10-Q

 

 

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 March 31, 2022

 

 

¨

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

 

Logan Ridge Finance Corporation

650 Madison Avenue, 23rd Floor

New York, New York 10022

State of Incorporation: Maryland

Telephone: (212) 891-2880

 

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

 

LRFC

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

¨

 

 

 

 

 

 

Non-accelerated filer

x

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 Logan Ridge Finance Corporation’s common stock, $0.01 par value, outstanding as of May 12, 2022 was 2,711,068.

 

 

 


 

 

TABLE OF CONTENTS

 

 

 

Page

PART I.

FINANCIAL INFORMATION

3

 

 

 

Item 1.

Consolidated Financial Statements

3

 

 

 

 

Consolidated Statements of Assets and Liabilities as of March 31, 2022 (unaudited) and December 31, 2021

3

 

 

 

 

Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (unaudited)

4

 

 

 

 

Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2022 and 2021 (unaudited)

5

 

 

 

 

Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited)

6

 

 

 

 

Consolidated Schedules of Investments as of March 31, 2022 (unaudited) and December 31, 2021

7

 

 

 

 

Notes to Consolidated Financial Statements as of and for the period ended March 31, 2022 (unaudited)

13

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

40

 

 

 

Item 4.

Controls and Procedures

41

 

 

 

PART II.

OTHER INFORMATION

41

 

 

 

Item 1.

Legal Proceedings

41

 

 

 

Item 1A.

Risk Factors

41

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

 

 

 

Item 3.

Defaults Upon Senior Securities

41

 

 

 

Item 4.

Mine Safety Disclosures

41

 

 

 

Item 5.

Other Information

41

 

 

 

Item 6.

Exhibits

42

 

 

Signatures

43

 

 


 

PART I. FINANCIAL INFORMATION

 

Logan Ridge Finance Corporation

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)

 

 

 

As of March 31,

 

 

As of December 31,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Investments at fair value:

 

 

 

 

 

 

Non-control/non-affiliate investments (amortized cost of $140,329 and $131,829, respectively)

 

 

137,341

 

 

$

129,991

 

Affiliate investments (amortized cost of $49,790 and $49,803, respectively)

 

 

62,649

 

 

 

61,359

 

Control investments (amortized cost of $8,850 and $8,850, respectively)

 

 

6,915

 

 

 

6,839

 

Total investments at fair value (amortized cost of $198,969 and $190,482, respectively)

 

 

206,905

 

 

 

198,189

 

Cash and cash equivalents

 

 

15,838

 

 

 

39,056

 

Interest and dividend receivable

 

 

1,025

 

 

 

929

 

Prepaid expenses

 

 

3,137

 

 

 

3,358

 

Receivable for unsettled trades

 

 

7,086

 

 

 

685

 

Total assets

 

$

233,991

 

 

$

242,217

 

LIABILITIES

 

 

 

 

 

 

2022 Notes (net of deferred financing costs of $18 and $46, respectively)

 

$

22,815

 

 

$

22,787

 

2022 Convertible Notes (net of deferred financing costs of $67 and $167, respectively)

 

 

52,020

 

 

 

51,921

 

2026 Notes (net of deferred financing costs and original issue discount of $1,540 and $1,552, respectively)

 

 

48,460

 

 

 

48,448

 

KeyBank Credit Facility (net of deferred financing costs of $305 and $353, respectively)

 

 

(305

)

 

 

(353

)

Management and incentive fees payable

 

 

1,027

 

 

 

1,065

 

Interest and financing fees payable

 

 

1,595

 

 

 

911

 

Payable for unsettled trades

 

 

1,478

 

 

 

9,265

 

Accounts payable and accrued expenses

 

 

730

 

 

 

1,144

 

Total liabilities

 

$

127,820

 

 

$

135,188

 

Commitments and contingencies (Note 2)

 

 

 

 

 

 

NET ASSETS

 

 

 

 

 

 

Common stock, par value $0.01, 100,000,000 common shares authorized, 2,711,068 and 2,711,068 common shares issued and outstanding, respectively

 

$

27

 

 

$

27

 

Additional paid in capital

 

 

