10-Q 1 tm2211940d1_10q.htm FORM 10-Q

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

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

 

For the quarterly period ended March 31, 2022

 

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, MASSACHUSETTS   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 every Interactive Data File required to be submitted 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 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.

 

Large accelerated filer ¨ Accelerated filer ¨
       
Non-accelerated filer x Smaller reporting company ¨
       
Emerging growth company ¨    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No  x

 

The registrant had 43,166,536 shares of common stock, par value $0.001 per share, outstanding as of May 12, 2022.

 

 

 

 

 

 

AUDAX CREDIT BDC INC.

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION:  
     
Item 1. Financial Statements  
     
  Statements of Assets and Liabilities as of March 31, 2022 (unaudited) and December 31, 2021   2
     
  Statements of Operations for the three months ended March 31, 2022 (unaudited) and 2021 (unaudited) 3
     
  Statements of Changes in Net Assets for the three months ended March 31, 2022 (unaudited) and 2021 (unaudited) 4
     
  Statements of Cash Flows for the three months ended March 31, 2022 (unaudited) and 2021 (unaudited) 5
     
  Schedules of Investments as of March 31, 2022 (unaudited) and December 31, 2021 6
     
  Notes to Financial Statements (unaudited) 16
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  
     
  Overview 37
  Results of Operations 39
  Financial Condition, Liquidity and Capital Resources 41
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 48
     
Item 4. Controls and Procedures 49
     
PART II. OTHER INFORMATION:  
     
Item 1. Legal Proceedings 51
     
Item 1A. Risk Factors 51
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 52
     
Item 3. Defaults Upon Senior Securities 52
     
Item 4. Mine Safety Disclosures 52
     
Item 5. Other Information 52
     
Item 6. Exhibits 52
   
SIGNATURES 53

 

 

 

 

Audax Credit BDC Inc.

Statements of Assets and Liabilities

March 31, 2022 and December 31, 2021

(Expressed in U.S. Dollars)

 

   March 31, 2022    
   (unaudited)   December 31, 2021 
Assets          
Investments, at fair value          
Non-Control/Non-Affiliate investments (Cost of $421,926,849 and $404,292,618, respectively)  $419,122,442   $403,054,374 
Cash and cash equivalents   11,581,409    11,058,796 
Interest receivable   1,513,151    1,043,554 
Receivable from bank loan repayment   97,517    26,771 
Other assets   157,500    - 
Total assets  $432,472,019   $415,183,495 
           
Liabilities          
Accrued expenses and other liabilities  $419,781   $326,497 
Fee due to administrator(a)   66,250    66,250 
Fees due to investment advisor, net of waivers(a)   1,424,197    640,329 
Payable for investments purchased   23,568,649    40,203,085 
Total liabilities  $25,478,877   $41,236,161 
Commitments and contingencies(b)          
           
Net Assets          
Common stock, $0.001 par value per share, 100,000,000 shares authorized, 43,166,536 and 39,961,408 shares issued and outstanding, respectively  $43,167   $39,961 
Capital in excess of par value   408,668,955    378,672,161 
Total distributable earnings   (1,718,980)   (4,764,788)
Total Net Assets  $406,993,142   $373,947,334 
           
Net Asset Value per Share of Common Stock at End of Period  $9.43   $9.36 
           
Shares Outstanding   43,166,536    39,961,408 

 

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

 

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 
   March 31, 2022   March 31, 2021 
Investment Income          
Interest income          
Non-Control/Non-Affiliate  $5,389,818   $4,768,685 
Other   384    274 
Total interest income   5,390,202    4,768,959 
Other income          
Non-Control/Non-Affiliate   38,118    47,514 
Total income   5,428,320    4,816,473 
           
Expenses          
Base management fee(a)  $1,038,439   $914,050 
Incentive fee(a)   426,322    291,293 
Administrative fee(a)   66,250    66,250 
Directors’ fees   56,250    56,250 
Professional fees   81,675    93,318 
Other expenses   79,177    89,223 
Interest expense   41,166    - 
Expenses before waivers from investment adviser and administrator   1,789,279    1,510,384 
Base management fee waivers(a)   (363,454)   (319,917)
Incentive fee waivers(a)   (383,690)   (262,164)
Total expenses, net of waivers   1,042,135    928,303 
Net Investment Income   4,386,185    3,888,170 
           
Realized and Unrealized Gain (Loss) on Investments          
Net realized gain on investments   225,786    63,270 
Net change in unrealized (depreciation) appreciation on investments   (1,566,163)   1,125,914 
Net realized and unrealized (loss) gain on investments   (1,340,377)   1,189,184 
           
