UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q 

 

 

 

(Mark One)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 20182019

 

OR

 

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

 

Commission file number: 814-01154

 

 

 

AUDAX CREDIT BDC INC.

(Exact name of registrant as specified in its charter)

 

 

 

DELAWARE 47-3039124

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

101 HUNTINGTON AVENUE  
BOSTON, MASSACHUSSETTSMASSACHUSETTS 02199
(Address of principal executive office) (Zip Code)

 

(617) 859-1500

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report) 

 

 

Securities registered pursuant to Section 12(b) of the Act:

None.

 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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 12 b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨ Accelerated filer ¨
       
Non-accelerated filer x    (Do not check if a smaller reporting company) Smaller reporting company ¨
       
Emerging growth company x    

 

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 registrant had 25,124,82033,538,562 shares of common stock, par value $0.001 per share, outstanding as of August 14, 2018.2019.

 

 

 

AUDAX CREDIT BDC INC.

TABLE OF CONTENTS

PART I.FINANCIAL INFORMATION: 
   
Item 1.Financial Statements 
   
 Statements of Assets and Liabilities as of June 30, 20182019 (unaudited) and December 31, 201720182
 Statements of Operations for the three and six months ended June 30, 20182019 (unaudited) and 20172018 (unaudited)3
 Statements of Changes in Net Assets for the six months ended June 30, 20182019 (unaudited) and 20172018 (unaudited)4
 Statements of Cash Flows for the six months ended June 30, 20182019 (unaudited) and 20172018 (unaudited)5
 Schedules of Investments as of June 30, 20182019 (unaudited) and December 31, 201720186
 Notes to Financial Statements (unaudited)1113
   
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations 
   
 Overview3033
 Results of Operations3134
 Financial Condition, Liquidity and Capital Resources3336
   
Item 3.Quantitative and Qualitative Disclosures About Market Risk4043
   
Item 4.Controls and Procedures4044
   
PART II.OTHER INFORMATION: 
   
Item 1.Legal Proceedings4144
   
Item 1A.Risk Factors4144
   
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds4245
   
Item 3.Defaults Upon Senior Securities4245
   
Item 4.Mine Safety Disclosures4245
   
Item 5.Other Information4245
   
Item 6.Exhibits4245
   
SIGNATURES4346

 

 

 

Audax Credit BDC Inc.

Statements of Assets and Liabilities

June 30, 20182019 and December 31, 20172018

(Expressed in U.S. Dollars)

 

 

 June 30, 2019 December 31, 2018 
 June 30, 2018 December 31, 2017  (unaudited)    
 (unaudited)         
Assets                
Investments, at fair value                 
Non-Control/Non-Affiliate investments (Cost of $237,294,506 and $184,175,573, respectively) $236,852,837  $184,336,177 
Non-Control/Non-Affiliate investments (Cost of $310,903,928 and $266,280,299, respectively) $308,624,774  $264,662,881 
Cash and cash equivalents  15,041,814   29,721,559   6,451,544   17,715,145 
Interest receivable  516,790   429,426   827,276   558,114 
Receivable from bank loan repayment  19,304   -   9,034   9,713 
Other assets  83,270   2,511   90,000   - 
                
Total assets $252,514,015  $214,489,673  $316,002,628  $282,945,853 
                
Liabilities                
Accrued expenses and other liabilities $412,765  $238,821  $335,314  $517,621 
Fee due to administrator(a)  66,250   66,250   66,250   66,250 
Fees due to investment advisor, net of waivers(a)  493,451   531,055   651,434   535,914 
Payable for investments purchased  12,927,966   4,457,971   13,248,127   14,402,833 
                
Total liabilities $13,900,432  $5,294,097  $14,301,125  $15,522,618 
Commitments and contingencies(b)                
                
Net Assets                
Common stock, $0.001 par value per share, 100,000,000 shares authorized, 25,124,820 and 21,988,238 shares issued and outstanding, respectively $25,125  $21,989 
Common stock, $0.001 par value per share, 100,000,000 shares authorized, 31,949,579 and 28,269,649 shares issued and outstanding, respectively $

31,950

  $

28,270

 
Capital in excess of par value  239,263,812   209,266,921   304,242,355   269,246,005 
Accumulated net (depreciation) appreciation on investments  (441,669)  160,604 
Accumulated net realized gain  67,960   - 
Accumulated distributions in excess of net investment income  (301,645)  (253,938)
Total distributable earnings  (2,572,802)  (1,851,040)
Total Net Assets $238,613,583  $209,195,576  $301,701,503  $267,423,235 
                
Net Asset Value per Share of Common Stock at End of Period $9.50  $9.51  $9.44  $9.46 
                
Shares Outstanding  25,124,820   21,988,238   31,949,579   28,269,649 

 

(a)Refer to Note 4-Related Party Transactions for additional informationinformation.
(b)Refer to Note 8-Commitments and Contingencies for additional informationinformation.

 

The accompanying notes are an integral part of these financial statements.

 

 2 

 

 

Audax Credit BDC Inc.

Statements of Operations

(Expressed in U.S. Dollars)

(unaudited)

 

 Three Months Ended Three Months Ended Six Months Ended Six Months Ended  Three Months Ended Three Months Ended Six Months Ended Six Months Ended 
 June 30, 2018  June 30, 2017  June 30, 2018  June 30, 2017  June 30, 2019  June 30, 2018  June 30, 2019  June 30, 2018 
                  
Investment Income                                
Interest income                                
Non-Control/Non-Affiliate $3,789,055  $2,480,149  $7,005,657  $4,820,902  $5,216,545  $3,789,055  $10,086,548  $7,005,657 
Other  31,119   33,746   68,107   56,630   42,795   31,119   93,515   68,107 
Total interest income  3,820,174   2,513,895   7,073,764   4,877,532   5,259,340   3,820,174   10,180,063   7,073,764 
Other income                                
Non-Control/Non-Affiliate  16,452   17,067   48,562   61,462   15,340   16,452   33,150   48,562 
Total income  3,836,626   2,530,962   7,122,326   4,938,994   5,274,680   3,836,626   10,213,213   7,122,326 
                                
Expenses                                
Base management fee(a) $623,184  $438,585  $1,161,484  $877,248  $808,440  $623,184  $1,547,094  $1,161,484 
Incentive fee(a)  476,412   305,227   874,976   424,625   647,108   476,412   1,259,236   874,976 
Administrative fee(a)  66,250   66,250   132,500   132,500   66,250   66,250   132,500   132,500 
Directors' fees  48,750   48,750   97,500   97,500   52,500   48,750   105,000   97,500 
Professional fees  101,309   51,967   213,019   187,737   233,450   101,309   388,131   213,019 
Other expenses  39,551   44,352   91,902   93,389   83,452   39,551   188,053   91,902 
                                
Expenses before waivers from investment adviser and administrator  1,355,456   955,131   2,571,381   1,812,999   1,891,200   1,355,456   3,620,014   2,571,381 
Base management fee waivers(a)  (218,114)  (153,504)  (406,518)  (307,036)  (282,954)  (218,114)  (541,483)  (406,518)
Incentive fee waivers(a)  (388,030)  (273,912)  (731,096)  (381,370)  (521,159)  (388,030)  (1,010,450)  (731,096)
Total expenses, net of waivers  749,312   527,715   1,433,767   1,124,593   1,087,087   749,312   2,068,081   1,433,767 
Net Investment Income  3,087,314   2,003,247   5,688,559   3,814,401   4,187,593   3,087,314   8,145,132   5,688,559 
                                
Realized and Unrealized Gain (Loss) on Investments                                
Net realized gain on investments  67,959   350,613   217,757   440,930   73,812   67,959   101,731   217,757 
Net change in unrealized depreciation on investments  (639,079)  (351,691)  (602,273)  (481,597)  (318,214)  (639,079)  (661,736)  (602,273)
Net realized and unrealized loss on investments  (571,120)  (1,078)  (384,516)  (40,667)  (244,402)  (571,120)  (560,005)  (384,516)
                                
Net Increase in Net Assets Resulting from Operations $2,516,194  $2,002,169  $5,304,043  $3,773,734  $3,943,191  $2,516,194  $7,585,127  $5,304,043 
                                
Basic and Diluted per Share of Common Stock:                                
Net investment income $0.13  $0.11  $0.25  $0.21  $0.13  $0.13  $0.26  $0.25 
Net increase in net assets resulting from operations $0.11  $0.11  $0.23  $0.21  $0.12  $0.11  $0.24  $0.23 
                                
Weighted average shares of common stock outstanding basic diluted  23,840,839   17,831,894   22,945,473   17,831,894   31,880,752   23,840,839   31,019,614   22,945,473 

 

(a)Refer to Note 4-Related Party Transactions for additional information

 

The accompanying notes are an integral part of these financial statements.

 

 3 

 

 

Audax Credit BDC Inc.

Statements of Changes in Net Assets

(Expressed in U.S. Dollars)

(unaudited)

 

 

 Six Months Ended
June 30, 2018		  Six Months Ended
June 30, 2017		  

Six Months Ended

June 30, 2019

 

Six Months Ended

June 30, 2018

 
          
Operations                
Net investment income $5,688,559  $3,814,401  $8,145,132  $5,688,559 
Net realized gain on investments  217,757   440,930   101,731   217,757 
Net change in unrealized depreciation on investments  (602,273)  (481,597)  (661,736)  (602,273)
Net increase in net assets resulting from operations  5,304,043   3,773,734   7,585,127   5,304,043 
                
Distributions:                
Distributions to common stockholders from net investment income  (5,736,266)  (3,606,521)
Distributions to common stockholders from realized gains  (149,797)  (138,177)
Distributions to common stockholders  (8,246,864)  (5,736,266)
Return of capital to common stockholders  (60,025)  (149,797)
Total distributions  (5,886,063)  (3,744,698)  (8,306,889)  (5,886,063)
        
                
Capital Share Transactions:                
Issuance of common stock  30,000,000   -   35,000,000   30,000,000 
Reinvestment of common stock  27   22   30   27 
Net increase in net assets from capital share transactions  30,000,027   22   35,000,030   30,000,027 
                
Net Increase in Net Assets  29,418,007   29,058   34,278,268   35,304,070 
                
Net Assets, Beginning of Period  209,195,576   170,369,661   267,423,235   209,195,576 
                
Net Assets, End of Period $238,613,583  $170,398,719  $301,701,503  $244,499,646 

 

The accompanying notes are an integral part of these financial statements.

 

 4 

 

 

Audax Credit BDC Inc.

Statements of Cash Flows

(Expressed in U.S. Dollars)

(unaudited)

 

 

 Six Months Ended Six Months Ended  Six Months Ended Six Months Ended 
 June 30, 2018  June 30, 2017  June 30, 2019  June 30, 2018 
          
Cash flows from operating activities:                
Net increase in net assets resulting from operations $5,304,043  $3,773,734  $7,585,127  $5,304,043 
Adjustments to reconcile net increase in net assets from operations to net cash (used in) provided by operating activities:        
Adjustments to reconcile net increase in net assets from operations to net cash used in operating activities:        
Net realized gain on investments  (217,757)  (440,930)  (101,733)  (217,757)
Net change in unrealized depreciation on investments  602,273   481,597   661,736   602,273 
Accretion of original issue discount interest  (76,643)  (132,661)
Accretion of original issue discount interest and payment-in-kind interest  (135,319)  (76,643)
Increase in interest receivable  (87,364)  (21,605)  (269,162)  (87,364)
Increase in receivable from bank loan repayment  (19,304)  (10,835)
(Decrease) increase in receivable from bank loan repayment  679   (19,304)
Increase in other assets  (80,759)  (83,494)  (90,000)  (80,759)
Increase in accrued expenses and other liabilities  173,944   92,508 
Increase in fee due to administrator(a)  -   44,375 
Decrease in fees due to investment advisor(a)  (37,604)  (1,332)
Increase (decrease) in payable for investments purchased  8,469,995   (227,323)
(Decrease) increase in accrued expenses and other liabilities  (182,307)  173,944 
Increase (decrease) in fees due to investment advisor(a)  115,520   (37,604)
(Decrease) increase in payable for investments purchased  (1,154,706)  8,469,995 
Investment activity:                
Investments purchased  (85,799,027)  (44,953,583)  (75,349,578)  (85,799,027)
Proceeds from investments sold  1,390,962   -   1,951,362   1,390,962 
Repayment of bank loans  31,583,532   42,382,537   29,011,639   31,583,532 
Total investment activity  (52,824,533)  (2,571,046)  (44,386,577)  (52,824,533)
                
Net cash (used in) provided by operating activities  (38,793,709)  902,988 
Net cash used in operating activities  (37,956,742)  (38,793,709)
                
Cash flows from financing activities:                
Issuance of shares of common stock  30,000,000   -   35,000,000   30,000,000 
Distributions paid to common stockholders  (5,886,036)  (3,744,676)  (8,306,859)  (5,886,036)
                
Net cash provided by financing activities  24,113,964   (3,744,676)  26,693,141   24,113,964 
                
Net decrease in cash and cash equivalents  (14,679,745)  (2,841,688)  (11,263,601)  (14,679,745)
                
Cash and cash equivalents:                
Cash and cash equivalents, beginning of period  29,721,559   30,566,068   17,715,145   29,721,559 
                
Cash and cash equivalents, end of period $15,041,814  $27,724,380  $6,451,544  $15,041,814 
                
        
Supplemental non-cash information                
Issuance of common shares in connection with dividend reinvestment plan $27  $22  $30  $27 

 

(a)Refer to Note 4-Related Party Transactions for additional information

 

The accompanying notes are an integral part of these financial statements.

 

 5 

 

 

Audax Credit BDC Inc.

Schedule of Investments

As of June 30, 20182019

(Expressed in U.S. Dollars)

(unaudited)

 

 

Portfolio Investments(a) (b) (c) (d) Par  Cost  Value 
          
NON-CONTROL/NON-AFFILIATE INVESTMENTS - (99.3%)(e)(f):            
             
Healthcare & Pharmaceuticals            
Radiology Partners, Senior Secured Term B Loan, 6.46% (Libor + 4.00%), maturity 7/9/25 $4,000,000  $3,960,000  $3,960,000 
Beaver-Visitec, Senior Secured Closing Date Term Loan (First Lien), 7.34% (Libor + 5.00%), maturity 8/21/23  3,933,712   3,933,712   3,933,712 
Young, Senior Secured Initial Term Loan (First Lien), 6.34% (Libor + 4.00%), maturity 11/7/24  3,513,417   3,500,915   3,522,199 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 5.84% (Libor + 3.50%), maturity 3/14/25  3,384,101   3,413,712   3,405,251 
Specialty Care, Senior Secured Initial Term Loan (First Lien), 6.09% (Libor + 3.75%), maturity 9/1/23  3,394,122   3,399,020   3,360,180 
Radiology Partners, Senior Secured Term A Loan, 8.09% (Libor + 5.75%), maturity 12/4/23  3,178,618   3,140,163   3,178,617 
Pathway, Senior Secured Term Loan (First Lien), 6.59% (Libor + 4.25%), maturity 10/10/24  2,982,125   2,968,045   2,952,303 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 6.59% (Libor + 4.25%), maturity 8/18/23  2,951,149   2,926,503   2,906,881 
MedRisk, Senior Secured Initial Term Loan (First Lien), 5.34% (Libor + 3.00%), maturity 12/27/24  2,487,500   2,494,059   2,487,500 
Curo Health Services, Senior Secured Term B Loan (First Lien), 6.34% (Libor + 4.00%), maturity 2/7/22  2,472,026   2,478,315   2,472,026 
Upstream Rehabilitation, Senior Secured Initial Term Loan, 6.84% (Libor + 4.50%), maturity 1/3/24  2,424,061   2,421,710   2,418,001 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 6.84% (Libor + 4.50%), maturity 9/23/24  2,375,270   2,352,006   2,369,332 
CareCentrix, Senior Secured Initial Term Loan, 6.84% (Libor + 4.50%), maturity 4/3/25  1,987,500   1,977,775   1,977,563 
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 6.59% (Libor + 4.25%), maturity 8/1/24  1,970,000   1,961,070   1,970,000 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 7.84% (Libor + 5.50%), maturity 5/9/25  1,000,000   985,000   992,500 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 5.84% (Libor + 3.50%), maturity 5/10/23  936,354   943,149   938,110 
Dermatologists of Central States, Senior Secured Term Loan, 8.84% (Libor + 6.50%), maturity 4/20/22  858,593   849,887   852,154 
Specialty Care, Senior Secured Initial Term Loan (Second Lien), 10.59% (Libor + 8.25%), maturity 9/1/24  850,000   841,731   843,625 
U.S. Renal Care, Senior Secured Initial Term Loan (First Lien), 6.59% (Libor + 4.25%), maturity 12/30/22  497,449   498,607   491,022 
RMP & MedA/Rx, Senior Secured Term Loan, 7.09% (Libor + 4.75%), maturity 3/2/22  476,728   474,866   473,153 
             
High Tech Industries            
             
Navicure, Senior Secured Initial Term Loan (First Lien), 6.09% (Libor + 3.75%), maturity 11/1/24  3,483,747   3,471,907   3,492,456 
Syncsort, Senior Secured Initial Term Loan (First Lien), 7.34% (Libor + 5.00%), maturity 8/16/24  3,473,750   3,442,110   3,489,950 
Sparta, Senior Secured New Term Loan (First Lien), 5.84% (Libor + 3.50%), maturity 8/21/24  3,473,750   3,476,014   3,434,670 
Masergy, Senior Secured Initial Loan (Second Lien), 9.84% (Libor + 7.50%), maturity 12/16/24  3,428,571   3,417,814   3,411,429 
Barracuda, Senior Secured Term Loan (First Lien), 5.59% (Libor + 3.25%), maturity 2/12/25  3,000,000   3,019,886   2,993,130 
Infogroup, Senior Secured Term Loan (First Lien), 7.34% (Libor + 5.00%), maturity 4/3/23  2,964,975   2,930,683   2,950,150 
McAfee, Senior Secured Closing Date USD Term Loan, 6.84% (Libor + 4.50%), maturity 9/29/24  2,486,225   2,500,055   2,502,659 
HelpSystems, Senior Secured Term Loan (First Lien), 6.09% (Libor + 3.75%), maturity 3/28/25  2,500,000   2,497,562   2,496,875 
Flexera Software, Senior Secured Initial Term Loan (First Lien), 5.59% (Libor + 3.25%), maturity 2/26/25  1,995,000   2,000,106   1,994,072 
GlobalLogic, Senior Secured Refinancing Term B-1 Loan, 6.09% (Libor + 3.75%), maturity 6/20/22  1,980,000   1,965,091   1,980,000 
Bomgar, Senior Secured Initial Term Loan (First Lien), 6.34% (Libor + 4.00%), maturity 4/18/25  1,750,000   1,763,125   1,763,125 
Idera, Senior Secured Initial Term Loan (First Lien), 6.84% (Libor + 4.50%), maturity 6/28/24  1,674,000   1,675,610   1,669,815 
SciQuest, Senior Secured Term Loan, 6.34% (Libor + 4.00%), maturity 12/28/24  1,496,250   1,489,150   1,492,509 
Compusearch Software Systems, Senior Secured Initial Term Loan, 6.59% (Libor + 4.25%), maturity 5/7/21  1,481,816   1,480,636   1,479,963 
ECi Software Solutions, Senior Secured Initial Term Loan, 6.59% (Libor + 4.25%), maturity 9/27/24  992,500   983,734   997,463 
Corsair, Senior Secured Term Loan (First Lien), 7.09% (Libor + 4.75%), maturity 8/28/24  997,491   992,638   990,010 
Intermedia, Senior Secured Initial Term Loan (First Lien), 7.84% (Libor + 5.50%), maturity 2/1/24  990,000   990,000   990,000 
LANDesk, Senior Secured Term Loan (First Lien), 6.59% (Libor + 4.25%), maturity 1/20/24  992,879   981,321   986,058 
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 12.59% (Libor + 10.25%), maturity 1/20/22  1,000,000   992,728   977,500 
Community Brands, Senior Secured Initial Term Loan (First Lien), 6.34% (Libor + 4.00%), maturity 12/2/22  709,555   704,676   706,007 
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 5.59% (Libor + 3.25%), maturity 12/15/23  492,500   490,483   494,347 
Endurance Int'l Group, Senior Secured Refinancing Loan, 6.34% (Libor + 4.00%), maturity 2/9/23  458,213   457,172   458,692 
             
Services: Business            
CoAdvantage, Senior Secured Term Loan (First Lien), 6.84% (Libor + 4.50%), maturity 10/1/23  3,965,038   3,951,383   3,965,038 
Sungard Public Sector, Senior Secured Term Loan (Second Lien), 10.84% (Libor + 8.50%), maturity 1/31/25  3,500,000   3,518,111   3,548,125 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 5.84% (Libor + 3.50%), maturity 6/19/24  2,938,745   2,938,745   2,931,398 
Systems Maintenance Services, Senior Secured Initial Term Loan (First Lien), 7.34% (Libor + 5.00%), maturity 10/30/23  2,955,000   2,955,000   2,659,500 
Kellermeyer Bergensons Services, Senior Secured Initial Term Loan (First Lien), 7.34% (Libor + 5.00%), maturity 10/29/21  2,330,747   2,319,446   2,330,747 
Vistage, Senior Secured Term B Loan (First Lien), 6.34% (Libor + 4.00%), maturity 2/10/25  1,995,000   1,990,324   2,004,975 
First Advantage, Senior Secured Term Loan (First Lien), 7.59% (Libor + 5.25%), maturity 6/30/22  2,000,000   1,990,545   1,975,000 
DBi Services, Senior Secured Term B Loan, 7.59% (Libor + 5.25%), maturity 8/1/21  1,982,881   1,966,729   1,953,138 
General Info Solutions, Senior Secured Initial Term Loan, 7.09% (Libor + 4.75%), maturity 1/26/23  1,706,827   1,694,507   1,706,827 
Livingston, Senior Secured Refinancing Term B-3 Loan (First Lien), 8.05% (Libor + 5.75%), maturity 3/20/20(g)  1,492,500   1,497,264   1,470,113 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 6.59% (Libor + 4.25%), maturity 3/27/24  1,240,481   1,234,397   1,234,278 
Intralinks, Senior Secured Initial Term Loan (First Lien), 6.34% (Libor + 4.00%), maturity 11/14/24  995,000   990,370   995,313 
Service Logic, Senior Secured Initial Term Loan (First Lien), 6.59% (Libor + 4.25%), maturity 7/31/23  995,000   990,636   990,025 
Equian, Senior Secured 2018 Incremental Term Loan, 5.59% (Libor + 3.25%), maturity 5/20/24  497,487   501,160   496,657 
Sungard Public Sector, Senior Secured Term Loan, 6.59% (Libor + 4.25%), maturity 2/1/24  246,875   245,855   244,098 
             
Chemicals, Plastics & Rubber            
             
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 5.84% (Libor + 3.50%), maturity 5/30/24  2,977,538   2,977,637   2,984,981 
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 7.09% (Libor + 4.75%), maturity 10/4/21  2,921,296   2,911,915   2,941,380 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 5.59% (Libor + 3.25%), maturity 1/31/25  2,723,175   2,734,600   2,719,875 
Borchers, Senior Secured Term Loan, 6.84% (Libor + 4.50%), maturity 11/1/24  1,979,962   1,973,584   1,970,063 
Zep, Senior Secured Initial Term Loan (First Lien), 6.34% (Libor + 4.00%), maturity 8/12/24  1,986,244   1,983,711   1,963,899 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 5.84% (Libor + 3.50%), maturity 3/31/25  997,500   992,603   998,747 
Houghton International, Senior Secured Term Loan (Second Lien), 10.84% (Libor + 8.50%), maturity 12/21/20  1,000,000   1,000,000   995,000 
DuBois, Senior Secured Term Loan (First Lien), 5.59% (Libor + 3.25%), maturity 3/15/24  995,151   995,151   985,200 
             
Wholesale            
             
SRP, Senior Secured Term Loan, 8.84% (Libor + 6.50%), maturity 9/8/23  3,759,062   3,729,331   3,730,869 
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 5.34% (Libor + 3.00%), maturity 3/20/25  3,255,644   3,255,963   3,255,644 
Ohio Transmission, Senior Secured Initial Term Loan, 6.59% (Libor + 4.25%), maturity 10/2/21  1,959,545   1,948,043   1,959,545 
Colony Hardware, Senior Secured Initial Term Loan, 8.34% (Libor + 6.00%), maturity 10/23/21  1,953,717   1,940,561   1,939,064 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 7.34% (Libor + 5.00%), maturity 8/19/22  1,945,000   1,912,299   1,925,550 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 7.34% (Libor + 5.00%), maturity 6/15/23  1,476,666   1,471,807   1,492,441 
Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
          
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (102.1%)(g)(h):            
             
