million and $26.0 million, respectively:
|
|
September 30, 2012 (Unaudited)
|
|
|
June 30, 2012
|
|
|
|
Investments at
|
|
|
|
|
|
Investments at
|
|
|
|
|
|
|
Fair Value
(dollars in millions)
|
|
|
Percentage of
Total Portfolio
|
|
|
Fair Value
(dollars in millions)
|
|
|
Percentage of
Total Portfolio
|
|
Senior Secured Loans
|
|
$
|
70.5
|
|
|
|
93.4
|
%
|
|
$
|
67.5
|
|
|
|
93.3
|
%
|
Subordinated Secured Loans
|
|
|
3.5
|
|
|
|
4.6
|
|
|
|
3.4
|
|
|
|
4.8
|
|
Limited Liability Company Interests
|
|
|
1.5
|
|
|
|
2.0
|
|
|
|
1.4
|
|
|
|
1.9
|
|
Total
|
|
$
|
75.5
|
|
|
|
100.0
|
%
|
|
$
|
72.3
|
|
|
|
100.0
|
%
|
At September 30, 2012,
the seventeen borrowers whose debt investments are included in the table above averaged a loan to value ratio of approximately
62% (i.e., each $62 of loan value outstanding is secured by $100 of collateral value).
At June 30, 2012, the
sixteen borrowers whose debt investments are included in the table above averaged a loan to value ratio of approximately 62% (i.e.,
each $62 of loan value outstanding is secured by $100 of collateral value).
The following table
shows the fair value of our portfolio of investments by industry, as of September 30, 2012, and June 30, 2012, excluding United
States Treasury Bills of approximately $25.0 and $22.5 million, respectively:
|
|
September 30, 2012 (Unaudited)
|
|
|
June 30, 2012 (Audited)
|
|
|
|
Investments at
|
|
|
|
|
|
Investments at
|
|
|
|
|
|
|
Fair Value
(dollars in
millions)
|
|
|
Percentage of
Total Portfolio
|
|
|
Fair Value
(dollars in
millions)
|
|
|
Percentage of
Total Portfolio
|
|
Cable TV/Broadband Services
|
|
$
|
18.1
|
|
|
|
24.0
|
%
|
|
$
|
17.7
|
|
|
|
24.5
|
%
|
Consumer Financing
|
|
|
7.0
|
|
|
|
9.3
|
|
|
|
6.8
|
|
|
|
9.4
|
|
Radio Broadcasting
|
|
|
6.3
|
|
|
|
8.4
|
|
|
|
6.3
|
|
|
|
8.7
|
|
Munitions
|
|
|
5.8
|
|
|
|
7.7
|
|
|
|
4.9
|
|
|
|
6.8
|
|
Staffing Services
|
|
|
5.0
|
|
|
|
6.6
|
|
|
|
5.0
|
|
|
|
6.9
|
|
Aerospace Parts Plating and Finishing
|
|
|
5.0
|
|
|
|
6.6
|
|
|
|
4.9
|
|
|
|
6.8
|
|
Industrial Metal Treatings
|
|
|
3.9
|
|
|
|
5.2
|
|
|
|
3.9
|
|
|
|
5.4
|
|
Real Estate Management Services
|
|
|
3.8
|
|
|
|
5.1
|
|
|
|
4.1
|
|
|
|
5.7
|
|
Medical Transcription Services
|
|
|
3.8
|
|
|
|
5.0
|
|
|
|
4.1
|
|
|
|
5.6
|
|
Healthcare Services
|
|
|
3.5
|
|
|
|
4.6
|
|
|
|
3.5
|
|
|
|
4.8
|
|
Information and Data Services
|
|
|
3.4
|
|
|
|
4.5
|
|
|
|
3.5
|
|
|
|
4.9
|
|
Equipment Rental Services
|
|
|
3.0
|
|
|
|
3.9
|
|
|
|
3.1
|
|
|
|
4.4
|
|
Energy Efficiency Services
|
|
|
3.0
|
|
|
|
3.9
|
|
|
|
-
|
|
|
|
-
|
|
Outdoor Advertising Services
|
|
|
1.8
|
|
|
|
2.4
|
|
|
|
1.9
|
|
|
|
2.6
|
|
Asset Recovery Services
|
|
|
1.5
|
|
|
|
2.0
|
|
|
|
2.0
|
|
|
|
2.7
|
|
Art Dealers
|
|
|
0.6
|
|
|
|
0.8
|
|
|
|
0.6
|
|
|
|
0.8
|
|
Total
|
|
$
|
75.5
|
|
|
|
100.0
|
%
|
|
$
|
72.3
|
|
|
|
100.0
|
%
|
Portfolio Grading
We have adopted a credit
grading system to monitor the quality of our debt investment portfolio. As of September 30, 2012, our portfolio had a weighted
average grade of 3.15, based upon the fair value of the debt investments in the portfolio, excluding United States Treasury Bills
of approximately $25.0. Equity securities are not graded. This was an improvement of 0.15 from the weighted average grade of 3.30
at June 30, 2012.