Net Increase in Net Assets Resulting from Operations  $3,045,808   $5,077,354 
           
Basic and Diluted per Share of Common Stock:          
Net investment income  $0.10   $0.10 
Net increase in net assets resulting from operations  $0.07   $0.13 
           
Weighted average shares of common stock outstanding basic diluted   42,774,798    38,957,735 

 

(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)

 

   Three Months Ended March 31, 2022   Three Months Ended March 31, 2021 
Operations          
Net investment income  $4,386,185   $3,888,170 
Net realized gain on investments   225,786    63,270 
Net change in unrealized (depreciation) appreciation on investments   (1,566,163)   1,125,914 
Net increase in net assets resulting from operations   3,045,808    5,077,354 
           
Capital Share Transactions:          
Issuance of common stock   30,000,000    6,200,000 
Net increase in net assets from capital share transactions   30,000,000    6,200,000 
           
Net Increase in Net Assets   33,045,808    11,277,354 
           
Net Assets, Beginning of Period   373,947,334    356,882,861 
           
Net Assets, End of Period  $406,993,142   $368,160,215 

 

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)

 

   Three Months Ended   Three Months Ended 
   March 31, 2022   March 31, 2021 
Cash flows from operating activities:          
Net increase in net assets resulting from operations  $3,045,808   $5,077,354 
Adjustments to reconcile net increase in net assets from operations to net cash (used in) provided by operating activities:          
Net realized gain on investments   (225,786)   (63,270)
Net change in unrealized depreciation (appreciation) on investments   1,566,163    (1,125,914)
Accretion of original issue discount interest and payment-in-kind interest   (206,238)   (159,050)
Increase in interest receivable   (469,597)   (165,263)
Increase in receivable from bank loan repayment   (70,746)   (34,970)
Increase in other assets   (157,500)   (146,250)
Increase (decrease) in accrued expenses and other liabilities   93,284    (3,374)
Increase in fees due to investment advisor(a)   783,868    8,418 
(Decrease) increase in payable for investments purchased   (16,634,436)   10,298,200 
Investment activity:          
Investments purchased   (33,568,785)   (31,758,494)
Proceeds from investments sold   4,047,932    5,113,536 
Repayment of bank loans   12,318,646    16,092,791 
Total investment activity   (17,202,207)   (10,552,167)
           
Net cash (used in) provided by operating activities   (29,477,387)   3,133,714 
           
Cash flows from financing activities:          
Issuance of shares of common stock   30,000,000    6,200,000 
           
Net cash provided by financing activities   30,000,000    6,200,000 
           
Net increase in cash and cash equivalents   522,613    9,333,714 
           
Cash and cash equivalents:          
Cash and cash equivalents, beginning of period   11,058,796    4,289,122 
           
Cash and cash equivalents, end of period  $11,581,409   $13,622,836 
           
Supplemental non-cash information          
Interest paid on short-term financing  $41,166   $- 
           
Supplemental non-cash information          
Payment-in-kind (“PIK”) interest income  $61,319   $40,499 

 

(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 March 31, 2022

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (102.5%)(g)(h):               
                