Healthcare & Pharmaceuticals            
Radiology Partners, Senior Secured Term B Loan (First Lien), 7.07% (Libor + 4.75%), maturity 7/9/25(i) $5,226,868  $5,185,916  $5,232,195 
Pathway, Senior Secured Initial Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 12/20/24  4,289,715   4,245,384   4,268,265 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 5/1/24(i)  3,979,696   3,961,815   3,973,440 
Young, Senior Secured Initial Term Loan (First Lien), 6.32% (Libor + 4.00%), maturity 11/7/24  3,853,813   3,842,673   3,834,542 
Advarra, Senior Secured Initial Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 7/9/26(i)  3,814,286   3,771,905   3,776,143 
Specialty Care, Senior Secured Initial Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 9/1/23  3,360,011   3,364,039   3,343,210 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 3/14/25  3,350,176   3,375,567   3,316,673 
Confluent Health, Senior Secured Initial Term Loan, 7.32% (Libor + 5.00%), maturity 6/24/26(i)  3,000,000   2,970,000   2,970,000 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 8/18/23  2,921,549   2,900,024   2,848,510 
Veritext, Senior Secured Initial Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 8/1/25  2,576,153   2,563,319   2,563,272 
MedRisk, Senior Secured Initial Term Loan (First Lien), 5.07% (Libor + 2.75%), maturity 12/27/24  2,462,500   2,468,172   2,456,344 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 9/23/24  2,458,391   2,437,899   2,439,953 
Upstream Rehabilitation, Senior Secured Initial Term Loan, 6.32% (Libor + 4.00%), maturity 1/3/24  2,399,699   2,397,672   2,393,700 
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 6.32% (Libor + 4.00%), maturity 8/1/24  2,352,319   2,340,522   2,352,319 
MedRisk, Senior Secured Initial Loan (Second Lien), 9.07% (Libor + 6.75%), maturity 12/29/25(i)  2,100,000   2,072,961   2,089,500 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 12/22/25  1,990,000   1,971,254   1,970,100 
CareCentrix, Senior Secured Initial Term Loan, 6.82% (Libor + 4.50%), maturity 4/3/25  1,937,500   1,929,195   1,937,500 
Premise Health, Senior Secured Initial Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 7/10/25  1,839,051   1,848,132   1,829,856 
Alpaca, Senior Secured Term Loan, 6.82% (Libor + 4.50%), maturity 4/19/24(j)(i)  1,682,540   1,657,445   1,657,302 
CPS, Unitranche, 7.82% (Libor + 5.50%), maturity 2/28/25  1,500,000   1,478,482   1,492,500 
Packaging Coordinators, Senior Secured Initial Term Loan (First Lien), 6.32% (Libor + 4.00%), maturity 6/30/23(i)  989,796   996,244   993,508 
Veritext, Senior Secured Initial Term Loan (Second Lien), 9.32% (Libor + 7.00%), maturity 7/31/26  1,000,000   995,371   992,500 
Dermatologists of Central States, Senior Secured Term Loan, 8.82% (Libor + 6.50%), maturity 4/20/22  982,297   975,021   977,385 
Alcami, Senior Secured Initial Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 7/14/25  992,500   988,061   972,650 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 7.82% (Libor + 5.50%), maturity 5/9/25  992,500   979,504   965,206 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 5/10/23(i)  926,799   932,332   916,079 
Specialty Care, Senior Secured Initial Term Loan (Second Lien), 10.57% (Libor + 8.25%), maturity 9/1/24  850,000   842,769   845,750 
Injured Workers Pharmacy, Senior Secured Term Loan (First Lien), 7.07% (Libor + 4.75%), maturity 7/22/20(i)  482,571   472,859   471,110 
RMP & MedA/Rx, Senior Secured Term Loan, 6.82% (Libor + 4.50%), maturity 3/2/22  449,941   448,591   448,816 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 6.57% (Libor + 4.25%), maturity 7/9/26(i)  47,619   40,000   47,143 
Alpaca, Senior Secured Revolver, 6.82% (Libor + 4.50%), maturity 4/19/24(i)  -   (3,883)  - 
             
High Tech Industries            
Qlik, Senior Secured 2019 Incremental Term Loan, 6.57% (Libor + 4.25%), maturity 4/26/24(i)  4,000,000   3,971,838   4,006,429 
Barracuda, Senior Secured 2019 Incremental Term Loan (First Lien), 5.57% (Libor + 3.25%), maturity 2/12/25(i)  3,468,741   3,482,926   3,475,805 
Navicure, Senior Secured Initial Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 11/1/24  3,448,734   3,438,547   3,448,734 
Masergy, Senior Secured Initial Loan (Second Lien), 9.82% (Libor + 7.50%), maturity 12/16/24  3,428,571   3,419,316   3,411,429 
Syncsort, Senior Secured 2018 Refinancing Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 8/16/24  3,439,013   3,412,096   3,404,622 
Sparta, Senior Secured New Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 8/21/24  3,438,750   3,440,680   3,361,378 
Infogroup, Senior Secured Term Loan (First Lien), 7.32% (Libor + 5.00%), maturity 4/3/23  2,934,950   2,907,107   2,912,938 
McAfee, Senior Secured Term B USD Loan, 6.07% (Libor + 3.75%), maturity 9/30/24(i)  2,878,935   2,890,891   2,881,068 
HelpSystems, Senior Secured Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 3/28/25  2,475,000   2,472,898   2,468,813 
Idera, Senior Secured Initial Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 6/28/24(i)  2,157,091   2,156,191   2,167,876 
eResearch (ERT), Senior Secured Initial Term Loan, 6.07% (Libor + 3.75%), maturity 5/2/23(i)  2,049,880   2,049,880   2,047,553 
QuickBase, Senior Secured Term Loan (First Lien), 6.32% (Libor + 4.00%), maturity 4/2/26(i)  2,000,000   1,990,349   2,005,000 
Intermedia , Senior Secured New Term Loan (First Lien), 8.32% (Libor + 6.00%), maturity 7/21/25(i)  1,990,000   1,972,072   1,999,950 
Flexera Software, Senior Secured Initial Term Loan (First Lien), 5.57% (Libor + 3.25%), maturity 2/26/25(i)  1,975,000   1,980,425   1,974,313 
ECi Software Solutions, Senior Secured Initial Term Loan, 6.57% (Libor + 4.25%), maturity 9/27/24(i)  1,976,180   1,964,808   1,977,443 
GlobalLogic, Senior Secured Initial Term Loan, 5.57% (Libor + 3.25%), maturity 8/1/25(i)  1,736,875   1,727,806   1,736,875 
Bomgar, Senior Secured Initial Term Loan (First Lien), 6.32% (Libor + 4.00%), maturity 4/18/25(i)  1,732,500   1,743,599   1,722,274 
Ultimate Software , Senior Secured Initial Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 5/4/26(i)  1,500,000   1,502,524   1,506,872 
SciQuest, Senior Secured Term Loan, 6.32% (Libor + 4.00%), maturity 12/28/24  1,477,500   1,471,373   1,477,500 
Navex Global, Senior Secured Initial Term Loan (First Lien), 5.57% (Libor + 3.25%), maturity 9/5/25(i)  1,488,750   1,473,436   1,467,956 
Compusearch Software Systems, Senior Secured Initial Term Loan, 6.57% (Libor + 4.25%), maturity 5/7/21  1,440,372   1,439,587   1,433,171 
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 12.57% (Libor + 10.25%), maturity 1/20/22  1,000,000   994,488   985,000 
LANDesk, Senior Secured Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 1/20/24(i)  983,378   973,778   983,378 
Corsair, Senior Secured Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 8/28/24  987,459   983,306   965,241 
Community Brands, Senior Secured Initial Term Loan (First Lien), 6.32% (Libor + 4.00%), maturity 12/2/22  838,498   834,347   834,306 
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 5.57% (Libor + 3.25%), maturity 12/15/23  487,500   485,823   485,063 
Endurance Int'l Group, Senior Secured Refinancing Loan (2018), 6.07% (Libor + 3.75%), maturity 2/9/23(i)  428,635   427,807   426,799 
             
Services: Business            
RevSpring, Senior Secured Initial Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 10/11/25(i)  3,980,000   3,975,454   3,977,165 
CoAdvantage, Senior Secured Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 10/1/23  3,652,771   3,652,771   3,634,507 
Allied Universal 2019, Senior Secured Initial Term Loan, 6.57% (Libor + 4.25%), maturity 7/10/26(i)  3,500,000   3,465,000   3,465,000 
Fleetwash, Senior Secured Incremental Term Loan, 7.07% (Libor + 4.75%), maturity 10/1/24  2,977,500   2,950,657   2,962,613 
Addison, Senior Secured Initial Term Loan, 7.32% (Libor + 5.00%), maturity 4/15/26(i)  3,000,000   2,941,604   2,962,500 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 6/19/24  2,909,060   2,909,060   2,879,970 
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 6.32% (Libor + 4.00%), maturity 2/9/26(i)  2,493,750   2,497,410   2,510,702 

 

The accompanying notes are an integral part of these financial statements.

 

 6 

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of June 30, 20182019

(Expressed in U.S. Dollars)

(unaudited)

 

 

Portfolio Investments(a) (b) (c) (d) Par  Cost  Value 
          
NON-CONTROL/NON-AFFILIATE INVESTMENTS(f)(Continued):                
             
Services: Consumer               
Restaurant Technologies, Senior Secured Term Loan (Second Lien ), 11.09% (Libor + 8.75%), maturity 11/23/23 $3,140,309  $3,161,780  $3,124,607 
A Place For Mom, Senior Secured Term Loan, 6.09% (Libor + 3.75%), maturity 8/10/24  2,707,056   2,706,103   2,720,592 
CIBT Holdings, Senior Secured Initial Term Loan (First Lien), 6.09% (Libor + 3.75%), maturity 6/3/24  1,989,950   2,006,528   1,975,025 
Weld North, Senior Secured Initial Term Loan, 6.59% (Libor + 4.25%), maturity 2/7/25  1,496,250   1,481,873   1,485,028 
Smart Start, Senior Secured Initial Term Loan (First Lien), 7.09% (Libor + 4.75%), maturity 2/21/22  1,462,500   1,462,500   1,455,188 
Smart Start, Senior Secured First Incremental Term Loan (First Lien), 6.84% (Libor + 4.50%), maturity 2/21/22  995,453   995,544   990,476 
Mister Car Wash, Senior Secured Term Loan, 5.59% (Libor + 3.25%), maturity 8/20/21  498,702   502,442   502,442 
             
Banking, Finance, Insurance & Real Estate               
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 8.09% (Libor + 5.75%), maturity 10/31/22  2,925,854   2,845,152   2,867,337 
Inst. Shareholder Services, Senior Secured Initial Term Loan (First Lien), 6.09% (Libor + 3.75%), maturity 10/16/24  2,488,021   2,482,265   2,475,581 
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 9.84% (Libor + 7.50%), maturity 4/30/23  2,000,000   2,000,000   2,000,000 
AmeriLife Group, Senior Secured Initial Term Loan (First Lien), 7.09% (Libor + 4.75%), maturity 7/10/22  1,902,054   1,884,409   1,887,788 
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 6.59% (Libor + 4.25%), maturity 9/6/24  1,492,500   1,489,012   1,485,038 
Genex Services, Senior Secured Initial Term Loan (First Lien), 5.59% (Libor + 3.25%), maturity 3/7/25  997,500   996,289   990,852 
             
Consumer Goods: Non-durable               
Manna Pro, Senior Secured Term Loan, 8.34% (Libor + 6.00%), maturity 12/8/23  3,257,917   3,208,697   3,241,627 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.84% (Libor + 4.50%), maturity 9/11/23  1,964,871   1,949,328   1,950,135 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 6.84% (Libor + 4.50%), maturity 10/26/23  1,858,228   1,842,498   1,830,354 
             
Transportation: Cargo               
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 6.09% (Libor + 3.75%), maturity 10/12/24  2,985,019   2,971,322   2,970,094 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 6.09% (Libor + 3.75%), maturity 10/7/24  1,995,000   1,990,126   2,004,975 
Capstone Logistics, Senior Secured Term Loan (First Lien), 6.84% (Libor + 4.50%), maturity 10/7/21  1,237,631   1,237,904   1,225,254 
GlobalTranz, Senior Secured Closing Date Term Loan (First Lien), 5.96% (Libor + 3.25%), maturity 6/29/25  802,083   798,073   798,073 
             
Capital Equipment               
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 5.84% (Libor + 3.50%), maturity 9/29/24  2,481,250   2,481,250   2,484,919 
TriMark, Senior Secured Initial Term Loan (First Lien), 5.84% (Libor + 3.50%), maturity 8/28/24  498,744   500,614   498,275 
Edward Don, Senior Secured Initial Term Loan, 6.46% (Libor + 4.25%), maturity 7/2/25  2,000,000   1,990,000   1,990,000 
BAS, Senior Secured Initial Term Loan, 6.59% (Libor + 4.25%), maturity 5/21/24  995,000   990,790   995,000 
United Flexible, Senior Secured Term Loan, 7.09% (Libor + 4.75%), maturity 2/16/21  471,532   468,227   471,532 
             
Containers, Packaging & Glass               
ProAmpac, Senior Secured Initial Term Loan (First Lien), 5.84% (Libor + 3.50%), maturity 11/20/23  3,478,671   3,504,827   3,467,800 
Pregis Corporation, Senior Secured Term Loan (First Lien), 5.84% (Libor + 3.50%), maturity 5/20/21  1,741,426   1,749,275   1,732,719 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 6.59% (Libor + 4.25%), maturity 5/12/20  496,337   495,352   496,958 
Tapp Label Company, Senior Secured Term Loan, 7.84% (Libor + 5.50%), maturity 7/6/20  380,936   381,111   266,655 
             
Hotel, Gaming & Leisure               
TravelCLICK, Senior Secured Term-3 Loan (First Lien), 5.84% (Libor + 3.50%), maturity 5/6/21  2,918,727   2,918,727   2,896,837 
On Location, Senior Secured Second Amendment Term Loan, 7.84% (Libor + 5.50%), maturity 9/29/21  1,481,250   1,464,817   1,470,141 
Auto Europe, Senior Secured Initial Dollar Term Loan, 7.34% (Libor + 5.00%), maturity 10/21/23  1,390,385   1,378,735   1,379,957 
             
Automotive            
Mavis, Senior Secured Closing Date Term Loan (First Lien), 5.59% (Libor + 3.25%), maturity 3/20/25  3,469,742   3,452,929   3,478,417 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 10.59% (Libor + 8.25%), maturity 4/21/25  1,800,000   1,798,195   1,786,500 
             
Aerospace & Defense               
StandardAero, Senior Secured Initial Term Loan, 6.06% (Libor + 3.75%), maturity 7/7/22  1,984,694   1,997,593   1,988,115 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 10.09% (Libor + 7.75%), maturity 4/30/26  1,500,000   1,517,500   1,515,000 
Tronair, Senior Secured Initial Term Loan (First Lien), 7.09% (Libor + 4.75%), maturity 9/8/23  1,478,712   1,469,982   1,449,138 
             
Media: Advertising, Printing & Publishing               
Ansira, Senior Secured Initial Term Loan, 8.09% (Libor + 5.75%), maturity 12/20/22  1,872,070   1,855,800   1,858,031 
Northstar, Senior Secured Term Loan, 8.59% (Libor + 6.25%), maturity 6/7/22  1,577,221   1,577,221   1,579,193 
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 7.09% (Libor + 4.75%), maturity 6/21/22  1,481,250   1,469,115   1,466,437 
             
Beverage, Food & Tobacco            
Lipari, Senior Secured Term Loan A, 6.84% (Libor + 4.50%), maturity 10/1/22  1,972,180   1,961,815   1,949,993 
Kettle Cuisine, Senior Secured Term Loan, 7.34% (Libor + 5.00%), maturity 8/21/21  1,948,146   1,948,146   1,943,276 
Sovos Brands, Senior Secured Initial Term Loan, 6.84% (Libor + 4.50%), maturity 7/18/24  992,500   988,063   972,650 
             
Construction & Building               
PlayPower, Senior Secured Initial Term Loan (First Lien), 7.09% (Libor + 4.75%), maturity 6/23/21  1,959,596   1,946,933   1,954,697 
PlayPower, Senior Secured Initial Term Loan (Second Lien), 11.09% (Libor + 8.75%), maturity 6/23/22  1,000,000   993,368   997,500 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 5.34% (Libor + 3.00%), maturity 6/3/24  994,977   994,977   992,494 
PlayCore, Senior Secured Initial Term Loan (First Lien), 6.09% (Libor + 3.75%), maturity 9/30/24  874,345   872,053   867,788 
             
Consumer Goods: Durable               
Strategic Partners, Senior Secured Initial Term Loan, 6.09% (Libor + 3.75%), maturity 6/30/23  2,473,837   2,469,072   2,492,391 
             
Media: Broadcasting & Subscription               
Encompass, Senior Secured Tranche B Term Loan (Second Lien), 10.09% (Libor + 7.75%), maturity 6/6/22  1,500,000   1,482,611   1,485,000 
Encompass, Senior Secured Tranche B Term Loan (First Lien), 6.84% (Libor + 4.50%), maturity 6/6/21  969,697   969,697   952,727 
Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
          
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(Continued):            
             
Services: Business (continued):            
HireRight, Senior Secured Initial Term Loan (Second Lien), 9.57% (Libor + 7.25%), maturity 7/10/26 $2,500,000  $2,477,716  $2,481,250 
Newport Group, Senior Secured Initial Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 9/12/25(i)  2,483,744   2,469,808   2,471,325 
Kellermeyer Bergensons Services, Senior Secured 2018 Replacement Term Loan (First Lien), 7.07% (Libor + 4.75%), maturity 10/29/21  2,307,274   2,299,141   2,289,970 
Systems Maintenance Services, Senior Secured Initial Term Loan (First Lien), 7.32% (Libor + 5.00%), maturity 10/30/23(i)  2,925,000   2,925,000   2,084,063 
Aimbridge, Senior Secured Initial Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 2/2/26(i)  1,995,000   1,987,816   2,005,450 
Allied Universal, Senior Secured Incremental Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 7/28/22(i)  1,990,000   1,990,024   1,990,000 
First Advantage, Senior Secured Term Loan (First Lien), 7.57% (Libor + 5.25%), maturity 6/30/22  2,000,000   1,993,108   1,985,000 
Equian, Senior Secured 2018 Incremental Term Loan, 5.57% (Libor + 3.25%), maturity 5/20/24(i)  1,977,741   1,970,279   1,974,734 
Vistage, Senior Secured Term B Loan (First Lien), 6.32% (Libor + 4.00%), maturity 2/10/25  1,975,000   1,971,271   1,970,063 
Service Logic, Senior Secured Initial Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 12/31/24(i)  1,521,613   1,517,412   1,519,711 
Eliassen Group, Senior Secured Initial Term B Loan, 6.82% (Libor + 4.50%), maturity 11/5/24  1,496,874   1,489,844   1,493,132 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 6.57% (Libor + 4.25%), maturity 3/27/24  1,481,891   1,476,744   1,467,072 
DBi Services, Senior Secured Term B Loan (Second Lien), 8.00% (Libor + 8.00%), maturity 2/2/26  1,209,731   1,209,731   1,209,731 
Diversified, Senior Secured Initial Term Loan, 7.07% (Libor + 4.75%), maturity 12/23/23  997,500   990,273   992,513 
             
Chemicals, Plastics & Rubber            
Plaskolite, Senior Secured Initial Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 12/15/25(i)  3,980,000   3,912,300   3,964,579 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 5/30/24  3,445,087   3,430,088   3,384,798 
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 7.07% (Libor + 4.75%), maturity 10/4/21  2,826,465   2,819,848   2,762,869 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 5.57% (Libor + 3.25%), maturity 1/31/25(i)  2,695,875   2,705,852   2,551,559 
Unifrax, Senior Secured USD Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 12/12/25(i)  2,488,747   2,466,875   2,424,716 
Zep, Senior Secured Initial Term Loan (First Lien), 6.32% (Libor + 4.00%), maturity 8/12/24  1,966,231   1,964,068   1,917,075 
Borchers, Senior Secured Term Loan, 6.82% (Libor + 4.50%), maturity 11/1/24  1,910,136   1,904,795   1,900,585 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 9.07% (Libor + 6.75%), maturity 9/6/26(i)  2,000,000   2,002,342   1,858,940 
DuBois, Senior Secured Term Loan (Second Lien), 10.32% (Libor + 8.00%), maturity 3/15/25  1,500,000   1,486,601   1,485,000 
DuBois, Senior Secured Term Loan (First Lien), 5.57% (Libor + 3.25%), maturity 3/15/24(i)  1,481,391   1,482,503   1,462,271 
Houghton International, Senior Secured Term Loan (Second Lien), 10.82% (Libor + 8.50%), maturity 12/21/20  1,000,000   1,000,000   995,000 
Invictus, Senior Secured Initial Term Loan (First Lien), 5.32% (Libor + 3.00%), maturity 3/28/25(i)  992,463   999,342   984,380 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 10/28/24  992,443   973,946   981,278 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 3/31/25(i)  987,500   983,251   906,101 
             
Services: Consumer            
CIBT Holdings, Senior Secured Initial Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 6/3/24(i)  5,452,083   5,433,496   5,397,562 
A Place For Mom, Senior Secured Term Loan, 6.07% (Libor + 3.75%), maturity 8/10/24  2,679,781   2,679,017   2,649,634 
Cambium Learning, Senior Secured Initial Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 12/18/25(i)  2,487,500   2,369,866   2,478,172 
Weld North, Senior Secured Initial Term Loan, 6.57% (Libor + 4.25%), maturity 2/15/25(i)  2,476,212   2,452,203   2,463,831 
Smart Start, Senior Secured Initial Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 2/21/22  2,430,055   2,430,055   2,417,905 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 5/14/26(i)  2,000,000   1,995,043   1,996,839 
LegalShield, Senior Secured Initial Term Loan (First Lien), 5.57% (Libor + 3.25%), maturity 5/1/25(i)  1,994,550   1,980,208   1,989,564 
SMG, Senior Secured Initial Term Loan (First Lien), 5.32% (Libor + 3.00%), maturity 1/23/25(i)  1,986,175   1,972,480   1,977,371 
Valet Living, Senior Secured Initial Term Loan, 6.32% (Libor + 4.00%), maturity 9/28/25(i)  992,500   990,232   992,500 
Spring Education, Senior Secured Initial Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 7/30/25(i)  992,500   990,290   987,223 
             
Banking, Finance, Insurance & Real Estate            
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 8.07% (Libor + 5.75%), maturity 10/31/22  2,895,854   2,832,946   2,830,697 
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 9.82% (Libor + 7.50%), maturity 4/30/23  2,000,000   2,000,000   2,000,000 
Kestra Financial, Senior Secured Initial Term Loan, 6.57% (Libor + 4.25%), maturity 6/3/26(i)  2,000,000   1,980,071   1,992,129 
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 9/6/24  1,477,500   1,474,490   1,466,419 
Aperio, Senior Secured Loan, 7.32% (Libor + 5.00%), maturity 10/25/24(i)  962,500   957,860   958,891 
AmeriLife Group, Senior Secured Initial Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 6/12/26(i)  877,193   872,210   872,807 
Integrity Marketing Group, Senior Secured Term Loan, 6.57% (Libor + 4.25%), maturity 11/28/25(i)  479,365   477,012   479,365 
             
Aerospace & Defense            
StandardAero, Senior Secured Initial Term B-1 Loan, 6.32% (Libor + 4.00%), maturity 4/6/26(i)  3,576,923   3,564,311   3,597,645 
StandardAero, Senior Secured Initial Term B-2 Loan, 6.32% (Libor + 4.00%), maturity 4/6/26(i)  1,923,077   1,916,296   1,934,218 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 10.07% (Libor + 7.75%), maturity 4/30/26  1,500,000   1,515,745   1,488,750 
Tronair, Senior Secured Initial Term Loan (First Lien), 7.07% (Libor + 4.75%), maturity 9/8/23  1,463,662   1,456,568   1,434,388 
             
Transportation: Cargo            
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 6.32% (Libor + 4.00%), maturity 10/12/24(i)  3,893,929   3,889,356   3,881,486 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 10/7/24(i)  2,967,462   2,958,688   2,960,231 
Capstone Logistics, Senior Secured Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 10/7/21  1,209,092   1,209,287   1,195,490 
             
Consumer Goods: Non-durable            
Manna Pro, Senior Secured Term Loan, 8.32% (Libor + 6.00%), maturity 12/8/23  3,456,250   3,413,521   3,417,367 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 9/11/23  1,906,766   1,893,944   1,878,165 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 6.82% (Libor + 4.50%), maturity 10/26/23(i)  1,741,772   1,728,720   1,733,063 
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 12/16/24  992,451   999,179   985,007 

 

The accompanying notes are an integral part of these financial statements.