At September 30, 2012,
our debt investment portfolio was graded as follows:
|
|
September 30, 2012
|
|
Grade
|
|
Summary Description
|
|
Fair Value
|
|
|
Percentage of
Total Portfolio
|
|
1
|
|
Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk profile are favorable (including a potential exit).
|
|
$
|
-
|
|
|
|
-
|
%
|
2
|
|
The portfolio company is performing above expectations and the risk profile is generally favorable.
|
|
|
8,111,228
|
|
|
|
10.75
|
|
3
|
|
Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk profile is generally neutral; all new investments are initially assessed a grade of 3.
|
|
|
46,836,486
|
|
|
|
62.07
|
|
4
|
|
The portfolio company is performing below expectations, requires procedures for closer monitoring, may be out of compliance with debt covenants, and the risk profile is generally unfavorable
|
|
|
18,979,669
|
|
|
|
25.15
|
|
5
|
|
The investment is performing well below expectations and the par value is not anticipated to be repaid in full.
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
$
|
73,927,383
|
|
|
|
97.97
|
%
|
At June 30, 2012, our
debt investment portfolio was graded as follows:
|
|
June 30, 2012
|
|
Grade
|
|
Summary Description
|
|
Fair Value
|
|
|
Percentage of
Total Portfolio
|
|
1
|
|
Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk profile are favorable (including a potential exit).
|
|
$
|
-
|
|
|
|
-
|
%
|
2
|
|
The portfolio company is performing above expectations and the risk profile is generally favorable.
|
|
|
6,788,625
|
|
|
|
9.38
|
|
3
|
|
Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk profile is generally neutral; all new investments are initially assessed a grade of 3.
|
|
|
44,638,741
|
|
|
|
61.70
|
|
4
|
|
The portfolio company is performing below expectations, requires procedures for closer monitoring, may be out of compliance with debt covenants, and the risk profile is generally unfavorable
|
|
|
17,583,423
|
|
|
|
24.31
|
|
5
|
|
The investment is performing well below expectations and is not anticipated to be repaid in full.
|
|
|
1,959,363
|
|
|
|
2.71
|
|
|
|
|
|
$
|
70,970,152
|
|
|
|
98.10
|
%
|
We expect that a portion
of our investments will be in grades 4 or 5 from time to time, and, as such, we will be required to work with portfolio companies
to improve their business and protect our investment. The number and amount of investments included in grades 4 or 5 may fluctuate
from period to period.
Results of Operations
Comparison of the three months ended
September 30, 2012 and 2011
Total Investment Income
Total investment income
includes interest and dividend income on our investments and other income, which is comprised entirely of fee income for the three
months ended September 30, 2012. Fee income consists principally of administrative fees, prepayment fees, structuring fees and
unused line fees.
Total investment income
for the three months ended September 30, 2012, was $2,773,303. This amount consisted of $2,579,098 of interest income from portfolio
investments (which included no PIK interest), $34,097 of dividend income and $160,108 of fee income. Dividend income was solely
earned from our investment in The Finance Company, LLC.
Total investment income
for the three months ended September 30, 2011, was $2,558,243. This amount consisted of $2,087,700 of interest income from portfolio
investments (which included $68,842 of PIK interest) and $470,543 of fee income.