Healthcare & Pharmaceuticals              
Radiology Partners, Senior Secured Term B Loan (First Lien), 5.21% (Libor + 4.25%), maturity 7/9/25 (i)  6/28/2018  $4,215,792   $4,346,660   $4,176,019 
Advarra, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/26  6/26/2019   4,135,031    4,108,030    4,135,031 
Young, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/7/24 (i)  11/6/2017   3,745,696    3,738,763    3,745,696 
American Vision Partners, Senior Secured Term Loan, 6.71% (Libor + 5.75%), maturity 9/30/27 (j)  9/22/2021   3,528,779    3,467,885    3,493,491 
InHealth Medical Alliance, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 6/28/28  6/25/2021   3,482,500    3,450,105    3,369,319 
PharMedQuest, Senior Secured Initial Term Loan, 6.75% (Libor + 5.75%), maturity 10/31/24 (j)  11/6/2019   3,288,398    3,261,221    3,271,956 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 3.50%), maturity 3/14/25 (i)  5/30/2018   3,239,110    3,251,031    3,171,425 
Waystar, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 10/22/26 (i)  9/19/2019   2,942,469    2,935,645    2,933,886 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%) PIK, maturity 8/18/23  8/18/2016   2,853,037    2,840,626    2,810,241 
Zelis RedCard, Senior Secured Term B-1 Loan, 4.46% (Libor + 3.50%), maturity 9/30/26 (i)  9/27/2019   2,414,528    2,404,810    2,395,156 
Soliant, Senior Secured Initial Term Loan, 5.21% (Libor + 4.25%), maturity 3/31/28  3/26/2021   2,325,000    2,308,390    2,325,000 
Premise Health, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 3.50%), maturity 7/10/25  8/15/2018   2,276,703    2,281,537    2,276,703 
Gastro Health, Senior Secured Initial Term Loan (First Lien), 5.46% (Libor + 4.50%), maturity 7/3/28 (i)  7/2/2021   1,990,000    1,980,500    1,990,000 
nThrive, Senior Secured Initial Loan (Second Lien), 7.71% (Libor + 6.75%), maturity 12/17/29 (i)  11/19/2021   2,000,000    1,971,500    1,975,828 
Upstream Rehabilitation, Senior Secured August 2021 Incremental Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 11/20/26  10/24/2019   1,966,391    1,963,648    1,956,559 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 3.50%), maturity 7/24/26 (i)  7/23/2019   1,950,000    1,945,109    1,925,794 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 5.46% (Libor + 4.50%), maturity 12/22/25  12/19/2018   1,935,000    1,924,801    1,872,113 
Advanced Diabetes Supply, Senior Secured Term Loan December 2020, 6.25% (Libor + 5.25%), maturity 12/30/26  7/13/2021   1,867,644    1,850,124    1,867,644 
Quantum Health, Senior Secured Amendment No. 1 Refinancing Term Loan (First Lien), 5.46% (Libor + 4.50%), maturity 12/22/27 (i)  12/18/2020   1,488,750    1,467,803    1,492,472 
Blue Cloud, Unitranche, 6.00% (Libor + 5.00%), maturity 1/21/28  12/13/2021   1,500,000    1,477,797    1,488,750 
Therapy Brands, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 5/18/28  5/12/2021   1,492,500    1,485,660    1,485,038 
Mission Veterinary Partners, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 4/27/28 (i)  12/15/2021   1,492,500    1,478,286    1,472,053 
Ivy Rehab, Senior Secured Initial Term Loan (First Lien), 5.71% (Libor + 4.75%), maturity 3/15/29 (i)  3/11/2022   1,500,000    1,470,000    1,470,000 
Symplr, Senior Secured Initial Term Loan (First Lien), 5.46% (Libor + 4.50%), maturity 12/22/27 (i)  11/23/2020   1,485,000    1,464,195    1,469,820 
CPS, Unitranche, 6.00% (Libor + 5.00%), maturity 2/28/25 (j)  3/1/2019   1,458,442    1,446,205    1,458,442 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/1/24  1/10/2019   1,152,861    1,150,808    1,115,393 
Solis Mammography, Senior Secured Initial Term Loan (First Lien), 5.71% (Libor + 4.75%), maturity 4/17/28  4/1/2021   1,058,333    1,049,403    1,050,396 
Wedgewood Pharmacy, Senior Secured Initial Term Loan, 5.21% (Libor + 4.25%), maturity 3/31/28 (i)  2/24/2021   995,000    985,785    997,488 
Solis Mammography, Senior Secured Initial Term Loan (Second Lien), 8.96% (Libor + 8.00%), maturity 4/16/29  4/1/2021   1,000,000    986,320    992,500 
nThrive, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 12/18/28 (i)  11/19/2021   1,000,000    995,250    990,881 
Micro Merchant Systems, Unitranche, 6.71% (Libor + 5.75%), maturity 12/14/27 (i) (j)  3/2/2022   1,000,000    988,889    990,000 
Allied Benefit Systems, Senior Secured Initial Term B Loan, 5.50% (Libor + 4.50%), maturity 11/18/26  10/21/2020   987,500    975,706    985,031 
CareCentrix, Senior Secured Initial Term Loan, 5.46% (Libor + 4.50%), maturity 4/3/25 (i)  4/2/2018   967,745    965,299    961,010 
Dermatologists of Central States, Senior Secured Term Loan, 9.50% (Libor + 8.50%), maturity 5/13/22 (i) (j)  3/12/2020   954,986    954,986    954,986 
Alcami, Senior Secured Initial Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 7/14/25  7/12/2018   965,000    962,402    926,400 
Forefront, Senior Secured Closing Date Term Loan, 5.21% (Libor + 4.25%), maturity 4/2/29 (i)  3/23/2022   842,520    825,669    825,669 
UDG, Senior Secured Initial Dollar Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 8/19/28 (i) (l)  8/6/2021   631,875    625,962    628,716 
ImageFirst, Senior Secured Initial Term Loan, 5.46% (Libor + 4.50%), maturity 4/27/28  4/26/2021   609,375    606,745    606,328 
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 8/31/26 (i)  8/2/2019   525,353    521,825    519,454 
MedRisk, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 5/10/28 (i)  4/1/2021   497,500    492,892    493,013 
AccentCare, Senior Secured 2021 Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 6/22/26 (i)  6/15/2021   496,250    496,250    490,446 
Press Ganey, Senior Secured 2020 Incremental Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 7/24/26 (i)  10/1/2020   495,009    491,001    488,865 
RMP & MedA/Rx, Senior Secured Term Loan, 5.50% (Libor + 4.50%), maturity 2/6/25  3/22/2021   484,375    479,853    484,375 
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 2/6/25  2/27/2017   414,044    413,954    413,009 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/24  6/26/2019   -    (7,619)   - 
                   