188,846

 

 

 

188,846

 

Total distributable loss

 

 

(82,702

)

 

 

(81,844

)

Total net assets

 

$

106,171

 

 

$

107,029

 

Total liabilities and net assets

 

$

233,991

 

 

$

242,217

 

Net asset value per share

 

$

39.16

 

 

$

39.48

 

 

See accompanying notes to consolidated financial statements

3


 

Logan Ridge Finance Corporation

Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

 

 

For the Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

INVESTMENT INCOME

 

 

 

 

 

 

Interest income:

 

 

 

 

 

 

Non-control/non-affiliate investments

 

$

2,383

 

 

$

3,197

 

Affiliate investments

 

 

719

 

 

 

1,297

 

Control investments

 

 

95

 

 

 

98

 

Total interest and fee income

 

 

3,197

 

 

 

4,592

 

Payment-in-kind interest and dividend income:

 

 

 

 

 

 

Non-control/non-affiliate investments

 

 

85

 

 

 

71

 

Affiliate investments

 

 

47

 

 

 

99

 

Total payment-in-kind interest and dividend income

 

 

132

 

 

 

170

 

Dividend income:

 

 

 

 

 

 

Affiliate investments

 

 

 

 

 

155

 

Total dividend income

 

 

 

 

 

155

 

Other income:

 

 

 

 

 

 

Affiliate investments

 

 

8

 

 

 

9

 

Total other income

 

 

8

 

 

 

9

 

Total investment income

 

 

3,337

 

 

 

4,926

 

EXPENSES

 

 

 

 

 

 

Interest and financing expenses

 

 

2,188

 

 

 

3,037

 

Base management fee

 

 

1,027

 

 

 

1,398

 

Directors expense

 

 

103

 

 

 

103

 

Administrative service fees

 

 

120

 

 

 

350

 

General and administrative expenses

 

 

950

 

 

 

821

 

Total expenses

 

 

4,388

 

 

 

5,709

 

NET INVESTMENT LOSS

 

 

(1,051

)

 

 

(783

)

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

 

 

 

 

 

 

Net realized loss on investments:

 

 

 

 

 

 

Non-control/non-affiliate investments

 

 

(36

)

 

 

(14,023

)

Net realized loss on investments

 

 

(36

)

 

 

(14,023

)

Net change in unrealized appreciation on investments:

 

 

 

 

 

 

Non-control/non-affiliate investments

 

 

(1,150

)

 

 

23,212

 

Affiliate investments

 

 

1,303

 

 

 

3,972

 

Control investments

 

 

76

 

 

 

(24

)

Net change in unrealized appreciation on investments

 

 

229

 

 

 

27,160

 

Total net realized and unrealized gain on investments

 

 

193

 

 

 

13,137

 

NET (DECREASE) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

 

$

(858

)

 

$

12,354

 

NET (DECREASE) INCREASE IN NET ASSETS PER SHARE RESULTING FROM

 

$

(0.32

)

 

$

4.56

 

   OPERATIONS – BASIC (SEE NOTE 10)

 

 

 

 

 

 

WEIGHTED AVERAGE COMMON STOCK OUTSTANDING –

 

 

2,711,068

 

 

 

2,711,068

 

   BASIC

 

 

 

 

 

 

NET (DECREASE) INCREASE IN NET ASSETS PER SHARE RESULTING FROM

 

$

(0.32

)

 

$

4.04

 

   OPERATIONS – DILUTED (SEE NOTE 10)

 

 

 

 

 

 

WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - DILUTED

 

 

2,711,068

 

 

 

3,263,647

 

DISTRIBUTIONS PAID PER SHARE

 

$

 

 

$

 

 

 

 

See accompanying notes to consolidated financial statements.

