UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2020
| ¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
| Commission File Number |
Exact name of registrant as specified in its charter, address of principal executive office, telephone number, and state or other jurisdiction of incorporation or organization |
I.R.S. Employer Identification Number | ||
| 814-01022 | Capitala Finance Corp. 4201 Congress St., Suite 360 Charlotte, North Carolina 28209 State of Incorporation: Maryland Telephone: (704) 376-5502 |
90-0945675 |
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading symbol(s) | Name of Each Exchange on Which Registered | ||
|
Common Stock, par value $0.01 per share 5.75% Convertible Notes due 2022 6.00% Notes due 2022 |
CPTA CPTAG CPTAL |
NASDAQ Global Select Market NASDAQ Capital Market NASDAQ Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
| Yes x | No ¨ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
| Yes ¨ | No ¨ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ¨ | Accelerated filer | x | |
| Non-accelerated filer | ¨ | Smaller reporting company | ¨ | |
| Emerging growth company | ¨ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes ¨ | No x |
The number of shares of Capitala Finance Corp.’s common stock, $0.01 par value, outstanding as of August 3, 2020 was 16,266,484.
TABLE OF CONTENTS
2
Item 1. Consolidated Financial Statements
Capitala Finance Corp.
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share data)
| As of | ||||||||
| June 30, 2020 | December 31, 2019 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Investments at fair value: | ||||||||
| Non-control/non-affiliate investments (amortized cost of $211,569 and $250,433, respectively) | $ | 190,650 | $ | 241,046 | ||||
| Affiliate investments (amortized cost of $84,403 and $80,756, respectively) | 87,679 | 98,763 | ||||||
| Control investments (amortized cost of $9,044 and $22,692, respectively) | 8,937 | 22,723 | ||||||
| Total investments at fair value (amortized cost of $305,016 and $353,881, respectively) | 287,266 | 362,532 | ||||||
| Cash and cash equivalents | 95,226 | 62,321 | ||||||
| Interest and dividend receivable | 2,078 | 1,745 | ||||||
| Prepaid expenses | 640 | 624 | ||||||
| Deferred tax asset, net | - | - | ||||||
| Other assets | 301 | 115 | ||||||
| Total assets | $ | 385,511 | $ | 427,337 | ||||
| LIABILITIES | ||||||||
| SBA Debentures (net of deferred financing costs of $758 and $1,006, respectively) | $ | 149,242 | $ | 148,994 | ||||
| 2022 Notes (net of deferred financing costs of $1,164 and $1,447, respectively) | 73,836 | 73,553 | ||||||
| 2022 Convertible Notes (net of deferred financing costs of $736 and $916, respectively) | 51,352 | 51,172 | ||||||
| Credit Facility (net of deferred financing costs of $0 and $1,165, respectively) | - | (1,165 | ) | |||||
| Management and incentive fees payable | 3,586 | 3,713 | ||||||
| Interest and financing fees payable | 2,429 | 2,439 | ||||||
| Accounts payable and accrued expenses | 11 | 518 | ||||||
| Total liabilities | $ | 280,456 | $ | 279,224 | ||||
| Commitments and contingencies (Note 2) | ||||||||
| NET ASSETS | ||||||||
| Common stock, par value $0.01, 100,000,000 common shares authorized, 16,266,484 and 16,203,769 common shares issued and outstanding, respectively | $ | 163 | $ | 162 | ||||
| Additional paid in capital | 238,220 | 237,886 | ||||||
| Total distributable loss | (133,328 | ) | (89,935 | ) | ||||
| Total net assets | $ | 105,055 | $ | 148,113 | ||||
| Total liabilities and net assets | $ | 385,511 | $ | 427,337 | ||||
| Net asset value per share | $ | 6.46 | $ | 9.14 | ||||
See accompanying notes to consolidated financial statements.
3
Capitala Finance Corp.
Consolidated Statements of Operations
(in thousands, except share and per share data)
(unaudited)
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2020 | 2019 | 2020 | 2019 | |||||||||||||
| INVESTMENT INCOME | ||||||||||||||||
| Interest and fee income: | ||||||||||||||||
| Non-control/non-affiliate investments | $ | 4,693 | $ | 7,541 | $ | 9,400 | $ | 14,826 | ||||||||
| Affiliate investments | 1,632 | 2,281 | 3,311 | 4,680 | ||||||||||||
| Control investments | 103 | 582 | 206 | 1,306 | ||||||||||||
| Total interest and fee income | 6,428 | 10,404 | 12,917 | 20,812 | ||||||||||||
| Payment-in-kind interest and dividend income: | ||||||||||||||||
| Non-control/non-affiliate investments | 378 | 453 | 714 | 895 | ||||||||||||
| Affiliate investments | 188 | 227 | 368 | 376 | ||||||||||||
| Control investments | - | 44 | - | 372 | ||||||||||||
| Total payment-in-kind interest and dividend income | 566 | 724 | 1,082 | 1,643 | ||||||||||||
| Dividend income: | ||||||||||||||||
| Non-control/non-affiliate investments | - | - | - | 1,281 | ||||||||||||
| Affiliate investments | - | - | 25 | - | ||||||||||||
| Control investments | - | 425 | - | 450 | ||||||||||||
| Total dividend income | - | 425 | 25 | 1,731 | ||||||||||||
| Interest income from cash and cash equivalents | 5 | 37 | 49 | 88 | ||||||||||||
| Total investment income | 6,999 | 11,590 | 14,073 | 24,274 | ||||||||||||
| EXPENSES | ||||||||||||||||
| Interest and financing expenses | 4,885 | 4,228 | 8,711 | 8,641 | ||||||||||||
| Base management fee | 1,666 | 2,020 | 3,423 | 4,138 | ||||||||||||
| Incentive fees | - | 463 | - | 1,497 | ||||||||||||
| General and administrative expenses | 1,057 | 1,145 | 2,561 | 2,129 | ||||||||||||
| Expenses before incentive fee waiver | 7,608 | 7,856 | 14,695 | 16,405 | ||||||||||||
