| Significant Accounting Policies | Note
2. Significant Accounting Policies Basis
of Presentation The
companyÂ’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles
(GAAP), which requires the use of estimates, assumptions and the exercise of subjective judgment as to future uncertainties. Actual
results could differ from those estimates, assumptions, and judgments. Significant items subject to such estimates will include
determining the fair value of investments, revenue recognition, income tax uncertainties, and other contingencies. The consolidated
financial statements of the company include the accounts of the LLC and its consolidated subsidiary, GREC. All intercompany accounts
and transactions have been eliminated. The
companyÂ’s consolidated financial statements are prepared using the specialized accounting principles of Accounting Standards
Codification Topic 946, Financial Services—Investment Companies (ASC Topic 946). In accordance with this specialized accounting
guidance, the company recognizes and carries all of its investments at fair value with changes in fair value recognized in earnings.
Additionally, the company will not apply consolidation or equity method of accounting to its investments. The company carries
its liabilities at amounts payable, net of unamortized premiums or discounts. The company does not currently plan to elect
to carry its liabilities at fair value. Net assets are calculated as the carrying amounts of assets, including the fair value
of investments, less the carrying amounts of its liabilities. The
financial information associated with the December 31, 2015 and 2014 consolidated financial statements has been prepared by management
and, in the opinion of management, contains all adjustments and eliminations, consisting of only normal recurring adjustments,
necessary for a fair presentation in accordance with GAAP. Cash
and Cash Equivalents Cash
consists of demand deposits at a financial institution. Such deposits may be in excess of the Federal Deposit Insurance Corporation
insurance limits. The company has not experienced any losses in any such accounts. The
company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Short-term investments that are cash equivalents are stated at cost, which approximates fair value. There are no restrictions
on the use of the companyÂ’s cash as of December 31, 2015 and 2014. Foreign
Currency Translation The
accounting records of the company are maintained in U.S. Dollars. The fair value of investments and other assets and liabilities
denominated in non-U.S. currencies are translated into U.S. Dollars using the exchange rate at the end of each reporting period.
Amounts related to the purchases and sales of investments, investment income and expenses are translated at the rates of exchange
prevailing on the respective dates of such transactions. Net
unrealized currency gains and losses arising from valuing foreign currency denominated assets and liabilities at the current exchange
rate are reflected as part of net change in unrealized depreciation on translation of assets and liabilities denominated in foreign
currencies. Valuation
of Investments at Fair Value Accounting
Standards Codification Topic 820, Fair Value Measurements and Disclosures (ASC Topic 820) defines fair value, establishes a framework
for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value.
The company recognizes and accounts for its investments at fair value. The fair value of the investments does not reflect transaction
costs that may be incurred upon disposition of the investments. Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants. Fair value is an exchange price notion under which fair value is the price in an orderly transaction
between market participants to sell an asset or transfer a liability in the market in which the reporting entity would transact
for the asset or liability. The
advisor has established procedures to estimate the fair value of its investments which the companyÂ’s board of directors has
reviewed and approved. The company will use observable market data to estimate the fair value of investments to the extent that
market data is available. In the absence of quoted market prices in active markets, or quoted market prices for similar assets
or in markets that are not active, the company will use the valuation methodologies described below with unobservable data based
on the best available information in the circumstances, which incorporates the companyÂ’s assumptions about the factors that
a market participant would use to value the asset. For
investments for which quoted market prices are not available, which will comprise most of our investment portfolio, fair value
will be estimated by using the income or market approach. The income approach is based on the assumption that value is created
by the expectation of future benefits discounted to a current value and the fair value estimate is the amount an investor would
be willing to pay to receive those future benefits. The m approach compares recent comparable transactions to the investment.