4


 

Logan Ridge Finance Corporation

Consolidated Statements of Changes in Net Assets

(in thousands, except share data)

(unaudited)

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2022 and 2021

Number of
Shares

 

 

Par Value

 

 

Additional
Paid in
Capital
(1)

 

 

Total
Distributable
Loss

 

 

Total

 

BALANCE, December 31, 2021

 

2,711,068

 

 

$

27

 

 

$

188,846

 

 

$

(81,844

)

 

$

107,029

 

   Net investment loss

 

 

 

 

 

 

 

 

 

 

(1,051

)

 

 

(1,051

)

   Net realized loss on investments

 

 

 

 

 

 

 

 

 

 

(36

)

 

 

(36

)

   Net change in unrealized appreciation on investments

 

 

 

 

 

 

 

 

 

 

229

 

 

 

229

 

BALANCE, March 31, 2022

 

2,711,068

 

 

$

27

 

 

$

188,846

 

 

$

(82,702

)

 

$

106,171

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, December 31, 2020

 

2,711,068

 

 

$

27

 

 

$

229,481

 

 

$

(120,561

)

 

$

108,947

 

   Net investment loss

 

 

 

 

 

 

 

 

 

 

(783

)

 

 

(783

)

   Net realized loss on investments

 

 

 

 

 

 

 

 

 

 

(14,023

)

 

 

(14,023

)

   Net change in unrealized appreciation on investments

 

 

 

 

 

 

 

 

 

 

27,160

 

 

 

27,160

 

BALANCE, March 31, 2021

 

2,711,068

 

 

$

27

 

 

$

229,481

 

 

$

(108,207

)

 

$

121,301

 

 

 

 

See accompanying notes to consolidated financial statements.

 

5


 

 

Logan Ridge Finance Corporation

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

For the Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net (decrease) increase in net assets resulting from operations

 

$

(858

)

 

$

12,354

 

Adjustments to reconcile net (decrease) increase in net assets resulting from operations to net cash (used in) provided by operating activities:

 

 

 

 

 

 

Purchase of investments

 

 

(16,393

)

 

 

 

Repayments and sales of investments

 

 

8,401

 

 

 

29,906

 

Net realized loss on investments

 

 

36

 

 

 

14,023

 

Net change in unrealized appreciation on investments

 

 

(229

)

 

 

(27,160

)

Payment-in-kind interest and dividends

 

 

(132

)

 

 

(170

)

Accretion of original issue discount on investments

 

 

(399

)

 

 

(77

)

Amortization of deferred financing fees and original issue discount

 

 

254

 

 

 

425

 

Changes in assets and liabilities:

 

 

 

 

 

 

Interest and dividend receivable

 

 

(96

)

 

 

1,143

 

Prepaid expenses

 

 

221

 

 

 

206

 

Receivable for unsettled trades

 

 

(6,401

)

 

 

 

Management and incentive fees payable

 

 

(38

)

 

 

(80

)

Interest and financing fees payable

 

 

684

 

 

 

(757

)

Payable for unsettled trades

 

 

(7,787

)

 

 

 

Accounts payable and accrued expenses

 

 

(414

)

 

 

(28

)

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES

 

 

(23,151

)

 

 

29,785

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Paydowns on SBA-guaranteed debentures

 

 

 

 

 

(20,000

)

Deferred financing fees paid

 

 

(67

)

 

 

 

NET CASH USED IN FINANCING ACTIVITIES

 

 

(67

)

 

 

(20,000

)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS

 

 

(23,218

)

 

 

9,785

 

CASH AND CASH EQUIVALENTS, beginning of period

 

 

39,056

 

 

 

49,942

 

CASH AND CASH EQUIVALENTS, end of period

 

$

15,838

 

 

$

59,727

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

Cash paid for interest

 

$

1,091

 

 

$

3,291

 

 

See accompanying notes to consolidated financial statements.

6


 

Logan Ridge Finance Corporation

Consolidated Schedule of Investments

(in thousands, except for units/shares)

March 31, 2022

(unaudited)

 

Investment (1), (2), (3), (4), (5)

 

Industry

 

Interest Rate (+)

 

Reference Rate
and Spread (+)

 

Floor (+)

 

Maturity

 

Par/Shares (++)

 

 

Cost

 

 

Fair Value

 

 

Footnotes

Investments in Non-Control, Non-Affiliate Portfolio Companies - 129.4%

 

 

 

 

 

 

 

 

 

 

 

 

 

First Lien/Senior Secured Debt - 85.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accordion Partners LLC