| Incentive fee waiver (See Note 6) | - | (288 | ) | - | (288 | ) | ||||||||||
| Total expenses | 7,608 | 7,568 | 14,695 | 16,117 | ||||||||||||
| NET INVESTMENT INCOME (LOSS) | (609 | ) | 4,022 | (622 | ) | 8,157 | ||||||||||
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||||||||||||||
| Net realized gain (loss) on investments: | ||||||||||||||||
| Non-control/non-affiliate investments | (14,142 | ) | 365 | (13,174 | ) | (3,544 | ) | |||||||||
| Affiliate investments | 1,341 | 2,387 | 1,341 | 2,276 | ||||||||||||
| Control investments | (484 | ) | (17,829 | ) | (484 | ) | (19,656 | ) | ||||||||
| Net realized loss on investments | (13,285 | ) | (15,077 | ) | (12,317 | ) | (20,924 | ) | ||||||||
| Net unrealized appreciation (depreciation) on investments: | ||||||||||||||||
| Non-control/non-affiliate investments | 16,993 | (3,018 | ) | (11,532 | ) | 3,021 | ||||||||||
| Affiliate investments | (1,003 | ) | (4,669 | ) | (14,731 | ) | (4,937 | ) | ||||||||
| Control investments | 1,004 | (9,708 | ) | (138 | ) | (13,984 | ) | |||||||||
| Net unrealized appreciation (depreciation) on investments | 16,994 | (17,395 | ) | (26,401 | ) | (15,900 | ) | |||||||||
| Net realized and unrealized gain (loss) on investments | 3,709 | (32,472 | ) | (38,718 | ) | (36,824 | ) | |||||||||
| Tax provision | - | (694 | ) | - | (628 | ) | ||||||||||
| Total net realized and unrealized gain (loss) on investments, net of taxes | 3,709 | (33,166 | ) | (38,718 | ) | (37,452 | ) | |||||||||
| NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 3,100 | $ | (29,144 | ) | $ | (39,340 | ) | $ | (29,295 | ) | |||||
| NET INCREASE (DECREASE) IN NET ASSETS PER SHARE RESULTING FROM OPERATIONS – BASIC AND DILUTED | $ | 0.19 | $ | (1.81 | ) | $ | (2.42 | ) | $ | (1.82 | ) | |||||
| WEIGHTED AVERAGE COMMON STOCK OUTSTANDING – BASIC AND DILUTED | 16,266,484 | 16,096,678 | 16,243,538 | 16,079,885 | ||||||||||||
| DISTRIBUTIONS PAID PER SHARE | $ | - | $ | 0.25 | $ | 0.25 | $ | 0.50 | ||||||||
See accompanying notes to consolidated financial statements.
4
Capitala Finance Corp.
Consolidated Statements of Changes in Net Assets
(in thousands, except share data)
(unaudited)
| Common Stock | Additional | Total | ||||||||||||||||||
| For the Three Months Ended June 30, 2020 and 2019 | Number of Shares | Par Value | Paid in Capital | Distributable Loss | Total | |||||||||||||||
| BALANCE, March 31, 2020 | 16,266,484 | $ | 163 | $ | 238,220 | $ | (136,428 | ) | $ | 101,955 | ||||||||||
| Net investment loss | - | - | - | (609 | ) | (609 | ) | |||||||||||||
| Net realized loss on investments | - | - | - | (13,285 | ) | (13,285 | ) | |||||||||||||
| Net unrealized appreciation on investments | - | - | - | 16,994 | 16,994 | |||||||||||||||
| Tax provision | - | - | - | - | - | |||||||||||||||
| BALANCE, June 30, 2020 | 16,266,484 | $ | 163 | $ | 238,220 | $ | (133,328 | ) | $ | 105,055 | ||||||||||
| BALANCE, March 31, 2019 | 16,084,143 | $ | 161 | $ | 242,012 | $ | (55,439 | ) | $ | 186,734 | ||||||||||
| Net investment income | - | - | - | 4,022 | 4,022 | |||||||||||||||
| Net realized loss on investments | - | - | - | (15,077 | ) | (15,077 | ) | |||||||||||||
| Net unrealized depreciation on investments | - | - | - | (17,395 | ) | (17,395 | ) | |||||||||||||
| Tax provision | - | - | - | (694 | ) | (694 | ) | |||||||||||||
| Distributions to Shareholders: | ||||||||||||||||||||
| Stock issued under dividend reinvestment plan | 34,805 | - | 295 | - | 295 | |||||||||||||||
| Distributions declared | - | - | - | (4,022 | ) | (4,022 | ) | |||||||||||||
| BALANCE, June 30, 2019 | 16,118,948 | $ | 161 | $ | 242,307 | $ | (88,605 | ) | $ | 153,863 | ||||||||||
| Common Stock | Additional | Total | ||||||||||||||||||
| For the Six Months Ended June 30, 2020 and 2019 | Number of Shares | Par Value | Paid in Capital | Distributable Loss | Total | |||||||||||||||
| BALANCE, December 31, 2019 | 16,203,769 | $ | 162 | $ | 237,886 | $ | (89,935 | ) | $ | 148,113 | ||||||||||
| Net investment loss | - | - | - | (622 | ) | (622 | ) | |||||||||||||
| Net realized loss on investments | - | - | - | (12,317 | ) | (12,317 | ) | |||||||||||||
| Net unrealized depreciation on investments | - | - | - | (26,401 | ) | (26,401 | ) | |||||||||||||
| Tax provision | - | - | - | - | - | |||||||||||||||
| Distributions to Shareholders: | ||||||||||||||||||||
| Stock issued under dividend reinvestment plan | 62,715 | 1 | 334 | - | 335 | |||||||||||||||
| Distributions declared | - | - | - | (4,053 | ) | (4,053 | ) | |||||||||||||
| BALANCE, June 30, 2020 | 16,266,484 | $ | 163 | $ | 238,220 | $ | (133,328 | ) | $ | 105,055 | ||||||||||
| BALANCE, December 31, 2018 | 16,051,547 | $ | 161 | $ | 241,757 | $ | (51,274 | ) | $ | 190,644 | ||||||||||
| Net investment income | - | - | - | 8,157 | 8,157 | |||||||||||||||
| Net realized loss on investments | - | - | - | (20,924 | ) | (20,924 | ) | |||||||||||||
| Net unrealized depreciation on investments | - | - | - | (15,900 | ) | (15,900 | ) | |||||||||||||
| Tax provision | - | - | - | (628 | ) | (628 | ) | |||||||||||||
| Distributions to Shareholders: | ||||||||||||||||||||
| Stock issued under dividend reinvestment plan | 67,401 | - | 550 | - | 550 | |||||||||||||||
| Distributions declared | - | - | - | (8,036 | ) | (8,036 | ) | |||||||||||||
| BALANCE, June 30, 2019 | 16,118,948 | $ | 161 | $ | 242,307 | $ | (88,605 | ) | $ | 153,863 | ||||||||||
See accompanying notes to consolidated financial statements.