Adjustments are made for any dissimilarity between the comparable transactions and the investments. These valuation methodologies
involve a significant degree of judgment on the part of our advisor. In
determining the appropriate fair value of an investment using these approaches, the most significant information and assumption
may include, as applicable: available current market data, including relevant and applicable comparable market transactions, applicable
market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value
of any collateral, the investmentÂ’s ability to make payments, its earnings and discounted cash flows, the markets in which
the project does business, comparisons of financial ratios of peer companies that are public, merger and acquisition comparables,
the principal market and enterprise values, environmental factors, among other factors. The
estimated fair values will not necessarily represent the amounts that may be ultimately realized due to the occurrence or nonoccurrence
of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of the valuation of the investments,
the estimate of fair values may differ significantly from the value that would have been used had a broader market for the investments
existed. The
authoritative accounting guidance prioritizes the use of market-based inputs over entity-specific inputs and establishes a three-level
hierarchy for fair value measurements based upon the transparency of inputs to the valuation. The three levels of valuation hierarchy
are defined as follows:
Level 1: Quoted prices in active markets for identical
assets or liabilities, accessible by us at the measurement date. Valuation adjustments and block discounts are not applied
to Level 1 measurements;
Level 2: Valuations based on quoted prices in less active,
dealer or broker markets. Fair values are primarily obtained from third-party pricing services or broker quotes for identical
or comparable assets or liabilities;
Level 3: Valuations derived from other valuation methodologies,
including pricing models, discounted cash flow models and similar techniques, and not based on market, exchange, dealer, or
broker-traded transactions. Level 3 valuations incorporate certain assumptions and projections that are not observable in
the market and significant professional judgment in determining the fair value assigned to such assets or liabilities. In
all cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls will be determined
based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a
particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each investment. Calculation
of Net Asset Value Net
asset value by class is calculated by subtracting total liabilities for each class from the total carrying amount of all assets
for that class, which includes the fair value of investments. Net asset value per share is calculated by dividing net asset value
for each class by the total number of outstanding common shares for that class on the reporting date. Earnings
(Loss) per Share In
accordance with the provisions of ASC Topic 260 — Earnings per Share (ASC Topic 260), basic earnings
per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding
during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating
earnings per share on a diluted basis. The
following information sets forth the computation of the weighted average basic and diluted net increase (decrease) in net assets
attributed to common stockholders per share for the year ended December 31, 2015 and for the period from Commencement of Operations
(April 25, 2014) through December, 2014:
For the
year ended For the
period from
Basic and diluted
Net
increase (decrease) in net assets attributed to common stockholders $ 1,972,201 $ (156,466 )
Weighted
average common shares outstanding 3,335,719 513,052
Net
increase (decrease) in net assets, attributed to common stockholders per share $ 0.59 $ (0.30 ) Revenue
Recognition Interest
income is recorded on an accrual basis to the extent the company expects to collect such amounts. Interest receivable on loans
and debt securities is not accrued for accounting purposes if there is reason to doubt an ability to collect such interest. Original
issue discounts, market discounts or market premiums are accreted or amortized using the effective interest method as interest
income. Prepayment premiums on loans and debt securities are recorded as interest income when received. Loans
are placed on non-accrual status when principal and interest are past due 90 days or more or when there is a reasonable doubt
that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual. Interest
payments received on non-accrual loans may be recognized as income or applied to principal depending upon managementÂ’s judgment.
Non-accrual loans are generally restored to accrual status when past due and principal and interest is paid and, in managementÂ’s
judgment, is likely to remain current. Dividend
income is recorded (1) on the ex-dividend date for publicly issued securities and (2) when received from private investments. Net
Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation on Investments Realized
gains or losses will be measured as the difference between the net proceeds from the sale, repayment, or disposal of an asset
and the adjusted cost basis of the asset, without regard to unrealized appreciation or depreciation previously recognized. Net
change in unrealized appreciation or depreciation will reflect the change in investment values during the reporting period, including
any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized. Payment-in-Kind
Interest For
loans and debt securities with contractual payment-in-kind (PIK) interest, any interest will be added to the principal balance
of such investments and be recorded as income, if the valuation indicates that such interest is collectible. Distribution
Policy Distributions
to members, if any, will be authorized and declared by our board of directors quarterly in advance and paid on a monthly basis.