The increase in interest
income for the three months ended September 30, 2012 relative to the same time period in 2011 was primarily due to growth in the
size of our portfolio. The decrease in PIK interest for the three months ended September 30, 2012 as compared to the three months
ended September 30, 2011 is primarily attributable to the fact that the Company received a prepayment from West World Media, LLC
and ceased generating PIK interest from any of its portfolio investments. The increase in dividend income for the three months
ended September 30, 2012 as compared to the three months ended September 30, 2011 was primarily due to the Company’s investment
in The Finance Company, LLC in September 2011. The decrease in fee income, which can fluctuate, for the three months ended September
30, 2012 as compared to the three months ended September 30, 2011 was primarily a result of fewer prepayment, administration and
other fees during the quarter ended September 30, 2012.
Expenses
Gross and net operating
expenses for the three months ended September 30, 2012, were $1,535,058.
Gross operating expenses
for the three months ended September 30, 2011, were $1,327,693. Net operating expenses (offset by the waived portion
of the base management fee and the accrual for waiver of operating expenses) for the three months ended September 30, 2011, were
$1,013,799.
The increase in our
net operating expenses for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011 is
primarily due to the increase in the Company’s borrowings to fund additional portfolio investments, which resulted in increased
interest expense. Additionally, the expiration of the Expense Reimbursement Agreement and Management Fee waiver resulted in increased
net operating expenses.
Net Investment Income (Loss)
Net investment income
for the three months ended September 30, 2012, was $1,238,245. Net investment income per share was $0.20 for the period.
Net investment income
for the three months ended September 30, 2011, was $1,544,342. Net investment income per share was $0.25 for the period.
The decrease in net
investment income for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011 was primarily
due to the increase in net operating expenses due to the expiration of the Expense Reimbursement Agreement and Management Fee waiver
and an increase in interest expenses due to the Company’s greater debt usage in the three months ended September 30, 2012
as compared to the same period in 2011 to fund portfolio growth. Additionally, the decrease in other income was due to lower fee
income, which can fluctuate, as the Company received fewer prepayment fees during the three months ended September 30, 2012 as
compared to the same period in 2011.
Realized Gain (Loss) on Investments
Realized gain (loss)
on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their
stated costs. During the three months ended September 30, 2012, we recorded a realized loss of $860,667, primarily from the conversion
of our senior secured loan in Equisearch Acquisition, Inc. to a senior secured term loan in TransAmerican Asset Servicing Group,
LLC upon to the finalization of the Equisearch Acquisition, Inc.’s bankruptcy proceedings. Realized loss per share was $0.14
for the period.
During the three months
ended September 30, 2011, we recorded a realized gain of $125,806 primarily in connection with the repayment of a portion of our
equity interests in West World Media, LLC. Realized gain per share was $0.02 for the period.
The decrease in realized
gains for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011 was due to the items
discussed above.
From time to time the
Company may enter into a new transaction with a portfolio investment as a result of the sale, merger, foreclosure, bankruptcy
or other corporate event involving the portfolio company. In such cases, the Company may receive newly-issued notes, securities
and/or other consideration in exchange for, or resulting from, the cancellation of the instruments previously held by the
Company with regard to that portfolio company. In such cases, the Company may experience a realized loss on the instrument being
sold or cancelled, and, concurrently, an elimination of any previously recognized unrealized losses on the portfolio investment.
Such elimination of unrealized loss is included on the Statements of Operations as an increase in the Change in Unrealized Gain
(Loss) on Investments.
Change in Unrealized Gain (Loss) on
Investments
Change in unrealized
gain (loss) on investments is the net change in the fair value of our investment portfolio during the reporting period, including
the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized.
Change in unrealized
gain (loss) on investments per share was $0.08 for the three months ended September 30, 2012. During the three months ended September
30, 2012, we recorded net unrealized appreciation of $517,313, primarily from the conversion of our senior secured loan in Equisearch
Acquisition, Inc. to a senior secured term loan in TransAmerican Asset Servicing Group, LLC upon the finalization of Equisearch
Acquisition, Inc.’s bankruptcy proceedings. This consisted of $133,634 of net unrealized appreciation on debt investments
and $383,679 of net unrealized appreciation on equity investments. See related information in the Realized Gain (Loss) on Investments
section.
Change in unrealized
gain (loss) on investments per share was ($0.02) for the three months ended September 30, 2011. During the three months ended September
30, 2011, we recorded net unrealized depreciation of $70,815. This consisted of $263,304 of net unrealized depreciation on debt
investments and $192,489 of net unrealized appreciation on equity investments.
The increase in change in unrealized gain
(loss) on investments for the three months ended September 30, 2012 as compared to the three months ended September 30, 2011 was
due to the items discussed above.
