PhenixFIN Corp
For the period ended Dec 31, 2024. Filed Feb 7, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Dec 31, 2024 · Filed Feb 7, 2025
PFX$42.03+1.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0001213900-24-065749
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-12-31; filed 2025-02-07.
0001213900-25-011052
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 130 previous paragraphs and 121 current paragraphs.
80 unchanged; 32 reworded; 8 added; 17 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 59 previous and 60 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
The large-scale invasion of Ukraine by Russia in February 2022 resulted in sanctions and market disruptions, including declines in regional and global stock markets, unusual volatility in global commodity markets and significant devaluations of Russian currency. The extent and duration of the military action are impossible to predict but could be significant. Market disruption caused by the Russian military action, and any counter measures or responses thereto (including international sanctions, a downgrade in a country’s credit rating, purchasing and financing restrictions, boycotts, tariffs, changes in consumer or purchaser preferences, cyberattacks and espionage) could continue to have severe adverse impacts on regional and/or global securities and commodities markets, including markets for oil and natural gas. These impacts may include reduced market liquidity, distress in credit markets, further disruption of global supply chains, increased risk of inflation, and limited access to investments in certain international markets and/or issuers. In addition, the current conflict in the Middle East and terrorist acts may cause significant volatility in the markets and/or market disruptions.
Current report
In December 2024, pursuant to the CIP, the Compensation Committee approved awards for Mr. Lorber and Ms. McMillan for the three-year performance period commencing on October 1, 2024 and ending on September 30, 2027 (the “2025 LTIP Plan”). Each participant is eligible to receive an amount of cash equal to a percentage of their target award amount set forth above based on the factors described above. The threshold, target, and maximum performance levels are structured similar to those of the 2022 LTIP Plan. The Compensation Committee, in approving the awards, evaluated each Performance Goal separately.
Current report
The Target Performance Award for the 2025 LTIP Plan for each of Mr. Lorber and Ms. McMillan is $1,000,000 and $425,000, respectively.
Current report
During the three months ended December 31, 2024 and 2023, the Company accrued $326,320 and $304,800, respectively, for these awards.
Current report
On October 1, 2024, the Company consummated the acquisition of approximately 80% of the equity of The National Security Group, an Alabama based insurance holding company (“NSG”). NSG is a nationwide underwriter of life, accident, and health insurance. In addition, NSG is a specialty underwriter of property and casualty insurance throughout the southeast, other than Florida and Louisiana. The Company has entered into a contract with NSG to manage a portion of its investment assets.
Current report
On February 21, 2024, the Pledge and Security Agreement was amended to (i) release and terminate the security interest in the equity interest of FlexFIN, LLC, pledged by PhenixFIN Investment Holdings LLC, (ii) grant a security interest in the membership interest of FlexFIN Holdco LLC, pledged by PhenixFIN Investment Holdings LLC, and (iii) reflect equity interests of certain subsidiaries held by the Company and its subsidiary in the exhibits.
Current report
On August 5, 2024, the Pledge and Security Agreement was further amended to join an additional subsidiary of the Company as a Guarantor and grant a security interest in the equity interest of such additional subsidiary.
Current report
On September 30, 2024, the Pledge and Security Agreement was further amended to exclude assets owned by excluded subsidiaries from the collateral package and reflect the equity interest of an additional subsidiary of the Company in the exhibits.
Removed paragraphs (17)
Previous report
In February 2022, Russia launched a large-scale invasion of Ukraine. The extent and duration of Russian military action in the Ukraine, resulting sanctions and resulting future market disruptions, including declines in stock markets in Russia and elsewhere and the value of the ruble against the U.S. dollar, are impossible to predict, but have been and could continue to be significant. Any such disruptions caused by Russian military or other actions (including cyberattacks and espionage) or resulting from actual or threatened responses to such actions have caused and could continue to cause disruptions to portfolio companies located in Europe or that have substantial business relationships with European or Russian companies.
Previous report
The recent outbreak of hostilities in the Middle East could also escalate to nearby areas.
Previous report
On December 21, 2020, the Company announced that it completed the application process for and was authorized to transfer the listing of its shares of common stock to the NASDAQ Global Market. The listing and trading of the common stock on the NYSE ceased at the close of trading on December 31, 2020. Since January 4, 2021, the common stock trades on the NASDAQ Global Market under the trading symbol “PFX.”
Previous report
During the three and nine months ended June 30, 2024, the Company recorded an expense of $684,735 and $1,494,425, respectively, for these awards. During the three and nine months ended June 30, 2023, the Company recorded an expense of $159,000 and $159,000, respectively, for these awards.