From time to time, we may also pay interim special distributions in the form of cash or shares, with the approval of our board
of directors. Distributions will be made on all classes of shares at the same time. The cash distributions with respect to the
Class C shares will be lower than the cash distributions with respect to Class A and Class I shares because of the distribution
fee associated with the Class C shares, which will be allocated as a Class C specific expense. Amounts distributed to each class
will be allocated among the holders of the shares in such class in proportion to their shares. Distributions declared by our board
of directors are recognized as distribution liabilities on the ex- dividend date. We began paying distributions in September 2014. Organization
and Offering Costs Organization
and offering costs (“O&O costs”), other than sales commissions and the dealer manager fee, are initially being paid
by our advisor and/or dealer manager on behalf of the company. These O&O costs include all costs to be paid by the company
in connection with its formation and the offering, including legal, accounting, printing, mailing and filing fees, charges of
the companyÂ’s escrow holder, transfer agent fees, due diligence expense reimbursements to participating broker-dealers included
in detailed and itemized invoices and costs in connection with administrative oversight of the offering and marketing process,
and preparing supplemental sales materials, holding educational conferences, and attending retail seminars conducted by broker-dealers.
While the total O&O costs shall be reasonable and shall in no event exceed an amount equal to 15% of the gross proceeds of
this offering and the distribution reinvestment plan, the company is targeting no more than 1.5% of the gross proceeds for O&O
costs other than sales commissions and dealer manager fees. The company anticipates that it will be obligated to reimburse our
advisor for O&O costs that it may incur on behalf of the company, in accordance with the advisory agreement, but only to the
extent that the reimbursement would not cause the selling commissions, the dealer manager fee and the other organization and offering
expenses borne by the company to exceed 15% of gross offering proceeds as of the date of reimbursement. The
costs incurred by our advisor and/or dealer manager are recognized as a liability of the company to the extent that the company
is obligated to reimburse our advisor and/or dealer manager, subject to the 15% of gross offering proceeds limitation described
above. When recognized by the company, organizational costs will be expensed and offering costs, excluding selling commissions
and dealer manager fees, will be recognized as a reduction of the proceeds from the offering. As
of December 31, 2015 and December 31, 2014, the advisor and the dealer manager have incurred approximately $5,913,000 and $4,613,000,
respectively, of O&O costs on behalf of the company of which $3,577,000 and $854,000 had been reimbursed to the advisor as
of December 31, 2015 and December 31, 2014, respectively. The O&O costs include $1,250,000 for formation services due to an
affiliate of the advisor of which $250,000 was included in O&O costs at December 31, 2015 and December 31, 2014, respectively,
but is not payable until the completion of the public offering. In addition, the dealer manager has incurred approximately $728,000
and $145,000 in O&O costs on behalf of the company as of December 31, 2015 and December 31, 2014, respectively, which will
be reimbursed by the company prospectively once gross offering proceeds reach a minimum of $50,000,000. As of December 31, 2015,
no O&O costs have been reimbursed to the dealer manager. Capital
Gains Incentive Allocation and Distribution Pursuant
to the terms of the LLCÂ’s amended and restated limited liability company agreement, a capital gains incentive distribution
will be earned by an affiliate of our advisor on realized gains from the sale of investments from the companyÂ’s portfolio
during operations prior to a liquidation of the company. While the terms of the advisory agreement neither include nor contemplate
the inclusion of unrealized gains in the calculation of the capital gains incentive distribution, pursuant to an interpretation
of an American Institute for Certified Public Accountants Technical Practice Aid for investment companies, the company will include
unrealized gains in the calculation of the capital gains incentive distribution expense and related capital gains incentive fee
payable. This amount reflects the incentive distribution that would be payable if the companyÂ’s entire portfolio was liquidated
at its fair value as of the consolidated statement of assets and liabilities date even though the advisor is not entitled to an incentive distribution with respect
to unrealized gains unless and until such gains are actually realized. Thus on each date that net asset value is calculated, the
company calculates for the capital gains incentive distribution by calculating such distribution as if it were due and payable
as of the end of such period. As of December 31, 2015 and December 31, 2014, a capital gains incentive distribution allocation
in the amount of $286,259 and $9,846 was recorded based upon unrealized gains, respectively. Reclassifications Certain
prior year amounts have been reclassified to conform with current year presentation. Derivative
Instruments The
company may utilize interest rate swaps to modify interest rate characteristics of certain liabilities to manage its exposure
to interest rate fluctuations. Changes in the fair value of the interest rate swaps during the period are recognized in the accompanying
consolidated statements of operations where the company is the counterparty and in the change in fair value of investments if
a subsidiary of the company is the counterparty. While