Services: Business                  
LegalShield, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 12/15/28 (i)  12/7/2021   4,500,000    4,457,250    4,449,177 
InnovateMR, Unitranche, 6.75% (Libor + 5.75%), maturity 1/20/28 (i) (j)  12/16/2021   4,236,683    4,159,678    4,161,086 
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 9/23/25  9/26/2019   3,900,000    3,875,694    3,900,000 
RevSpring, Senior Secured Initial Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 10/11/25  10/5/2018   3,870,000    3,867,171    3,860,325 
Eliassen, Unitranche, 6.71% (Libor + 5.75%), maturity 4/7/28 (i)  3/31/2022   3,259,259    3,210,370    3,210,370 
Veritext, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 3.25%), maturity 8/1/25 (i)  8/14/2018   3,113,027    3,099,541    3,072,878 
Discovery Education, Unitranche, 6.71% (Libor + 5.75%), maturity 3/10/29 (i)  3/25/2022   3,000,000    2,947,500    2,947,500 
Fleetwash, Senior Secured Incremental Term Loan, 5.75% (Libor + 4.75%), maturity 10/1/24  9/25/2018   2,895,619    2,881,428    2,866,663 
CoolSys, Senior Secured Closing Date Initial Term Loan, 5.71% (Libor + 4.75%), maturity 8/11/28  8/4/2021   2,583,802    2,554,724    2,538,586 
Duff & Phelps, Senior Secured Initial Dollar Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 4/9/27 (i)  3/6/2020   2,456,250    2,438,130    2,443,952 
Service Logic, Senior Secured Closing Date Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 10/29/27  10/23/2020   2,358,505    2,337,349    2,346,712 
Vistage, Senior Secured Term B Loan (First Lien), 5.00% (Libor + 4.00%), maturity 2/10/25 (i)  2/6/2018   2,317,141    2,314,612    2,314,361 
The Facilities Group, Unitranche, 6.75% (Libor + 5.75%), maturity 11/30/27  12/10/2021   2,253,024    2,231,566    2,236,126 
TRC Companies, Senior Secured Initial Term Loan (Second Lien), 7.71% (Libor + 6.75%), maturity 12/7/29  11/19/2021   2,000,000    1,981,000    1,985,000 
Mediaocean, Senior Secured Initial Term Loan, 4.46% (Libor + 3.50%), maturity 12/15/28 (i)  12/9/2021   2,000,000    1,981,000    1,979,409 
ECi Software, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 11/9/27 (i)  9/17/2020   1,975,000    1,967,916    1,956,038 

 

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

 

6

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2022

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):           
                