Previous report
During the three and nine months ended June 30, 2023, we recognized $1.3 million and $2.1 million of realized losses, respectively on our portfolio investments. The realized losses were primarily due to the write off of Walker Edison Furniture Company for $2.1 million and proceeds from Footprint for $1.2 million of a gain.
Previous report
For the nine months ended June 30, 2024, we had $1.1 million of net unrealized appreciation on investments. The net unrealized appreciation resulted from the reversal of the unrealized loss on 1888 Industrial Services and unrealized appreciation primarily on Chimera Investment Corporation, FST Holdings Parent LLC, Power Stop LLC, and PHH Mortgage Corporation, offset by the reversal of the unrealized gain on Maritime Wireless Holdings and Kemmerer Operations, LLC.
Previous report
For the nine months ended June 30, 2023, we had $17.1 million of net unrealized appreciation on investments. The net unrealized appreciation resulted from fair market value appreciation primarily attributable to Level 1 assets along with Kemmerer Operations, Maritime Wireless, the reversal of the realized loss on Walker Edison which was offset by the unrealized depreciation on Lucky Bucks.
Previous report
On March 18, 2013, the Company issued $60.0 million in aggregate principal amount of 2023 Notes. As of March 30, 2016, the 2023 Notes may be redeemed in whole or in part at any time or from time to time at the Company’s option. On March 26, 2013, the Company closed an additional $3.5 million in aggregate principal amount of 2023 Notes, pursuant to the partial exercise of the underwriters’ option to purchase additional notes. The 2023 Notes bore interest at a rate of 6.125% per year, payable quarterly on March 30, June 30, September 30 and December 30 of each year, beginning June 30, 2013.
Previous report
On December 12, 2016, the Company entered into an “At-The-Market” (“ATM”) debt distribution agreement with FBR Capital Markets & Co., through which the Company could offer for sale, from time to time, up to $40.0 million in aggregate principal amount of the 2023 Notes. The Company sold 1,573,872 of the 2023 Notes at an average price of $25.03 per note, and raised $38.6 million in net proceeds, through the ATM debt distribution agreement.
Previous report
On March 10, 2018, the Company redeemed $13.0 million in aggregate principal amount of the 2023 Notes. The redemption was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.3 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.
Previous report
On December 31, 2018, the Company redeemed $12.0 million in aggregate principal amount of the 2023 Notes. The redemption was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.2 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.
Previous report
On December 21, 2020, the Company announced that it completed the application process for and was authorized to transfer the listing of the 2023 Notes to the NASDAQ Global Market. The listing and trading of the 2023 Notes on the NYSE ceased at the close of trading on December 31, 2020. Effective January 4, 2021, the 2023 Notes trade on the NASDAQ Global Market under the trading symbol “PFXNL.”
Previous report
On November 15, 2021, the Company caused notices to be issued to the holders of the 2023 Notes regarding the Company’s exercise of its option to redeem $55,325,000 in aggregate principal amount of the issued and outstanding 2023 Notes on December 16, 2021. The redemption was accounted for as a debt extinguishment in accordance with ASC 470-50, Modifications and Extinguishments, which resulted in a realized loss of $0.3 million and was recorded on the Consolidated Statements of Operations as a loss on extinguishment of debt.
Previous report
On December 15, 2022, the Company caused notices to be issued to the holders of its 2023 Notes regarding the Company’s exercise of its option to redeem $22,521,800 in aggregate principal amount of issued and outstanding 2023 Notes, comprising all issued and outstanding 2023 Notes, at a price equal to 100% of the principal amount of the 2023 Notes, plus accrued and unpaid interest thereon from September 30, 2022, through, but excluding, January 17, 2023 in accordance with the terms of the indenture governing the 2023 Notes. The redemption was completed on January 17, 2023. The Company funded the redemption of the 2023 Notes with loans obtained under the Credit Facility, as described earlier in this section.
Previous report
2028 Notes
Previous report
In December 2023, the Company established a subsidiary to serve as a regulated insurance company. The Company purchased 100,000 shares of the subsidiary’s common stock for a purchase price of $1.00 per share on February 8, 2024. This subsidiary also entered into a merger agreement pursuant to which it agreed to acquire a controlling interest in VR Insurance SPV, LLC, a company primarily engaged in the insurance business through its subsidiaries (“VR”), and to provide additional capital to such company. The Company’s total investment in the insurance subsidiary and VR is expected to approximate $49 million. The merger transaction is presently expected to close during 2024, subject to various closing conditions, including insurance regulatory approvals.