 

 7 

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of June 30, 20182019

(Expressed in U.S. Dollars)

(unaudited)

 

 

Portfolio Investments(a) (b) (c) (d) Par  Cost  Value 
          
NON-CONTROL/NON-AFFILIATE INVESTMENTS(f)(Continued):            
             
Retail            
Grocery Outlet, Senior Secured Incremental Term Loan (First Lien), 5.84% (Libor + 3.50%), maturity 10/21/21 $1,989,924  $2,006,230  $2,007,336 
             
Forest Products & Paper            
Hoffmaster Group, Senior Secured Initial Term Loan (First Lien), 6.84% (Libor + 4.50%), maturity 11/21/23  1,970,000   1,953,925   1,978,364 
             
Utilities: Electric            
CLEAResult, Senior Secured Initial Term Loan, 7.84% (Libor + 5.50%), maturity 8/31/23  1,390,987   1,379,288   1,384,032 
             
Total Portfolio Investments(h)     $237,294,506  $236,852,837 
Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
          
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(Continued):            
             
Wholesale            
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 5.32% (Libor + 3.00%), maturity 3/20/25 $3,955,596  $3,955,979  $3,925,929 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 7.32% (Libor + 5.00%), maturity 8/19/22(i)  1,925,184   1,899,874   1,915,559 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 7.32% (Libor + 5.00%), maturity 6/15/23  1,462,424   1,459,133   1,425,864 
             
Containers, Packaging & Glass            
ProAmpac, Senior Secured Initial Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 11/20/23(i)  3,443,354   3,464,949   3,315,958 
Pregis Corporation, Senior Secured Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 5/20/21(i)  1,722,682   1,727,931   1,722,843 
Tank Holding, Senior Secured Initial Term Loan (First Lien), 6.32% (Libor + 4.00%), maturity 3/26/26(i)  1,000,000   995,148   1,002,162 
TricorBraun, Senior Secured Closing Date Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 11/30/23(i)  497,451   497,451   492,238 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 6.57% (Libor + 4.25%), maturity 5/12/20  491,337   490,631   487,652 
             
Construction & Building            
PlayPower, Senior Secured Initial Term Loan, 7.82% (Libor + 5.50%), maturity 5/8/26  1,944,444   1,944,444   1,929,861 
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 5.57% (Libor + 3.25%), maturity 7/29/22  1,488,434   1,474,797   1,488,434 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 5.32% (Libor + 3.00%), maturity 6/3/24(i)  1,482,393   1,469,367   1,437,218 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.82% (Libor + 4.50%), maturity 8/14/23(i)  993,671   983,785   983,734 
PlayCore, Senior Secured Initial Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 9/30/24(i)  981,909   979,906   967,016 
             
Capital Equipment            
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 9/30/24(i)  2,456,250   2,456,250   2,411,755 
BAS, Senior Secured Repricing Term Loan, 6.07% (Libor + 3.75%), maturity 5/21/24(i)  1,979,809   1,980,962   1,981,819 
Edward Don, Senior Secured Initial Term Loan, 6.57% (Libor + 4.25%), maturity 7/2/25(i)  1,486,256   1,479,633   1,482,541 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 12/2/24(i)  496,222   500,205   496,156 
TriMark, Senior Secured Initial Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 8/28/24(i)  493,719   495,318   412,875 
             
Automotive            
Mavis, Senior Secured Closing Date Term Loan (First Lien), 5.57% (Libor + 3.25%), maturity 3/20/25  3,510,367   3,495,458   3,484,039 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 10.57% (Libor + 8.25%), maturity 4/21/25  1,800,000   1,798,399   1,791,000 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 2/3/25  992,500   966,791   987,538 
             
Media: Advertising, Printing & Publishing            
Ansira, Unitranche, 8.07% (Libor + 5.75%), maturity 12/20/22  1,915,217   1,901,717   1,896,066 
Northstar, Senior Secured Term Loan, 8.57% (Libor + 6.25%), maturity 6/7/22  1,491,935   1,491,935   1,477,016 
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 7.07% (Libor + 4.75%), maturity 6/21/22  1,466,250   1,457,089   1,444,256 
Vestcom International, Senior Secured L/C Collaterilized, 6.32% (Libor + 4.00%), maturity 12/19/23  783,878   787,025   776,039 
             
Beverage, Food & Tobacco            
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 6.07% (Libor + 3.75%), maturity 8/25/25  1,985,000   1,976,066   1,985,000 
Sovos Brands, Senior Secured Initial Term Loan (2018), 7.32% (Libor + 5.00%), maturity 11/20/25  1,990,000   1,971,427   1,975,075 
             
Hotel, Gaming & Leisure            
On Location, Senior Secured Second Amendment Term Loan, 7.32% (Libor + 5.00%), maturity 9/29/21(i)  1,937,437   1,922,055   1,918,063 
Auto Europe, Senior Secured Initial Dollar Term Loan, 7.32% (Libor + 5.00%), maturity 10/21/23  1,200,000   1,190,446   1,197,000 
             
Forest Products & Paper            
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 6.32% (Libor + 4.00%), maturity 11/21/23  2,942,366   2,928,989   2,920,299 
             
Consumer Goods: Durable            
Strategic Partners, Senior Secured Initial Term Loan, 6.07% (Libor + 3.75%), maturity 6/30/23  2,321,181   2,317,516   2,321,181 
             
Retail            
Grocery Outlet, Senior Secured Initial Term Loan (First Lien), 6.07% (Libor + 3.75%), maturity 10/22/25(i)  1,310,862   1,307,898   1,311,676 
Albertson's, Senior Secured 2018 Term B-7 Loan, 5.32% (Libor + 3.00%), maturity 11/17/25(i)  497,500   494,040   496,439 
             
Total Bank Loans     $310,044,785  $308,165,899 
             
EQUITY AND PREFERRED SHARES: NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.2%)(g)(h):            
             
Services: Business            
DBi Services, Class A-1 Preferred Units (800.53 units)(k)     $800,535  $400,267 
DBi Services, Class B Common Shares (169,362.31 shares)(l)(m)      -   - 
             
Healthcare & Pharmaceuticals            
Alpaca, Class A Units (33,300.04 Class A Units, Fair value of $58,608)(j)(m)(n)(o)      58,608   58,608 
             
Total Equity and Preferred Shares     $859,143  $458,875 
             
Total Portfolio Investments(p)     $310,903,928  $308,624,774 

The accompanying notes are an integral part of these financial statements.

8

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of June 30, 2019

(Expressed in U.S. Dollars)

(unaudited)

 

(a)All companies are located in the United States of America.America, unless otherwise noted.
(b)Interest rate percentages represent actual interest rates which are indexed from then 30-day London Interbank Offered Rate ("LIBOR") unless otherwise noted. LIBOR rates are subject to interest rate floors which can vary based on the contractual agreement with the borrower. Due dates represent the contractual maturity date.
(c)All loans are income-producing, unless otherwise noted.
(d)All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.
(e)All loans are restricted, unless otherwise noted.
(f)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(g)Percentages are calculated using fair value of investments over net assets.
(f)(h)As defined in 1940 Act, the Company is not deemed to be an “Affiliated Person” of or “Control” this portfolio company because it neither owns 5% or more of the portfolio company’s outstanding voting securities nor has the power to exercise control over the management or policies of such portfolio company (including through a management agreement).
(g)(i)The borrowerInvestment was valued using Level 2 inputs within the ASC 820 fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for Livingston, Livingston International Inc., is located in Canada.additional information.
(h)(j)Three of our affiliated funds, Audax Direct Lending Solutions Fund - A, L.P., Audax Direct Lending Solutions Fund - C, L.P., and Audax Direct Lending Solutions Fund - D, L.P.,"'co-invested with us in this portfolio company pursuant to an exemptive order granted by the U.S. Securities and Exchange Commission.
(k)Represents an investment owned by APD Dbi Preferred, Inc., a holding company for the investment in DBi.
(l)Represents an investment owned by APD Dbi Common, Inc., a holding company for the investment in DBi.
(m)Investment is non-income producing.
(n)Represents an investment in APD ALP Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(o)Other net assets of $0 at the aggregator levels are included in the fair value of the investments when using the net asset value as a practical expedient.
(p)At June 30, 2018,2019, the cost of investments for income tax purposes was $237,294,506$310,903,928 the gross unrealized depreciation for federal tax purposes was $1,059,487,$3,027,620, the gross unrealized appreciation for federal income tax purposes was $617,818,$748,466, and the net unrealized depreciation was $441,669.$2,279,154.

 

The accompanying notes are an integral part of these financial statements.

8

Audax Credit BDC Inc.

Schedule of Investments

As of December 31, 2017

(Expressed in U.S. Dollars)

Portfolio Investments(a) (b) (c) (d) Par  Cost  Value 
          
NON-CONTROL/NON-AFFILIATE INVESTMENTS - (88.1%)(e)(f):                
             
High Tech Industries               
Masergy, Senior Secured Initial Loan (Second Lien), 10.19% (Libor + 8.50%), maturity 12/16/24 $4,000,000  $3,986,617  $3,989,999 
Sparta, Senior Secured Initial Term Loan (First Lien), 5.69% (Libor + 4.00%), maturity 8/21/24  3,491,250   3,493,682   3,473,793 
Help/Systems, Senior Secured Refinancing Term Loan (First Lien), 6.19% (Libor + 4.50%), maturity 10/8/21  3,473,418   3,469,538   3,473,417 
Syncsort, Senior Secured Initial Term Loan (First Lien), 6.69% (Libor + 5.00%), maturity 8/16/24  3,491,250   3,457,390   3,429,425 
Navicure, Senior Secured Initial Term Loan (First Lien), 5.44% (Libor + 3.75%), maturity 11/1/24  3,000,000   2,985,311   3,011,250 
Infogroup, Senior Secured Term Loan (First Lien), 6.69% (Libor + 5.00%), maturity 4/3/23  2,979,987   2,942,629   2,965,088 
GlobalLogic, Senior Secured Closing Date Term Loan, 6.19% (Libor + 4.50%), maturity 6/20/22  1,985,000   1,968,369   1,989,963 
Idera, Senior Secured Initial Term Loan (First Lien), 6.69% (Libor + 5.00%), maturity 6/28/24  1,682,535   1,684,149   1,678,329 
SciQuest, Senior Secured Term Loan, 5.69% (Libor + 4.00%), maturity 12/28/24  1,500,000   1,492,500   1,492,500 
Flexera Software, Senior Secured Term Loan (Second Lien), 8.69% (Libor + 7.00%), maturity 4/2/21  1,000,000   981,929   997,500 
Intermedia, Senior Secured Initial Term Loan (First Lien), 7.19% (Libor + 5.50%), maturity 2/1/24  995,000   995,000   997,488 
ECi Software Solutions, Senior Secured Initial Term Loan, 5.94% (Libor + 4.25%), maturity 9/27/24  997,500   987,787   990,019 
Compusearch Software Systems, Senior Secured Initial Term Loan, 6.19% (Libor + 4.50%), maturity 5/7/21  989,420   989,420   989,420 
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 11.94% (Libor + 10.25%), maturity 1/20/22  1,000,000   991,916   977,500 
McAfee, Senior Secured Closing Date USD Term Loan, 6.19% (Libor + 4.50%), maturity 9/30/24  498,750   493,884   497,860 
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 5.44% (Libor + 3.75%), maturity 12/15/23  495,000   492,815   493,763 
Endurance Int'l Group, Senior Secured Refinancing Loan, 5.69% (Libor + 4.00%), maturity 2/9/23  473,057   471,912   476,775 
LANDesk, Senior Secured Term Loan (First Lien), 5.94% (Libor + 4.25%), maturity 1/20/24  497,630   491,604   474,615 
             
Healthcare & Pharmaceuticals            
Beaver-Visitec, Senior Secured Closing Date Term Loan (First Lien), 6.69% (Libor + 5.00%), maturity 8/21/23  3,953,731   3,953,731   3,933,962 
Physicans Endoscopy, Senior Secured Initial Term Loan, 6.69% (Libor + 5.00%), maturity 8/18/23  2,965,975   2,939,822   2,936,315 
Young, Senior Secured Initial Term Loan (First Lien), 5.69% (Libor + 4.00%), maturity 11/7/24  2,750,000   2,732,984   2,750,000 
Pathway, Senior Secured Term Loan (First Lien), 5.94% (Libor + 4.25%), maturity 10/10/24  2,176,311   2,161,569   2,159,989 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 6.19% (Libor + 4.50%), maturity 9/23/24  2,153,693   2,129,086   2,137,540 
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 5.94% (Libor + 4.25%), maturity 8/1/24  2,000,000   1,990,432   2,012,500 
Sarnova, Senior Secured Term Loan (First Lien), 6.44% (Libor + 4.75%), maturity 1/28/22  1,965,000   1,950,833   1,965,000 
Upstream Rehabilitation, Senior Secured Term Loan, 5.69% (Libor + 4.00%), maturity 12/15/21  1,936,242   1,904,024   1,936,242 
Radiology Partners, Senior Secured Term Loan, 7.44% (Libor + 5.75%), maturity 12/4/23  1,824,433   1,804,541   1,806,189 
Specialty Care, Senior Secured Initial Term Loan (First Lien), 5.94% (Libor + 4.25%), maturity 9/1/23  1,500,000   1,507,781   1,488,750 
Curo Health Services, Senior Secured Term B Loan (First Lien), 5.69% (Libor + 4.00%), maturity 2/7/22  1,484,770   1,487,960   1,486,255 
CareCentrix, Senior Secured Initial Term Loan, 6.69% (Libor + 5.00%), maturity 7/8/21  1,471,187   1,456,513   1,485,899 
NAPA, Senior Secured Initial Term Loan (First Lien), 6.69% (Libor + 5.00%), maturity 4/19/23  903,118   896,101   894,087 
Dermatologists of Central States, Senior Secured Term Loan, 8.19% (Libor + 6.50%), maturity 4/20/22  862,583   853,203   856,113 
RMP & MedA/Rx, Senior Secured Term Loan, 6.44% (Libor + 4.75%), maturity 3/2/22  490,625   488,507   485,719 
             
Services: Business            
CoAdvantage, Senior Secured Term Loan (First Lien), 6.19% (Libor + 4.50%), maturity 10/1/23  3,985,013   3,970,218   3,955,125 
Sungard Public Sector, Senior Secured Term Loan (Second Lien), 10.19% (Libor + 8.50%), maturity 1/31/25  3,500,000   3,519,114   3,482,500 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 5.19% (Libor + 3.50%), maturity 6/19/24  2,953,587   2,953,587   2,968,860 
Systems Maintenance Services, Senior Secured Initial Term Loan (First Lien), 6.69% (Libor + 5.00%), maturity 10/30/23  2,970,000   2,970,000   2,895,750 
Kellermeyer Bergensons Services, Senior Secured Initial Term Loan (First Lien), 6.69% (Libor + 5.00%), maturity 10/29/21  2,342,823   2,329,977   2,336,966 
ABILITY Network, Senior Secured Initial Term Loan (First Lien), 5.44% (Libor + 3.75%), maturity 12/13/24  2,000,000   1,990,000   2,007,500 
First Advantage, Senior Secured Term Loan (First Lien), 6.94% (Libor + 5.25%), maturity 6/30/22  2,000,000   1,989,326   1,945,000 
General Info Solutions, Senior Secured Initial Term Loan, 6.44% (Libor + 4.75%), maturity 1/26/23  1,215,625   1,204,679   1,206,508 
Service Logic, Senior Secured Initial Term Loan (First Lien), 5.94% (Libor + 4.25%), maturity 7/31/23  1,000,000   995,254   995,000 
Intralinks, Senior Secured Initial Term Loan (First Lien), 5.69% (Libor + 4.00%), maturity 11/14/24  1,000,000   995,052   992,500 
DBi Services, Senior Secured Term B Loan, 6.94% (Libor + 5.25%), maturity 8/1/21  989,985   981,912   987,510 
ACA Compliance Group, Senior Secured Term Loan, 6.44% (Libor + 4.75%), maturity 1/30/21  497,500   493,116   493,769 
Sungard Public Sector, Senior Secured Term Loan, 5.94% (Libor + 4.25%), maturity 2/1/24  248,125   247,024   251,057 
             
Banking, Finance, Insurance & Real Estate               
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 7.44% (Libor + 5.75%), maturity 10/31/22  2,940,854   2,851,768   2,911,446 
Inst. Shareholder Services, Senior Secured Initial Term Loan (First Lien), 5.44% (Libor + 3.75%), maturity 10/16/24  2,291,667   2,285,541   2,303,125 
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 9.19% (Libor + 7.50%), maturity 4/30/23  2,000,000   2,000,000   2,000,000 
AmeriLife Group, Senior Secured Initial Term Loan (First Lien), 6.44% (Libor + 4.75%), maturity 7/10/22  1,945,641   1,926,032   1,923,752 
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 6.44% (Libor + 4.75%), maturity 9/6/24  1,500,000   1,496,280   1,492,500 
GENEX Services, Senior Secured Initial Term Loan (Second Lien), 9.44% (Libor + 7.75%), maturity 5/30/22  1,271,000   1,216,818   1,266,234 
             
Wholesale               
SRP, Senior Secured Term Loan, 8.19% (Libor + 6.50%), maturity 9/8/23  3,436,401   3,404,984   3,419,219 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.69% (Libor + 5.00%), maturity 8/19/22  1,955,000   1,919,234   1,967,219 
Ohio Transmission, Senior Secured Initial Term Loan, 5.94% (Libor + 4.25%), maturity 10/2/21  1,969,545   1,956,406   1,964,622 
Colony Hardware, Senior Secured Initial Term Loan, 7.69% (Libor + 6.00%), maturity 10/23/21  1,963,741   1,948,815   1,949,013 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.69% (Libor + 5.00%), maturity 6/15/23  1,484,981   1,479,366   1,490,131 
             
Chemicals, Plastics & Rubber               
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 5.19% (Libor + 3.50%), maturity 5/30/24  2,992,500   2,992,608   2,992,500 
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 6.44% (Libor + 4.75%), maturity 10/4/21  2,939,995   2,929,297   2,903,245 
Borchers, Senior Secured Term Loan, 6.19% (Libor + 4.50%), maturity 11/1/24  1,989,987   1,983,107   1,985,012 
Zep, Senior Secured Initial Term Loan (First Lien), 5.69% (Libor + 4.00%), maturity 8/12/24  1,496,250   1,489,035   1,485,028 
Houghton International, Senior Secured Term Loan (Second Lien), 10.19% (Libor + 8.50%), maturity 12/21/20  1,000,000   1,000,000   1,005,000 
             
Services: Consumer               
Restaurant Technologies, Senior Secured Term Loan (Second Lien ), 10.44% (Libor + 8.75%), maturity 11/23/23  3,140,309   3,163,677   3,163,861 
A Place For Mom, Senior Secured Term Loan, 5.69% (Libor + 4.00%), maturity 8/10/24  2,219,438   2,215,736   2,213,889 
Smart Start, Senior Secured Initial Term Loan (First Lien), 6.44% (Libor + 4.75%), maturity 2/21/22  1,470,000   1,470,000   1,466,325 
Smart Start, Senior Secured First Incremental Term Loan (First Lien), 6.19% (Libor + 4.50%), maturity 2/21/22  998,484   995,988   997,236 
             
Consumer Goods: Non-durable               
Manna Pro, Senior Secured Term Loan, 7.69% (Libor + 6.00%), maturity 12/8/23  2,916,667   2,864,167   2,872,917 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 6.19% (Libor + 4.50%), maturity 9/11/23  1,974,957   1,958,097   1,955,207 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 6.19% (Libor + 4.50%), maturity 10/26/23  1,868,354   1,851,317   1,849,671 

The accompanying notes are an integral part of these financial statements.

 

 9 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 20172018

(Expressed in U.S. Dollars)

 

 

Portfolio Investments(a) (b) (c) (d) Par  Cost  Value 
          
NON-CONTROL/NON-AFFILIATE INVESTMENTS(f)(Continued):                
             
Consumer Goods: Durable               
Pelican Products, Senior Secured Term Loan (First Lien), 5.94% (Libor + 4.25%), maturity 4/10/20 $3,977,987  $3,962,506  $3,992,904 
Strategic Partners, Senior Secured Initial Term Loan, 6.19% (Libor + 4.50%), maturity 6/30/23  1,980,038   1,974,869   1,994,888 
             
Capital Equipment               
MW Industries, Senior Secured Initial Term Loan (First Lien), 5.69% (Libor + 4.00%), maturity 9/30/24  2,493,750   2,481,542   2,522,096 
FCX, Senior Secured Eighth Amendment Acquisition Loan, 5.94% (Libor + 4.25%), maturity 8/4/20  997,500   992,710   992,513 
BAS, Senior Secured Initial Term Loan, 5.94% (Libor + 4.25%), maturity 5/21/24  1,000,000   995,111   992,500 
FCX, Senior Secured Seventh Amendment Acquisition Loan, 6.19% (Libor + 4.50%), maturity 8/4/20  987,500   987,500   982,563 
United Flexible, Senior Secured Term Loan, 6.44% (Libor + 4.75%), maturity 2/16/21  477,858   473,970   476,663 
             
Media: Advertising, Printing & Publishing               
Ansira, Senior Secured Initial Term Loan, 8.19% (Libor + 6.50%), maturity 12/20/22  1,868,492   1,850,917   1,854,480 
Northstar, Senior Secured Term Loan, 7.94% (Libor + 6.25%), maturity 6/7/22  1,620,083   1,620,083   1,607,932 
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 6.44% (Libor + 4.75%), maturity 6/21/22  1,488,750   1,475,137   1,462,697 
Mspark, Senior Secured Term Loan, 7.19% (Libor + 5.50%), maturity 4/22/21  926,356   919,435   926,356 
             
Hotel, Gaming & Leisure               
TravelCLICK, Senior Secured Term-1 Loan (First Lien), 5.69% (Libor + 4.00%), maturity 5/6/21  2,933,431   2,933,431   2,953,539 
On Location, Senior Secured Second Amendment Incremental Term Loan, 7.19% (Libor + 5.50%), maturity 9/29/21  1,490,625   1,471,992   1,471,992 
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.69% (Libor + 5.00%), maturity 10/21/23  1,407,692   1,395,010   1,404,173 
             
Aerospace & Defense               
StandardAero, Senior Secured Initial Term Loan, 5.44% (Libor + 3.75%), maturity 7/7/22  1,994,898   2,009,478   2,013,191 
MB Aerospace, Senior Secured Initial Term Loan, 7.19% (Libor + 5.50%), maturity 12/15/22  1,962,456   1,946,911   1,952,644 
Tronair, Senior Secured Initial Term Loan (First Lien), 6.44% (Libor + 4.75%), maturity 9/8/23  1,486,237   1,476,682   1,482,522 
             
Beverage, Food & Tobacco            
Lipari, Senior Secured Term Loan A, 6.19% (Libor + 4.50%), maturity 10/1/22  1,982,180   1,968,907   1,962,358 
Kettle Cuisine, Senior Secured Term Loan, 6.69% (Libor + 5.00%), maturity 8/21/21  1,958,093   1,958,093   1,958,093 
Sovos Brands, Senior Secured Initial Term Loan, 6.19% (Libor + 4.50%), maturity 7/18/24  997,500   992,745   990,019 
             
Transportation: Cargo               
Odyssey Logistics & Technology , Senior Secured Initial Term Loan (First Lien), 5.94% (Libor + 4.25%), maturity 10/12/24  3,000,000   2,985,000   2,977,500 
Capstone Logistics, Senior Secured Term Loan (First Lien), 6.19% (Libor + 4.50%), maturity 10/7/21  1,280,194   1,280,506   1,267,392 
             
Construction & Building               
PlayPower, Senior Secured Initial Term Loan (First Lien), 6.44% (Libor + 4.75%), maturity 6/23/21  1,969,697   1,954,979   1,979,545 
PlayPower, Senior Secured Initial Term Loan (Second Lien), 10.44% (Libor + 8.75%), maturity 6/23/22  1,000,000   992,705   997,500 
PlayCore, Senior Secured Initial Term Loan (First Lien), 5.44% (Libor + 3.75%), maturity 9/30/24  878,750   876,316   872,159 
             
Media: Broadcasting & Subscription               
Encompass, Senior Secured Tranche B Term Loan (Second Lien), 9.44% (Libor + 7.75%), maturity 6/6/22  1,500,000   1,480,811   1,485,000 
Encompass, Senior Secured Tranche B Term Loan (First Lien), 6.19% (Libor + 4.50%), maturity 6/6/21  974,748   974,748   965,000 
             
Forest Products & Paper               
Hoffmaster Group, Senior Secured Initial Term Loan (First Lien), 6.19% (Libor + 4.50%), maturity 11/21/23  1,980,000   1,962,639   1,998,977 
             
Automotive            
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 9.94% (Libor + 8.25%), maturity 4/21/25  1,800,000   1,798,099   1,786,500 
             
Utilities: Electric               
CLEAResult, Senior Secured Initial Term Loan, 7.19% (Libor + 5.50%), maturity 8/31/23  1,390,987   1,378,314   1,390,987 
             
Media: Diversified & Production               
Vubiquity, Senior Secured Initial Term Loan, 7.19% (Libor + 5.50%), maturity 8/12/21  980,000   973,568   970,200 
             
Containers, Packaging & Glass               
Tapp Label Company, Senior Secured Term Loan, 7.19% (Libor + 5.50%), maturity 7/6/20  463,487   462,519   324,441 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 5.94% (Libor + 4.25%), maturity 5/12/20  498,392   497,269   498,392 
             
Total Portfolio Investments(g)     $184,175,573  $184,336,177 
Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
          
NON-CONTROL/NON-AFFILIATE INVESTMENTS - (99.0%)(g)(h):            
             