 

Industrials

 

6.50%

 

L + 5.50%

 

1.00%

 

09/24/2027

 

$

6,748

 

 

$

6,640

 

 

$

6,639

 

 

(12)

Accordion Partners LLC (Revolver)

 

Industrials

 

6.50%

 

L + 5.50%

 

1.00%

 

09/30/2026

 

 

2,500

 

 

 

2,433

 

 

 

2,439

 

 

(13)

Accurate Background, LLC

 

Information Technology

 

7.00%

 

L + 6.00%

 

1.00%

 

03/26/2027

 

 

2,985

 

 

 

2,737

 

 

 

2,850

 

 

 

Alternative Biomedical Solutions, LLC

 

Healthcare

 

8.00%

 

 

 

12/18/2022

 

 

6,941

 

 

 

6,941

 

 

 

6,442

 

 

 

American Academy Holdings, LLC

 

Healthcare

 

12.00%

 

L + 11.00%

 

1.00%

 

01/01/2025

 

 

2,078

 

 

 

2,054

 

 

 

2,053

 

 

(17)

American Clinical Solutions, LLC

 

Healthcare

 

7.00%

 

 

 

12/31/2022

 

 

3,500

 

 

 

3,500

 

 

 

3,386

 

 

 

AP Core Holdings II, LLC

 

Information Technology

 

6.25%

 

L + 5.50%

 

0.75%

 

07/21/2027

 

 

1,219

 

 

 

1,202

 

 

 

1,211

 

 

 

AP Core Holdings II, LLC

 

Information Technology

 

6.25%

 

L + 5.50%

 

0.75%

 

07/21/2027

 

 

1,250

 

 

 

1,233

 

 

 

1,250

 

 

 

BigMouth, Inc.

 

Consumer Products

 

 

 

 

11/14/2021

 

 

1,513

 

 

 

758

 

 

 

803

 

 

(7)(25)

Bradshaw International, Inc.

 

Consumer Discretionary

 

6.75%

 

L + 5.75%

 

1.00%

 

10/21/2027

 

 

505

 

 

 

493

 

 

 

490

 

 

 

Bradshaw International, Inc. (Revolver)

 

Consumer Discretionary

 

 

L + 5.75%

 

1.00%

 

10/21/2026

 

 

 

 

 

(22

)

 

 

(22

)

 

(14)

Critical Nurse Staffing, LLC

 

Healthcare

 

7.00%

 

L + 6.00%

 

1.00%

 

10/30/2026

 

 

5,909

 

 

 

5,797

 

 

 

5,780

 

 

(15)

Critical Nurse Staffing, LLC (Revolver)

 

Healthcare

 

 

L + 6.00%

 

1.00%

 

10/30/2026

 

 

 

 

 

(16

)

 

 

(16

)

 

(16)

Dodge Data & Analytics LLC

 

Information Technology

 

5.25%

 

L + 4.75%

 

0.50%

 

02/10/2029

 

 

1,500

 

 

 

1,478

 

 

 

1,478

 

 

 

Freedom Electronics, LLC (First Out)

 

Electronic Machine Repair

 

7.00%

 

L + 5.00%

 

2.00%

 

12/20/2023

 

 

2,581

 

 

 

2,581

 

 

 

2,581

 

 

(26)

Freedom Electronics, LLC (Last Out)

 

Electronic Machine Repair

 

8.67%

 

 

 

12/20/2023

 

 

5,632

 

 

 

5,632

 

 

 

5,584

 

 

(10)(26)

HUMC Opco, LLC

 

Healthcare

 

9.00%

 

 

 

01/14/2022

 

 

4,527

 

 

 

4,527

 

 

 

4,441

 

 

(26)

JO ET Holdings Limited

 

Information Technology

 

14.00%

 

SOFR+6.00%, 7.00% PIK

 

1.00%

 

12/15/2026

 

 

1,015

 

 

 

980

 

 

 

996

 

 

 

Jurassic Quest Holdings, LLC

 

Entertainment

 

9.50%

 

L + 7.50%

 

2.00%

 

05/01/2024

 

 

8,230

 

 

 

8,230

 