Previous report
We intend to pay dividends to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to pay a specified level of dividends or year-to-year increases in dividends. In addition, the inability to satisfy the asset coverage test applicable to us as a BDC could limit our ability to pay dividends. All dividends will be paid at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our RIC tax treatment, compliance with applicable BDC regulations and such other factors as our board of directors may deem relevant from time to time. We cannot assure you that we will pay dividends to our stockholders in the future.
Reworded paragraphs (32)
Previous wording
In recent years, the Federal Reserve raised short-term interest rates and has indicated additional interest rate increases may come. Changing interest rates may have unpredictable effects on markets, may result in heightened market volatility and may detract from our performance to the extent we are exposed to such interest rates and/or volatility. In periods of rising interest rates, such as the current interest rate environment, to the extent we borrow money subject to a floating interest rate, our cost of funds would increase, which could reduce our net investment income. Further, rising interest rates could also adversely affect our performance if such increases cause our borrowing costs to rise at a rate in excess of the rate that our investments yield. Further, rising interest rates could also adversely affect our performance if we hold investments with floating interest rates, subject to specified minimum interest rates (such as a SOFR floor), while at the same time engaging in borrowings subject to floating interest rates not subject to such minimums. In such a scenario, rising interest rates may increase our interest expense, even though our interest income from investments is not increasing in a corresponding manner as a result of such minimum interest rates.
Current wording
In the past, the Federal Reserve raised short-term interest rates. Changing interest rates may have unpredictable effects on markets, may result in heightened market volatility and may detract from our performance to the extent we are exposed to such interest rates and/or volatility. In periods of rising interest rates, such as the current interest rate environment, to the extent we borrow money subject to a floating interest rate, our cost of funds would increase, which could reduce our net investment income. Further, rising interest rates could also adversely affect our performance if such increases cause our borrowing costs to rise at a rate in excess of the rate that our investments yield. Further, rising interest rates could also adversely affect our performance if we hold investments with floating interest rates, subject to specified minimum interest rates (such as a SOFR floor), while at the same time engaging in borrowings subject to floating interest rates not subject to such minimums. In such a scenario, rising interest rates may increase our interest expense, even though our interest income from investments is not increasing in a corresponding manner as a result of such minimum interest rates.
Previous wording
If general interest rates continue to rise, there is a risk that the portfolio companies in which we hold floating rate securities will be unable to pay escalating interest amounts, which could result in a default under their loan documents with us. Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. In addition, rising interest rates may increase pressure on us to provide fixed rate loans to our portfolio companies, which could adversely affect our net investment income, as increases in our cost of borrowed funds would not be accompanied by increased interest income from such fixed-rate investments
Current wording
If general interest rates rise, there is a risk that the portfolio companies in which we hold floating rate securities will be unable to pay escalating interest amounts, which could result in a default under their loan documents with us. Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. In addition, rising interest rates may increase pressure on us to provide fixed rate loans to our portfolio companies, which could adversely affect our net investment income, as increases in our cost of borrowed funds would not be accompanied by increased interest income from such fixed-rate investments
Previous wording
We are an internally-managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. In addition, we have elected, and intend to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. Through December 31, 2020, we were an externally managed company. Since January 1, 2021, we have operated under such internalized management structure.
Current wording
We are an internally-managed non-diversified closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. In addition, we have elected, and intend to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code. Through December 31, 2020, we were an externally managed company. Since January 1, 2021, we have operated under our present internalized management structure.
Previous wording
We generate revenue in the form of interest income on the debt that we hold and capital gains, if any, on warrants or other equity interests that we may acquire in portfolio companies. We invest our assets primarily in privately held companies with enterprise or asset values between $25 million and $250 million and generally focus on investment sizes of $10 million to $50 million. We believe that pursuing opportunities of this size offers several benefits including reduced competition, a larger investment opportunity set and the ability to minimize the impact of financial intermediaries. We expect our debt investments to bear interest at either a fixed or floating rate. Interest on debt will be payable generally either monthly or quarterly. In some cases our debt investments may provide for a portion of the interest to be PIK. To the extent interest is PIK, it will be payable through the increase of the principal amount of the obligation by the amount of interest due on the then-outstanding aggregate principal amount of such obligation. The principal amount of the debt and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance or investment management services and possibly consulting fees. Any such fees will be recognized as earned.