Healthcare & Pharmaceuticals            
Radiology Partners, Senior Secured Term B Loan (First Lien), 7.05% (Libor + 4.25%), maturity 7/9/25(i) $3,990,000  $3,952,085  $4,019,924 
Young, Senior Secured Initial Term Loan (First Lien), 6.80% (Libor + 4.00%), maturity 11/7/24(i)  3,902,369   3,890,558   3,921,880 
Beaver-Visitec, Senior Secured Term B Loan, 6.80% (Libor + 4.00%), maturity 8/21/23(i)  3,914,044   3,914,043   3,914,043 
Specialty Care, Senior Secured Initial Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 9/1/23  3,377,066   3,381,533   3,351,737 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 3/14/25  3,367,138   3,394,604   3,333,466 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 8/18/23  2,936,340   2,913,237   2,884,954 
MedRisk, Senior Secured Initial Term Loan (First Lien), 5.55% (Libor + 2.75%), maturity 12/27/24  2,475,000   2,481,109   2,462,624 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 7.30% (Libor + 4.50%), maturity 9/23/24  2,465,213   2,443,320   2,452,887 
Upstream Rehabilitation, Senior Secured Initial Term Loan, 7.05% (Libor + 4.25%), maturity 1/3/24  2,411,880   2,409,690   2,405,850 
OB Hospitalist Group, Senior Secured Term Loan (First Lien), 6.80% (Libor + 4.00%), maturity 8/1/24  2,363,660   2,350,839   2,363,660 
Avalign Technologies, Senior Secured Term Loan B, 7.30% (Libor + 4.50%), maturity 12/19/25(i)  2,000,000   1,980,000   1,980,000 
CareCentrix, Senior Secured Initial Term Loan, 7.30% (Libor + 4.50%), maturity 4/3/25  1,962,500   1,953,489   1,957,594 
Premise Health, Senior Secured Initial Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 7/10/25(i)  1,848,316   1,858,011   1,859,868 
Veritext, Senior Secured Initial Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 8/1/25(i)  1,459,924   1,460,860   1,463,574 
MedRisk, Senior Secured Initial Loan (Second Lien), 9.55% (Libor + 6.75%), maturity 12/29/25  1,100,000   1,089,000   1,091,750 
Packaging Coordinators, Senior Secured Initial Term Loan (First Lien), 6.80% (Libor + 4.00%), maturity 6/30/23(i)  994,898   1,002,071   992,411 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 8.30% (Libor + 5.50%), maturity 5/9/25  997,500   983,581   990,019 
Veritext, Senior Secured Initial Term Loan (Second Lien), 9.80% (Libor + 7.00%), maturity 7/31/26  1,000,000   995,138   990,000 
Alcami, Senior Secured Initial Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 7/14/25  997,500   992,739   982,538 
U.S. Renal Care, Senior Secured Initial Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 12/30/22(i)  993,613   989,751   980,199 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 5/10/23  931,577   937,752   919,932 
Dermatologists of Central States, Senior Secured Term Loan, 9.30% (Libor + 6.50%), maturity 4/20/22  895,940   887,937   891,460 
Specialty Care, Senior Secured Initial Term Loan (Second Lien), 11.05% (Libor + 8.25%), maturity 9/1/24  850,000   842,238   843,625 
RMP & MedA/Rx, Senior Secured Term Loan, 7.55% (Libor + 4.75%), maturity 3/2/22  467,243   465,637   466,075 
             
High Tech Industries            
Navicure, Senior Secured Initial Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 11/1/24  3,466,241   3,455,194   3,457,575 
Syncsort, Senior Secured 2018 Refinancing Term Loan (First Lien), 7.30% (Libor + 4.50%), maturity 8/16/24(i)  3,456,338   3,427,046   3,452,017 
Masergy, Senior Secured Initial Loan (Second Lien), 10.30% (Libor + 7.50%), maturity 12/16/24  3,428,571   3,418,552   3,402,857 
Sparta, Senior Secured New Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 8/21/24  3,456,250   3,458,349   3,387,125 
Barracuda, Senior Secured Term Loan (First Lien), 6.05% (Libor + 3.25%), maturity 2/12/25(i)  2,985,000   3,003,618   2,950,673 
Infogroup, Senior Secured Term Loan (First Lien), 7.80% (Libor + 5.00%), maturity 4/3/23  2,949,962   2,918,814   2,935,213 
McAfee, Senior Secured Term B USD Loan, 6.55% (Libor + 3.75%), maturity 9/30/24(i)  2,893,438   2,906,309   2,881,864 
HelpSystems, Senior Secured Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 3/28/25  2,487,500   2,485,229   2,468,844 
Intermedia , Senior Secured New Term Loan (First Lien), 8.80% (Libor + 6.00%), maturity 7/21/25  2,000,000   1,980,887   1,995,000 
Flexera Software, Senior Secured Initial Term Loan (First Lien), 6.05% (Libor + 3.25%), maturity 2/26/25(i)  1,985,000   1,990,262   1,962,173 
Bomgar, Senior Secured Initial Term Loan (First Lien), 6.80% (Libor + 4.00%), maturity 4/18/25  1,741,250   1,753,357   1,732,544 
GlobalLogic, Senior Secured Initial Term Loan, 6.05% (Libor + 3.25%), maturity 8/1/25(i)  1,745,625   1,735,985   1,725,987 
Idera, Senior Secured Initial Term Loan (First Lien), 7.30% (Libor + 4.50%), maturity 6/28/24  1,665,545   1,667,150   1,665,545 
SciQuest, Senior Secured Term Loan, 6.80% (Libor + 4.00%), maturity 12/28/24  1,488,750   1,482,127   1,488,750 
ECi Software Solutions, Senior Secured Initial Term Loan, 7.05% (Libor + 4.25%), maturity 9/27/24(i)  1,486,237   1,474,659   1,482,522 
Compusearch Software Systems, Senior Secured Initial Term Loan, 7.05% (Libor + 4.25%), maturity 5/7/21  1,474,211   1,473,229   1,466,840 
Navex Global, Senior Secured Initial Term Loan (First Lien), 6.05% (Libor + 3.25%), maturity 9/5/25(i)  1,496,250   1,479,928   1,455,103 
Corsair, Senior Secured Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 8/28/24  992,683   988,177   982,756 
Global Knowledge, Senior Secured Initial Term Loan (Second Lien), 13.05% (Libor + 10.25%), maturity 1/20/22  1,000,000   993,585   975,000 
LANDesk, Senior Secured Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 1/20/24(i)  988,129   977,504   958,979 
Community Brands, Senior Secured Initial Term Loan (First Lien), 6.80% (Libor + 4.00%), maturity 12/2/22  798,373   793,856   794,381 
Masergy, Senior Secured 2017 Replacement Term Loan (First Lien), 6.05% (Libor + 3.25%), maturity 12/15/23  490,000   488,150   486,325 
MultiPlan, Senior Secured Initial Term Loan, 5.55% (Libor + 2.75%), maturity 6/7/23(i)  500,000   483,750   485,650 
Endurance Int'l Group, Senior Secured Refinancing Loan (2018), 6.55% (Libor + 3.75%), maturity 2/9/23(i)  443,365   442,430   437,823 
             
Services: Business            
CoAdvantage, Senior Secured Term Loan (First Lien), 7.30% (Libor + 4.50%), maturity 10/1/23(i)  3,955,050   3,955,050   3,915,500 
RevSpring, Senior Secured Initial Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 10/11/25(i)  3,500,000   3,496,396   3,491,250 
Fleetwash, Senior Secured Initial Term Loan, 7.55% (Libor + 4.75%), maturity 10/1/24  2,992,500   2,963,427   2,977,538 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 6/19/24  2,923,903   2,923,903   2,891,009 
Systems Maintenance Services, Senior Secured Initial Term Loan (First Lien), 7.80% (Libor + 5.00%), maturity 10/30/23  2,940,000   2,940,000   2,499,000 
HireRight, Senior Secured Initial Term Loan (Second Lien), 10.05% (Libor + 7.25%), maturity 7/10/26  2,500,000   2,476,095   2,481,250 
Kellermeyer Bergensons Services, Senior Secured 2018 Replacement Term Loan (First Lien), 7.55% (Libor + 4.75%), maturity 10/29/21(i)  2,318,897   2,309,135   2,313,099 
First Advantage, Senior Secured Term Loan (First Lien), 8.05% (Libor + 5.25%), maturity 6/30/22  2,000,000   1,991,806   1,985,000 
Newport Group, Senior Secured Initial Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 9/12/25  1,995,000   1,985,318   1,980,038 
Vistage, Senior Secured Term B Loan (First Lien), 6.80% (Libor + 4.00%), maturity 2/10/25  1,985,000   1,980,809   1,980,038 
Allied Universal, Senior Secured Incremental Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 7/28/22  2,000,000   2,000,000   1,977,500 
DBi Services, Senior Secured Term B Loan, 8.05% (Libor + 5.25%), maturity 8/1/21  1,977,444   1,963,482   1,720,376 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 7.05% (Libor + 4.25%), maturity 3/27/24  1,489,391   1,483,770   1,478,221 
Livingston, Senior Secured Refinancing Term B-3 Loan (First Lien), 8.55% (Libor + 5.75%), maturity 3/20/20(j)  1,485,000   1,486,788   1,468,294 
Eliassen Group, Senior Secured Term Loan B, 7.30% (Libor + 4.50%), maturity 11/5/24  1,000,000   995,057   992,500 
Service Logic, Senior Secured Initial Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 7/31/23(i)  990,005   986,031   990,005 
Equian, Senior Secured 2018 Incremental Term Loan, 6.05% (Libor + 3.25%), maturity 5/20/24(i)  993,709   997,137   976,816 
Livingston, Senior Secured Initial Term Loan (Second Lien), 11.05% (Libor + 8.25%), maturity 4/17/20(i)(j)  616,000   597,520   597,520 
DBi Services, Senior Secured Super Priority Term Loan, 15.00% (Libor + 15.00%), maturity 2/1/20(i)  144,000   144,000   144,000 
             
Chemicals, Plastics & Rubber            
Plaskolite, Senior Secured Initial Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 12/15/25(i)  3,500,000   3,430,000   3,482,500 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 5/30/24(i)  2,962,575   2,962,667   2,969,981 

The accompanying notes are an integral part of these financial statements.

10

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2018

(Expressed in U.S. Dollars)

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
          
NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(Continued):            
             
Chemicals, Plastics & Rubber (continued):            
Universal Fiber Systems, Senior Secured Initial Term Loan (First Lien), 7.55% (Libor + 4.75%), maturity 10/4/21 $2,864,310  $2,856,324  $2,828,506 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 6.05% (Libor + 3.25%), maturity 1/31/25  2,709,525   2,720,231   2,662,108 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 9.55% (Libor + 6.75%), maturity 9/6/26(i)  2,000,000   2,002,455   2,000,000 
Unifrax, Senior Secured USD Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 12/12/25(i)  2,000,000   1,990,000   1,992,500 
Borchers, Senior Secured Term Loan, 7.30% (Libor + 4.50%), maturity 11/1/24  1,969,937   1,964,072   1,960,088 
Zep, Senior Secured Initial Term Loan (First Lien), 6.80% (Libor + 4.00%), maturity 8/12/24  1,976,237   1,973,888   1,946,594 
DuBois, Senior Secured Term Loan (First Lien), 6.05% (Libor + 3.25%), maturity 3/15/24(i)  1,488,898   1,490,117   1,492,620 
DuBois, Senior Secured Term Loan (Second Lien), 10.80% (Libor + 8.00%), maturity 3/15/25  1,500,000   1,485,490   1,483,125 
Houghton International, Senior Secured Term Loan (Second Lien), 11.30% (Libor + 8.50%), maturity 12/21/20  1,000,000   1,000,000   995,000 
Invictus, Senior Secured Initial Term Loan (First Lien), 5.80% (Libor + 3.00%), maturity 3/28/25(i)  997,487   1,004,912   983,549 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 3/31/25  992,500   987,925   980,094 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 10/28/24(i)  997,481   977,531   977,531 
Boyd Corp, Senior Secured Initial Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 9/6/25(i)  997,500   980,044   962,588 
             
Services: Consumer            
A Place For Mom, Senior Secured Term Loan, 6.55% (Libor + 3.75%), maturity 8/10/24(i)  2,693,419   2,692,552   2,693,419 
Smart Start, Senior Secured Initial Term Loan (First Lien), 7.30% (Libor + 4.50%), maturity 2/21/22(i)  2,442,485   2,442,485   2,436,379 
Cambium Learning, Senior Secured Initial Term Loan (First Lien), 7.30% (Libor + 4.50%), maturity 12/18/25(i)  2,500,000   2,375,000   2,375,000 
CIBT Holdings, Senior Secured Initial Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 6/3/24  1,979,900   1,995,160   1,960,101 
SMG, Senior Secured Initial Term Loan (First Lien), 5.80% (Libor + 3.00%), maturity 1/23/25(i)  1,496,231   1,489,971   1,499,972 
Weld North, Senior Secured Initial Term Loan, 7.05% (Libor + 4.25%), maturity 2/15/25  1,488,750   1,475,327   1,485,028 
Valet Living, Senior Secured Initial Term Loan, 6.80% (Libor + 4.00%), maturity 9/28/25(i)  997,500   995,073   1,004,981 
Mister Car Wash, Senior Secured Term Loan, 6.05% (Libor + 3.25%), maturity 8/20/21(i)  994,801   1,001,543   994,801 
Spring Education, Senior Secured Initial Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 7/30/25  997,500   995,113   992,513 
LegalShield, Senior Secured Initial Term Loan (First Lien), 5.80% (Libor + 3.00%), maturity 5/1/25(i)  500,000   500,000   500,000 
             
Banking, Finance, Insurance & Real Estate            
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 8.55% (Libor + 5.75%), maturity 10/31/22  2,910,854   2,838,756   2,881,746 
Inst. Shareholder Services, Senior Secured Initial Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 10/16/24(i)  2,475,521   2,470,128   2,469,332 
American Beacon Advisors, Senior Secured Tranche C Term Loan (Second Lien), 10.30% (Libor + 7.50%), maturity 4/30/23  2,000,000   2,000,000   2,000,000 
AmeriLife Group, Senior Secured Initial Term Loan (First Lien), 7.55% (Libor + 4.75%), maturity 7/10/22  1,892,041   1,876,407   1,882,581 
EPIC Insurance, Senior Secured Initial Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 9/6/24  1,485,000   1,481,748   1,477,575 
Aperio, Senior Secured Loan, 7.80% (Libor + 5.00%), maturity 10/25/24(i)  1,000,000   995,000   995,000 
Integrity Marketing Group, Senior Secured Term Loan, 7.05% (Libor + 4.25%), maturity 11/28/25(i)  421,260   418,774   419,154 
             
Transportation: Cargo            
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 6.80% (Libor + 4.00%), maturity 10/12/24(i)  3,967,544   3,962,584   3,947,706 
Transplace, Senior Secured Closing Date Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 10/7/24(i)  2,982,487   2,972,987   2,967,575 
Capstone Logistics, Senior Secured Term Loan (First Lien), 7.30% (Libor + 4.50%), maturity 10/7/21  1,237,631   1,237,865   1,228,348 
GlobalTranz, Senior Secured Term Loan (First Lien), 7.05% (Libor + 4.25%), maturity 6/29/25  997,500   996,510   990,019 
             
Wholesale            
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 5.80% (Libor + 3.00%), maturity 3/20/25  3,239,325   3,239,674   3,206,932 
Ohio Transmission, Senior Secured Initial Term Loan, 7.05% (Libor + 4.25%), maturity 10/2/21  1,944,545   1,934,714   1,944,545 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 7.80% (Libor + 5.00%), maturity 8/19/22  1,935,184   1,906,108   1,915,833 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 7.80% (Libor + 5.00%), maturity 6/15/23  1,469,943   1,465,859   1,451,569 
             
Consumer Goods: Non-durable            
Manna Pro, Senior Secured Term Loan, 8.80% (Libor + 6.00%), maturity 12/8/23(i)  3,243,333   3,197,312   3,194,683 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 7.30% (Libor + 4.50%), maturity 9/11/23  1,954,707   1,940,509   1,944,933 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 7.30% (Libor + 4.50%), maturity 10/26/23  1,812,658   1,798,262   1,790,000 
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 12/16/24(i)  997,484   1,004,750   985,015 
             
Capital Equipment            
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 9/30/24(i)  2,468,750   2,468,750   2,414,900 
Edward Don, Senior Secured Initial Term Loan, 7.05% (Libor + 4.25%), maturity 7/2/25  1,995,000   1,985,498   1,975,050 
BAS, Senior Secured Repricing Term Loan, 6.55% (Libor + 3.75%), maturity 5/21/24(i)  1,488,680   1,489,497   1,494,262 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 12/2/24(i)  498,741   503,059   501,234 
TriMark, Senior Secured Initial Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 8/28/24(i)  496,232   497,969   456,857 
United Flexible, Senior Secured Term Loan, 7.55% (Libor + 4.75%), maturity 2/16/21  414,596   412,054   414,596 
             
Construction & Building            
PlayPower, Senior Secured Initial Term Loan (First Lien), 7.55% (Libor + 4.75%), maturity 6/23/21  1,949,495   1,938,816   1,949,495 
PlayPower, Senior Secured Initial Term Loan (Second Lien), 11.55% (Libor + 8.75%), maturity 6/23/22  1,000,000   994,051   1,000,000 
CHI Overhead Doors, Senior Secured Initial Term Loan (First Lien), 6.05% (Libor + 3.25%), maturity 7/29/22(i)  1,496,145   1,480,497   1,501,755 
DiversiTech Corporation, Senior Secured Tranche B-1 Term Loan (First Lien), 5.80% (Libor + 3.00%), maturity 6/3/24  989,953   989,953   982,529 
PlayCore, Senior Secured Initial Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 9/30/24  986,906   984,757   977,037 
             
Automotive            
Mavis, Senior Secured Closing Date Term Loan (First Lien), 6.05% (Libor + 3.25%), maturity 3/20/25  3,504,018   3,488,084   3,468,978 
Truck Hero, Senior Secured Initial Term Loan (Second Lien), 11.05% (Libor + 8.25%), maturity 4/21/25  1,800,000   1,798,295   1,782,000 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 2/3/25(i)  997,500   970,069   970,069 

The accompanying notes are an integral part of these financial statements.

11

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2018

(Expressed in U.S. Dollars)

Portfolio Investments(a) (b) (c) (d) (e) (f) Par  Cost  Value 
          
NON-CONTROL/NON-AFFILIATE INVESTMENTS(h)(Continued):            
Aerospace & Defense            
StandardAero, Senior Secured Initial Term Loan, 6.55% (Libor + 3.75%), maturity 7/7/22(i) $2,971,912  $2,987,349  $2,971,912 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 10.55% (Libor + 7.75%), maturity 4/30/26(i)  1,500,000   1,516,576   1,503,750 
Tronair, Senior Secured Initial Term Loan (First Lien), 7.55% (Libor + 4.75%), maturity 9/8/23  1,471,187   1,463,261   1,434,407 
             
Beverage, Food & Tobacco            
Sovos Brands, Senior Secured Initial Term Loan (2018), 7.80% (Libor + 5.00%), maturity 11/20/25(i)  2,000,000   1,980,206   1,980,000 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien) , 6.55% (Libor + 3.75%), maturity 8/25/25  1,995,000   1,985,383   1,972,556 
Lipari, Senior Secured Term Loan A, 7.30% (Libor + 4.50%), maturity 10/1/22(i)  1,957,180   1,949,755   1,957,180 
             
Containers, Packaging & Glass            
ProAmpac, Senior Secured Initial Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 11/20/23(i)  3,461,013   3,484,861   3,383,140 
Pregis Corporation, Senior Secured Term Loan (First Lien), 6.30% (Libor + 3.50%), maturity 5/20/21(i)  1,732,054   1,738,637   1,712,135 
Alpha Packaging, Senior Secured Tranche B-1 Term Loan, 7.05% (Libor + 4.25%), maturity 5/12/20  493,837   492,994   491,368 
             
Media: Advertising, Printing & Publishing            
Ansira, Senior Secured Initial Term Loan, 8.55% (Libor + 5.75%), maturity 12/20/22(i)  1,877,875   1,863,012   1,882,570 
Northstar, Senior Secured Term Loan, 9.05% (Libor + 6.25%), maturity 6/7/22  1,534,360   1,534,360   1,515,180 
Imagine! Print Solutions, Senior Secured Term B-1 Loan (First Lien), 7.55% (Libor + 4.75%), maturity 6/21/22(i)  1,473,750   1,463,068   1,429,537 
Vestcom International, Senior Secured L/C Collaterilized, 6.80% (Libor + 4.00%), maturity 12/19/23  796,874   800,335   787,909 
             
Hotel, Gaming & Leisure            
On Location, Senior Secured Second Amendment Term Loan, 8.30% (Libor + 5.50%), maturity 9/29/21  1,949,969   1,931,313   1,920,719 
Auto Europe, Senior Secured Initial Dollar Term Loan, 7.80% (Libor + 5.00%), maturity 10/21/23  1,286,538   1,275,932   1,283,322 
             
Forest Products & Paper            
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 6.80% (Libor + 4.00%), maturity 11/21/23(i)  2,957,455   2,942,751   2,947,992 
             
Retail            
Grocery Outlet, Senior Secured Initial Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 10/22/25(i)  2,000,000   1,995,111   2,002,500 
Albertson's, Senior Secured 2018 Term B-7 Loan, 5.80% (Libor + 3.00%), maturity 11/17/25(i)  500,000   496,293   491,250 
             
Consumer Goods: Durable            
Strategic Partners, Senior Secured Initial Term Loan, 6.55% (Libor + 3.75%), maturity 6/30/23(i)  2,332,933   2,328,833   2,344,598 
             
Total Portfolio Investments(k)     $266,280,299  $264,662,881 

 

(a)All companies are located in the United States of America.America, unless otherwise noted.
(b)Interest rate percentages represent actual interest rates which are indexed from then 30-day London Interbank Offered Rate ("LIBOR") unless otherwise noted. LIBOR rates are subject to interest rate floors which can vary based on the contractual agreement with the borrower. Due dates represent the contractual maturity date.
(c)All loans are income-producing, unless otherwise noted.
(d)All investments are qualifying assets under Section 55(a) of the Investment Company Act of 1940, as amended (the "1940 Act") unless otherwise noted.
(e)All loans are restricted, unless otherwise noted.
(f)Unless indicated otherwise, all of our investments are valued using Level 3 inputs within the FASB Accounting Standard Codification (“ASC”) Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”) fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(g)Percentages are calculated using fair value of investments over net assets.
(f)(h)As defined in 1940 Act, the Company is not deemed to be an “Affiliated Person” of or “Control” this portfolio company because it neither owns 5% or more of the portfolio company’s outstanding voting securities nor has the power to exercise control over the management or policies of such portfolio company (including through a management agreement).
(g)(i)Investment was valued using Level 2 inputs within the ASC 820 fair value hierarchy. Refer to Note 3 – Investments in the accompanying Notes to Financial Statements for additional information.
(j)The borrower for Livingston, Livingston International Inc., is located in Canada.
(k)At December 31, 2017,2018, the cost of investments for income tax purposes was $184,175,573$266,280,299 the gross unrealized depreciation for federal tax purposes was $2,140,935, the gross unrealized appreciation for federal tax purposes was $745,404, the gross unrealized depreciation for federal income tax purposes was $584,800,$523,517, and the net unrealized appreciationdepreciation was $160,604.$1,617,418.

 

The accompanying notes are an integral part of these financial statements.

 

 1012 

 

 

Audax Credit BDC Inc.

Notes to Financial Statements

June 30, 20182019

(unaudited)

 

 

Note 1. Organization

 

Audax Credit BDC Inc. (the “Company”) is a Delaware corporation that was formed on January 29, 2015. The Company is an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, effective with the Company’s taxable year ended December 31, 2015, the Company has elected to be treated for federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the U.S. Internal Revenue Code of 1986, as amended (the “Code”).

 

The Company commenced business operations on July 8, 2015, the date on which the Company made its first investment. The Company has been formed for the purpose of investing primarily in the debt of leveraged, non-investment grade middle market companies, with the principal objective of generating income and capital appreciation. The Company’s investment strategy is to invest primarily in first lien senior secured loans and selectively in second lien loans to middle market companies. During the period prior to July 8, 2015, the Company was a development stage company, as defined in Paragraph 915-10-05,Development Stage Entity, of the Financial Accounting Standards Board’s (“FASB’s”) Accounting Standards Codification, as amended (“ASC”). During this time, the Company was devoting substantially all of its efforts to establishing its business and its planned principal operations had not commenced. All losses incurred during the period prior to July 8, 2015 have been considered a part of the Company’s development stage activities.

 

Audax Management Company (NY), LLC (the “Adviser”) is the investment adviser of the Company. The Adviser is registered as an investment adviser with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended.

 

Note 2. Significant Accounting Policies

 

Basis of Presentation

As an investment company, the accompanying financial statements of the Company are prepared in accordance with the investment company accounting and reporting guidance of ASC Topic 946, “Financial Services – Investment Companies,” as amended (“ASC Topic 946”), which incorporates the requirements for reporting on Form 10-Q and Articles 6 and 10 of Regulation S-X, as well as generally accepted accounting principles generally accepted in the United States of America (“GAAP”).

 

Certain financial information that is normally included in annual financial statements, including certain financial statement footnotes, prepared in accordance with GAAP, is not required for interim reporting purposes and has been condensed or omitted herein. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of management of the Company, the unaudited financial results included herein contain all adjustments, consisting solely of normal accruals, considered necessary for the fair presentation of financial statements for the interim period included herein. The current period’s results of operations are not necessarily indicative of the operating results to be expected for future periods. The accounting records of the Company are maintained in U.S. dollars.