5
Capitala Finance Corp.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net decrease in net assets resulting from operations | $ | (39,340 | ) | $ | (29,295 | ) | ||
| Adjustments to reconcile net decrease in net assets resulting from operations to net cash provided by operating activities: | ||||||||
| Purchase of investments | (20,820 | ) | (34,924 | ) | ||||
| Repayments and sales of investments | 58,888 | 58,131 | ||||||
| Net realized loss on investments | 12,317 | 20,924 | ||||||
| Net unrealized depreciation on investments | 26,401 | 15,900 | ||||||
| Payment-in-kind interest and dividends | (1,082 | ) | (1,643 | ) | ||||
| Accretion of original issue discount on investments | (438 | ) | (520 | ) | ||||
| Amortization of deferred financing fees | 2,090 | 1,096 | ||||||
| Tax provision | - | 628 | ||||||
| Changes in assets and liabilities: | ||||||||
| Interest and dividend receivable | (333 | ) | 1,325 | |||||
| Prepaid expenses | (16 | ) | 237 | |||||
| Other assets | (186 | ) | (21 | ) | ||||
| Management and incentive fees payable | (127 | ) | 1,096 | |||||
| Interest and financing fees payable | (10 | ) | (387 | ) | ||||
| Accounts payable and accrued expenses | (507 | ) | (100 | ) | ||||
| NET CASH PROVIDED BY OPERATING ACTIVITIES | 36,837 | 32,447 | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Paydowns on SBA debentures | - | (15,700 | ) | |||||
| Proceeds from Credit Facility | - | 15,000 | ||||||
| Repayments on Credit Facility | - | (20,000 | ) | |||||
| Distributions paid to shareholders | (3,718 | ) | (7,486 | ) | ||||
| Deferred financing fees paid | (214 | ) | (82 | ) | ||||
| NET CASH USED IN FINANCING ACTIVITIES | (3,932 | ) | (28,268 | ) | ||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS | 32,905 | 4,179 | ||||||
| CASH AND CASH EQUIVALENTS, beginning of period | 62,321 | 39,295 | ||||||
| CASH AND CASH EQUIVALENTS, end of period | $ | 95,226 | $ | 43,474 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for interest | $ | 6,409 | $ | 7,279 | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS | ||||||||
| Distributions paid through dividend reinvestment plan share issuances | $ | 335 | $ | 550 | ||||
See accompanying notes to consolidated financial statements.
6
Capitala Finance Corp.