Current wording
We generate revenue in the form of interest income on the debt that we hold and dividends and capital gains, if any, on our equity investments that we may acquire in portfolio companies. We invest our assets primarily in privately held companies with enterprise or asset values between $25 million and $250 million and generally focus on investment sizes of $10 million to $50 million. We believe that pursuing opportunities of this size offers several benefits including reduced competition, a larger investment opportunity set and the ability to minimize the impact of financial intermediaries. We expect our debt investments to bear interest at either a fixed or floating rate. Interest on debt will be payable generally either monthly or quarterly. In some cases our debt investments may provide for a portion of the interest to be PIK. To the extent interest is PIK, it will be payable through the increase of the principal amount of the obligation by the amount of interest due on the then-outstanding aggregate principal amount of such obligation. The principal amount of the debt and any accrued but unpaid interest will generally become due at the maturity date. In addition, we may generate revenue in the form of commitment, origination, structuring or diligence fees, fees for providing managerial assistance or investment management services and possibly consulting fees. Any such fees will be recognized as earned.
Previous wording
In periods prior to December 31, 2020, our primary operating expenses included management and incentive fees pursuant to the investment management agreement we had with MCC Advisors and overhead expenses, including our allocable portion of our administrator’s overhead under the administration agreement, which were paid during the quarter ended March 31, 2021. Our management and incentive fees compensated MCC Advisors for its work in identifying, evaluating, negotiating, closing and monitoring our investments. On November 18, 2020, the board of directors adopted an internally managed structure, effective January 1, 2021, under which we bear all costs and expenses of our operations and transactions, including those relating to:
Current wording
Under our internally managed structure, we bear all costs and expenses of our operations and transactions, including those relating to:
Previous wording
In connection with the approval of the CIP, the Compensation Committee in April 2022 approved awards for the three-year performance period commencing on October 1, 2021 and ending on September 30, 2024 (the “2022 LTIP Plan”). Each participant is eligible to receive an amount of cash equal to 0%-200% of the target award set forth in the table below (“Target Performance Award”), based on the achievement of net asset value (“NAV”) and NAV per share goals (weighted at 30% and 70%, respectively) as of the end of the performance period (the “Performance Goals”). Performance is evaluated separately for each Performance Goal. No payment is made with respect to a Performance Goal if a threshold level of performance is not achieved. Each Performance Goal is subject to (i) a threshold level of performance at which a percentage of the Target Performance Award attributable to that Performance Goal may be paid and below which no payment is made pursuant to an award, (ii) a target level of performance at which 100% of the Target Performance Award attributable to that Performance Goal may be paid and (iii) a maximum level of performance, at which 200% of the Target Performance Award attributable to that Performance Goal may be paid, in each case subject to such other terms and conditions of an award. Between threshold, target and maximum performance levels for each Performance Goal, the portion of that award attributed to the Performance Goals shall be interpolated in a linear progression.
Current wording
In connection with the approval of the CIP, the Compensation Committee in April 2022 approved awards for the three-year performance period commencing on October 1, 2021 and ending on September 30, 2024 (the “2022 LTIP Plan”). Each participant is eligible to receive an amount of cash equal to 0%-200% of the target award set forth in the table below (“Target Performance Award”), based on the achievement of net asset value (“NAV”) and NAV per share goals (weighted at 30% and 70%, respectively) as of the end of the performance period (the “Performance Goals”). Performance is evaluated separately for each Performance Goal. No payment is made with respect to a Performance Goal if a threshold level of performance is not achieved. Each Performance Goal is subject to (i) a threshold level of performance at which a percentage of the Target Performance Award attributable to that Performance Goal may be paid and below which no payment is made pursuant to an award, (ii) a target level of performance at which 100% of the Target Performance Award attributable to that Performance Goal may be paid and (iii) a maximum level of performance, at which 200% of the Target Performance Award attributable to that Performance Goal may be paid, in each case subject to such other terms and conditions of an award. Between threshold, target and maximum performance levels for each Performance Goal, the portion of that award attributed to the Performance Goals shall be interpolated in a linear progression. On September 30, 2024, the performance cycle for the 2022 LTIP Plan ended. Based on achievement of the Performance Goals, Mr. Lorber received $1,403,530 and Ms. McMillan received $599,260 pursuant to the 2022 LTIP Plan awards (the “2022 Awards”).
Previous wording
As of June 30, 2024 and September 30, 2023, our portfolio had a fair market value of approximately $233.7 million and $226.5 million, respectively.
Current wording
As of December 31, 2024 and September 30, 2024, our portfolio had a fair market value of approximately $300.1 million and $227.9 million, respectively.
Previous wording
During the nine months ended June 30, 2024, we received proceeds from sale and settlements of investments of $87.9 million, including principal proceeds, net realized gains on investments of $7.1 million and invested $85.5 million.