Liquidity and Capital Resources
At September 30, 2012,
we had investments in debt securities of seventeen companies, totaling approximately $73.9 million in fair value, and equity investments
in seven companies, totaling approximately $1.5 million in fair value.
Cash used in operating
activities for the three months ended September 30, 2012, consisting primarily of purchases, sales and repayments of investments
and the items described in "Results of Operations," was approximately $3.6 million, reflecting the purchases and repayments
of investments, income resulting from operations, offset by non-cash income related to OID income, changes in working capital and
accrued interest receivable. Net cash used in purchases and sales of investments was approximately $3.3, reflecting net additional
investments in existing securities of $11.4 million, offset by principal repayments of $8.1. Such amounts are not inclusive
of our purchase of United States Treasury Bills or Money Market Funds.
Immediately prior to
the Full Circle Portfolio Acquisition, Full Circle Capital entered into the Credit Facility, a secured revolving credit facility
with First Capital. The facility size is $35 million and, as amended, expires on December 31, 2013. Under the agreement, base rate
borrowings bear interest at LIBOR plus 5.50%. As of September 30, 2012, we had $23.1 million outstanding borrowings under the Credit
Facility.
As of September 30,
2012, we had Distribution Notes outstanding of approximately $3.4 million. These senior unsecured notes bear interest at a rate
of 8.0% per annum, payable quarterly in cash, and mature on February 28, 2014.
As of September 30,
2012, we held approximately $66,504 in cash and did not have any cash equivalents in our investment portfolio.
As a business development
company, we generally have an ongoing need to raise additional capital for investment purposes. As a result, we expect, from time
to time, to access the debt and equity markets when we believe it is necessary and appropriate to do so. In this regard, we are
currently exploring various options for obtaining additional debt or equity capital for investments. This may include replacing
or further extending our Credit Facility, or the issuance of additional shares of our common stock, possibly at prices below our
then current net asset value per share pursuant to a proposal, approved by our stockholders at our December 2011 annual meeting
of stockholders, authorizing us to sell shares of our common stock below its then current net asset value per share in one or more
offerings for a period of one year ending on December 20, 2012. We would need similar future approval from our stockholders to
issue shares below the then current net asset value per share any time after the expiration of the current approval. If we are
unable to obtain leverage or raise equity capital on terms that are acceptable to us, our ability to grow our portfolio will be
substantially impacted.
Contractual Obligations
Payments Due By Period
(dollars in millions)
|
|
|
Total
|
|
|
Less than 1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
More than 5
years
|
|
Credit Facility
(1)
|
|
$
|
23.1
|
|
|
$
|
—
|
|
|
$
|
23.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distribution Notes
|
|
|
3.4
|
|
|
|
—
|
|
|
|
3.4
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
26.5
|
|
|
$
|
—
|
|
|
$
|
26.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
_____________________
(1)
At September 30, 2012,
$11.9 remained unused under the Credit Facility.
In addition to the
contractual obligations set forth above, we have certain obligations with respect to the investment advisory and administration
services we receive. See “Overview”. We incurred $641,968 for investment advisory services and $205,379 for administrative
services for the three months ended September 30, 2012.
As of September 30,
2012, we had approximately $6.3 million in unfunded loan commitments, subject to our approval in certain instances, to provide
debt financing to certain of our portfolio companies.
Off-Balance Sheet Arrangements
We currently have no
off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.
Borrowings
Secured Revolving
Credit Facility.
Immediately prior to the Full Circle Portfolio Acquisition, Full Circle Capital entered
into the Credit Facility, a secured revolving credit facility with First Capital. The facility size is $35 million and, as amended,
expires on December 31, 2013. Under the agreement, base rate borrowings bear interest at LIBOR plus 5.50%. The Credit Facility
is secured by all of our assets. Under the Credit Facility we are required to satisfy several financial covenants, including maintaining
a minimum level of net assets, a maximum level of leverage and minimum asset coverage and interest coverage ratios. In addition,
we are required to comply with other general covenants, including with respect to indebtedness, liens, restricted payments and
mergers and consolidations.
Distribution
Notes.