Services: Business (continued)                  
Veregy, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 11/3/27  11/2/2020  $1,975,000   $1,926,139   $1,955,250 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 6/19/24  6/30/2017   1,933,491    1,933,491    1,933,491 
Addison Group, Senior Secured Initial Term Loan, 5.21% (Libor + 4.25%), maturity 12/29/28 (i)  1/19/2022   1,500,000    1,496,438    1,491,529 
Insight Global, Senior Secured Closing Date Term Loan, 6.96% (Libor + 6.00%), maturity 9/22/28  9/22/2021   1,492,500    1,461,508    1,488,769 
Epic Staffing Group, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 2/5/27  2/3/2021   1,486,222    1,458,292    1,486,222 
Eliassen Group, Senior Secured Initial Term B Loan, 5.21% (Libor + 4.25%), maturity 11/5/24  10/19/2018   1,476,241    1,472,480    1,472,550 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 5.50% (Libor + 4.50%), maturity 3/27/24  3/26/2018   1,440,641    1,438,139    1,426,235 
First Advantage, Senior Secured Term B-1 Loan (First Lien), 3.71% (Libor + 2.75%), maturity 1/31/27 (i)  1/23/2020   1,100,312    1,089,708    1,094,031 
Restaurant Technologies, Senior Secured Initial Term Loan, 5.21% (Libor + 4.25%), maturity 4/2/29 (i)  3/17/2022   1,000,000    975,000    997,968 
Veritext, Senior Secured Initial Term Loan (Second Lien), 7.71% (Libor + 6.75%), maturity 7/31/26  8/14/2018   1,000,000    996,844    997,500 
trustaff Management, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 3/6/28 (i)  12/9/2021   994,975    992,606    990,509 
Divisions Maintenance Group, Senior Secured Term B Loan, 5.71% (Libor + 4.75%), maturity 5/27/28 (i)  5/21/2021   995,000    986,070    990,114 
TRC Companies, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 12/8/28 (i)  11/19/2021   1,000,000    995,250    987,208 
eResearch (ERT), Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.50%), maturity 2/4/27 (i)  12/1/2020   987,443    987,443    985,319 
WCG, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 1/8/27 (i)  12/13/2019   982,500    975,177    980,735 
Diversified, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 12/23/23  4/19/2019   899,347    896,131    892,602 
Secretariat International, Senior Secured Initial Term Loan (First Lien), 5.71% (Libor + 4.75%), maturity 12/29/28  12/16/2021   847,875    843,166    841,516 
Therma Holdings, Senior Secured Initial Term Loan (2021), 4.96% (Libor + 4.00%), maturity 12/16/27  12/11/2020   500,135    499,018    500,135 
System One, Senior Secured Initial Term Loan, 4.96% (Libor + 4.00%), maturity 3/2/28  1/28/2021   497,500    495,410    495,013 
Insight Global, Senior Secured Revolving Loan, 6.96% (Libor + 6.00%), maturity 9/22/27  9/23/2021   26,836    26,836    26,768 
                   
High Tech Industries                  
Qlik, Senior Secured 2021 Refinancing Term Loan, 4.96% (Libor + 4.00%), maturity 4/26/24 (i)  3/29/2019   3,890,750    3,877,052    3,876,187 
Netsmart, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 10/1/27 (i)  9/29/2020   3,465,000    3,452,563    3,450,506 
Golden Source, Senior Secured , 6.50% (Libor + 5.50%), maturity 5/31/28 (i) (j)  3/25/2022   3,474,178    3,404,695    3,404,695 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 8/14/26 (i)  8/9/2019   3,083,195    3,079,585    3,063,782 
Ivanti Software, Senior Secured 2021 Specified Refinancing Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 12/1/27 (i)  11/20/2020   2,985,000    2,949,619    2,950,501 
Infogroup, Senior Secured Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 4/3/23 (i)  3/28/2017   2,852,381    2,842,393    2,717,865 
Planview, Senior Secured Closing Date Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 12/17/27 (i)  12/11/2020   2,625,643    2,601,982    2,599,945 
Idera, Senior Secured Term B-1 Loan (First Lien), 4.71% (Libor + 3.75%), maturity 3/2/28 (i)  6/27/2017   2,592,770    2,592,053    2,556,234 
Precisely, Senior Secured Third Amendment Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 4/24/28 (i)  3/19/2021   2,487,500    2,476,195    2,464,259 
PracticeTek, Unitranche, 6.46% (Libor + 5.50%), maturity 11/23/27 (i) (j)  11/22/2021   2,401,002    2,337,302    2,369,015 
Flexera Software, Senior Secured Term B-1 Loan (First Lien), 4.71% (Libor + 3.75%), maturity 3/3/28 (i)  2/16/2020   2,384,704    2,384,704    2,361,803 
HelpSystems, Senior Secured Term Loan, 4.96% (Libor + 4.00%), maturity 11/19/26 (i)  12/19/2019   1,984,917    1,977,819    1,964,893 
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 4.46% (Libor + 3.50%), maturity 3/5/27 (i) (m)  1/16/2020   1,965,015    1,877,220    1,947,360 
QuickBase, Senior Secured Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 4/2/26  3/29/2019   1,945,000    1,939,142    1,935,275 
Intermedia , Senior Secured New Term Loan (First Lien), 7.00% (Libor + 6.00%), maturity 7/21/25  7/13/2018   1,935,000    1,926,643    1,901,138 
Bomgar, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 4/18/25 (i)  5/25/2018   1,636,949    1,642,961    1,621,073 
OEConnection, Senior Secured Initial Term Loan, 4.96% (Libor + 4.00%), maturity 9/25/26  9/24/2019   1,604,498    1,599,660    1,596,476 
Digital Room, Senior Secured Closing Date Term Loan (First Lien), 6.21% (Libor + 5.25%), maturity 12/21/28 (i)  12/16/2021   1,500,000    1,485,750    1,477,589 
Navex Global, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 3.25%), maturity 9/5/25 (i)  8/15/2018   1,447,500    1,438,523    1,433,472 
ORBCOMM, Senior Secured Closing Date Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 9/1/28 (i)  6/17/2021   995,000    990,250    987,774 
SmartBear, Senior Secured Initial Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 3/3/28  11/20/2020   992,500    983,570    987,538 
Veracode, Senior Secured Initial Term Loan, 4.96% (Libor + 4.00%), maturity 11/5/27 (i)  10/30/2020   990,000    982,061    986,716 
Unison, Unitranche, 8.00% (Libor + 7.00%), maturity 6/25/26 (j)  6/25/2020   982,500    963,730    982,500 
Barracuda, Senior Secured 2020 Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 2/12/25 (i)  3/2/2018   985,000    985,000    981,218 
Infoblox, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 12/1/27 (i)  10/7/2020   992,500    988,569    980,850 
Imperva, Senior Secured Term Loan, 5.00% (Libor + 4.00%), maturity 1/12/26 (i)  9/23/2020   983,567    976,508    972,990 
Cloudera, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 10/8/28 (i)  8/10/2021   500,000    495,278    494,905 
DigiCert, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 10/16/26 (i)  3/13/2020   490,000    469,162    487,345 
PracticeTek, Senior Secured Revolving Loan, 6.46% (Libor + 5.50%), maturity 11/23/27 (i) (j)  11/22/2021   -    (7,156)   - 
                   