Current wording
During the three months ended December 31, 2024, we received proceeds from sale and settlements of investments of $30.0 million, including principal proceeds, net realized gains on investments of $1.2 million and invested $100.9 million.
Previous wording
During the nine months ended June 30, 2023, we received proceeds from sale and settlements of investments of $39.8 million, including principal and dividend proceeds, realized net losses on investments of $2.1 million, and invested $49.3 million.
Current wording
During the three months ended December 31, 2023, we received proceeds from sale and settlements of investments of $22.1 million, including principal and dividend proceeds, realized net losses on investments of $0.2 million, and invested $14.3 million.
Previous wording
As of June 30, 2024, our income-bearing investment portfolio based upon cost represented 85.2% of our total portfolio of which 59.0% bore interest based on floating rates, such as SOFR or LIBOR, 17.8% bore interest at fixed rates, and 23.2% are income-producing equity investments. As of September 30, 2023, our income-bearing investment portfolio based upon cost represented 88.2% of our total portfolio of which 59.5% bore interest based on floating rates, such as LIBOR or SOFR, 13.9% bore interest at fixed rates, and 26.6% are income-producing equity investments. As of June 30, 2024, the Company had a weighted average yield of 13.8% on debt and other income producing investments. The weighted average yield of our total portfolio does not represent the total return to our stockholders.
Current wording
As of December 31, 2024, our income-bearing investment portfolio based upon cost represented 70.3% of our total portfolio of which 60.7% bore interest based on floating rates, such as SOFR or LIBOR, 14.0% bore interest at fixed rates, and 25.4% are income-producing equity investments. As of September 30, 2024, our income-bearing investment portfolio based upon cost represented 84.5% of our total portfolio of which 57.9% bore interest based on floating rates, such as LIBOR or SOFR, 17.0% bore interest at fixed rates, and 25.1% are income-producing equity investments. As of December 31, 2024, the Company had a weighted average yield of 13.3% on debt and other income producing investments. As of September 30, 2024, the Company had a weighted average yield of 12.3% on debt and other income producing investments. The weighted average yield of our total portfolio does not represent the total return to our stockholders.
Previous wording
Operating results for three and nine months ended June 30, 2024 and 2023 are as follows (dollars in thousands):
Current wording
Operating results for three months ended December 31, 2024 and 2023 are as follows (dollars in thousands):
Previous wording
For the three months ended June 30, 2024, investment income totaled $6.2 million, of which $4.2 million was attributable to portfolio interest, approximately $1.5 million was attributable to dividend income, $0.4 million was attributable to fee and other income, and $0.1 million was attributable to interest on cash and cash equivalents. For the nine months ended June 30, 2024, investment income totaled $16.6 million, of which $10.5 million was attributable to portfolio interest, approximately $5.2 million was attributable to dividend income, $0.5 million was attributable to fee and other income, and $0.4 million was attributable to interest on cash and cash equivalents. Dividend income was received from nine investments during the nine months ended June 30, 2024.
Current wording
For the three months ended December 31, 2024, investment income totaled $6.2 million, of which $3.8 million was attributable to portfolio interest, approximately $2.1 million was attributable to dividend income, $0.1 million was attributable to fee and other income, and $0.2 million was attributable to interest on cash and cash equivalents. Dividend income was received from eight investments during the three months ended December 31, 2024.
Previous wording
For the three months ended June 30, 2023, investment income totaled $4.8 million, of which $2.7 million was attributable to portfolio interest, approximately $1.9 million was attributable to dividend income, $0.1 million was attributable to fee and other income, and $0.1 million was attributable to interest on cash and cash equivalents. For the nine months ended June 30, 2023, investment income totaled $14.5 million, of which $8.0 million was attributable to portfolio interest, approximately $5.5 million was attributable to dividend income, $0.7 million was attributable to fee and other income, and $0.3 million was attributable to interest on cash and cash equivalents. Dividend income was received from ten investments during the nine months ended June 30, 2023.
Current wording
For the three months ended December 31, 2023, investment income totaled $5.7 million, of which $3.7 million was attributable to portfolio interest, approximately $2.0 million was attributable to dividend income, $0.0 thousand was attributable to fee and other income, and $41.1 thousand was attributable to interest on cash and cash equivalents. Dividend income was received from ten investments during the three months ended December 31, 2023.