 

 

8,223

 

 

(26)

Keg Logistics LLC

 

Consumer Discretionary

 

7.00%

 

L + 6.00%

 

1.00%

 

11/23/2027

 

 

7,516

 

 

 

7,410

 

 

 

7,432

 

 

 

Keg Logistics LLC (Revolver)

 

Consumer Discretionary

 

 

L + 6.00%

 

1.00%

 

11/23/2027

 

 

 

 

 

(12

)

 

 

(10

)

 

(18)

Lucky Bucks, LLC

 

Consumer Discretionary

 

6.25%

 

L + 5.50%

 

0.75%

 

07/21/2027

 

 

2,963

 

 

 

2,909

 

 

 

2,911

 

 

 

Marble Point Credit Management LLC

 

Financials

 

7.00%

 

L + 6.00%

 

1.00%

 

08/11/2028

 

 

5,727

 

 

 

5,584

 

 

 

5,629

 

 

 

Marble Point Credit Management LLC (Revolver)

 

Financials

 

7.00%

 

L + 6.00%

 

1.00%

 

08/11/2028

 

 

2,500

 

 

 

2,477

 

 

 

2,457

 

 

 

Premier Imaging, LLC

 

Healthcare

 

7.00%

 

L + 6.00%

 

1.00%

 

12/29/2028

 

 

2,496

 

 

 

2,459

 

 

 

2,456

 

 

(20)

Rotolo Consultants, Inc.

 

Industrials

 

9.00%

 

L + 8.00%

 

1.00%

 

12/21/2026

 

 

998

 

 

 

988

 

 

 

984

 

 

 

Sequoia Healthcare Management, LLC

 

Healthcare Management

 

 

 

 

01/14/2022

 

 

11,935

 

 

 

11,935

 

 

 

6,247

 

 

(7)

Symplr Software, Inc.

 

Healthcare

 

5.25%

 

SOFR + 4.50%

 

0.75%

 

06/30/2022

 

 

1,700

 

 

 

1,696

 

 

 

1,678

 

 

 

Wealth Enhancement Group, LLC

 

Financials

 

6.75%

 

L + 5.75%

 

1.00%

 

10/02/2027

 

 

4,339

 

 

 

4,316

 

 

 

4,289

 

 

(21)

Wealth Enhancement Group, LLC (Revolver)

 

Financials

 

6.75%

 

L + 5.75%

 

1.00%

 

10/02/2027

 

 

108

 

 

 

105

 

 

 

105

 

 

(22)

Total First Lien/Senior Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

97,045

 

 

 

90,786

 

 

 

Second Lien/Senior Secured Debt - 14.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

American Academy Holdings, LLC

 

Healthcare

 

14.50% PIK

 

 

 

03/01/2028

 

 

3,219

 

 

 

3,124

 

 

 

3,123

 

 

 

BLST Operating Company, LLC

 

Online Merchandise Retailer

 

10.00%

 

L + 8.50%

 

1.50%

 

08/28/2025

 

 

1,780

 

 

 

1,780

 

 

 

1,780

 

 

(8)(26)

Ivanti Software, Inc.

 

Information Technology

 

7.75%

 

L + 7.25%

 

0.50%

 

12/01/2028

 

 

7,000

 

 

 

6,965

 

 

 

6,930

 

 

(26)

Mandolin Technology Intermediate Holdings, Inc.

 

Information Technology

 

7.00%

 

L + 6.50%

 

0.50%

 

07/23/2029

 

 

4,000

 

 

 

3,972

 

 

 

3,975

 

 

 

Total Second Lien/Senior Secured Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

15,841

 

 

 

15,808

 

 

 

Subordinated Debt - 6.7%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lucky Bucks, LLC

 

Consumer Discretionary

 

12.50% PIK

 

 

 

05/29/2028

 

 

2,062

 

 

 

2,023

 

 

 

2,008

 

 

 

Tubular Textile Machinery, Inc.

 

Textile Equipment Manufacturer

 

5.00%

 

 

 

10/29/2027

 

 

5,094

 

 

 

5,094

 

 

 

5,107

 

 

 

Total Subordinated Debt