 

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management of the Company to make estimates and assumptions that may affect the reported amounts and disclosures in the financial statements. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ and these differences could be material.

 

 1113 

 

Cash and Cash Equivalents

Cash and cash equivalents are stated at fair value. The Company considers all highly liquid investments purchased with maturities of three months or less and money market mutual funds to be cash equivalents. No cash equivalent balances were held at June 30, 20182019 and December 31, 2017.2018. At such dates, cash was not subject to any restrictions on withdrawal.

Offering Expenses

The Company incurred offering costs of $145,358 in prior periods. The Company’s offering costs included legal fees and other costs pertaining to the preparation of the Company’s registration statement on Form 10 (the “Registration Statement”) and sale of the Company’s shares of common stock. The Company capitalized these expenses and amortized them on a straight-line basis over a twelve-month period. The Company did not amortize offering costs during the three and six months ended June 30, 2018 or 2017.

 

Expenses

The Company is responsible for investment expenses, legal expenses, auditing fees and other expenses related to the Company’s operations. Such fees and expenses, including expenses initially incurred by the Adviser, may be reimbursed by the Company.

 

Investment Valuation Policy

The Company conducts the valuation of the Company’s investments, pursuant to which the Company’s net asset value is determined, at all times consistent with GAAP and the 1940 Act. The Company’s Board of Directors, with the assistance of the Audit Committee, determines the fair value of the Company’s investments, for investments with a public market and for investments with no readily available public market, on at least a quarterly basis, in accordance with the terms of ASC Topic 820, “Fair Value Measurement and Disclosures,” (“ASC 820”). The Company’s valuation procedures are set forth in more detail below.

 

ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

 

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

 

The three-level hierarchy for fair value measurement is defined as follows:

 

Level 1— Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. The Company does not adjust the quoted price for these instruments, even in situations where the Company holds a large position, and a sale could reasonably be expected to impact the quoted price.

 

12

Level 2— Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

14

Level 3— Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

 

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

 

Pursuant to the framework set forth above, the Company values securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. The Company may also obtain quotes with respect to certain of its investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

 

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, the Company determines whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, the Company uses the quote obtained.

 

Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Company’s Board of Directors, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. The process used to determine the applicable value is as follows: (i) each portfolio company or investment is initially valued by the investment professionals of the Adviser responsible for the portfolio investment using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs; (ii) preliminary valuation conclusions are documented and discussed with the Company’s senior management and members of the Company’s Adviser’s valuation team; (iii) the Company’s Audit Committee reviews the assessments of the Adviser and provides the Company’s Board of Directors with recommendations with respect to the fair value of the investments in the Company’s portfolio; and (iv) the Company’s Board of Directors discusses the valuation recommendations of the Company’s Audit Committee and determines the fair value of the investments in the Company’s portfolio in good faith based on the input of the Adviser and in accordance with the Company’s valuation policy.

 

The Company’s Audit Committee’s recommendation of fair value is generally based on its assessment of the following factors, as relevant:

 

·the nature and realizable value of any collateral;

 

·call features, put features and other relevant terms of debt;

 

13

·the portfolio company’s ability to make payments;

 

·the portfolio company’s actual and expected earnings and discounted cash flow;

 

·prevailing interest rates for like securities and expected volatility in future interest rates;

15

 

·the markets in which the portfolio company does business and recent economic and/or market events; and

 

·comparisons to publicly traded securities.

 

Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

 

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

 

·private placements and restricted securities that do not have an active trading market;

 

·securities whose trading has been suspended or for which market quotes are no longer available;

 

·debt securities that have recently gone into default and for which there is no current market;

 

·securities whose prices are stale; and

 

·securities affected by significant events.

 

The Company’s Board of Directors is responsible for the determination, in good faith, of the fair value of the Company’s portfolio investments.

 

Determination of fair value involves subjective judgments and estimates. Accordingly, these notes to the

Company’s financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on the Company’s financial statements.

 

Security transactions are recorded on the trade date (date(the date the order to buy or sell is executed or, in the case of privately issued securities, the closing date, which is when all terms of the transactions have been defined).

Realized gains and losses on investments are determined based on the identified cost method.

 

Refer to Note 3 —Investments in the notes accompanying the financial statements for additional information regarding fair value measurements and the Company’s application of ASC 820.

 

Interest Income Recognition

Interest income, adjusted for amortization of premium, acquisition costs, and amendment fees and the accretion of original issue discount (“OID”), is recorded on an accrual basis to the extent that such amounts are expected to be collected. Generally, when a loan becomes 120 days or more past due, or if the Company’s qualitative assessment indicates that the debtor is unable to service its debt or other obligations, the Company will place the loan on non-accrual status and cease recognizing interest income on that loan for financial reporting purposes until the borrower has demonstrated the ability and intent to pay contractual amounts due. However, the Company will remain contractually entitled to this interest. Interest payments received on non-accrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current or, due to a restructuring, the interest income is deemed to be collectible.

 

14

The Company currently holds loans in the portfolio that contain OID and expects to hold loans in the future that contain payment-in-kind (“PIK”) provisions. The Company recognizes OID for loans originally issued at a discount and recognizes the income over the life of the obligation based on an effective yield calculation. PIK interest, computed at the contractual rate specified in a loan agreement, is added to the principal balance of a loan and recorded as income over the life of the obligation. Therefore, the actual collection of PIK income may be deferred until the time of debt principal repayment. To maintain the ability to be taxed as a RIC, the Company may need to pay out of both OID and PIK non-cash income amounts in the form of distributions, even though the Company has not yet collected the cash on either.

 

16

As of June 30, 2019, the Company held 141 investments in loans with OID. The Company accrued OID income of $72,568 and $102,497 for the three and six months ended June 30, 2019, respectively. The unamortized balance of OID on debt investments as of June 30, 2019, totaled $1,427,384. As of December 31, 2018, the Company held 110130 investments in loans with OID. The Company accrued OID income of $33,697 and $76,643 for the three and six months ended June 30, 2018, respectively. The unamortized balance of OID investments as of December 31, 2018, totaled $1,038,045.

As of June 30, 2019, the Company held one investment which had a PIK interest component. The Company recorded $32,822 of PIK interest income for three and six months ended June 30, 2019. The Company did not hold any investments as of June 30, 2018 totaled $702,556. As of December 31, 2017, the Company held 89 investments in loans with OID. The unamortized balance of OID investments as of December 31, 2017, totaled $1,028,002.which had a PIK interest component. The Company accrued OIDdid not record any PIK interest income of $68,127 and $132,661 for the three and six months ended June 30, 2017, respectively.2018.

 

As of June 30, 20182019 and December 31, 2017,2018, the Company held $15,041,814$6,451,544 and $29,721,559$17,715,145 cash and cash equivalents, respectively. For the three and six months ended June 30, 2018,2019, the Company earned $31,119$42,795 and $68,107,$93,515, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations. For the three and six months ended June 30, 2017,2018, the Company earned $33,746$31,119 and $56,630,$68,107, respectively, of interest income related to cash, which is included in other interest income within the accompanying statement of operations.

 

Other Income Recognition

The Company generally records prepayment fees upon receipt of cash or as soon as the Company becomes aware of the prepayment.

 

Dividend income on equity investments is accrued to the extent that such amounts are expected to be collected and if the Company has the option to collect such amounts in cash.

 

Prepayment fees and dividend income are both accrued in other income in the accompanying statements of operations.

 

For the three and six months ended June 30, 2019, the Company accrued $15,340 and $33,150 of other income, respectively, related to amendment and documentation fees. For the three and six months ended June 30, 2018, the Company accrued $16,452 and $48,562 of other income, respectively, related to amendment fees. For the three and six months ended June 30, 2017, the Company accrued $17,067 and $61,462 of other income, respectively, related to amendment fees.

New Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09 (“ASU 2014-09”), “Revenue from Contracts with Customers (Topic 606).” The guidance in this ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2014-09 are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted for annual reporting periods beginning after December 15, 2016 and interim periods therein. The Company has determined that this standard will not have a material impact on the financial statements, primarily because the majority of the Company’s revenue is accounted for under FASB ASC Topic 320, “Investments – Debt and Equity Securities”, which is scoped out of this standard.

15

 

Note 3. Investments

 

Fair Value

 

In accordance with ASC 820, the Company’s investments’ fair value is determined to be the price that would be received for an investment in a current sale, assuming an orderly transaction between willing market participants on the measurement date. This fair value definition focuses on exit price in the principal, or most advantageous, market and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. ASC 820 also establishes the three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of a financial instrument as of the measurement date as described in Note–2 –Significant Accounting Policies.

 

As of June 30, 2018, $124,405,7872019, $155,256,376 of the Company’s investments were valued using unobservable inputs, and $112,447,050$153,368,398 were valued using observable inputs. During the six months ended June 30, 2019, $44,029,798 and $31,502,321 of investments transferred into and out of Level 3, respectively.

17

As of December 31, 2018, $142,020,074 of the Company’s investments were valued using unobservable inputs, and $122,642,807 were valued using observable inputs. During the six months ended June 30, 2018, $48,655,402 and $17,862,753 of investments transferred into and out of Level 3, respectively.

 

As of December 31, 2017, $80,094,421 of the Company’s investments were valued using unobservable inputs, and $104,241,756 were valued using observable inputs. During the six months ended June 30, 2017, $9,181,233 and $17,406,407 of investments transferred into and out of Level 3, respectively.

The following tables present the Company’s investments carried at fair value as of June 30, 20182019 and December 31, 2017,2018, by caption on the Company’s accompanying statements of assets and liabilities and by security type.

 

 Assets at Fair Value as of June 30, 2018  Assets at Fair Value as of June 30, 2019 
 Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
First lien debt $-  $106,386,425  $109,782,126  $216,168,551  $-  $149,361,350  $137,170,699  $286,532,049 
Second lien debt      6,060,625   14,623,661   20,684,286   -   3,948,440   17,685,410   21,633,850 
Equity and Preferred Shares  -   58,608   400,267   458,875 
Total $-  $112,447,050  $124,405,787  $236,852,837  $-  $153,368,398  $155,256,376  $308,624,774 

 

 Assets at Fair Value as of December 31, 2017  Assets at Fair Value as of December 31, 2018 
 Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 
First lien debt $-  $98,806,661  $64,377,922  $163,184,583  $-  $118,541,537  $124,975,467  $243,517,004 
Second lien debt      5,435,095   15,716,499   21,151,594       4,101,270   17,044,607   21,145,877 
Total $-  $104,241,756  $80,094,421  $184,336,177  $-  $122,642,807  $142,020,074  $264,662,881 

 

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of June 30, 2018.2019. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

 

 1618 

 

 

  Fair  Valuation Unobservable   Weighted
  Value  Technique  Inputs(1)  Range(2)  Average(3)
            
First lien debt $106,855,971   Matrix Pricing  Senior Leverage 2.67x - 6.89x 4.62x
         Total Leverage 3.28x - 8.65x 5.77x
         Interest Coverage 1.24x - 4.02x 2.35x
         Debt Service Coverage 1.14x - 3.28x 1.86x
         TEV Coverage 1.45x - 3.89x 2.45x
         Liquidity 45.95% - 625.29% 128.27%
         Spread Comparison 325bps - 650bps 463bps
             
   2,926,155   Market Analysis  Senior Leverage 5.51x - 6.91x 6.78x
         Total Leverage 9.22x - 14.62x 9.71x
         Interest Coverage 0.39x - 1.35x 1.27x
         Debt Service Coverage 0.31x - 1.23x 1.14x
         TEV Coverage 0.91x - 1.29x 1.26x
         Liquidity 6.22% - 123.44% 112.76%
         Spread Comparison 500bps - 550bps 505bps
             
Second lien debt  14,623,661   Matrix Pricing  Senior Leverage 4.61x - 6.58x 5.85x
         Total Leverage 4.61x - 6.58x 5.85x
         Interest Coverage 1.10x - 3.35x 1.82x
         Debt Service Coverage 0.97x - 2.99x 1.56x
         TEV Coverage 1.33x - 2.43x 1.81x
         Liquidity 23.00% - 212.51% 116.03%
         Spread Comparison 750bps - 1025bps 818bps
             
Total $124,405,787         

  Fair  Valuation Unobservable   Weighted
  Value  Technique   Inputs(1)   Range(2)   Average(3)
            
First lien debt $137,170,699  Matrix Pricing Senior Leverage 2.72x - 7.00x 4.80x
        Total Leverage 3.36x - 9.24x 6.07x
        Interest Coverage 1.18x - 4.18x 2.05x
        Debt Service Coverage 1.02x - 2.97x 1.71x
        TEV Coverage 1.17x - 4.51x 2.43x
        Liquidity 18.81% - 504.44% 140.20%
        Spread Comparison 275bps - 650bps 429bps
             
Second lien debt  16,475,679  Matrix Pricing Senior Leverage 4.41x - 7.00x 5.91x
        Total Leverage 4.41x - 7.00x 5.92x
        Interest Coverage 1.61x - 3.38x 2.07x
        Debt Service Coverage 1.42x - 3.02x 1.80x
        TEV Coverage 1.37x - 2.39x 1.78x
        Liquidity 19.50% - 291.13% 140.80%
        Spread Comparison 700bps - 1025bps 784bps
             
   1,209,731  Market Analysis Senior Leverage 11.23x 11.23x
        Total Leverage 17.66x 17.66x
        Interest Coverage 5.34x 5.34x
        Debt Service Coverage 5.34x 5.34x
        TEV Coverage 0.68x 0.68x
        Liquidity 74.48% 74.48%
        Spread Comparison 800bps 800bps
             
Total $154,856,109         

(1)For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility. The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.
(2)Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority. The range may be a single data point when there is only one company represented in a specific credit seniority.
(3)

Inputs are weighted based on the fair value of the investments included in the range.

The table above does not include $400,267 of equity and preferred shares which management values using other unobservable inputs, such as earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA multiples, as well as other qualitative information, including company specific information.

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of December 31, 2018. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

19

  Fair  Valuation Unobservable   Weighted
  Value  Technique  Inputs(1)  Range(2)  Average(3)
            
First lien debt $120,756,091  Matrix Pricing Senior Leverage 1.98x - 6.39x 4.67x
        Total Leverage 2.48x - 8.79x 5.97x
        Interest Coverage 1.21x - 4.33x 2.12x
        Debt Service Coverage 1.04x - 2.82x 1.73x
        TEV Coverage 1.31x - 4.84x 2.45x
        Liquidity 8.64% - 608.88% 142.62%
        Spread Comparison 275bps - 650bps 427bps
             
   4,219,376  Market Analysis Senior Leverage 5.05x - 8.14x 6.88x
        Total Leverage 5.76x - 10.80x 8.74x
        Interest Coverage 0.95x - 2.17x 1.45x
        Debt Service Coverage 0.87x - 1.78x 1.24x
        TEV Coverage 1.11x - 2.04x 1.49x
        Liquidity 63.01% - 89.50% 78.70%
        Spread Comparison 500bps - 525bps 510bps
             
Second lien debt  17,044,607  Matrix Pricing Senior Leverage 4.25x - 7.05x 6.05x
        Total Leverage 4.25x - 7.05x 6.05x
        Interest Coverage 1.42x - 3.48x 2.07x
        Debt Service Coverage 1.01x - 3.10x 1.75x
        TEV Coverage 1.28x - 2.17x 1.65x
        Liquidity 18.96% - 283.00% 136.11%
        Spread Comparison 675bps - 1025bps 783bps
             
Total $142,020,074         

 

(1)For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility. The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.

(2)Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority. The range may be a single data point when there is only one company represented in a specific credit seniority.

(3)Inputs are weighted based on the fair value of the investments included in the range.

In accordance with ASC 820, the following table provides quantitative information about the Level 3 fair value measurements of the Company’s investments as of December 31, 2017. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

17

  Fair  Valuation Unobservable   Weighted
  Value  Technique  Inputs(1)  Range(2)  Average(3)
            
First lien debt $64,053,481   Matrix Pricing  Senior Leverage 1.87x - 6.08x 4.55x
         Total Leverage 2.86x - 8.32x 5.72x
         Interest Coverage 1.38x - 3.91x 2.27x
         Debt Service Coverage 1.15x - 2.72x 1.70x
         TEV Coverage 1.44x - 4.88x 2.48x
         Liquidity 50.39% - 280.44% 120.80%
         Spread Comparison 375bps - 650bps 473bps
             
   324,441   Market Analysis  Senior Leverage (55.65)x (55.65)x
         Total Leverage (130.28)x (130.28)x
         Interest Coverage (0.37)x (0.37)x
         Debt Service Coverage (0.27)x (0.27)x
         TEV Coverage (0.09)x (0.09)x
         Liquidity 52.10% 52.10%
         Spread Comparison 550bps 550bps
             
Second lien debt  15,716,499   Matrix Pricing  Senior Leverage 4.65x - 6.61x 5.93x
         Total Leverage 4.65x - 6.61x 5.92x
         Interest Coverage 1.51x - 3.97x 2.24x
         Debt Service Coverage 1.14x - 3.42x 1.84x
         TEV Coverage 1.33x - 2.15x 1.79x
         Liquidity 32.50% - 222.30% 125.66%
         Spread Comparison 700bps - 1025bps 830bps
             
Total $80,094,421         

(1)For any portfolio company, the unobservable input "Liquidity" is a fraction, expressed as a percentage, the numerator of which is the sum of the company's undrawn revolving credit facility capacity plus cash, and the denominator of which is the total amount that may be borrowed under the company's revolving credit facility. The unobservable input "Spread Comparison" is a comparison of the spread over LIBOR for each investment to the spread over LIBOR for general leveraged loan transactions.

(2)Each range represents the variance of outputs from calculating each statistic for each portfolio company within a specific credit seniority. The range may be a single data point when there is only one company represented in a specific credit seniority.

(3)Inputs are weighted based on the fair value of the investments included in the range.

 

Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in market yields, discounts rates, leverage, earnings before interest, taxes, depreciation and amortization (“EBITDA”)EBITDA or EBITDA multiples (or revenue or revenue multiples), each in isolation, may change the fair value of certain of the Company’s investments. Generally, an increase or decrease in market yields, discount rates or leverage or a decrease in EBITDA or EBITDA multiples (or revenue or revenue multiples) may result in a corresponding decrease or increase, respectively, in the fair value of certain of the Company’s investments.

 

18

The following tables provide the changes in fair value, broken out by security type, during the six months ended June 30, 20182019 and 20172018 for all investments for which the Company determines fair value using unobservable (Level 3) factors.

 

Six Months Ended June 30, 2018 First lien debt  Second lien
debt		  Total 
Fair Value as of December 31, 2017 $64,377,922  $15,716,499  $80,094,421 
Transfers into Level 3  44,486,541   4,168,861   48,655,402 
Transfers out of Level 3  (13,382,753)  (4,480,000)  (17,862,753)
Total gains:            
Net realized gain(a)  25,705   19,140   44,845 
Net unrealized depreciation(b)  (528,494)  (73,511)  (602,005)
New investments, repayments and settlements:(c)            
Purchases  23,171,724   841,500   24,013,224 
Settlements/repayments  (7,532,490)  (1,571,429)  (9,103,919)
Net amortization of premiums, discounts and fees  58,058   2,601   60,659 
Sales  (894,087)  -   (894,087)
Fair Value as of June 30, 2018 $109,782,126  $14,623,661  $124,405,787 
20

Six Months Ended June 30, 2019 First lien debt  

Second lien

debt

  

Equity and

Preferred

Shares

  Total 
Fair Value as of December 31, 2018 $124,975,467  $17,044,607  $-  $142,020,074 
Transfers into Level 3  42,526,048   1,503,750   -   44,029,798 
Transfers out of Level 3  (30,410,571)  (1,091,750)  -   (31,502,321)
Total gains:                
Net realized gain(a)  68,003   5,476   -   73,479 
Net unrealized depreciation(b)  (23,300)  8,688   (400,268)  (414,880)
New investments, repayments and settlements:(c)                
Purchases  11,947,299   1,209,731   800,535   13,957,565 
Settlements/repayments  (12,004,057)  (1,000,000)  -   (13,004,057)
Net amortization of premiums, PIK, discounts and fees  91,810   4,908   -   96,718 
Fair Value as of June 30, 2019 $137,170,699  $17,685,410  $400,267  $155,256,376 

 

 (a)Included in net realized gain on the accompanyingStatement of Operations for the six months ended June 30, 2018.2019.
   
 (b)Included in net change in unrealized depreciation on the accompanyingStatement of Operations for the six months ended June 30, 2018.2019.
   
 (c)Includes increases in the cost basis of investments resulting from portfolio investments, the amortization of discounts, and PIK, as well as decreases in the costs basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.

 

Six Months Ended June 30, 2017 First lien debt  Second lien
debt		  Total 
Fair Value as of December 31, 2016 $83,470,626  $9,705,218  $93,175,844 
Six Months Ended June 30, 2018 First lien debt  

Second lien

debt

  Total 
Fair Value as of December 31, 2017 $64,377,922  $15,716,499  $80,094,421 
Transfers into Level 3  9,181,233   -   9,181,233   44,486,541   4,168,861   48,655,402 
Transfers out of Level 3  (41,593,080)  -   (41,593,080)  (13,382,753)  (4,480,000)  (17,862,753)
Total gains:                        
Net unrealized depreciation(a)  (300,709)  (36,115)  (336,824)
New investments, repayments and settlements:(b)            
Net realized gain(a)  25,705   19,140   44,845 
Net unrealized depreciation(b)  (528,494)  (73,511)  (602,005)
New investments, repayments and settlements:(c)            
Purchases  22,041,729   -   22,041,729   23,171,724   841,500   24,013,224 
Settlements/repayments  (614,938)  -   (614,938)  (7,532,490)  (1,571,429)  (9,103,919)
Net amortization of premiums, discounts and fees  51,848   12,937   64,785   58,058   2,601   60,659 
Fair Value as of June 30, 2017 $72,236,709  $9,682,040  $81,918,749 
Sales  (894,087)  -   (894,087)
Fair Value as of June 30, 2018 $109,782,126  $14,623,661  $124,405,787 

 

(a)Included in net realized gain on the accompanying Statement of Operations for the six months ended June 30, 2018.
(b)Included in net change in unrealized depreciation on the accompanyingStatement of Operations for the six months ended June 30, 2017.2018.

(b)
(c)Includes increases in the cost basis of investments resulting from portfolio investments, the amortization of discounts, and PIK, as well as decreases in the costs basis of investments resulting from principal repayments or sales, the amortization of premiums and acquisition costs and other cost-basis adjustments.

19

 

The change in unrealized value attributable to investments still held at June 30, 2019 and 2018 was $(590,452) and 2017 $(564,292) and $(336,824), respectively.

 

21

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur. For the six months ended June 30, 2018 and 2017, transfers between Level 2 to Level 3 were primarily due to increased or decreased price transparency.

 

Investment Activities

 

The Company held a total of 124157 investments with an aggregate fair value of $308,624,774 as of June 30, 2019. During the six months ended June 30, 2019, the Company invested in 31 new investments for a combined $57,384,637 and in existing investments for a combined $17,964,941. The Company also received $29,011,639 in repayments from investments and $1,951,362 from investments sold during the six months ended June 30, 2019.

The Company held a total of 144 syndicated investments with an aggregate fair value of $236,852,837$264,662,881 as of June 30,December 31, 2018. During the six months ended June 30, 2018, the Company invested in 44 new syndicated investments for a combined $72,398,817 and in existing investments for a combined $13,400,210. The Company also received $31,583,532 in repayments from investments and $1,390,962 from investments sold during the six months.

The Company held a total of 102 syndicated investments with an aggregate fair value of $184,336,177 as of December 31, 2017. During the six months ended June 30, 2017, the Company invested in 24 new syndicated investments for a combined $39,414,095 and in existing investments for a combined $5,539,488. The Company also received $42,382,537 in repayments from investments during the six months.2018.

 

Investment Concentrations

 

As of June 30, 2018,2019, the Company’s investment portfolio consisted of investments in 117145 companies located in 2934 states across 2220 different industries, with an aggregate fair value of $236,852,837.$308,624,774. The five largest investments at fair value as of June 30, 20182019 totaled $19,137,744,$22,881,616, or 8.08%7.41% of the Company’s total investment portfolio as of such date. As of June 30, 2018,2019, the Company’s average investment was $1,913,665$1,980,280 at cost.

 

As of December 31, 2017,2018, the Company’s investment portfolio consisted of investments in 96135 companies located in 2834 states across 2220 different industries, with an aggregate fair value of $184,336,177.$264,662,881. The five largest investments at fair value as of December 31, 20172018 totaled $19,354,490,$19,719,053, or 10.50%7.45% of the Company’s total investment portfolio as of such date. As of December 31, 2017,2018, the Company’s average investment by obligor was $1,918,496$1,927,447 at cost.