The Distribution Notes consist of $3.4 million in senior unsecured notes, which bear interest at a rate of 8.0%
per annum, payable quarterly in cash, and mature on February 28, 2014. The Distribution Notes are callable by us at any time, in
whole or in part, at a price of 100% of their principal amount, plus accrued and unpaid interest. In electing to exercise our call
right with respect to the Distribution Notes, our Board of Directors will consider all of the relevant factors, including alternative
uses of available capital and whether any Distribution Notes have recently been transferred or sold at prices below par value,
and will be required to determine that such a call is in the best interests of Full Circle Capital and our stockholders. The Distribution
Notes subject Full Circle Capital to customary covenants, including, among other things, a restriction on incurring any debt on
a junior lien basis, or any debt that is contractually subordinated in right of payment to any other debt unless it is also subordinated
to the Distribution Notes on substantially identical terms. The agreement under which the Distribution Notes were issued contains
customary events of default.
Distributions
In order to qualify
as a regulated investment company and to avoid corporate level tax on the income we distribute to our stockholders, we are required,
under Subchapter M of the Code, to distribute at least 90% of our ordinary income and short-term capital gains to our stockholders
on an annual basis.
The following table
lists the cash distributions, including dividends and returns of capital, if any, per share that we have declared since our formation
on April 16, 2010. The table is divided by fiscal year according to record date.
Date Declared
|
|
Record Date
|
|
Payment Date
|
|
Amount
|
|
|
|
|
|
|
|
|
|
Fiscal 2011:
|
|
|
|
|
|
|
|
|
July 21, 2010
|
|
September 30, 2010
|
|
October 15, 2010
|
|
$
|
0.076
|
(1)
|
November 5, 2010
|
|
December 31, 2010
|
|
January 14, 2011
|
|
|
0.225
|
|
February 4, 2011
|
|
March 31, 2011
|
|
April 15, 2011
|
|
|
0.225
|
|
May 6, 2011
|
|
June 30, 2011
|
|
July 15, 2011
|
|
|
0.225
|
|
Total (2011)
|
|
|
|
|
|
$
|
0.751
|
|
Fiscal 2012:
|
|
|
|
|
|
|
|
|
June 28, 2011
|
|
July 29, 2011
|
|
August 15, 2011
|
|
$
|
0.075
|
(2)
|
June 28, 2011
|
|
August 31, 2011
|
|
September 15, 2011
|
|
|
0.075
|
|
June 28, 2011
|
|
September 30, 2011
|
|
October 14, 2011
|
|
|
0.075
|
|
September 8, 2011
|
|
October 31, 2011
|
|
November 15, 2011
|
|
|
0.077
|
|
September 8, 2011
|
|
November 30, 2011
|
|
December 15, 2011
|
|
|
0.077
|
|
September 8, 2011
|
|
December 30, 2011
|
|
January 13, 2012
|
|
|
0.077
|
|
November 7, 2011
|
|
January 31, 2012
|
|
February 15, 2012
|
|
|
0.077
|
|
November 7, 2011
|
|
February 29, 2012
|
|
March 15, 2012
|
|
|
0.077
|
|
November 7, 2011
|
|
March 30, 2012
|
|
April 13, 2012
|
|
|
0.077
|
|
February 3, 2012
|
|
April 30, 2012
|
|
May 15, 2012
|
|
|
0.077
|
|
February 3, 2012
|
|
May 31, 2012
|
|
June 15, 2012
|
|
|
0.077
|
|
February 3, 2012
|
|
June 29, 2012
|
|
July 13, 2012
|
|
|
0.077
|
|
Total (2012)
|
|
|
|
|
|
$
|
0.918
|
|
Fiscal 2013:
|
|
|
|
|
|
|
|
|
May 7, 2012
|
|
July 31, 2012
|
|
August 15, 2012
|
|
$
|
0.077
|
|
May 7, 2012
|
|
August 31, 2012
|
|
September 14, 2012
|
|
|
0.077
|
|
May 7, 2012
|
|
September 28, 2012
|
|
October 15, 2012
|
|
|
0.077
|
|
September 10, 2012
|
|
October 31, 2012
|
|
November 15, 2012
|
|
|
0.077
|
|
September 10, 2012
|
|
November 30, 2012
|
|
December 14, 2012
|
|
|
0.077
|
|
September 10, 2012
|
|
December 31, 2012
|
|
January 15, 2012
|
|
|
0.077
|
|
November 5, 2012
|
|
January 31, 2013
|
|
February 15, 2013
|
|
|
0.077
|
|
November 5, 2012
|
|
February 28, 2013
|
|
March 15, 2013
|
|
|
0.077
|
|
November 5, 2012
|
|
March 29, 2013
|
|
April 15, 2013
|
|
|
0.077
|
|
Total (2013 to date)
|
|
|
|
|
|
$
|
0.693
|
|
(1)
This quarterly dividend
was prorated for the number of days remaining in the third calendar quarter after our initial public offering. Our initial public
offering was on August 31, 2010, and the gross amount of the prorated dividend was $0.225.