Consolidated Schedule of Investments
(in thousands, except for units/shares)
June 30, 2020
(unaudited)
| Portfolio Company, Country (1), (2), (3), (4), (5) | Industry | Type of Investment | Principal Amount | Cost | Fair Value | %
of Net Assets | ||||||||||||||
| Non-control/non-affiliated investments - 181.4% | ||||||||||||||||||||
| Non-control/non-affiliated investments - United States | ||||||||||||||||||||
| 3 Bridge Solutions, LLC | IT Consulting | First Lien Debt (13.0% Cash, Due 12/4/22) | $ | 13,036 | $ | 13,036 | $ | 13,036 | 12.4 | % | ||||||||||
| 3 Bridge Solutions, LLC | IT Consulting | Preferred Units (965 units) | 1,090 | 709 | 0.7 | % | ||||||||||||||
| 3 Bridge Solutions, LLC | IT Consulting | Membership Units (39,000 units) | 10 | - | 0.0 | % | ||||||||||||||
| 14,136 | 13,745 | 13.1 | % | |||||||||||||||||
| Alternative Biomedical Solutions, LLC | Healthcare | First Lien Debt (8.0% Cash, Due 12/18/22) | 7,119 | 7,119 | 7,119 | 6.8 | % | |||||||||||||
| Alternative Biomedical Solutions, LLC | Healthcare | Series A Preferred Units (12,759 units) | 1,275 | 1,275 | 1.2 | % | ||||||||||||||
| Alternative Biomedical Solutions, LLC | Healthcare | Series B Preferred Units (44,367 units) | 3,943 | 3,943 | 3.8 | % | ||||||||||||||
| Alternative Biomedical Solutions, LLC | Healthcare | Series C Preferred Units (78,900 units) | - | - | 0.0 | % | ||||||||||||||
| Alternative Biomedical Solutions, LLC | Healthcare | Membership Units (20,092 units) | 800 | - | 0.0 | % | ||||||||||||||
| Alternative Biomedical Solutions, LLC | Healthcare | Membership Unit Warrants (49,295 warrants) | - | - | 0.0 | % | ||||||||||||||
| 13,137 | 12,337 | 11.8 | % | |||||||||||||||||
| American Clinical Solutions, LLC | Healthcare | First Lien Debt (7.0% Cash, Due 12/31/22) | 3,500 | 3,500 | 3,430 | 3.3 | % | |||||||||||||
| American Clinical Solutions, LLC | Healthcare | First Lien Debt (7.0% Cash, Due 10/13/20) | 250 | 250 | 250 | 0.2 | % | |||||||||||||
| American Clinical Solutions, LLC | Healthcare | Class A Membership Units (6,030,384 units) | 3,198 | 3,198 | 3.0 | % | ||||||||||||||
| 6,948 | 6,878 | 6.5 | % | |||||||||||||||||
| AmeriMark Direct, LLC | Consumer Products | First Lien Debt (14.3% Cash, Due 9/8/21) | 15,373 | 15,273 | 15,023 | 14.3 | % | |||||||||||||
| 15,273 | 15,023 | 14.3 | % | |||||||||||||||||
| BigMouth, Inc. | Consumer Products | First Lien Debt (9.0% Cash (1 month LIBOR + 8.5%, 0.5% Floor), Due 11/14/21) (6) | 5,803 | 5,372 | 2,460 | 2.3 | % | |||||||||||||
| 5,372 | 2,460 | 2.3 | % | |||||||||||||||||
| Bluestem Brands, Inc. | Online Merchandise Retailer | First Lien Debt (7.0% Cash (1 month LIBOR + 6.0%, 1.0% Floor), Due 9/8/20) (7) | - | - | - | 0.0 | % | |||||||||||||
| Bluestem Brands, Inc. | Online Merchandise Retailer | First Lien Debt (7.0% Cash (1 month LIBOR + 6.0%, 1.0% Floor), Due 9/8/20) | 1,803 | 1,803 | 1,803 | 1.7 | % | |||||||||||||
| Bluestem Brands, Inc. | Online Merchandise Retailer | First Lien Debt (9.8% Cash (Prime + 6.5%, 2.0% Floor), Due 11/7/20) (6) | 3,529 | 3,529 | 2,057 | 2.0 | % | |||||||||||||
| 5,332 | 3,860 | 3.7 | % | |||||||||||||||||
7
Capitala Finance Corp.
Consolidated Schedule of Investments
(in thousands, except for units/shares)
June 30, 2020
(unaudited)
| Portfolio Company, Country (1), (2), (3), (4), (5) | Industry | Type of Investment | Principal Amount | Cost | Fair Value | %
of Net Assets | ||||||||||||||
| Burke America Parts Group, LLC | Home Repair Parts Manufacturer | Membership Units (14 units) | $ | 5 | $ | 2,118 | 2.0 | % | ||||||||||||
| 5 | 2,118 | 2.0 | % | |||||||||||||||||
| California Pizza Kitchen, Inc. | Restaurant | Second Lien Debt (11.0% Cash (3 month LIBOR + 10.0%, 1.0% Floor), Due 8/23/23) (6) | $ | 5,000 | 4,933 | 944 | 0.9 | % | ||||||||||||
| 4,933 | 944 | 0.9 | % | |||||||||||||||||
| Chicken Soup for the Soul, LLC | Multi-platform Media and Consumer Products | First Lien Debt (10.0% Cash (1 month LIBOR + 8.5%, 1.5% Floor), Due 12/13/20) | 13,000 | 13,000 | 13,000 | 12.4 | % | |||||||||||||
| 13,000 | 13,000 | 12.4 | % | |||||||||||||||||
| Chief Fire Intermediate, Inc. | Security System Services | First Lien Debt (8.6% Cash (1 month LIBOR + 7.0%, 1.6% Floor), Due 11/8/24) (6) | 8,100 | 8,100 | 6,824 | 6.5 | % | |||||||||||||
| Chief Fire Intermediate, Inc. | Security System Services | Class A Preferred Units (34,740 units) | 913 | - | 0.0 | % | ||||||||||||||
| Chief Fire Intermediate, Inc. | Security System Services | Class B Common Units (3,510 units) | - | - | 0.0 | % | ||||||||||||||
| 9,013 | 6,824 | 6.5 | % | |||||||||||||||||
| CIS Secure Computing, Inc. | Government Services | First Lien Debt (9.5% Cash (1 month LIBOR + 8.5%, 1.0% Floor), 1.0% PIK, Due 9/14/22) | 9,189 | 9,189 | 9,189 | 8.7 | % | |||||||||||||
| CIS Secure Computing, Inc. | Government Services | Common Stock (46,163 shares) | 1,000 | 2,550 | 2.4 | % | ||||||||||||||
| 10,189 | 11,739 | 11.1 | % | |||||||||||||||||
| Corporate Visions, Inc. | Sales & Marketing Services | Second Lien Debt (9.0% Cash, 2.0% PIK, Due 11/29/21) | 19,425 | 19,425 | 19,025 | 18.1 | % | |||||||||||||
| Corporate Visions, Inc. | Sales & Marketing Services | Common Stock (15,750 shares) | 1,575 | 667 | 0.6 | % | ||||||||||||||
| 21,000 | 19,692 | 18.7 | % | |||||||||||||||||
| Currency Capital, LLC | Financial Services | First Lien Debt (12.5% Cash (1 month LIBOR + 12.0%, 0.5% Floor), 4.0% PIK, Due 7/20/21) (8)(9) | 16,170 | 16,170 | 15,988 | 15.2 | % | |||||||||||||
| Currency Capital, LLC | Financial Services | Class A Preferred Units (2,000,000 units) (8) | 2,000 | 1,258 | 1.2 | % | ||||||||||||||
| 18,170 | 17,246 | 16.4 | % | |||||||||||||||||
| Freedom Electronics, LLC | Electronic Machine Repair | First Lien Debt (7.0% Cash (1 month LIBOR + 5.0%, 2.0% Floor), Due 12/20/23) | 2,704 | 2,704 | 2,704 | 2.6 | % | |||||||||||||
| Freedom Electronics, LLC | Electronic Machine Repair | First Lien Debt (8.6% Cash, Due 12/20/23) (10)(11) | 6,399 | 6,399 | 6,219 | 5.9 | % | |||||||||||||
| Freedom Electronics, LLC | Electronic Machine Repair | Membership Units (181,818 units) | 182 | 139 | 0.1 | % | ||||||||||||||
| 9,285 | 9,062 | 8.6 | % | |||||||||||||||||
8
Capitala Finance Corp.