Chemicals, Plastics & Rubber                  
InMark, Senior Secured Incremental Term Loan, 7.00% (Libor + 6.00%), maturity 12/23/26 (i) (j)  12/10/2021   4,540,855    4,449,614    4,450,038 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/30/24  5/11/2017   3,344,325    3,337,319    3,235,635 
Brook & Whittle, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 12/14/28 (i)  12/9/2021   2,556,581    2,534,753    2,531,015 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 7/18/26  7/17/2019   2,510,102    2,500,584    2,485,001 
Packaging Coordinators, Senior Secured Term B Loan (First Lien), 4.71% (Libor + 3.75%), maturity 11/30/27 (i)  9/25/2020   2,462,594    2,454,956    2,449,431 
Paragon Films, Senior Secured Closing Date Term Loan (First Lien), 5.96% (Libor + 5.00%), maturity 12/16/28 (i)  12/15/2021   2,000,000    1,979,589    1,980,000 
Resource Label Group, Senior Secured Closing Date Initial Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 7/7/28 (i)  7/2/2021   1,875,047    1,866,404    1,857,127 
TricorBraun, Senior Secured Closing Date Initial Term Loan (First Lien), 4.21% (Libor + 3.25%), maturity 3/3/28 (i)  1/29/2021   1,824,167    1,816,076    1,788,150 
Potters Industries, Senior Secured Initial Term Loan, 4.96% (Libor + 4.00%), maturity 12/14/27 (i)  11/19/2020   1,485,000    1,473,206    1,485,891 
Technimark, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 7/7/28  6/30/2021   1,488,750    1,481,910    1,477,584 
Tekni-Plex, Senior Secured Tranche B-3 Initial Term Loan, 4.96% (Libor + 4.00%), maturity 9/15/28 (i)  7/29/2021   1,083,713    1,081,315    1,072,366 
Lacerta, Senior Secured Term Loan, 6.46% (Libor + 5.50%), maturity 12/30/26  2/8/2021   987,500    978,143    987,500 
Novolex, Senior Secured Term B Loan (First Lien), 5.21% (Libor + 4.25%), maturity 4/13/29 (i)  3/30/2022   1,000,000    975,000    975,000 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 7/31/26 (i)  7/25/2019   977,500    975,903    959,738 
Applied Adhesives, Senior Secured Term A Loan, 5.96% (Libor + 5.00%), maturity 3/12/27  3/12/2021   561,908    556,712    557,693 
Golden West Packaging, Senior Secured Initial Term Loan, 6.21% (Libor + 5.25%), maturity 12/1/27  11/29/2021   500,000    495,250    496,250 
Pregis Corporation, Senior Secured Third Amendment Refinancing Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 7/31/26  12/9/2020   497,500    495,534    491,281 
Applied Adhesives, Senior Secured Revolving Loan, 5.96% (Libor + 5.00%), maturity 3/12/27  3/12/2021   4,267    3,591    4,235 