Previous wording
Operating expenses for the three and nine months ended June 30, 2024 and 2023 are as follows (dollars in thousands):
Current wording
Operating expenses for the three months ended December 31, 2024 and 2023 are as follows (dollars in thousands):
Previous wording
For the three months ended June 30, 2024, total operating expenses increased by $0.6 million, or 17.5% compared to the three months ended June 30, 2023. For the nine months ended June 30, 2024, total operating expenses increased by $2.5 million, or 25.9% compared to the nine months ended June 30, 2023.
Current wording
For the three months ended December 31, 2024, total operating expenses increased by $0.6 million, or 14.4% compared to the three months ended December 31, 2023.
Previous wording
Interest and financing expenses for the three months ended June 30, 2024 increased by $0.3 million, or 21.7% compared to the three months ended June 30, 2023. Interest and financing expenses for the nine months ended June 30, 2024 increased by $0.8 million, or 19.9% compared to the nine months ended June 30, 2023. The increase in interest and financing expenses for the nine months ended June 30, 2024 was primarily due to increased borrowings on the credit facility.
Current wording
Interest and financing expenses for the three months ended December 31, 2024 increased by $1.0 million, or 65.2% compared to the three months ended December 31, 2023. The increase in interest and financing expenses for the three months ended December 31, 2024 was primarily due to increased borrowings on the Credit Facility.
Previous wording
Professional fees and general and administrative expenses for the three months ended June 30, 2024 increased by $0.1 million, or 16.9% compared to the three months ended June 30, 2023. Professional fees and general and administrative expenses for the nine months ended June 30, 2024 increased by $0.3 million, or 16.7% compared to the nine months ended June 30, 2023.
Current wording
Professional fees and general and administrative expenses for the three months ended December 31, 2024 decreased by $43 thousand, or 6.3% compared to the three months ended December 31, 2023.
Previous wording
During the three and nine months ended June 30, 2024, we recognized $8.7 million and $7.1 million of realized gains, respectively on our portfolio investments. The realized gains were primarily due to a realized gain on Maritime Wireless Holdings for $7.0 million and a realized gain on Kemmerer Operations, LLC for $8.5 million, offset by a loss on the sale of 1888 Industrial Services for $8.8 million.
Current wording
During the three months ended December 31, 2024, we recognized $1.2 million of realized gains on our portfolio investments. The realized gains were primarily due to a realized gain on PHH Mortgage Corp. for $0.8 million and a realized gain on Chimera Investment Corp for $0.3 million.
Previous wording
For the three months ended June 30, 2024, we had $8.1 million of net unrealized depreciation on investments. The net unrealized depreciation resulted from the reversal of the unrealized gain on Kemmerer Operations, LLC for $8.0 million and unrealized depreciation on ECC Capital Corp. for $1.2 million, offset by unrealized appreciation on JFL-NGS-WGS Partners, LLC for $1.1 million.
Current wording
For the three months ended December 31, 2024, we had $0.3 million of net unrealized depreciation on investments. The net unrealized depreciation resulted from the reversal of the unrealized gain on PHH Mortgage Corp. for $0.7 million, unrealized depreciation on Black Angus Steakhouses for $0.9 million, offset by unrealized appreciation on JFL-NGS-WGS Partners, LLC for $1.0 million.
Previous wording
For the three months ended June 30, 2023, we had $9.0 million of net unrealized appreciation on investments. The net unrealized appreciation resulted from fair market value appreciation primarily attributable to Kemmerer Operations, Maritime Wireless, the reversal of the realized loss on Walker Edison which was offset by the unrealized depreciation on Lucky Bucks.
Current wording
For the three months ended December 31, 2023, we had $2.6 million of net unrealized appreciation on investments. The net unrealized appreciation was comprised of $6.0 million of net unrealized appreciation that resulted from fair market value appreciation primarily attributable to Maritime Wireless, 1888 Industrial Services, and level one investments, and $3.4 million of net unrealized depreciation primarily attributable to Kemmerer Operations and JFL-NGS-WCS Partners.
Previous wording
Provision for Deferred Taxes on Unrealized Depreciation on Investments
Current wording
Provision for Deferred Taxes
Previous wording
Certain consolidated subsidiaries of ours are subject to U.S. federal and state income taxes. These taxable subsidiaries are not consolidated with the Company for income tax purposes, but are consolidated for GAAP purposes, and may generate income tax liabilities or assets from temporary differences in the recognition of items for financial reporting and income tax purposes at the subsidiaries. For the three and nine months ended June 30, 2024 and 2023, the Company did not record a change in provision for deferred taxes on the unrealized (appreciation)/depreciation on investments.