Consolidated Schedule of Investments
(in thousands, except for units/shares)
June 30, 2020
(unaudited)
| Portfolio Company, Country (1), (2), (3), (4), (5) | Industry | Type of Investment | Principal Amount | Cost | Fair Value | %
of Net Assets | ||||||||||||||
| HUMC Opco, LLC | Healthcare | First Lien Debt (9.0% Cash, Due 8/16/20) | $ | 5,000 | $ | 5,000 | $ | 5,000 | 4.8 | % | ||||||||||
| 5,000 | 5,000 | 4.8 | % | |||||||||||||||||
| J5 Infrastructure Partners, LLC | Wireless Deployment Services | First Lien Debt (8.3% Cash (1 month LIBOR + 6.5%, 1.8% Floor), Due 12/20/24) (12) | - | - | - | 0.0 | % | |||||||||||||
| J5 Infrastructure Partners, LLC | Wireless Deployment Services | First Lien Debt (8.3% Cash (1 month LIBOR + 6.5%, 1.8% Floor), Due 12/20/24) | 6,983 | 6,983 | 6,983 | 6.6 | % | |||||||||||||
| 6,983 | 6,983 | 6.6 | % | |||||||||||||||||
| Jurassic Quest Holdings, LLC | Entertainment | First Lien Debt (9.5% Cash (1 month LIBOR + 7.5%, 2.0% Floor), Due 5/1/24) | 9,665 | 9,665 | 8,662 | 8.3 | % | |||||||||||||
| Jurassic Quest Holdings, LLC | Entertainment | Preferred Units (467,784 units) | 480 | - | 0.0 | % | ||||||||||||||
| 10,145 | 8,662 | 8.3 | % | |||||||||||||||||
| MicroHoldco, LLC | General Industrial | Preferred Units (838,042 units) (13) | 838 | 670 | 0.7 | % | ||||||||||||||
| 838 | 670 | 0.7 | % | |||||||||||||||||
| Rapid Fire Protection, Inc. | Security System Services | First Lien Debt (5.5% Cash (1 month LIBOR + 3.8%, 1.7% Floor), Due 11/22/24) (14) | 646 | 646 | 646 | 0.6 | % | |||||||||||||
| Rapid Fire Protection, Inc. | Security System Services | First Lien Debt (9.0% Cash, Due 11/22/24) (10)(15) | 7,479 | 7,479 | 7,479 | 7.1 | % | |||||||||||||
| Rapid Fire Protection, Inc. | Security System Services | Common Stock (363 shares) | 500 | 848 | 0.8 | % | ||||||||||||||
| 8,625 | 8,973 | 8.5 | % | |||||||||||||||||
| Seitel, Inc. | Data Services | First Lien Debt (9.3% Cash (3 month LIBOR + 8.3%, 1.0% Floor), Due 3/15/23) | 4,624 | 4,624 | 4,039 | 3.9 | % | |||||||||||||
| 4,624 | 4,039 | 3.9 | % | |||||||||||||||||
| Sequoia Healthcare Management, LLC | Healthcare Management | First Lien Debt (12.8% Cash, Due 8/16/20) (6)(9) | 12,535 | 12,535 | 11,601 | 11.0 | % | |||||||||||||
| 12,535 | 11,601 | 11.0 | % | |||||||||||||||||
| Taylor Precision Products, Inc. | Household Product Manufacturer | Series C Preferred Stock (379 shares) | 758 | 758 | 0.7 | % | ||||||||||||||
| 758 | 758 | 0.7 | % | |||||||||||||||||
| U.S. BioTek Laboratories, LLC | Testing laboratories | First Lien Debt (7.0% Cash (3 month LIBOR + 5.0%, 2.0% Floor), Due 12/14/23) | 1,843 | 1,843 | 1,843 | 1.8 | % | |||||||||||||
| U.S. BioTek Laboratories, LLC | Testing laboratories | First Lien Debt (9.3% Cash, Due 12/14/23) (10)(16) | 5,734 | 5,734 | 5,606 | 5.3 | % | |||||||||||||
| U.S. BioTek Laboratories, LLC | Testing laboratories | Class D Preferred Units (78 Units) | 78 | 81 | 0.1 | % | ||||||||||||||
| U.S. BioTek Laboratories, LLC | Testing laboratories | Class A Preferred Units (500 Units) | 540 | 118 | 0.1 | % | ||||||||||||||
| U.S. BioTek Laboratories, LLC | Testing laboratories | Class C Units (578 Units) | 1 | - | 0.0 | % | ||||||||||||||
| 8,196 | 7,648 | 7.3 | % | |||||||||||||||||
9
Capitala Finance Corp.