 

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

 

7

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2022

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):              
                   
Banking, Finance, Insurance & Real Estate                  
Confluence, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 7/31/28  7/22/2021  $3,990,000   $3,971,000   $3,990,000 
Ascensus, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 3.50%), maturity 8/2/28 (i)  11/17/2021   2,992,500    2,978,286    2,957,298 
AmeriLife, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 3/18/27  2/6/2020   2,456,593    2,443,998    2,438,169 
Newport Group, Senior Secured Term Loan, 4.46% (Libor + 3.50%), maturity 9/12/25  8/9/2018   2,414,925    2,406,677    2,414,925 
American Beacon Advisors, Senior Secured Tranche D Term Loan (Second Lien), 9.00% (Libor + 8.00%), maturity 4/30/25  10/31/2017   2,117,133    2,121,922    2,117,133 
EPIC Insurance, Unitranche, 6.21% (Libor + 5.25%), maturity 9/29/28 (i)  8/27/2021   2,115,962    2,082,521    2,100,093 
Kestra Financial, Senior Secured Initial Term Loan, 5.21% (Libor + 4.25%), maturity 6/3/26  4/29/2019   1,950,000    1,937,435    1,950,000 
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 6.75% (Libor + 5.75%), maturity 10/31/22  10/9/2015   1,930,484    1,932,791    1,814,655 
Orion, Senior Secured 2021 Refinancing Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 9/24/27 (i)  8/4/2020   1,481,287    1,467,037    1,470,828 
SIAA, Unitranche, 7.25% (Libor + 6.25%), maturity 4/28/28  4/21/2021   1,169,578    1,150,606    1,169,578 
Advisor Group, Senior Secured Term B-1 Loan, 5.46% (Libor + 4.50%), maturity 7/31/26 (i)  1/31/2020   1,026,807    1,022,785    1,021,534 
LERETA, Senior Secured Initial Term Loan, 6.21% (Libor + 5.25%), maturity 7/30/28 (i)  7/27/2021   995,000    985,500    995,128 
Community Brands, Senior Secured Initial Term Loan, 6.50% (Libor + 5.75%), maturity 2/24/28  2/23/2022   1,000,000    977,975    992,500 
Sedgwick Claims, Senior Secured Initial Term Loan, 4.21% (Libor + 3.25%), maturity 12/31/25 (i)  2/12/2020   488,636    488,183    483,521 
EdgeCo, Senior Secured Third Amendment Term Loan, 5.75% (Libor + 4.75%), maturity 6/1/26 (i)  3/29/2022   300,000    295,500    295,500 
                   
Aerospace & Defense                  
CPI International, Senior Secured Second Amendment Incremental Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 7/26/24 (i)  10/1/2019   5,209,053    5,170,626    5,196,030 
HDT Global, Senior Secured Initial Term Loan, 6.71% (Libor + 5.75%), maturity 7/8/27  6/30/2021   3,368,750    3,269,000    3,309,797 
StandardAero, Senior Secured 2020 Term B-1 Loan, 4.46% (Libor + 3.50%), maturity 4/6/26 (i)  1/24/2019   3,262,789    3,256,331    3,169,957 
Amentum, Senior Secured Tranche 3 Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 2/15/29 (i)  2/10/2022   2,000,000    1,990,169    1,989,048 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 7.75%), maturity 4/30/26  5/10/2018   2,000,000    2,006,657    1,920,000 
Whitcraft, Unitranche, 7.00% (Libor + 6.00%), maturity 4/3/23  3/6/2020   1,957,384    1,950,137    1,908,450 
StandardAero, Senior Secured 2020 Term B-2 Loan, 4.46% (Libor + 3.50%), maturity 4/6/26 (i)  1/24/2019   1,754,188    1,750,716    1,704,278 
Tronair, Senior Secured Initial Term Loan (First Lien), 6.75% (Libor + 5.75%) cash, 0.50% PIK, maturity 9/8/23  9/30/2016   1,365,352    1,362,740    1,327,805 
Amentum, Senior Secured Tranche 1 Term Loan (First Lien), 4.46% (Libor + 3.50%), maturity 1/29/27 (i)  1/24/2020   982,500    958,779    974,400 
Peraton, Senior Secured Term B Loan (First Lien), 4.71% (Libor + 3.75%), maturity 2/1/28 (i)  2/23/2021   972,112    967,932    966,268 
API Technologies, Senior Secured Initial Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 5/9/26  1/15/2020   977,387    955,200    960,283 
BlueHalo, Unitranche, 7.00% (Libor + 6.00%), maturity 10/31/25  11/17/2021   497,774    490,649    495,285 
Novaria Group, Senior Secured Initial Term Loan, 6.50% (Libor + 5.50%), maturity 1/27/27  1/24/2020   481,818    478,163    466,159 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 4/30/25 (i)  7/18/2019   486,696    485,028    463,216 
BlueHalo, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 10/31/25  11/17/2021   54,502    53,087    54,230 
                   