(2)
From
our initial public offering through the fourth fiscal quarter of 2011, we paid quarterly dividends, but in the first fiscal quarter
of 2012 we began paying, and we intend to continue paying, monthly dividends to our stockholders. Our monthly dividends, if any,
are determined by our Board of Directors on a quarterly basis.
Related Parties
We have entered into
a number of business relationships with affiliated or related parties, including the following:
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We have entered into the Investment Advisory Agreement with Full Circle Advisors. John E. Stuart, our Chief Executive Officer and President, is the managing member of, and has financial and controlling interests in, Full Circle Advisors.
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We have entered into the Administration Agreement with Full Circle Service Company. Pursuant to the terms of the Administration Agreement, Full Circle Service Company provides us with the office facilities and administrative services necessary to conduct our day-to-day operations. Mr. Stuart, our Chief Executive Officer and President, is the managing member of, and has financial and controlling interests in, Full Circle Service Company.
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We have entered into a license agreement with Full Circle Advisors, pursuant to which Full Circle Advisors has agreed to grant us a non-exclusive, royalty-free license to use the name “Full Circle.”
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Our Chief Financial Officer, Treasurer and Secretary, William E. Vastardis, is the President of Vastardis Fund Services, LLC (“Vastardis”). Full Circle Service Company has engaged Vastardis to provide certain administrative services to us. For the three months ended September 30, 2012, Vastardis was paid $73,429 for services provided under the Administration Agreement and $62,500 for the services of Mr. Vastardis as the Chief Financial Officer.
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Full Circle Advisors’
investment committee presently manages Full Circle Funding, LP, a specialty lender serving smaller and lower middle-market companies.
Although the existing investment funds managed by Full Circle Funding, LP, which currently consist of the Legacy Funds, are no
longer making investments in new opportunities, any affiliated investment vehicle formed in the future and managed by our investment
adviser or its affiliates may, notwithstanding different stated investment objectives, have overlapping investment objectives with
our own and, accordingly, may invest in asset classes similar to those targeted by us. Full Circle Advisors and its affiliates
may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the
availability of such investment and other appropriate factors, Full Circle Advisors or its affiliates may determine that we should
invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable
law and interpretive positions of the SEC and its staff, and consistent with Full Circle Advisors’ allocation procedures.
In connection with our acquisition of the Legacy Portfolio, we issued an aggregate of 4,191,415 shares of our common stock and
approximately $3.4 million of Distribution Notes to investors in the Legacy Funds.
We have also adopted
a Code of Ethics which applies to, among others, our senior officers, including our Chief Executive Officer and Chief Financial
Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors
avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant
to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might
give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged with approving any waivers under our Code
of Ethics. As required by the NASDAQ corporate governance listing standards, the Audit Committee of our Board of Directors is also
required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S-K).
Recent Developments
Dividend
On November 5, 2012,
the Board of Directors declared monthly dividends of $0.077, $0.077 and $0.077 per share payable on February 15, 2013 for holders
of record at January 31, 2013, March 15, 2013 for holders of record at February 28, 2013 and April 15, 2013 for holders of record
at March 29, 2013.
Recent Portfolio
Activity
On October 31, 2012,
the Company extended the loan to Ygnition Networks, Inc. through December 31, 2012.
On November 1, 2012,
the Company extended the loan to Attention Transit Advertising Systems, LLC through May 31, 2013.
Subsequent to September
30, 2012, the Company increased the availability under the Global Energy Efficiency Holdings, Inc. revolving loan facility to $3,250,000
from $2,250,000.
On November 2, 2012,
The Selling Source, LLC pre-paid, at par, $1,140,496 of its loan from the Company.
Credit Facility
On October 31, 2013,
the Company re-extended the maturity of the Credit Facility through December 31, 2013.