 

  June 30, 2018  December 31, 2017 
  Cost  Percentage of
Total
Investments		  Fair Value  Percentage of
Total
Investments		  Cost  Percentage
of Total
Investments		  Fair Value  Percentage
of Total
Investments		 
First lien debt $216,570,668   91.27% $216,168,551   91.27% $163,043,887   88.53% $163,184,583   88.53%
Second lien debt  20,723,838   8.73%  20,684,286   8.73%  21,131,686   11.47%  21,151,594   11.47%
Total Investments $237,294,506   100.00% $236,852,837   100.00% $184,175,573   100.00% $184,336,177   100.00%

The following table outlines the Company’s investments by security type as of June 30, 2019 and December 31, 2018:

 

20

  June 30, 2019  December 31, 2018 
  Cost  

Percentage of

Total

Investments

  Fair Value  

Percentage of

Total

Investments

  Cost  

Percentage

of Total

Investments

  Fair Value  

Percentage

of Total

Investments

 
First lien debt $288,229,346   92.71% $286,532,049   92.84% $245,071,304   92.04% $243,517,004   92.01%
Second lien debt  21,815,439   7.01%  21,633,850   7.01%  21,208,995   7.96%  21,145,877   7.99%
Total Debt Investments  310,044,785   99.72%  308,165,899   99.85%  266,280,299   100.00%  264,662,881   100.00%
Equity and Preferred Shares  859,143   0.28%  458,875   0.15%  -   0.00%  -   0.00%
Total Equity Investments  859,143   0.28%  458,875   0.15%  -   0.00%  -   0.00%
Total Investments $310,903,928   100.00% $308,624,774   100.00% $266,280,299   100.00% $264,662,881   100.00%

 

Investments at fair value consisted of the following industry classifications as of June 30, 20182019 and December 31, 2017:2018:

 

  June 30, 2018  December 31, 2017 
Industry Fair Value  Percentage of
Total Investments		  Fair Value  Percentage of
Total Investments		 
Healthcare & Pharmaceuticals $45,504,129   19.21% $28,334,560   15.37%
High Tech Industries  41,750,880   17.63   32,398,704   17.58 
Services: Business  28,505,232   12.03   24,518,045   13.30 
Chemicals, Plastics & Rubber  15,559,145   6.57   10,370,785   5.63 
Wholesale  14,303,113   6.04   10,790,204   5.85 
Services: Consumer  12,253,358   5.17   7,841,311   4.25 
Banking, Finance, Insurance & Real Estate  11,706,596   4.94   11,897,057   6.45 
Consumer Goods: Non-durable  7,022,116   2.96   6,677,795   3.62 
Transportation: Cargo  6,998,396   2.95   4,244,892   2.30 
Capital Equipment  6,439,726   2.72   5,966,335   3.24 
Containers, Packaging & Glass  5,964,132   2.52   822,833   0.46 
Hotel, Gaming & Leisure  5,746,935   2.43   5,829,704   3.16 
Automotive  5,264,917   2.22   1,786,500   0.97 
Aerospace & Defense  4,952,253   2.09   5,448,357   2.96 
Media: Advertising, Printing & Publishing  4,903,661   2.07   5,851,465   3.17 
Beverage, Food & Tobacco  4,865,919   2.05   4,910,470   2.66 
Construction & Building  4,812,479   2.03   3,849,204   2.09 
Consumer Goods: Durable  2,492,391   1.05   5,987,792   3.25 
Media: Broadcasting & Subscription  2,437,727   1.03   2,450,000   1.33 
Retail  2,007,336   0.85   -   - 
Forest Products & Paper  1,978,364   0.85   1,998,977   1.08 
Utilities: Electric  1,384,032   0.59   1,390,987   0.75 
Media: Diversified & Production  -   -   970,200   0.53 
  $236,852,837   100.00% $184,336,177   100.00%

22

  June 30, 2019  December 31, 2018 
Industry Fair Value  

Percentage of

Total Investments

  Fair Value  

Percentage of

Total Investments

 
Healthcare & Pharmaceuticals $64,434,079   20.88% $47,520,070   17.95%
High Tech Industries  55,567,786   18.00   45,031,546   17.01 
Services: Business  48,726,738   15.79   36,858,954   13.93 
Chemicals, Plastics & Rubber  27,579,151   8.94   27,716,784   10.47 
Services: Consumer  23,350,601   7.57   15,942,194   6.02 
Banking, Finance, Insurance & Real Estate  10,600,308   3.43   12,125,388   4.58 
Aerospace & Defense  8,455,001   2.74   5,910,069   2.23 
Transportation: Cargo  8,037,207   2.60   9,133,648   3.45 
Consumer Goods: Non-durable  8,013,602   2.60   7,914,631   2.99 
Wholesale  7,267,352   2.35   8,518,879   3.22 
Containers, Packaging & Glass  7,020,853   2.27   5,586,643   2.11 
Construction & Building  6,806,263   2.21   6,410,816   2.42 
Capital Equipment  6,785,146   2.20   7,256,899   2.74 
Automotive  6,262,577   2.03   6,221,047   2.35 
Media: Advertising, Printing & Publishing  5,593,377   1.81   5,615,196   2.12 
Beverage, Food & Tobacco  3,960,075   1.28   5,909,736   2.23 
Hotel, Gaming & Leisure  3,115,063   1.01   3,204,041   1.21 
Forest Products & Paper  2,920,299   0.95   2,947,992   1.12 
Consumer Goods: Durable  2,321,181   0.75   2,344,598   0.90 
Retail  1,808,115   0.59   2,493,750   0.95 
  $308,624,774   100.00% $264,662,881   100.00%

 

Investments at fair value were included in the following geographic regions of the United States as of June 30, 20182019 and December 31, 2017:2018:

 

 June 30, 2018  December 31, 2017  June 30, 2019  December 31, 2018 
Geographic Region Fair Value  Percentage
of Total
Investments		  Fair Value  Percentage of
Total
Investments		  Fair Value  

Percentage of

Total

Investments

  Fair Value  

Percentage of

Total

Investments

 
         
Northeast $79,612,482   25.80% $61,537,340   23.25%
Midwest $53,273,026   22.49% $43,870,888   23.80%  65,689,319   21.28   63,396,284   23.95 
Northeast  52,222,115   22.05   44,603,594   24.20 
Southeast  39,984,602   16.88   28,690,823   15.56 
West  36,314,973   15.33   21,087,825   11.44   44,327,618   14.36   40,497,635   15.30 
Southwest  25,088,576   10.59   20,144,926   10.93   39,980,633   12.95   27,587,594   10.42 
Southeast  38,038,134   12.33   36,204,672   13.68 
East  23,360,840   9.86   20,861,634   11.32   33,192,820   10.76   25,540,011   9.65 
Northwest  2,720,592   1.15   2,213,889   1.20   4,614,029   1.50   4,639,772   1.75 
South  2,418,000   1.03   2,862,598   1.55   3,169,739   1.02   3,193,759   1.21 
Other(a)  1,470,113   0.62   -   -   -   -   2,065,814   0.79 
Total Investments $236,852,837   100.00% $184,336,177   100.00% $308,624,774   100.00% $264,662,881   100.00%

 

(a)The borrower for Livingston, Livingston International Inc., is located in Canada.

 

 2123 

 

 

The geographic region indicates the location of the headquarters of the Company’s portfolio companies. A portfolio company may have a number of other business locations in other geographic regions.

Investment Principal Repayments

 

The following table summarizes the contractual principal repayments and maturity of the Company’s investment portfolio by fiscal year, assuming no voluntary prepayments, as of June 30, 2018:2019:

 

For the Fiscal Years Ending December 31: Amount  Amount 
2018 $1,172,417 
2019  5,591,211  $1,292,691 
2020  3,959,260   4,551,550 
2021  30,342,013   15,079,338 
2022  33,371,736   24,853,044 
2023  47,857,329 
Thereafter  163,560,425   217,838,217 
Total contractual repayments  237,997,062   311,472,169 
Adjustments to cost basis on debt investments(a)  (702,556)  (1,427,384)
Total Cost Basis of Investments Held at June 30, 2018: $237,294,506 
Total Cost Basis of Debt Investments Held at June 30, 2019: $310,044,785 

 

(a)Adjustment to cost basis related to unamortized balance of OID investments.

(a) Adjustment to cost basis related to unamortized balance of OID investments.

 

Note 4. Related Party Transactions

 

Investment Advisory Agreement

The Company has entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Adviser. In accordance with the Investment Advisory Agreement, the Company pays the Adviser certain fees as compensation for its services, such fees consisting of a base management fee and an incentive fee (the “Incentive Fee”). The services the Adviser provides to the Company, subject to the overall supervision of the Company’s Board of Directors, include managing the day-to-day operations of, and providing investment services to, the Company. The Company also entered into a management fee waiver agreement with the Adviser (the “Waiver Agreement”), which the Company or the Adviser may terminate upon 60 days’ prior written notice.

 

Management Fee

The base management fee is calculated at an annual rate of 1.0% of the Company’s average gross assets including cash and any temporary investments in cash-equivalents, including U.SU.S. government securities and other high-quality investment grade debt investments that mature in 12 months or less from the date of investment, payable quarterly in arrears on a calendar quarter basis.

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive the base management fee to the extent necessary so that the base management fee payable under the Investment Advisory Agreement equals, and is calculated in the same manner as if, the base management fee otherwise payable by the Company were calculated at an annual rate equal to 0.65% (instead of an annual rate of 1.00%).

 

For the three and six months ended June 30, 2019, the Company recorded base management fees of $808,440 and $1,547,094, respectively, and waivers to the base management fees of $282,954 and $541,483, respectively, as set forth within the accompanying statements of operations. For the three and six months ended June 30, 2018, the Company recorded base management fees of $623,184 and $1,161,484, respectively, and waivers to the base management fees of $218,114 and $406,518, respectively, as set forth within the accompanying statements of operations. For the three and six months ended June 30, 2017, the Company recorded base management fees of $438,585 and $877,248, respectively, and waivers to the base management fees of $153,504 and $307,036, respectively, as set forth within the accompanying statements of operations.

 2224 

 

 

Incentive Fee

The Incentive Fee has two parts, as follows: one is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) accrued during the calendar quarter, minus the Company’s operating expenses accrued for the quarter (including the base management fee, expenses payable under the Administration Agreement and any interest expense on any credit facilities or outstanding debt and dividends paid on any issued and outstanding preferred stock, but excluding the Incentive Fee).

 

The Company determines pre-incentive fee net investment income in accordance with GAAP, including, in the case of investments with a deferred interest feature, such as OID, debt instruments with PIK interest and OID securities, accrued income that the Company has not yet received in cash. Pre-incentive fee net investment income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.0% per quarter (4.0% annualized). The Company determines its average gross assets during each fiscal quarter and calculates the base management fee payable with respect to such amount at the end of each fiscal quarter.  As a result, a portion of the Company’s net investment income is included in its gross assets for the period between the date on which such income is earned and the date on which such income is distributed. Therefore, the Company’s net investment income used to calculate part of the Incentive Fee is also included in the amount of the Company’s gross assets used to calculate the 1%1.0% annual base management fee. The Company pays its Adviser an Incentive Fee with respect to its pre-incentive fee net investment income in each calendar quarter as follows:

 

·no amount is paid on the income-portion of the Incentive Fee in any calendar quarter in which the Company’s pre-incentive fee net investment income does not exceed the hurdle of 1.0% (4.0% annualized);

·100% of the Company’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 1.1765 % in any calendar quarter (4.706% annualized). The Company refers to this portion of its pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 1.1765%) as the “catch-up” provision. The catch-up is meant to provide the Company’s Adviser with 15.0% of the pre-incentive fee net investment income as if a hurdle rate did not apply if net investment income exceeds 1.1765% in any calendar quarter (4.706% annualized); and

·15.0% of the amount of the Company’s pre-incentive fee net investment income, if any, that exceeds 1.1765% in any calendar quarter (4.706% annualized) is payable to the Company’s Adviser.

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive its right to receive the Incentive Fee on pre-incentive fee net investment income to the extent necessary so that such Incentive Fee equals, and is calculated in the same manner as, the corresponding Incentive Fee on pre-incentive fee net investment income, if such Incentive Fee (i) were calculated based upon the Adviser receiving 10%10.0% (instead of 15%15.0%) of the applicable pre-incentive fee net investment income and (ii) did not include any “catch-up” feature in favor of the Adviser.

 

The second part of the Incentive Fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 15%15.0% of the Company’s realized capital gains, if any, on a cumulative basis from June 16, 2015, the effective date of the Registration Statement, through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain Incentive Fees with respect to each of the investments in the Company’s portfolio.

 

Pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive the Incentive Fee on capital gains to the extent necessary so that such portion of the Incentive Fee equals, and is calculated in the same manner as, the corresponding Incentive Fee on capital gains, if such portion of the Incentive Fee were calculated based upon the Adviser receiving 10%10.0% (instead of 15%15.0%).

 

 2325 

 

 

In addition, pursuant to the Waiver Agreement, the Adviser has agreed to waive the right to receive both components of the Incentive Fee to the extent necessary so that it does not receive Incentive Fees which are attributable to income and gains of the Company that exceed an annualized rate of 12%12.0% in any calendar quarter.

 

The waivers from the Adviser will remain effective until terminated earlier by either party on 60 days’ prior to written notice.

 

For the three and six months ended June 30, 2019, the Company recorded incentive fees related to net investment income of $647,108 and $1,259,236, respectively. Offsetting the incentive fees were waivers of the incentive fees of $521,159 and $1,010,450 for the three and six months ended June 30, 2019, respectively, as set forth within the accompanying statements of operations. For the three and six months ended June 30, 2018, the Company recorded incentive fees related to net investment income of $476,412 and $874,976, respectively. Offsetting the incentive fees were waivers of the incentive fees of $388,030 and $731,096 for the three and six months ended June 30, 2018, respectively, as set forth within the accompanying statements of operations. For the three and six months ended June 30, 2017, the Company recorded incentive fees related to net investment income of $305,227 and $424,625, respectively. Offsetting the incentive fees were waivers of the incentive fees of $273,912 and $381,370 for the three and six months ended June 30, 2017, respectively, as set forth within the accompanying statements of operations.

 

Administrative Fee

The Company has also entered into an administration agreement (the “Administration Agreement”) with Audax Management Company, LLC (the “Administrator”) under which the Administrator provides administrative services to the Company. Under the Administration Agreement, the Administrator performs, or oversees the performance of administrative services necessary for the operation of the Company, which include being responsible for the financial records which the Company is required to maintain and prepare reports filed with the SEC. In addition, the Administrator assists in determining and publishing the Company’s net asset value, oversees the preparation and filing of the Company’s tax returns and the printing and dissemination of reports to the Company’s stockholders, and generally oversees the payment of the Company’s expenses and the performance of administrative and professional services rendered to the Company by others. The Company reimburses the Administrator for its allocable portion of the costs and expenses incurred by the Administrator for overhead in performance by the Administrator of its duties under the Administration Agreement, including the cost of facilities, office equipment and the Company’s allocable portion of cost of compensation and related expenses of its Chief Financial Officer and Chief Compliance Officer and their respective staffs, as well as any costs and expenses incurred by the Administrator relating to any administrative or operating services provided by the Administrator to the Company. Such costs are reflected as an administrative fee in the accompanying statements of operations.

 

The Company has also entered into a fee waiver agreement with the Administrator, pursuant to which the Administrator may waive, in whole or in part, its entitlement to receive reimbursements from the Company.

 

The Company accrued administrative fees of $66,250 and $132,500 for the three and six months ended June 30, 2018,2019, respectively, as set forth within the accompanying statements of operations. The Company accrued administrative fees of $66,250 and $132,500 for the three and six months ended June 30, 2017,2018, respectively, as set forth within the accompanying statements of operations.

24

Related Party Fees

Fees due to related parties as of June 30, 20182019 and December 31, 20172018 on the Company’s accompanying statements of assets and liabilities were as follows:

 

  June 30, 2018  December 31, 2017 
Net base management fee due to Adviser $405,070  $309,784 
Net incentive fee due to Adviser  88,381   68,237 
Other expenses due to Adviser(a)  -   153,034 
Total fees due to Adviser, net of waivers  493,451   531,055 
Fee due to Administrator, net of waivers  66,250   66,250 
Total Related Party Fees Due $559,701  $597,305 

26

 

(a)Expenses paid on behalf of the Company by the Adviser

  June 30, 2019  December 31, 2018 
Net base management fee due to Adviser $525,486  $424,873 
Net incentive fee due to Adviser  125,948   111,041 
Other expenses due to Adviser(a)  -   - 
Total fees due to Adviser, net of waivers  651,434   535,914 
Fee due to Administrator, net of waivers  66,250   66,250 
Total Related Party Fees Due $717,684  $602,164 

(a) Expenses paid on behalf of the Company by the Adviser

 

Note 5. Net Increase in Net Assets Resulting from Operations Per Share of Common Stock:

 

The following table sets forth the computation of basic and diluted net increase in net assets resulting from operations per weighted average share of Company’s common stock for the three and six months ended June 30, 20182019 and 2017:2018:

 

 Three Months Ended
June 30, 2018		  Three Months Ended
June 30, 2017		  Six Months Ended
June 30, 2018		  Six Months Ended
June 30, 2017		  

Three Months Ended

June 30, 2019

 

Three Months Ended

June 30, 2018

 

Six Months Ended

June 30, 2019

 

Six Months Ended

June 30, 2018

 
                  
Numerator for basic and diluted net increase in net assets resulting from operations per common share $2,516,194  $2,002,169  $5,304,043  $3,773,734  $3,943,191  $2,516,194  $7,585,127  $5,304,043 
                
Denominator for basic and diluted weighted average common shares  23,840,839   17,831,894   22,945,473   17,831,894   31,880,752   23,840,839   31,019,614   22,945,473 
Basic and diluted net increase in net assets resulting from operations per common share $0.11  $0.11  $0.23  $0.21  $0.12  $0.11  $0.24  $0.23 

 

Note 6. Income Tax

 

The Company has elected to be regulated as a BDC under the 1940 Act, as well as elected to be treated as a RIC under Subchapter M of the Code. As a RIC, the Company generally is not subject to corporate-level U.S. federal income taxes on any ordinary income or capital gains that it timely distributes as dividends for U.S. federal income tax purposes to its stockholders. To qualify to be treated as a RIC, the Company is required to meet certain source of income and asset diversification requirements, and to timely distribute dividends out of assets legally available for distributions to its stockholders of an amount generally equal to at least 90% of the sum of its net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any (i.e., “investment company taxable income,” determined without regard to any deduction for dividends paid), for each taxable year. The amount to be paid out as distributions to the Company’s stockholders is determined by the Company’s Board of Directors and is based on management’s estimate of the fiscal year earnings. Based on that estimate, the Company intends to make the requisite distributions to its stockholders, which will generally relieve the Company from corporate-level U.S. federal income taxes. Although the Company currently intends to distribute its net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, recognized in respect of each taxable year as dividends out of the Company’s assets legally available for distribution, the Company in the future may decide to retain for investment and be subject to entity-level income tax on such net capital gains. Additionally, depending on the level of taxable income earned in a taxable year, the Company may choose to carry forward taxable income in excess of current year distributions into the next taxable year and incur a 4% excise tax on such income, as required. To the extent that the Company determines that its estimated current year annual taxable income will be in excess of estimated current year distributions, the Company will accrue an excise tax, if any, on estimated excess taxable income as such excess taxable income is earned.

 

 2527 

 

 

The Company had aggregate distributions declared and paid to its shareholders for the year ended December 31, 2018 of $13,002,172, or $0.52 per share. The tax character of the distributions declared and paid represented $12,537,786 from ordinary income, $450,049 capital gains, and $14,337 from tax return of capital. The Company had aggregate distributions declared and paid to its shareholders for the year ended December 31, 2017 of $8,915,421, or $0.47 per share. The tax character of the distributions declared and paid represented $8,199,556 from ordinary income, $505,988 capital gains, and $209,867 from tax return of capital. The

During the three and six months ended June 30, 2019, the Company had aggregate distributions declared and paid to its shareholders for the year ended December 31, 2016distributions of $5,144,149,$8,306,889, or $0.35$0.26 per share. The tax character of the distributions declared and paid represented $4,798,829$8,280,510 from ordinary income $103,499and $26,379 from capital gains, and $241,821 from tax return of capital. We estimate that the full amount of the distributions declared and paid during such period will be characterized, for U.S. federal income tax purposes, as ordinary income.

gains. During the three and six months ended June 30, 2018, the Company declared and paid distributions of $5,886,063, or $0.25 per share. The tax character of the distributions declared and paid represented $5,736,266 from ordinary income and $149,797 from capital gains. During the three and six months ended June 30, 2017, the Company declared and paid distributions of $3,744,698, or $0.21 per share. The estimated tax character of the distributions declared and paid represented $3,606,521 from ordinary income and $138,177 from capital gains.

 

The determination of the tax attributes of the Company’s distributions is made annually at the end of the

Company’s taxable year, based upon the Company’s taxable income for the full taxable year and distributions paid for the full taxable year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full taxable year. The actual tax characteristics of distributions to stockholders will reported to the Company’s stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

 

AtAs of December 31, 2017,2018, the components of accumulated net unrealized appreciation on investments and net investment losses and losses on a tax basis as detailed below differ from the amounts reflected in the Company’s statements of assets and liabilities by temporary book/tax differences primarily arising from amortization of organizational expenditures.

 

Temporary Differences
  As of December 31,
2017		 
Other temporary book/tax differences $(253,937)
Net tax basis unrealized appreciation  160,604 
Components of tax distributable deficit at period end $(93,333)

Temporary Differences

  

As of December 31,

2018

 
Other temporary book/tax differences $(233,622)
Net tax basis unrealized depreciation  (1,617,418)
Components of tax distributable deficit at period end $(1,851,040)

 

Certain losses incurred by the Company after October 31 of a taxable year are deemed to arise on the first business day of the Company’s next taxable year. The Company did not incur such losses after October 31 of the Company’s taxable year ended December 31, 2017.2018.

 

Capital losses are generally eligible to be carried forward indefinitely, and retain their status as short-term or long-term in the manner originally incurred by the company. The Company did not maintain any capital losses as of December 31, 2017.2018. The Company has evaluated tax positions it has taken, expects to take, or that are otherwise relevant to the Company for purposes of determining whether any relevant tax positions would “more-likely-than-not” be sustained by the applicable tax authority in accordance with ASC Topic 740, “Income Taxes,” as modified by ASC Topic 946. The Company has analyzed such tax positions and has concluded that no unrecognized tax benefits should be recorded for uncertain tax positions for taxable years that may be open. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. The Company’s U.S.federalU.S. federal tax returns for fiscal years 2015, 2016, 2017 2016, 2015and 2018 remain subject to examination by the Internal Revenue Service. The Company records tax positions that are not deemed to meet a more-likely-than-not threshold as tax expenses as well as any applicable penalties or interest associated with such positions. During each of the three and six months ended June 30, 20182019 and 2017,2018, no tax expense or any related interest or penalties were incurred.

 

 2628 

 

 

Note 7. Equity

 

On June 23, 2015, an investor made a $140,000,000 capital commitment to the Company. On December 2, 2016, the same investor made an additional capital commitment of $50,000,000. On December 7, 2017, the same investor made an additional capital commitment of $100,000,000. On March 22, 2019, the same investor made an additional capital commitment of $40,000,000. As of June 30, 2018, $50,000,0002019, $25,000,000 of total capital commitments remained unfunded by the Company’s investors.

 

The number of Shares issued and outstanding as of June 30, 20182019 and December 31, 2017,2018, were 25,124,82031,949,579 and 21,988,238,28,269,649, respectively.

The following table details the activity of Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018:

Three Months Ended June 30, 2019 Common Stock  

Capital in Excess

of Par Value

  

Total

Distributable

(Loss) Earnings

  

Total

Stockholders'

Equity

 
Balance as of March 31, 2019 $30,384  $289,243,891  $1,790,897  $291,065,172 
Net investment income  -   -   4,187,593   4,187,593 
Net realized gains from investment transactions  -   -   73,811   73,811 
Net change in unrealized depreciation on investments  -   -   (318,214)  (318,214)
Issuance of shares  1,566   14,998,434   -   15,000,000 
Distributions to Stockholders  -   -   (8,306,889)  (8,306,889)
Reinvested Dividends  -   30   -   30 
Balance as of June 30, 2019 $31,950  $304,242,355  $(2,572,802) $301,701,503 

Six Months Ended June 30, 2019 Common Stock  

Capital in Excess

of Par Value

  

Total

Distributable

(Loss) Earnings

  

Total

Stockholders'

Equity

 
Balance as of December 31, 2018 $28,270  $269,246,005  $(1,851,040) $267,423,235 
Net investment income  -   -   8,145,132   8,145,132 
Net realized gains from investment transactions  -   -   101,731   101,731 
Net change in unrealized depreciation on investments  -   -   (661,736)  (661,736)
Issuance of shares  3,680   34,996,320   -   35,000,000 
Distributions to Stockholders  -   -   (8,306,889)  (8,306,889)
Reinvested Dividends  -   30   -   30 
Balance as of June 30, 2019 $31,950  $304,242,355  $(2,572,802) $301,701,503 

Three Months Ended June 30, 2018 Common Stock  

Capital in Excess of

Par Value

  

Total

Distributable

(Loss) Earnings

  

Total

Stockholders'

Equity

 
Balance as of March 31, 2018 $23,546  $224,265,364  $2,694,515  $226,983,425 
Net investment income  -   -   3,087,314   3,087,314 
Net realized gains from investment transactions  -   -   67,959   67,959 
Net change in unrealized depreciation on investments  -   -   (639,079)  (639,079)
Issuance of shares  1,579   14,998,421   -   15,000,000 
Distributions to Stockholders  -   -   (5,886,063)  (5,886,063)
Reinvested Dividends  -   27   -   27 
Balance as of June 30, 2018 $25,125  $239,263,812  $(675,354) $238,613,583 

29

Six Months Ended June 30, 2018 Common Stock  

Capital in Excess

of Par Value

  

Total

Distributable

(Loss) Earnings

  

Total

Stockholders'

Equity

 
Balance as of December 31, 2017 $21,989  $209,266,921  $(93,334) $209,195,576 
Net investment income  -   -   5,688,559   5,688,559 
Net realized gains from investment transactions  -   -   217,757   217,757 
Net change in unrealized appreciation on investments  -   -   (602,273)  (602,273)
Issuance of shares  3,136   29,996,864   -   30,000,000 
Distributions to Stockholders  -   -   (5,886,063)  (5,886,063)
Reinvested Dividends  -   27   -   27 
Balance as of June 30, 2018 $25,125  $239,263,812  $(675,354) $238,613,583 

 

Note 8. Commitments and Contingencies

 

The Company may enter into certain credit agreements that include loan commitments where all or a portion of such commitment may be unfunded. The Company is generally obligated to fund the unfunded loan commitments at the borrowers’ discretion. Funded portions of credit agreements are presented on the accompanying schedule of investments. Unfunded loan commitments and funded portions of credit agreements are fair valued and unrealized appreciation or depreciation, if any, have been included in the accompanying statements of assets and liabilities and statements of operations.