Consolidated Schedule of Investments
(in thousands, except for units/shares)
June 30, 2020
(unaudited)
| Portfolio Company, Country (1), (2), (3), (4), (5) | Industry | Type of Investment | Principal Amount | Cost | Fair Value | %
of Net Assets | ||||||||||||||
| U.S. Well Services, Inc. | Oil & Gas Services | Class A Common Stock (77,073 shares) (17) | $ | 771 | $ | 38 | 0.0 | % | ||||||||||||
| U.S. Well Services, Inc. | Oil & Gas Services | Class B Common Stock (1,125,426 shares) (17) | 6,701 | 551 | 0.5 | % | ||||||||||||||
| 7,472 | 589 | 0.5 | % | |||||||||||||||||
| Xirgo Technologies, LLC | Information Technology | Membership Units (600,000 units) | 600 | 799 | 0.8 | % | ||||||||||||||
| 600 | 799 | 0.8 | % | |||||||||||||||||
| Sub Total Non-control/non-affiliated investments - United States | $ | 211,569 | $ | 190,650 | 181.4 | % | ||||||||||||||
| Affiliate Investments - 83.5% | ||||||||||||||||||||
| Affiliate investments - United States | ||||||||||||||||||||
| Burgaflex Holdings, LLC | Automobile Part Manufacturer | First Lien Debt (12.0% Cash, 3.0% PIK, Due 3/23/21) | $ | 14,135 | $ | 14,135 | $ | 14,016 | 13.4 | % | ||||||||||
| Burgaflex Holdings, LLC | Automobile Part Manufacturer | Common Stock Class B (1,085,073 shares) | 362 | - | 0.0 | % | ||||||||||||||
| Burgaflex Holdings, LLC | Automobile Part Manufacturer | Common Stock Class A (1,253,198 shares) | 1,504 | - | 0.0 | % | ||||||||||||||
| 16,001 | 14,016 | 13.4 | % | |||||||||||||||||
| City Gear, LLC | Footwear Retail | Membership Unit Warrants (13) | - | 1,810 | 1.7 | % | ||||||||||||||
| - | 1,810 | 1.7 | % | |||||||||||||||||
| Eastport Holdings, LLC | Business Services | Second Lien Debt (13.5% Cash (3 month LIBOR + 13.0%, 0.5% Floor), Due 12/29/21) (9) | 16,500 | 16,243 | 16,395 | 15.6 | % | |||||||||||||
| Eastport Holdings, LLC | Business Services | Membership Units (22.9% ownership) | 3,263 | 15,545 | 14.8 | % | ||||||||||||||
| 19,506 | 31,940 | 30.4 | % | |||||||||||||||||
| GA Communications, Inc. | Advertising & Marketing Services | Series A-1 Preferred Stock (1,998 shares) | 3,477 | 3,908 | 3.7 | % | ||||||||||||||
| GA Communications, Inc. | Advertising & Marketing Services | Series B-1 Common Stock (200,000 shares) | 2 | 31 | 0.0 | % | ||||||||||||||
| 3,479 | 3,939 | 3.7 | % | |||||||||||||||||
| LJS Partners, LLC | QSR Franchisor | Preferred Units (175,867 units) | 437 | 704 | 0.7 | % | ||||||||||||||
| LJS Partners, LLC | QSR Franchisor | Membership Units (2,593,234 units) | 1,224 | 2,357 | 2.2 | % | ||||||||||||||
| 1,661 | 3,061 | 2.9 | % | |||||||||||||||||
10
Capitala Finance Corp.
Consolidated Schedule of Investments
(in thousands, except for units/shares)
June 30, 2020
(unaudited)
| Portfolio Company, Country (1), (2), (3), (4), (5) | Industry | Type of Investment | Principal Amount | Cost | Fair Value | %
of Net Assets | ||||||||||||||
| MMI Holdings, LLC | Medical Device Distributor | First Lien Debt (12.0% Cash, Due 1/31/21) (9) | $ | 2,600 | $ | 2,600 | $ | 2,600 | 2.5 | % | ||||||||||
| MMI Holdings, LLC | Medical Device Distributor | Second Lien Debt (6.0% Cash, Due 1/31/21) (9) | 400 | 388 | 400 | 0.4 | % | |||||||||||||
| MMI Holdings, LLC | Medical Device Distributor | Preferred Units (1,000 units, 6.0% PIK Dividend) (18) | 1,623 | 1,762 | 1.7 | % | ||||||||||||||
| MMI Holdings, LLC | Medical Device Distributor | Common Membership Units (45 units) | - | 208 | 0.2 | % | ||||||||||||||
| 4,611 | 4,970 | 4.8 | % | |||||||||||||||||
| Navis Holdings, Inc. | Textile Equipment Manufacturer | First Lien Debt (9.0% Cash, 2.0% PIK, Due 6/30/23) (9) | 11,428 | 11,428 | 10,963 | 10.4 | % | |||||||||||||
| Navis Holdings, Inc. | Textile Equipment Manufacturer | Class A Preferred Stock (1,000 shares) | 1,000 | 959 | 0.9 | % | ||||||||||||||
| Navis Holdings, Inc. | Textile Equipment Manufacturer | Common Stock (60,000 shares) | - | - | 0.0 | % | ||||||||||||||
| 12,428 | 11,922 | 11.3 | % | |||||||||||||||||
| Nth Degree Investment Group, LLC | Business Services | Membership Units (6,088,000 Units) | 6,088 | - | 0.0 | % | ||||||||||||||
| 6,088 | - | 0.0 | % | |||||||||||||||||