we are currently of the opinion that the currency fluctuation between the Canadian and U.S. dollar will not have a material impact
on our operating results, we may in the future enter into derivatives or other financial instruments in an attempt to hedge our
foreign currency exchange risk if we believe not doing so would have a material impact our results of operations. Income
Taxes The
LLC intends to operate so that it will qualify to be treated as a partnership for U.S. federal income tax purposes under the Internal
Revenue Code. As such, it will not be subject to any U.S. federal and state income taxes. In any particular year it is possible
that the LLC will not meet the qualifying income exception and will not qualify to be treated as a partnership. If the LLC does
not meet the qualifying income exception, the members would then be treated as stockholders in a corporation and the company would
become taxable as a corporation for U.S. federal income tax purposes under the Internal Revenue Code. The LLC would be required
to pay income tax at corporate rates on its net taxable income. Distributions to members from the LLC would constitute dividend
income taxable to such members, to the extent of the companyÂ’s earnings and profits and the payment of the distributions
would not be deductible by the LLC. The
LLC plans to conduct substantially all of its operations through its wholly-owned subsidiary, GREC, which is a corporation that
is subject to U.S. federal, state and local income taxes. Accordingly, most of its operations will be subject to U.S. federal,
state and local income taxes. Income
taxes are accounted for under the assets and liabilities method. Deferred tax assets and liabilities are recorded for the estimated
future tax consequences attributable to differences between items that are recognized in the consolidated financial statements
and tax returns in different years. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. For
income tax benefits to be recognized including uncertain tax benefits, a tax position must be more-likely-than-not to be sustained
upon examination by taxing authorities. The amount recognized is measured as the largest amount of the benefit that is more likely
than not to be realized upon ultimate settlement. A valuation allowance is established against net deferred tax assets if, based
on the weight of available evidence, it is more likely than not that some or all of the net deferred tax assets will not be realized.
Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Interest and penalties
associated with income taxes, if any, will be recognized in general and administrative expense. The
company does not consolidate its investments for financial statements, rather it accounts for its investments at fair
value under the specialized accounting of ASC Topic 946. The tax attributes of the individual investments will be considered
and incorporated in the companyÂ’s fair value estimates for those investments. The amounts recognized in the
consolidated financial statements for unrealized appreciation and depreciation will result in a difference between the
consolidated financial statements and the cost basis of the assets for tax purposes. These differences will be recognized as
deferred tax assets and liabilities. Generally, the entities that hold the companyÂ’s investments will be included in the
consolidated tax return of GREC and the differences between the amounts recognized for financial statement purposes and the
tax return will be recognized as additional deferred tax assets and liabilities. The
company follows the authoritative guidance on accounting for uncertainty in income taxes and concluded it has no material uncertain
tax positions to be recognized at this time. The
company assessed its tax positions for all open tax years as of December 31, 2015 for all U.S. federal and state tax jurisdictions
for the years 2011 through 2014. The results of this assessment are included in the companyÂ’s tax provision and deferred
tax assets as of December 31, 2015. Recently
Issued Accounting Pronouncements Under
the Jumpstart Our Business Startups Act (the “JOBS Act”), emerging growth companies can delay the adoption of new or
revised accounting standards until such time as those standards apply to private companies. The company is choosing not to take
advantage of the extended transition period for complying with new or revised accounting standards. In
August 2014, the Financial Accounting Standards Board (the “FASB”) issued new accounting guidance that requires management
to assess an entityÂ’s ability to continue as a going concern by incorporating and expanding upon certain principles that
are currently in U.S. auditing standards. The amendments provide a definition of the term ‘substantial doubt’ and include
principles for considering the mitigating effect of managementÂ’s plans. The amendments also require an evaluation every reporting
period, including interim periods for a period of one year after the date that the financial statements are issued (or available
to be issued), and certain disclosures when substantial doubt is alleviated or not alleviated. The amendments in this update are
effective for reporting periods ending after December 15, 2016. Management is of the opinion that adoption of this new guidance
will not have a material impact on the companyÂ’s consolidated financial statements. On
January 9, 2015, the FASB issued Accounting Standards Update (“ASU”) 2015-01, Income Statement-Extraordinary and
Unusual Items In
February 2015, the FASB issued ASU 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis In
April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30) – Simplifying the Presentation
of Debt Issuance Costs In
May 2015, the FASB issued ASU 2015-07, Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share
(or Its Equivalent) |