 

The following table summarizes the Company’s significant contractual payment obligations as of June 30, 20182019 and December 31, 2017:2018:

 

Investment Industry June 30, 2018  December 31, 2017 
         
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 5.34% (Libor + 3.00%), maturity 3/20/25 Wholesale $644,172  $- 
Mavis, Senior Secured Closing Date Term Loan (First Lien), 5.59% (Libor + 3.25%), maturity 3/20/25 Automotive  521,562   - 
Community Brands, Senior Secured Initial Term Loan (First Lien), 6.34% (Libor + 4.00%), maturity 12/2/22 High Tech Industries  287,557   - 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 5.59% (Libor + 3.25%), maturity 1/31/25 Chemicals, Plastics & Rubber  270,000   - 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 6.59% (Libor + 4.25%), maturity 3/27/24 Services: Business  256,410   - 
Manna Pro, Senior Secured Term Loan, 8.34% (Libor + 6.00%), maturity 12/8/23 Consumer Goods: Non-durable  227,500   583,333 
SRP, Senior Secured Term Loan, 8.84% (Libor + 6.50%), maturity 9/8/23 Wholesale  196,429   535,714 
Dermatologists of Central States, Senior Secured Term Loan, 8.84% (Libor + 6.50%), maturity 4/20/22 Healthcare & Pharmaceuticals  133,257   133,257 
PlayCore, Senior Secured Initial Term Loan (First Lien), 6.09% (Libor + 3.75%), maturity 9/30/24 Construction & Building  119,048   119,048 
Young, Senior Secured Initial Term Loan (First Lien), 6.34% (Libor + 4.00%), maturity 11/7/24 Healthcare & Pharmaceuticals  119,048   687,500 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 6.84% (Libor + 4.50%), maturity 9/23/24 Healthcare & Pharmaceuticals  107,955   340,909 
Ansira, Senior Secured Initial Term Loan, 8.09% (Libor + 5.75%), maturity 12/20/22 Media: Advertising, Printing & Publishing  100,392   113,346 
Pathway, Senior Secured Term Loan (First Lien), 6.59% (Libor + 4.25%), maturity 10/10/24 Healthcare & Pharmaceuticals  -   818,454 
Inst. Shareholder Services, Senior Secured Initial Term Loan (First Lien), 6.09% (Libor + 3.75%), maturity 10/16/24 Banking, Finance, Insurance & Real Estate  -   208,333 
Radiology Partners, Senior Secured Term A Loan, 8.09% (Libor + 5.75%), maturity 12/4/23 Healthcare & Pharmaceuticals  -   175,567 
           
    $2,983,330  $3,715,461 
Investment Industry June 30, 2019  December 31, 2018 
         
Advarra, Senior Secured Initial Revolving Loan (First Lien), 6.57% (Libor + 4.25%), maturity 7/9/26(i) Healthcare & Pharmaceuticals $714,286  $- 
Pathway, Senior Secured Initial Term Loan (First Lien), 7.10% (Libor + 4.50%), maturity 12/20/24 Healthcare & Pharmaceuticals  690,264   - 
Service Logic, Senior Secured Initial Term Loan (First Lien), 6.57% (Libor + 4.25%), maturity 12/31/24(i) Services: Business  464,667   - 
Mavis, Senior Secured Closing Date Term Loan (First Lien), 6.05% (Libor + 3.25%), maturity 3/20/25 Automotive  445,141   469,764 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 6.57% (Libor + 4.25%), maturity 7/9/26(i) Healthcare & Pharmaceuticals  423,810   - 
Alpaca, Senior Secured Revolver, 6.82% (Libor + 4.50%), maturity 4/19/24(i) Healthcare & Pharmaceuticals  258,852   - 
Community Brands, Senior Secured Initial Term Loan (First Lien), 6.80% (Libor + 4.00%), maturity 12/2/22 High Tech Industries  153,941   194,963 
Premise Health, Senior Secured Initial Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 7/10/25 Healthcare & Pharmaceuticals  147,052   147,052 
Veritext, Senior Secured Initial Term Loan (First Lien), 6.55% (Libor + 3.75%), maturity 8/1/25 Healthcare & Pharmaceuticals  125,522   166,833 
AmeriLife Group, Senior Secured Initial Term Loan (First Lien), 6.82% (Libor + 4.50%), maturity 6/12/26(i) Banking, Finance, Insurance & Real Estate  122,807   - 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 5.82% (Libor + 3.50%), maturity 5/14/26(i) Services: Consumer  100,000   - 
Ansira, Senior Secured Initial Term Loan, 8.55% (Libor + 5.75%), maturity 12/20/22 Media: Advertising, Printing & Publishing  38,214   85,171 
Integrity Marketing Group, Senior Secured Term Loan, 7.05% (Libor + 4.25%), maturity 11/28/25 Banking, Finance, Insurance & Real Estate  19,370   78,740 
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 5.80% (Libor + 3.00%), maturity 3/20/25 Wholesale  -   736,196 
GlobalLogic, Senior Secured Initial Term Loan, 6.05% (Libor + 3.25%), maturity 8/1/25 High Tech Industries  -   250,000 
Dermatologists of Central States, Senior Secured Term Loan, 9.30% (Libor + 6.50%), maturity 4/20/22 Healthcare & Pharmaceuticals  -   91,116 
Eating Recovery Center, Senior Secured Initial Term Loan (First Lien), 7.30% (Libor + 4.50%), maturity 9/23/24 Healthcare & Pharmaceuticals  -   5,682 
           
    $3,703,926  $2,225,517 

 

Unfunded commitments represent all amounts unfunded as of June 30, 2019 and December 31, 2018. These amounts may or may not be funded to the borrowing party now or in the future.

 2730 

 

 

Note 9. Financial Highlights

 

 Three Months Ended
June 30, 2018		  Three Months Ended
June 30, 2017		  Six Months Ended
June 30, 2018		  Six Months Ended
June 30, 2017		  

Three Months Ended

June 30, 2019

  

Three Months Ended

June 30, 2018

  

Six Months Ended

June 30, 2019

  

Six Months Ended

June 30, 2018

 
Per Share Data:                                
Net asset value, beginning of period $9.64  $9.65  $9.51  $9.55  $9.58  $9.64  $9.46  $9.51 
Net investment income(a)  0.13   0.11   0.25   0.21   0.13   0.13   0.26   0.25 
Net realized gain on investments and change in unrealized (depreciation) appreciation on investments(a)(b)  (0.02)  0.01   (0.01)  0.01 
Net realized gain on investments and change in unrealized depreciation on investments(a)(b)  (0.01)  (0.02)  (0.02)  (0.01)
Net increase in net assets resulting from operations $0.11  $0.12  $0.24  $0.22  $0.12  $0.11  $0.24  $0.24 
                                
Effect of equity capital activity                                
Distributions to stockholders from net investment income  (0.24)  (0.20)  (0.24)  (0.20)  (0.26)  (0.24)  (0.26)  (0.24)
Distributions to stockholders from capital gains  (0.01)  (0.01)  (0.01)  (0.01)  -   (0.01)  -   (0.01)
Distributions to stockholders from return of capital(c)  -   -   -   (0.02)
Net asset value at end of period $9.50  $9.56  $9.50  $9.56  $9.44  $9.50  $9.44  $9.50 
Total return(c)(g)  1.10%  1.22%  2.49%  2.28%
Total return(d)(h)  1.21%  1.10%  2.50%  2.49%
Shares of common stock outstanding at end of period  25,124,820   17,831,896   25,124,820   17,831,896   31,949,579   25,124,820   31,949,579   25,124,820 
                                
Statement of Assets and Liabilities Data:                                
Net assets at end of period $238,613,583  $170,398,719  $238,613,583  $170,398,719  $301,701,503  $238,613,583  $301,701,503  $238,613,583 
Average net assets(d)  231,990,089   172,190,226   226,000,729   171,894,623 
Average net assets(e)  299,820,875   231,990,089   299,820,875   226,000,729 
                                
Ratio/Supplemental Data:                                
Ratio of gross expenses to average net assets-annualized(e)  2.34%  2.23%  2.29%  2.13%
Ratio of net expenses to average net assets-annualized(f)  1.30%  1.23%  1.28%  1.32%
Ratio of gross expenses to average net assets-annualized(f)  2.53%  2.34%  2.43%  2.29%
Ratio of net expenses to average net assets- annualized(g)  1.45%  1.30%  1.39%  1.28%
Ratio of net investment income to average net assets-annualized  5.34%  4.67%  5.08%  4.47%  5.60%  5.34%  5.48%  5.08%
Portfolio turnover(g)  0.61%  19.58%  0.65%  29.13%
Portfolio turnover(h)  0.65%  0.61%  0.65%  0.65%

 

(a)Based on weighted average basic per share of Common Stock data.
(b)The per share amount varies from the net realized and unrealized gain (loss) for the period because of the timing of sales of fund shares and the per share amount of realized and unrealized gains and losses at such time.
(c)For the three and six months ended June 30, 2019, the 0.00 is due to rounding.
(d)Total return is based on the change in net asset value during the respective periods. Total return also takes into account dividends and distributions, if any, reinvested in accordance with the Company's dividend reinvestment plan.
(d)(e)Average net assets are computed using the average balance of net assets at the end of each month of the reporting period.
(e)(f)Ratio of gross expenses to average net assets is computed using expenses before waivers from the Adviser and Administrator.
(f)(g)Ratio of net expenses to average net assets is computed using total expenses net of waivers from the Adviser and Administrator.
(g)(h)Not annualized.

 

Note 10. Indemnification

 

In the normal course of business, the Company may enter into certain contracts that provide a variety of indemnities. The Company’s maximum exposure under these indemnities is unknown. The Company does not consider it necessary to record a liability in this regard.

 

Note 11. Subsequent Events

 

On June 12, 2019, the Company delivered a capital drawdown notice to one of its investors relating to the sale of 1,588,983 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) for an aggregate offering price of $15 million. The sale closed on July 3, 2019.

The sale of Common Stock was made pursuant to a subscription agreement entered into by the Company and the investor. Under the terms of the subscription agreement, the investor is required to fund drawdowns to purchase shares of Common Stock up to the amount of its capital commitment on an as-needed basis with a minimum of 10 calendar days’ prior notice.

The issuance of the Common Stock is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof. The Company has considerednot engaged in general solicitation or advertising with regard to the effects, if any, of events occurring after the dateissuance and sale of the Company’s Statement of AssetsCommon Stock and Liabilities through August 14, 2018,has not offered securities to the date the quarterly report on Form 10-Q was issued. The Company has concluded there are no material items that warrant disclosure.public in connection with such issuance and sale.

 

 2831 

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

In this quarterly report on Form 10-Q, except where the context suggests otherwise, the terms “we,” us,” our” and the “Company” refer to Audax Credit BDC Inc. The information contained in this section should be read in the conjunction with the financial statements and notes to the financial statements appearing elsewhere in this report.

This report and other statements contain forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, our current and prospective portfolio investments, our industry, our beliefs and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including:

 

·our future operating results;
·our business prospects and the prospects of our portfolio companies;
·the ability of our portfolio companies to achieve their objectives;
·the timing of cash flows, if any, from the operations of our portfolio companies;
·the ability of our Adviser to locate suitable investments for us and to monitor and administer our investments;
·changes in the general economy;
·risk associated with possible disruptions in our operations or the economy generally;
·the effect of investments that we expect to make;
·our contractual arrangements and relationships with third parties;
·actual and potential conflicts of interest with Adviser and its affiliates;
·the dependence of our future success on the general economy and its effect on the industries in which we invest;
·the adequacy of our financing sources and working capital;
·the ability of our Adviser and its affiliates to attract and retain highly talented professionals;
·our ability to qualify and maintain our qualification as a BDC and as a RIC; and
·the risks, uncertainties and other factors we identify under “Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K (file no. 814-01154) (the “Annual Report”).

 

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this report should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in the section of our Annual Report entitled “Item 1A. Risk Factors”. of this Report and our Annual Report. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. Moreover, we assume no duty and do not undertake to update the forward-looking statements. The forward-looking statements and projections contained in this report are excluded from the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended, and provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

 2932 

 

 

OVERVIEW

 

Audax Credit BDC Inc. is a Delaware corporation that was formed on January 29, 2015. We are an externally managed, closed-end, non-diversified management investment company that has elected to be treated as a BDC under the 1940 Act. In addition, we have elected to be treated for U.S. federal income tax purposes as a RIC under Subchapter M of the Code.

 

Our investment objective is to generate current income and, to a lesser extent, long-term capital appreciation. We intend to meet our investment objective by investing primarily in senior secured debt of privately owned U.S. middle- market companies. We intend to invest at least 80% of our net assets plus the amount of any borrowings in “credit instruments,” which we define as any fixed income instruments.

 

Although we have no present intention of doing so, we may decide to incur leverage. If we do incur leverage, however, we anticipate that it will be used in limited circumstances and on a short-term basis for purposes such as funding distributions. As a BDC, we are limited in our use of leverage under the 1940 Act. Under the 1940 Act, a BDC generally is required to maintain asset coverage of 200% for senior securities representing indebtedness (such as borrowings from banks or other financial institutions) or stock (such as preferred stock). The Small Business Credit Availability Act, which was signed into law on March 23, 2018, provides that a BDC's required asset coverage under the 1940 Act may be reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). This reduction in asset coverage would permitpermits a BDC to double the amount of leverage it may utilize, subject to certain approval, timing and reporting requirements, including either stockholder approval or approval of a majority of the directors who are not “interested persons” (as defined in the 1940 Act) of the BDC and who have no financial interest in the arrangement. In addition, as a non-traded BDC, if we receive the relevant approval to increase our authorized leverage, we will be required to offer our stockholders the opportunity to sell their shares of common stock over the next year following the calendar quarter in which the approval was obtained. In determining whether to use leverage, we will analyze the maturity, covenants and interest rate structure of the proposed borrowings, as well as the risks of such borrowings within the context of our investment outlook and the impact of leverage on our investment portfolio. The amount of any leverage that we will employ as a BDC will be subject to oversight by our Board of Directors.

 

We generate revenue in the form of interest on the debt securities that we hold in our portfolio companies. The senior debt we invest in generally has stated terms of three to ten years. Our senior debt investments generally bear interest at a floating rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, some of our investments may provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally will become due at the maturity date. In addition, we may generate revenue in the form of commitment and other fees in connection with transactions, although we do not expect to do so. OID as well as market discount and premium are accreted and amortized in determining our interest income. We record any prepayment premiums on loans and debt securities as income.

 

PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY

 

Portfolio Composition

 

The fair value of our investments all of which were syndicated loans as of June 30, 2018,2019, was approximately $236,852,837$308,624,774 and held in 117145 portfolio companies as of June 30, 2018.2019. The fair value of our investments, all of which were syndicated loans as of December 31, 2017,2018, was approximately $184,336,177$264,662,881 and held in 96135 portfolio companies as of December 31, 2017.2018.

 

During the six months ended June 30, 2019, we invested in 31 new syndicated investments for a combined $57,384,637 and in existing investments for a combined $17,964,941. We also received $29,011,639 in repayments from investments and $1,951,362 from investments sold during the six months ended June 30, 2019. During the six months ended June 30, 2018, we invested in 44 new syndicated investments for a combined $72,398,817 and in existing investments for a combined $13,400,210. We also received $31,583,532 in repayments from investments and $1,390,962 from investments sold during the six months. Duringmonths ended June 30, 2018. In addition, for the three and six months ended June 30, 2017,2019, we investedhad a change in 24 new syndicated investments for a combined $39,414,095unrealized depreciation of approximately $318,214 and in existing investments for a combined $5,539,488. We also received $42,382,537 in repayments from investments.$661,736, respectively, and realized gains of $73,812 and $101,731, respectively. In addition, for the three and six months ended June 30, 2018, we had a change in unrealized depreciation of approximately $639,079 and $602,273, respectively, and realized gains of $67,959 and $217,757, respectively. In addition, for the three and six months ended June 30, 2017, we had a change in unrealized depreciation of approximately $351,691 and $481,597, respectively, and realized gains of $350,613 and $440,930, respectively.

 

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Our investment activity for the six months ended June 30, 20182019 and 2017,2018, is presented below:

 

 Six Months Ended
June 30, 2018		  Six Months Ended
June 30, 2017		  

Six Months Ended

June 30, 2019

 

Six Months Ended

June 30, 2018

 
          
Beginning investment portfolio, at fair value $184,336,177  $143,789,221  $264,662,881  $184,336,177 
Investments in new portfolio investments  72,398,817   39,414,095   57,384,637   72,398,817 
Investments in existing portfolio investments  13,400,210   5,539,488   17,964,941   13,400,210 
Principal repayments  (31,583,532)  (42,382,537)  (29,011,639)  (31,583,532)
Proceeds from investments sold  (1,390,962)  -   (1,951,362)  (1,390,962)
Change in premiums, discounts and amortization  76,643   132,661   135,319   76,643 
Net unrealized depreciation on investments  (602,273)  (481,597)
Net change in unrealized (depreciation) appreciation on investments  (661,736)  (602,273)
Realized gain on investments  217,757   440,930   101,733   217,757 
Ending portfolio investment activity, at fair value $236,852,837  $146,452,261  $308,624,774  $236,852,837 
Number of portfolio investments  124   85   157   124 
Average investment amount, at cost $1,913,665  $1,715,192  $1,980,280  $1,913,665 
Percentage of investments at floating rates  100.00%  100.00%  100.00%  100.00%

 

As of June 30, 20182019 and December 31, 2017,2018, our entire portfolio consisted of non-controlled/non-affiliated investments.

 

RECENT DEVELOPMENTS

 

Subsequent to June 30, 20182019 and through August 14, 2018,2019, we invested $1,129,108$6,995,857 at cost in threeeleven portfolio companies.

On June 12, 2019, the Company delivered a capital drawdown notice to one of its investors relating to the sale of 1,588,983 shares of the Common Stock for an aggregate offering price of $15 million. The sale closed on July 3, 2019.

The sale of Common Stock was made pursuant to a subscription agreement entered into by the Company and the investor. Under the terms of the subscription agreement, the investor is required to fund drawdowns to purchase shares of Common Stock up to the amount of its capital commitment on an as-needed basis with a minimum of 10 calendar days’ prior notice.

The issuance of the Common Stock is exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) thereof. The Company has not engaged in general solicitation or advertising with regard to the issuance and sale of the Common Stock and has not offered securities to the public in connection with such issuance and sale.

 

RESULTS OF OPERATIONS

 

The net increase or decrease in net assets from operations may vary substantially from period to period as a result of various factors, including the recognition of realized gains and/or losses and net change in unrealized appreciation and depreciation.

 

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Revenue

 

Total investment income for the three and six months ended June 30, 20182019 and 2017,2018, is presented in the table below.

 

 Three Months Ended
June 30, 2018		  Three Months Ended
June 30, 2017		  Six Months Ended
June 30, 2018		  Six Months Ended
June 30, 2017		  

Three Months Ended

June 30, 2019

 

Three Months Ended

June 30, 2018

 

Six Months Ended

June 30, 2019

 

Six Months Ended

June 30, 2018

 
                  
Total interest income from non-controlled/non-affiliated investments $3,789,055  $2,480,149  $7,005,657  $4,820,902  $5,216,545  $3,789,055  $10,086,548  $7,005,657 
Total other interest income  31,119   33,746   68,107   56,630   42,795   31,119   93,515   68,107 
Total other income  16,452   17,067   48,562   61,462   15,340   16,452   33,150   48,562 
Total investment income $3,836,626  $2,530,962  $7,122,326  $4,938,994  $5,274,680  $3,836,626  $10,213,213  $7,122,326 

 

Total investment income for the three months ended June 30, 20182019 increased to $3,836,626$5,274,680 from $2,530,962$3,836,626 for the three months ended June 30, 2017,2018, and was driven by our interest income from our increasing investment balance. Total investment income for the six months ended June 30, 20182019 increased to $7,122,326$10,213,213 from $4,938,994$7,122,326 for the six months ended June 30, 2017,2018, and was driven by our interest income from our increasing investment balance. As of June 30, 20182019 and 2017,2018, the size of our debt portfolio was $237,294,506$310,903,928 and $145,791,288$237,294,506 at amortized cost, respectively, with total debt principal amount outstanding of $237,997,062$311,472,169 and $146,778,216,$237,997,062, respectively.

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Expenses

 

Total expenses net of waivers for the three and six months ended June 30, 20182019 and 2017,2018, were as follows:

 

 Three Months Ended
June 30, 2018		  Three Months Ended
June 30, 2017		  Six Months Ended
June 30, 2018		  Six Months Ended
June 30, 2017		  

Three Months Ended

June 30, 2019

 

Three Months Ended

June 30, 2018

 

Six Months Ended

June 30, 2019

 

Six Months Ended

June 30, 2018

 
                  
Base management fee(a) $623,184  $438,585  $1,161,484  $877,248  $808,440  $623,184  $1,547,094  $1,161,484 
Incentive fee(a)  476,412   305,227   874,976   424,625   647,108   476,412   1,259,236   874,976 
Administrative fee(a)  66,250   66,250   132,500   132,500   66,250   66,250   132,500   132,500 
Directors' fees  48,750   48,750   97,500   97,500   52,500   48,750   105,000   97,500 
Professional fees  101,309   51,967   213,019   187,737   233,450   101,309   388,131   213,019 
Other expenses  39,551   44,352   91,902   93,389   83,452   39,551   188,053   91,902 
Total expenses  1,355,456   955,131   2,571,381   1,812,999   1,891,200   1,355,456   3,620,014   2,571,381 
Base management fee waivers(a)  (218,114)  (153,504)  (406,518)  (307,036)  (282,954)  (218,114)  (541,483)  (406,518)
Incentive fee waivers(a)  (388,030)  (273,912)  (731,096)  (381,370)  (521,159)  (388,030)  (1,010,450)  (731,096)
Total expenses, net of waivers $749,312  $527,715  $1,433,767  $1,124,593  $1,087,087  $749,312  $2,068,081  $1,433,767 

 

(a) Refer to Note 4-Related Party Transactionswithin the financial statements for a description of the relevant fees.

(a)Refer to Note 4-Related Party Transactionswithin the financial statements for a description of the relevant fees.

 

The increase in base management fees before waivers for the three months ended June 30, 20182019 in comparison to the three months ended June 30, 20172018 was driven by our increasing invested balance. For the three months ended June 30, 20182019 and 2017,2018, we accrued gross base management fees before waivers of $623,184$808,440 and $438,585,$623,184, respectively. Offsetting those fees, we recognized base management fee waivers of $282,954 and $218,114, and $153,504, respectively. For the three months ended June 30, 2019, we accrued incentive fees related to net investment income before waivers of $647,108, offset by incentive fee waivers of $521,159. For the three months ended June 30, 2018, we accrued incentive fees related to net investment income before waivers of $476,412, offset by incentive fee waivers of $388,030. For the three months ended June 30, 2017, we accrued incentive fees related to net investment income before waivers of $305,227, offset by incentive fee waivers of $273,912. Additionally, we accrued $66,250 of administrative fees for each of the three months ended June 30, 20182019 and 2017.2018. Refer to Note 4 —Related Party Transactionsin the notes accompanying our financial statements for more information related to base management fees, incentive fees and waivers.

 

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During the three months ended June 30, 20182019 and 2017,2018, we incurred professional fees of $101,309$233,450 and $51,967,$101,309, respectively, related to audit fees, tax fees, and legal fees. The increase in professional fees was driven by an increase in legal expenses during the three months ended June 30, 20182019 as compared to the three months ended June 30, 2017.2018. We also incurred expenses related to fees paid to our independent directors of $52,500 and $48,750 for each of the three months ended June 30, 2019 and 2018, and 2017.respectively.