| RAM Payment, LLC | Financial Services | First Lien Debt (6.5% Cash (1 month LIBOR + 5.0%, 1.5% Floor), Due 1/4/24) | 3,029 | 3,029 | 3,029 | 2.9 | % | |||||||||||||
| RAM Payment, LLC | Financial Services | First Lien Debt (9.8% Cash, Due 1/4/24) (10) | 8,212 | 8,212 | 8,212 | 7.8 | % | |||||||||||||
| RAM Payment, LLC | Financial Services | Preferred Units (86,000 units, 8.0% PIK Dividend) (18) | 962 | 2,331 | 2.2 | % | ||||||||||||||
| 12,203 | 13,572 | 12.9 | % | |||||||||||||||||
| Sierra Hamilton Holdings Corporation | Oil & Gas Engineering and Consulting Services | Second Lien Debt (15.0% PIK, Due 9/12/23) | 843 | 813 | 813 | 0.8 | % | |||||||||||||
| Sierra Hamilton Holdings Corporation | Oil & Gas Engineering and Consulting Services | Common Stock (15,068,000 shares) | 6,958 | 928 | 0.9 | % | ||||||||||||||
| 7,771 | 1,741 | 1.7 | % | |||||||||||||||||
| V12 Holdings, Inc. | Data Processing & Digital Marketing | Second Lien Debt (13) | 655 | 708 | 0.7 | % | ||||||||||||||
| 655 | 708 | 0.7 | % | |||||||||||||||||
| Sub Total Affiliate investments - United States | $ | 84,403 | $ | 87,679 | 83.5 | % | ||||||||||||||
11
Capitala Finance Corp.
Consolidated Schedule of Investments
(in thousands, except for units/shares)
June 30, 2020
(unaudited)
| Portfolio Company, Country (1), (2), (3), (4), (5) | Industry | Type of Investment | Principal Amount | Cost | Fair Value | %
of Net Assets | ||||||||||||||
| Control Investments - 8.5% | ||||||||||||||||||||
| Control investments - United States | ||||||||||||||||||||
| Vology, Inc. | Information Technology | First Lien Debt (10.5% Cash (1 month LIBOR + 8.5%, 2.0% Floor), Due 12/31/21) | $ | 3,829 | $ | 3,829 | $ | 3,829 | 3.6 | % | ||||||||||
| Vology, Inc. | Information Technology | Class A Preferred Units (9,041,810 Units) | 5,215 | 5,108 | 4.9 | % | ||||||||||||||
| Vology, Inc. | Information Technology | Membership Units (5,363,982 Units) | - | - | 0.0 | % | ||||||||||||||
| 9,044 | 8,937 | 8.5 | % | |||||||||||||||||
| Sub Total Control investments - United States | $ | 9,044 | $ | 8,937 | 8.5 | % | ||||||||||||||
| TOTAL INVESTMENTS - 273.4% | $ | 305,016 | $ | 287,266 | 273.4 | % | ||||||||||||||
| (1) All investments valued using unobservable inputs (Level 3), unless otherwise noted. |
| (2) All investments valued by Capitala Finance Corp.'s (the "Company") board of directors. |
| (3) All debt investments are income producing, unless otherwise noted. Equity and warrant investments are non-income producing, unless otherwise noted. |
| (4) Percentages are based on net assets of $105,055 as of June 30, 2020. |
| (5) The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). These investments are generally subject to certain limitations on resale, and may be deemed to be "restricted securities" under the Securities Act. |
| (6) Non-accrual investment. |
| (7) The investment has a $8.2 million unfunded commitment. |
| (8) Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act of 1940, as amended. Qualifying assets must represent at least 70% of the Company's total assets at the time of acquisition of any additional non-qualifying assets. As of June 30, 2020, 4.5% of the Company's total assets were non-qualifying assets. |
| (9) The maturity date of the original investment has been extended. |
| (10) The cash rate equals the approximate current yield on our last-out portion of the unitranche facility. |
| (11) The investment has a $0.5 million unfunded commitment. |
| (12) The investment has a $3.5 million unfunded commitment. |
| (13) The investment has been exited or sold. The residual value reflects estimated earnout, escrow, or other proceeds expected post-closing. |
| (14) The investment has a $3.0 million unfunded commitment. |
| (15) The investment has a $3.3 million unfunded commitment. |
| (16) The investment has a $1.0 million unfunded commitment. |
| (17) Investment is valued using observable inputs (Level 1). The stock of the company is traded on the NASDAQ Capital Market under the ticker "USWS." |
| (18) The equity investment is income producing, based on rate disclosed. |
See accompanying notes to consolidated financial statements.
12
Capitala Finance Corp.