Current wording
Certain consolidated subsidiaries of ours are subject to U.S. federal and state income taxes. These taxable subsidiaries are not consolidated with the Company for income tax purposes, but are consolidated for GAAP purposes, and may generate income tax liabilities or assets from temporary differences in the recognition of items for financial reporting and income tax purposes at the subsidiaries. For the three months ended December 31, 2024 and 2023, the Company did not record a change in provision for deferred taxes.
Previous wording
For the three months ended June 30, 2024, we recorded a net increase in net assets resulting from operations of $2.6 million compared to a net increase in net assets resulting from operations of $8.9 million for the three months ended June 30, 2023. Total Net Assets decreased from the last quarter due to share repurchases in the amount of $31.2 thousand. Based on 2,019,786 and 2,090,691 weighted average common shares outstanding for the three months ended June 30, 2024 and 2023, respectively, our per share net increase in net assets resulting from operations was $1.29 for the three months ended June 30, 2024 and $4.26 for the three months ended June 30, 2023.
Current wording
For the three months ended December 31, 2024, we recorded a net increase in net assets resulting from operations of $2.5 million compared to a net increase in net assets resulting from operations of $4.5 million for the three months ended December 31, 2023. Based on 2,019,778 and 2,072,694 weighted average common shares outstanding for the three months ended December 31, 2024 and 2023, respectively, our per share net increase in net assets resulting from operations was $1.22 for the three months ended December 31, 2024 and $2.19 for the three months ended December 31, 2023.
Previous wording
As of June 30, 2024 and September 30, 2023, we had $8.9 million and $6.0 million, respectively, in cash and cash equivalents.
Current wording
As of December 31, 2024 and September 30, 2024, we had $7.2 million and $67.6 million, respectively, in cash and cash equivalents.
Previous wording
On December 15, 2022, the Company and its wholly-owned subsidiaries executed a three-year, $50 million revolving credit facility (the “Credit Facility”) with WoodForest Bank, N.A. (“WoodForest”), Valley National Bank, and Axiom Bank, (collectively, the “Lenders”). WoodForest is the administrative agent, sole bookrunner and sole lead arranger. As of June 30, 2024, there was $27.6 million outstanding borrowings by the Company under the Credit Facility.
Current wording
On December 15, 2022, the Company and its wholly-owned subsidiaries executed a three-year, $50 million revolving credit facility (the “Credit Facility”) with WoodForest Bank, N.A. (“WoodForest”), Valley National Bank, and Axiom Bank, (collectively, the “Lenders”). WoodForest is the administrative agent, sole bookrunner and sole lead arranger. The Credit Facility has a maturity date of December 15, 2025. As of December 31, 2024, there was $84.0 million outstanding borrowings by the Company under the Credit Facility.
Previous wording
On February 21, 2024 (the “Effective Date”), in order to increase the size of the Credit Facility, the parties to the Credit Facility amended the terms of the Credit Facility, effective as of the Effective Date (the “Amendment”). The Amendment increased the principal amount of loan available under the Credit Facility by $12.5 million to $62.5 million. All other material terms of the Credit Facility remain unchanged.
Current wording
On February 21, 2024 (the “First Amendment Effective Date”), in order to increase the size of the Credit Facility, the parties to the Credit Facility amended the terms of the Credit Facility, effective as of the First Amendment Effective Date (the “First Amendment”). The First Amendment increased the principal amount of loan available under the Credit Facility by $12.5 million to $62.5 million. All other material terms of the Credit Facility remain unchanged.
Previous wording
As of June 30, 2024 and September 30, 2023, we had commitments under loan and financing agreements to fund up to $2.9 million to three portfolio companies and $3.4 million to four portfolio companies, respectively. These commitments are primarily composed of senior secured term loans and revolvers, and the determination of their fair value is included in the Consolidated Schedule of Investments. The commitments are generally subject to the borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. The terms of the borrowings and financings subject to commitment are comparable to the terms of other loan and equity securities in our portfolio. A summary of the composition of the unfunded commitments as of June 30, 2024 and September 30, 2023 is shown in the table below (dollars in thousands):
Current wording
As of December 31, 2024 and September 30, 2024, we had commitments under loan and financing agreements to fund up to $2.2 million to three portfolio companies and $1.6 million to two portfolio companies, respectively. These commitments are primarily composed of senior secured term loans and revolvers, and the determination of their fair value is included in the Consolidated Schedule of Investments. The commitments are generally subject to the borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. The terms of the borrowings and financings subject to commitment are comparable to the terms of other loan and equity securities in our portfolio. A summary of the composition of the unfunded commitments as of December 31, 2024 and September 30, 2024 is shown in the table below (dollars in thousands):
Previous wording
The following table shows our payment obligations for repayment of debt and other contractual obligations at June 30, 2024 (dollars in thousands):
Current wording
The following table shows our payment obligations by calendar year for repayment of debt and other contractual obligations at December 31, 2024 (dollars in thousands):
Previous wording
The Company did not declare any distribution payments during the three and nine months ended June 30, 2023.