 

The increase in base management fees before waivers for the six months ended June 30, 20182019 in comparison to the six months ended June 30, 20172018 was driven by our increasing invested balance. For the six months ended June 30, 20182019 and 2017,2018, we accrued gross base management fees before waivers of $1,161,484$1,547,094 and $877,248,$1,161,484, respectively. Offsetting those fees, we recognized base management fee waivers of $541,483 and $406,518, and $307,036, respectively. For the six months ended June 30, 2019, we accrued incentive fees related to net investment income before waivers of $1,259,236, offset by incentive fee waivers of $1,010,450. For the six months ended June 30, 2018, we accrued incentive fees related to net investment income before waivers of $874,976, offset by incentive fee waivers of $731,096. For the six months ended June 30, 2017, we accrued incentive fees related to net investment income before waivers of $424,625, offset by incentive fee waivers of $381,370. Additionally, we accrued $132,500 of administrative fees for each of the six months ended June 30, 20182019 and 2017.2018. Refer to Note 4 —Related Party Transactionsin the notes accompanying our financial statements for more information related to base management fees, incentive fees and waivers.

 

During the six months ended June 30, 20182019 and 2017,2018, we incurred professional fees of $213,019$388,131 and $187,737,$213,019, respectively, related to audit fees, tax fees, and legal fees. The increase in professional fees was driven by an increase in legal expenses during the six months ended June 30, 20182019 as compared to the six months ended June 30, 2017.2018. We also incurred expenses related to fees paid to our independent directors of $105,000 and $97,500 for each of the six months ended June 30, 2019 and 2018, and 2017, respectively.

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Realized and Unrealized Gains and Losses

 

We recognized $67,959$73,812 and $350,613$67,959 in net realized gains for the three months ended June 30, 20182019 and 2017,2018, respectively. We recognized $217,757$101,731 and 440,930$217,757 in net realized gains for the six months ended June 30, 20182019 and 2017,2018, respectively.

 

Net change in unrealized (depreciation) appreciation on investments for the three and six months ended June 30, 20182019 and 20172018 was as follows:

 

Type Three Months Ended
June 30, 2018		  Three Months Ended
June 30, 2017		  Six Months Ended
June 30, 2018		  Six Months Ended
June 30, 2017		  

Three Months Ended

June 30, 2019

 

Three Months Ended

June 30, 2018

 

Six Months Ended

June 30, 2019

 

Six Months Ended

June 30, 2018

 
First Lien Debt $(658,243) $(349,500) $(542,810) $(563,809) $(197,770) $(658,243) $(143,049) $(563,809)
Second Lien Debt  19,164   (2,191)  (59,463)  82,212   (120,444)  19,164   (118,470)  82,212 
Net change in unrealized depreciation on investments $(639,079) $(351,691) $(602,273) $(481,597)
Equity and Preferred Shares  -   -   (400,267)  - 
Net change in unrealized depreciation appreciation on investments $(318,214) $(639,079) $(661,786) $(481,597)

 

Net change in unrealized depreciation on investments during the three and six months ended June 30, 20182019 was primarily due to the change in the results and financial position of the portfolio companies. Net change in unrealized depreciation on investments during the three and six months ended June 30, 20172018 was primarily due to the reversalchange in the results and financial position of previously appreciated investments due to full principal paydowns.the portfolio companies.

 

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

 

We generate cash primarily from the net proceeds of any offering of shares of our common stock (“Shares”), from cash flows from interest and fees earned from our investments, and from principal repayments and proceeds from sales of our investments. Our primary use of cash is investments in portfolio companies, payments of our expenses and cash distributions to our stockholders. As of June 30, 20182019 and December 31, 2017,2018, we had cash of $15,041,814$6,451,544 and $29,721,559,$17,715,145, respectively.

 

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Operating Activities

 

Net cash used in operating activities for the six months ended June 30, 2019 was $37,956,742. The primary operating activities during this period were investments in portfolio companies. This was partially offset by repayments of bank loans. Net cash used in operating activities for the six months ended June 30, 2018 was $38,793,709. The primary operating activities during this period were investments in portfolio companies. This was partially offset by repayments of bank loans and interest received from investments. Net cash provided by operating activities for the six months ended June 30, 2017 was $902,988. The primary operating activities during this period were repayments of bank loans and interest received from investments. This was partially offset by investments in portfolio companies.

 

As of June 30, 20182019 and December 31, 2017,2018, we had twelve13 and ten10 investments with unfunded commitments of $2,983,330$3,703,926 and $3,715,461,$2,225,517, respectively. We believe that, as of June 30, 20182019 and December 31, 2017,2018, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

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The following table summarizes our total portfolio activity during the six months ended June 30, 20182019 and 2017:2018:

 

 Six Months Ended
June 30, 2018		  Six Months Ended
June 30, 2017		  

Six Months Ended

June 30, 2019

 

Six Months Ended

June 30, 2018

 
          
Beginning investment portfolio $184,336,177  $143,789,221  $264,662,881  $184,336,177 
Investments in new portfolio investments  72,398,817   39,414,095   57,384,637   72,398,817 
Investments in existing portfolio investments  13,400,210   5,539,488   17,964,941   13,400,210 
Principal repayments  (31,583,532)  (42,382,537)  (29,011,639)  (31,583,532)
Proceeds from sales of investments  (1,390,962)  -   (1,951,362)  (1,390,962)
Net unrealized depreciation on investments  (602,273)  (481,597)
Net change in unrealized depreciation on investments  (661,736)  (602,273)
Net realized gain on investments  217,757   132,661   101,733   217,757 
Net change in premiums, discounts and amortization  76,643   440,930   135,319   76,643 
Investment Portfolio, at Fair Value $236,852,837  $146,452,261  $308,624,774  $236,852,837 

 

Financing Activities

 

Net cash provided by our financing activities for the six months ended June 30, 2019 was $35,000,000 from issuances of 3,679,930 Shares to our stockholders, in connection with our capital calls and our dividend reinvestment program during the period. This was partially offset by $8,306,859 of distributions paid to our common stockholders. Net cash provided by our financing activities for the six months ended June 30, 2018 was $24,113,964 from issuances of 3,136,580 of3,136,583 Shares to our shareholders,stockholders, in connection with our capital calls and our dividend reinvestment program during the period. This was partially offset by $5,886,036 of distributions paid to our common stockholders. Net cash used in our financing activities for the six months ended June 30, 2017 was $3,744,676 from distributions paid to our common stockholders.

 

Equity Activity

 

On June 23, 2015, an investor made a $140,000,000 capital commitment to the Company. On December 2, 2016, the same investor made an additional capital commitment of $50,000,000. On December 7, 2017, the same investor made an additional capital commitment of $100,000,000. On March 22, 2019, the same investor made an additional capital commitment of $40,000,000. As of June 30, 2018, $50,000,0002019, $25,000,000 of total capital commitments remained unfunded by the Company’s investors.

 

The number of Shares issued and outstanding as of June 30, 20182019 and December 31, 2017,2018, were 25,124,82031,949,579 and 21,988,238,28,269,649, respectively.

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Distributions to Stockholders – Common Stock Distributions

 

We have elected to be treated as a RIC for U.S. federal income tax purposes. As a RIC, we generally are not subject to corporate-level U.S. federal income taxes on ordinary income or capital gains that we timely distribute as dividends for U.S. federal income tax purposes to our stockholders. To qualify to be taxed as a RIC and thus avoid corporate-level income tax on the income that we distribute as dividends to our stockholders, we are required to distribute dividends to our stockholders each taxable year generally of an amount at least equal to 90% of our investment company taxable income, determined without regard to the deduction for any dividends paid. To avoid the imposition of a 4% excise tax on undistributed earnings, we are required to distribute dividends to our stockholders in respect of each calendar year of an amount at least equal to the sum of (i) 98% of our ordinary income (taking into account certain deferrals and elections) for such calendar year, (ii) 98.2% of our capital gain net income, adjusted for certain ordinary losses, for the one-year period ending October 31 of that calendar year and (iii) any income or capital gains recognized, but not distributed, in preceding calendar years and on which we incurred no U.S. federal income tax. We intend to make distributions to stockholders on an annual basis of substantially all of our net investment income. Although we intend to make distributions of net realized capital gains, if any, at least annually, out of assets legally available for such distributions, we may in the future decide to retain such capital gains for investment. In addition, the extent and timing of special dividends, if any, will be determined by our Board of Directors and will largely be driven by portfolio specific events and tax considerations.

 

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We may fund our cash distributions from any sources of funds available, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee waivers from our Adviser. Our distributions may exceed our earnings, especially during the period before we have substantially invested the proceeds from an offering. As a result, a portion of the distributions we may represent a return of capital for U.S. federal income tax purposes. Thus the source of a distribution to our stockholders may be the original capital invested by the stockholder rather than our income or gains. In addition, we may be limited in our ability to make distributions due to the asset coverage test for borrowings applicable to us as a BDC under the 1940 Act. We declared and paid distributions of $8,306,889, or $0.26 per share during the three and six months ended June 30, 2019. We declared and paid distributions of $5,886,063, or $0.25 per share during the three and six months ended June 30, 2018. We declared and paid distributions of $3,744,698, or $0.21 per share during the three and six months ended June 30, 2017.

 

The determination of the tax attributes of our distributions is made annually at the end of our taxable year, based upon our taxable income for the full taxable year and distributions paid for the full taxable year. Therefore, estimates made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. The actual tax characteristics of distributions to stockholders will be reported to stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

 

Related Party Fees

 

For the three months ended June 30, 20182019 and 2017,2018, we recorded base management fees of $623,184$808,440 and $438,585,$623,184, respectively. Offsetting these fees were waivers to the base management fees of $218,114$282,954 and $153,504,$218,114, respectively, as set forth within the accompanying statements of operations.

 

For the six months ended June 30, 20182019 and 2017,2018, we recorded base management fees of $1,161,484$1,547,094 and $877,248,$1,161,484, respectively. Offsetting those fees were waivers to the base management fees of $406,518$541,483 and $307,036,$406,518, respectively, as set forth within the accompanying statements of operations.

 

For the three and six months ended June 30, 2019, we recorded incentive fees of $647,108 and $1,259,236, respectively. Offsetting these fees were waivers to the incentive fees of $521,159 and $1,010,450, respectively, as set forth within the accompanying statements of operations. For the three and six months ended June 30, 2018, we recorded incentive fees of $476,412 and $874,976, respectively. Offsetting these fees were waivers to the incentive fees of $388,030 and $731,096, respectively, as set forth within the accompanying statements of operations. For the three and six months ended June 30, 2017, we recorded incentive fees of $305,227 and $424,625, respectively. Offsetting these fees were waivers to the incentive fees of $273,912 and $381,370, respectively, as set forth within the accompanying statements of operations.

38

 

For each of the three months ended June 30, 20182019 and 2017,2018, we recorded administrative fees of $62,500, respectively, as set forth within the accompanying statements of operations. For each of the six months ended June 30, 20182019 and 2017,2018, we recorded administrative fees of $132,500, respectively, as set forth within the accompanying statements of operations.

 

Fees due to related parties as of June 30, 20182019 and December 31, 20172018 on our accompanying statements of assets and liabilities were as follows:

 

 June 30, 2018  December 31, 2017  June 30, 2019  December 31, 2018 
Net base management fee due to Adviser $405,070  $309,784  $525,486  $424,873 
Net incentive fee due to Adviser  88,381   68,237   125,948   111,041 
Other expenses due to Adviser(a)  -   153,034 
Total fees due to Adviser, net of waivers  493,451   531,055   651,434   535,914 
Fee due to Administrator, net of waivers  66,250   66,250   66,250   66,250 
Total Related Party Fees Due $559,701  $597,305  $717,684  $602,164 

(a)Expenses paid on behalf of the Company by the Adviser

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Tender Offers

 

We do not currently intend to list our common stockthe Shares on any securities exchange, and we do not expect a public market for itthem to develop in the foreseeable future. Therefore, stockholders should not expect to be able to sell our common stocktheir Shares promptly or at a desired price. To provide our stockholders with limited liquidity, we may, in the absolute discretion of our Board of Directors, conduct an annual tender offer. Our tenders for the common stock,Shares, if any, would be conducted on such terms as may be determined by our Board of Directors and in accordance with the requirements of applicable law, including Section 23(c) of the 1940 Act and Regulation M under the Exchange Act. We have not commenced any tender offers, and we do not currently intend to conduct any tender offers.

 

CRITICAL ACCOUNTING POLICIES

 

This discussion of our operations is based upon our financial statements, which are prepared in accordance with GAAP. The preparation of these financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

 

Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. In addition to the discussion below, we describe our critical accounting policies in the notes to our financial statements.

 

Valuation of Investments

 

We conduct the valuation of our investments, pursuant to which our net asset value is determined, at all times consistent with GAAP and the 1940 Act. Our Board of Directors, with the assistance of our Audit Committee, determines the fair value of our investments, for investments with a public market and for investments with no readily available public market, on at least a quarterly basis, in accordance with the terms of ASC 820. Our valuation procedures are set forth in more detail below.

 

ASC 820 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same – to estimate the price when an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions (that is, an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).

 

39

ASC 820 establishes a hierarchal disclosure framework which ranks the observability of inputs used in measuring financial instruments at fair value. The observability of inputs is impacted by a number of factors, including the type of financial instruments and their specific characteristics. Financial instruments with readily available quoted prices, or for which fair value can be measured from quoted prices in active markets, generally will have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

The three-level hierarchy for fair value measurement is defined as follows:

Level 1— Inputs to the valuation methodology are quoted prices available in active markets for identical financial instruments as of the measurement date. The types of financial instruments in this category include unrestricted securities, including equities and derivatives, listed in active markets. We do not adjust the quoted price for these instruments, even in situations where we hold a large position, and a sale could reasonably be expected to impact the quoted price.

 

Level 2— Inputs to the valuation methodology are quoted prices in markets that are not active or for which all significant inputs are either directly or indirectly observable as of the measurement date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.

 

Level 3— Inputs to the valuation methodology are unobservable and significant to the overall fair value measurement, and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. The types of financial instruments in this category include investments in privately held entities, non-investment grade residual interests in securitizations, collateralized loan obligations, and certain over-the-counter derivatives where the fair value is based on unobservable inputs.

 

36

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.

 

Pursuant to the framework set forth above, we value securities traded in active markets on the measurement date by multiplying the exchange closing price of such traded securities/instruments by the quantity of shares or amount of the instrument held. We may also obtain quotes with respect to certain of our investments from pricing services, brokers or dealers’ quotes, or counterparty marks in order to value liquid assets that are not traded in active markets.

 

Pricing services aggregate, evaluate and report pricing from a variety of sources including observed trades of identical or similar securities, broker or dealer quotes, model-based valuations and internal fundamental analysis and research. When doing so, we determine whether the quote obtained is sufficient according to GAAP to determine the fair value of the security. If determined adequate, we use the quote obtained.

 

Securities that are illiquid or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of our Board of Directors, does not represent fair value, are each valued as of the measurement date using all techniques appropriate under the circumstances and for which sufficient data are available. These valuation techniques vary by investment but include comparable public market valuations, comparable precedent transaction valuations and discounted cash flow analyses. The process used to determine the applicable value is as follows: (i) each portfolio company or investment is initially valued by the investment professionals of the Adviser responsible for the portfolio investment using a standardized template designed to approximate fair market value based on observable market inputs and updated credit statistics and unobservable inputs; (ii) preliminary valuation conclusions are documented and discussed with our senior management and members of our Adviser’s valuation team; (iii) our Audit Committee reviews the assessments of the Adviser and provides our Board of Directors with recommendations with respect to the fair value of the investments in our portfolio; and (iv) our Board of Directors discusses the valuation recommendations of our Audit Committee and determines the fair value of the investments in our portfolio in good faith based on the input of the Adviser and in accordance with our valuation policy.

 

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Our Audit Committee’s recommendation of fair value is generally based on its assessment of the following factors, as relevant:

 

·the nature and realizable value of any collateral;

 

·call features, put features and other relevant terms of debt;

 

·the portfolio company’s ability to make payments;

 

·the portfolio company’s actual and expected earnings and discounted cash flow;

 

·prevailing interest rates for like securities and expected volatility in future interest rates;

 

·the markets in which the portfolio company does business and recent economic and/or market events; and

 

·comparisons to publicly traded securities.

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Investment performance data utilized are the most recently available as of the measurement date, which in many cases may reflect up to a one quarter lag in information.

 

Securities for which market quotations are not readily available or for which a pricing source is not sufficient may include the following:

 

·private placements and restricted securities that do not have an active trading market;

 

·securities whose trading has been suspended or for which market quotes are no longer available;

 

·debt securities that have recently gone into default and for which there is no current market;

 

·securities whose prices are stale; and

 

·securities affected by significant events.

 

Our Board of Directors is responsible for the determination, in good faith, of the fair value of our portfolio investments.

 

Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.

 

Security transactions are recorded on the trade date (date(the date the order to buy or sell is executed or, in the case of privately issued securities, the closing date, which is when all terms of the transactions have been defined). Realized gains and losses on investments are determined based on the identified cost method.

 

Refer to Note 3 —Investmentsin the notes to our accompanying financial statements included elsewhere in this quarterly report for additional information regarding fair value measurements and our application of ASC 820.

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Revenue Recognition

 

We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the principal balance, we generally will not accrue PIK interest for accounting purposes if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest. OID, market discounts or premiums are accreted or amortized using the effective interest method as interest income. We record prepayment premiums on loans and debt securities as interest income.

 

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

 

We measure net realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

PIK Interest

 

We may have investments in our portfolio that contain a PIK interest provision. Any PIK interest will be added to the principal balance of such investments and is recorded as income if the portfolio company valuation indicates that such PIK interest is collectible. In order to maintain our status as a RIC, substantially all of this income must be included in the amounts paid out by us to stockholders in the form of dividends, even if we have not collected any cash.

 

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Organization and Offering Expenses

We incurred offering costs of $145,358 in prior periods. Our offering costs included legal fees and other costs pertaining to the preparation of the Registration Statement and sale of our shares of common stock. We capitalized these expenses and amortized them on a straight-line basis over a twelve-month period. We did not amortize offering costs for each of the three and six months ended June 30, 2018 and 2017.

U.S. Federal Income Taxes

 

We have elected to be subject to tax as a RIC under Subchapter M of the Code. As a RIC, we generally will not have to incur any corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute as dividends to our stockholders. To qualify and maintain our qualification as a RIC, we must meet certain source-of-income and asset diversification requirements as well as distribute dividends to our stockholders each taxable year of an amount generally at least equal to 90% of our investment company taxable income, determined without regard to any distributions paid.

 

Depending on the level of taxable income earned in a taxable year, we may choose to retain taxable income in excess of current year distributions into the next taxable year. We would then incur a 4% excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income may exceed estimated current year distributions, we will accrue an excise tax, if any, on estimated excess taxable income as taxable income is earned. We did not accrue any excise tax for the fiscal years ended December 31, 2018, 2017, 2016, and 2015.2016.

 

Because U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent differences are reclassified within capital accounts in the financial statements to reflect their tax character. Permanent differences may also result from differences in classification in certain items, such as the treatment of short-term gains as ordinary income for tax purposes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

 

We evaluate tax positions taken or expected to be taken in the course of preparing our financial statements to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current fiscal year. All penalties and interest associated with any income taxes accrued are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax law, regulations and interpretations thereof. Our accounting policy on income taxes is critical because if we are unable to qualify, or once qualified, maintain our tax status as a RIC, we would be required to record a provision for corporate-level U.S. federal income taxes, as well as any related state or local taxes which may be significant to our financial results.

 

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COMMITMENTS AND CONTINGENCIES

 

From time to time, we, or the Adviser, may become party to legal proceedings in the ordinary course of business, including proceedings related to the enforcement of our rights under contracts with our portfolio companies. Neither we nor the Adviser is currently subject to any material legal proceedings.

 

Unfunded commitments to provide funds to portfolio companies are not reflected in our accompanying statements of assets and liabilities. Our unfunded commitments may be significant from time to time. These commitments are subject to the same underwriting and ongoing portfolio maintenance as are the on-balance sheet financial instruments that we hold. Since these commitments may expire without being drawn, the total commitment amount does not necessarily represent future cash requirements. We use cash flow from normal and early principal repayments and proceeds from borrowings and offerings to fund these commitments. As of June 30, 2018,2019, we had twelvenine investments with unfunded commitments of $2,983,330.$3,703,926. As of December 31, 2017,2018, we had ten investments with unfunded commitments of $3,715,461.$2,225,517. We believe that, as of June 30, 20182019 and December 31, 2017,2018, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are subject to financial market risks, including changes in interest rates. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. As of June 30, 20182019 and December 31, 2017,2018, all of our investments included variable rates with a minimum guaranteed rate, or floor, and bore interest at the minimum guaranteed rate.

 

Assuming that the accompanying statement of assets and liabilities as of June 30, 20182019 was to remain constant and that we took no actions to alter interest rate sensitivity as of such date, the following table shows the annualized impact of hypothetical base rate changes in interest rates.

 

Change in interest rates 

Increase (decrease) in

investment income

 
Down 300 basis points(4,992,041)
Down 200 basis points  (2,611,7494,709,831)
Down 100 basis points  (2,375,9893,114,722)
Up 100 basis points  2,379,9713,114,722 
Up 200 basis points  4,759,9416,229,443 
Up 300 basis points  7,139,9129,344,165 

 

Although we believe that this measure is indicative of our sensitivity to interest rate changes, it does not reflect potential changes in the credit market, credit quality, size and composition of the assets on the Consolidated Statements of Assets and Liabilities and other business developments that could affect our net increase in net assets resulting from operations or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.

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In addition, any investments we make that are denominated in a foreign currency will be subject to risks associated with changes in currency exchange rates. These risks include the possibility of significant fluctuations in the foreign currency markets, the imposition or modification of foreign exchange controls and potential illiquidity in the secondary market. These risks will vary depending upon the currency or currencies involved.

 

We may hedge against interest rate and currency exchange rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

As of June 30, 2018,2019, our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness and design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective at a reasonable assurance level in timely alerting management, including the Chief Executive Officer and Chief Financial Officer, of material information about us required to be included in periodic SEC filings. However, in evaluation of the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

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Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II–OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not currently subject to any material legal proceeding, nor, to our knowledge, is any material legal proceeding threatened against us.

 

From time to time, we, our Adviser or Administrator may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

 

From time to time, we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us.

 

ITEM 1A. RISK FACTORS

 

In addition to the risks discussed below, important risk factors that could cause results or events to differ from current expectations are described in Part I, Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 20172018 filed with the Securities and Exchange CommissionSEC on March 16, 2018.18, 2019.

 

RecentlyLegislation passed legislation may allowin 2018 allows us to incur additional leverage and would require us to offer liquidity to our stockholders.

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Under the 1940 Act, a BDC generally is required to maintain asset coverage of 200% for senior securities representing indebtedness (such as borrowings from banks or other financial institutions) or stock (such as preferred stock). The Small Business Credit Availability Act, which was signed into law on March 23, 2018, provides that a BDC’s required asset coverage under the 1940 Act may be reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). This reduction in asset coverage would permitpermits a BDC to double the amount of leverage it may utilize, subject to certain approval, timing and reporting requirements, including either stockholder approval or approval of a majority of the directors who are not “interested persons” (as defined in the 1940 Act) of the BDC and who have no financial interest in the arrangement. As a result, if we receive the relevant approval and we comply with the applicable disclosure requirements, we would be able to incur additional leverage, which may increase the risk of investing in us. In addition, since our base management fee is payable based upon our average adjusted gross assets, which includes any borrowings for investment purposes, our base management fee expenses may increase if we incur additional leverage.

 

We have not commenced any tender offers, and we do not currently intend to conduct any tender offers. As a non-traded BDC, however, if we receive the relevant approval to increase our authorized leverage, we will be required to offer our stockholders the opportunity to sell their shares of common stockShares over the next year following the calendar quarter in which the approval was obtained. The timing and method for such offers has not been determined at this time.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

Not applicable.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

Not applicable.

 

ITEM 6. EXHIBITS

 

3.1Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to the Registration Statement on Form 10 (File no. 000-55426), filed on April 17, 2015).
  
3.2Form of Bylaws (Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form 10 (File no. 000-55426), filed on April 17, 2015).
  
11.1Computation of per share earnings (included in the notes to the financial statements included in this report).
 
31.131.1*Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
  
31.231.2*Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
  
32.132.1*Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (18 U.S.C. 1350).
  
32.232.2*Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as amended (18 U.S.C. 1350).
  
99.1Code of Ethics (Incorporated by reference to Exhibit 99.1 to Pre-Effective Amendment No. 1 to the Registration Statement on Form 10, File No. 000-55426, filed on June 5, 2015).

 

*Filed herewith

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this reportthisreport to be signed on its behalf by the undersigned thereunto duly authorized.

 

 Audax Credit BDC Inc.

 

Date: August 14, 20182019By:/s/ Michael P. McGonigle
  Michael P. McGonigle
  Chief Executive Officer

Date: August 14, 20182019By:/s/ Richard T. Joseph
  Richard T. Joseph
  Chief Financial Officer

 

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