Consolidated Schedule of Investments
(in thousands, except for units/shares)
December 31, 2019
| Portfolio Company, Country (1), (2), (3), (4), (5) | Industry | Type of Investment | Principal Amount | Cost | Fair Value | %
of Net Assets | ||||||||||||||
| Non-control/non-affiliated investments - 162.8% | ||||||||||||||||||||
| Non-control/non-affiliated investments - United States | ||||||||||||||||||||
| 3 Bridge Solutions, LLC | IT Consulting | First Lien Debt (10.7% Cash (1 month LIBOR + 9.0%, 1.0% Floor), Due 12/4/22) | $ | 13,274 | $ | 13,274 | $ | 13,274 | 9.0 | % | ||||||||||
| 3 Bridge Solutions, LLC | IT Consulting | Preferred Units (965 units) | 1,090 | 499 | 0.3 | % | ||||||||||||||
| 3 Bridge Solutions, LLC | IT Consulting | Membership Units (39,000 units) | 10 | - | 0.0 | % | ||||||||||||||
| 14,374 | 13,773 | 9.3 | % | |||||||||||||||||
| Alternative Biomedical Solutions, LLC | Healthcare | First Lien Debt (8.0% Cash, 3.8% PIK, Due 12/18/22) | 5,491 | 5,331 | 5,319 | 3.6 | % | |||||||||||||
| Alternative Biomedical Solutions, LLC | Healthcare | First Lien Debt (8.0% Cash, 3.8% PIK, Due 12/18/22) (6) | 13,125 | 13,125 | 10,624 | 7.2 | % | |||||||||||||
| Alternative Biomedical Solutions, LLC | Healthcare | Membership Units (20,092 units) | 800 | - | 0.0 | % | ||||||||||||||
| 19,256 | 15,943 | 10.8 | % | |||||||||||||||||
| American Clinical Solutions, LLC | Healthcare | First Lien Debt (7.0% Cash, Due 12/31/22) | 3,500 | 3,500 | 3,500 | 2.3 | % | |||||||||||||
| American Clinical Solutions, LLC | Healthcare | First Lien Debt (2.0% PIK, Due 12/31/22) (7) | 6,000 | 3,485 | 3,485 | 2.4 | % | |||||||||||||
| 6,985 | 6,985 | 4.7 | % | |||||||||||||||||
| AmeriMark Direct, LLC | Consumer Products | First Lien Debt (14.3% Cash, Due 9/8/21) | 16,123 | 15,974 | 15,633 | 10.6 | % | |||||||||||||
| 15,974 | 15,633 | 10.6 | % | |||||||||||||||||
| BigMouth, Inc. | Consumer Products | First Lien Debt (10.3% Cash (1 month LIBOR + 8.5%, 0.5% Floor, Due 11/14/21) (8) | 857 | 857 | 857 | 0.6 | % | |||||||||||||
| BigMouth, Inc. | Consumer Products | First Lien Debt (10.2% Cash (1 month LIBOR + 8.5%, 0.5% Floor, Due 11/14/21) | 8,784 | 8,784 | 8,628 | 5.8 | % | |||||||||||||
| 9,641 | 9,485 | 6.4 | % | |||||||||||||||||
| Bluestem Brands, Inc. | Online Merchandise Retailer | First Lien Debt (9.3% Cash (1 month LIBOR + 7.5%, 1.0% Floor), Due 11/7/20) | 3,529 | 3,529 | 2,877 | 1.9 | % | |||||||||||||
| 3,529 | 2,877 | 1.9 | % | |||||||||||||||||
| Burke America Parts Group, LLC | Home Repair Parts Manufacturer | Membership Units (14 units) | 5 | 2,489 | 1.7 | % | ||||||||||||||
| 5 | 2,489 | 1.7 | % | |||||||||||||||||
| CableOrganizer Acquisition, LLC | Computer Supply Retail | First Lien Debt (9) | 1,532 | 1,490 | 1.0 | % | ||||||||||||||
| 1,532 | 1,490 | 1.0 | % | |||||||||||||||||
13
Capitala Finance Corp.
Consolidated Schedule of Investments
(in thousands, except for units/shares)
December 31, 2019
| Portfolio Company, Country (1), (2), (3), (4), (5) | Industry | Type of Investment | Principal Amount | Cost | Fair Value | %
of Net Assets | ||||||||||||||
| California Pizza Kitchen, Inc. | Restaurant | Second Lien Debt (11.9% Cash (3 month LIBOR + 10.0%, 1.0% Floor), Due 8/23/23) | $ | 5,000 | $ | 4,927 | $ | 4,697 | 3.2 | % | ||||||||||
| 4,927 | 4,697 | 3.2 | % | |||||||||||||||||
| Chicken Soup for the Soul, LLC | Multi-platform Media and Consumer Products | First Lien Debt (10.2% Cash (1 month LIBOR + 8.5%, 1.5% Floor), Due 12/13/20) | 13,000 | 13,000 | 13,000 | 8.8 | % | |||||||||||||
| 13,000 | 13,000 | 8.8 | % | |||||||||||||||||
| Chief Fire Intermediate, Inc. | Security System Services | First Lien Debt (8.7% Cash (1 month LIBOR + 7.0%, 1.6% Floor), Due 11/8/24) | 8,100 | 8,100 | 8,100 | 5.5 | % | |||||||||||||
| Chief Fire Intermediate, Inc. | Security System Services | Class A Preferred Units (34,740 units, 10.0% PIK Dividend) (10) | 913 | 913 | 0.6 | % | ||||||||||||||
| Chief Fire Intermediate, Inc. | Security System Services | Class B Common Units (3,510 units) | - | - | 0.0 | % | ||||||||||||||
| 9,013 | 9,013 | 6.1 | % | |||||||||||||||||
| CIS Secure Computing, Inc. | Government Services | First Lien Debt (10.2% Cash (1 month LIBOR + 8.5%, 1.0% Floor), 1.0% PIK, Due 9/14/22) | 9,389 | 9,389 | 9,389 | 6.3 | % | |||||||||||||
| CIS Secure Computing, Inc. | Government Services | Common Stock (46,163 shares) | 1,000 | 1,890 | 1.3 | % | ||||||||||||||
| 10,389 | 11,279 | 7.6 | % | |||||||||||||||||
| Corporate Visions, Inc. | Sales & Marketing Services | Second Lien Debt (9.0% Cash, 2.0% PIK, Due 11/29/21) | 19,327 | 19,327 | ||||||||||||||||