Current wording
On May 9, 2024, the Board of Directors declared a special dividend in the amount of $2,645,925. This dividend was paid on June 10, 2024 to stockholders of record as of May 27, 2024. On December 13, 2024, the Company identified that it did not distribute at least 90% of its investment company taxable income for the tax year ended September 30, 2023. The Company filed Form 8927 on December 16, 2024 notifying the IRS. On February 6, 2025, the Board of Directors declared a special dividend in the amount of $2,895,785 for a record date of February 17, 2025 and payable on February 18, 2025. The Company did not declare any distribution payments during the three months ended December 31, 2024 and 2023.
Previous wording
We have adopted a formal business code of conduct and ethics that governs the conduct of our CEO, CFO, chief accounting officer (which role is currently fulfilled by our CFO) and controller (Covered Officers). Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Delaware General Corporation Law. Our Code of Business Conduct and Ethics requires that all Covered Officers promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between an individual’s personal and professional relationships. Pursuant to our Code of Business Conduct and Ethics, each Covered Officer must disclose to the Company’s CCO any conflicts of interest, or actions or relationships that might give rise to a conflict. Any approvals or waivers under our Code of Business Conduct and Ethics must be considered by the disinterested directors.
Current wording
We have adopted a formal business code of conduct and ethics that governs the conduct of our CEO, CFO, chief accounting officer (which role is currently fulfilled by our CFO) and controller (Covered Officers). Our officers and directors also remain subject to the duties imposed by both the 1940 Act and the Delaware General Corporation Law. Our Code of Business Conduct and Ethics requires that all Covered Officers promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between an individual’s personal and professional relationships. Pursuant to our Code of Business Conduct and Ethics, each Covered Officer must disclose to the Company’s CCO any conflicts of interest, or actions or relationships that might give rise to a conflict. Any approvals or waivers under our Code of Business Conduct and Ethics must be considered by the disinterested directors. During the year ended September 30, 2024, the Company entered into a related party transaction with NVTN LLC whereby the $11.9 million of equity of Maritime Wireless Holdings LLC was transferred to NVTN LLC.
Previous wording
*Non-accrual:*We place loans on non-accrual status when principal and interest payments are past due by 90 days or more, or when there is reasonable doubt that we will collect principal or interest. Accrued interest is generally reversed when a loan is placed on non-accrual. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in our management’s judgment, are likely to remain current. At June 30, 2024, certain investments in three portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $3.3 million, or 1.4% of the fair value of our portfolio. At September 30, 2023, certain investments in four portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $6.5 million, or 2.9% of the fair value of our portfolio.
Current wording
*Non-accrual:*We place loans on non-accrual status when principal and interest payments are past due by 90 days or more, or when there is reasonable doubt that we will collect principal or interest. Accrued interest is generally reversed when a loan is placed on non-accrual. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in our management’s judgment, are likely to remain current. At December 31, 2024, certain investments in three portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $1.5 million, or 0.5% of the fair value of our portfolio. At September 30, 2024, certain investments in three portfolio companies held by the Company were on non-accrual status with a combined fair value of approximately $2.4 million, or 1.1% of the fair value of our portfolio.
Previous wording
On May 9, 2024, the Board of Directors declared a special dividend of $1.31 per share. This dividend was paid on June 10, 2024 to stockholders of record as of May 27, 2024.
Current wording
On February 6, 2025, the Board of Directors declared a special dividend in the amount of $2,895,785 for a record date of February 17, 2025 and payable on February 18, 2025.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
During the three months ended December 31, 2023, we recognized $0.2 million of realized gains on our portfolio investments. The realized gains were primarily due to additional proceeds received from two investments.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
For the nine months ended June 30, 2024, we recorded a net increase in net assets resulting from operations of $12.5 million compared to a net increase in net assets resulting from operations of $19.6 million for the nine months ended June 30, 2023. Total Net Assets decreased from the last quarter due to share repurchases in the amount of $2.4 million. Based on 2,047,127 and 2,095,591 weighted average common shares outstanding for the nine months ended June 30, 2024 and 2023, respectively, our per share net increase in net assets resulting from operations was $6.11 for the nine months ended June 30, 2024 and $9.34 for the nine months ended June 30, 2023.