Chemicals, Plastics & Rubber                  
DuBois Chemicals, Senior Secured Term Loan (Second Lien) - 2019, 9.46% (Libor + 8.50%), maturity 9/30/27  10/8/2019   3,000,000    2,976,586    2,985,000 
Vertellus, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 12/22/27  12/18/2020   2,977,500    2,909,100    2,962,613 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 1/31/25 (i)  1/26/2018   2,620,800    2,626,670    2,535,190 
Unifrax, Senior Secured USD Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 12/12/25 (i)  11/5/2018   2,419,962    2,402,263    2,343,946 
USALCO, Senior Secured Term Loan A, 7.00% (Libor + 6.00%), maturity 10/19/27  10/26/2021   1,995,000    1,976,000    1,980,038 
Meridian Adhesives Group, Senior Secured Initial Term Loan, 4.96% (Libor + 4.00%), maturity 7/24/28  7/16/2021   1,995,000    1,976,285    1,980,038 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 7.71% (Libor + 6.75%), maturity 9/6/26 (i)  8/16/2018   2,000,000    2,001,590    1,968,942 
Q Holding, Senior Secured Term B Loan (2019), 6.00% (Libor + 5.00%), maturity 12/29/23  8/20/2019   1,950,000    1,943,934    1,930,500 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 5.46% (Libor + 4.50%), maturity 9/30/26  10/8/2019   1,772,773    1,742,753    1,759,477 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 3/31/25  3/22/2018   960,000    957,591    955,200 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 10/28/24 (i)  11/30/2018   964,736    954,817    930,792 
Ascensus Specialties, Senior Secured Initial Term Loan, 5.21% (Libor + 4.25%), maturity 6/30/28  12/3/2021   497,489    487,989    493,758 
Polytek, Senior Secured Term Loan, 6.00% (Libor + 5.00%), maturity 9/20/24  12/23/2020   493,840    489,375    490,137 
Boyd Corp, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 3.50%), maturity 9/6/25 (i)  11/7/2018   491,094    465,680    481,022 
USALCO, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 10/19/26  10/26/2021   104,839    101,774    104,052 
Vertellus, Senior Secured Revolving Credit Loan, 7.00% (Libor + 6.00%), maturity 12/22/25  12/18/2020   -    (11,548)   - 
                   
Capital Equipment                  
FloWorks, Senior Secured Initial Term Loan (First Lien), 5.68% (Libor + 5.00%), maturity 12/27/28  12/27/2021   4,000,000    3,857,500    3,970,000 
Tank Holding, Unitranche, 6.96% (Libor + 6.00%), maturity 3/31/28 (i)  3/25/2022   4,000,000    3,920,000    3,920,000 
Plaskolite, Senior Secured 2021-1 Refinancing Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 12/15/25 (i)  12/12/2018   3,870,900    3,828,761    3,723,359 
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 9/30/24  4/20/2018   2,037,185    2,037,185    2,026,999 
Excelitas, Senior Secured Initial Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 12/1/25 (i)  2/19/2020   1,500,000    1,483,692    1,499,454 
Radwell, Unitranche, 6.71% (Libor + 5.75%), maturity 4/1/29 (i)  3/11/2022   1,500,000    1,477,500    1,477,500 
Edward Don, Senior Secured Initial Term Loan, 5.25% (Libor + 4.25%), maturity 7/2/25  6/26/2018   1,370,943    1,368,121    1,302,395 
Flow Control Group, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 3/31/28 (i)  3/17/2021   1,181,568    1,179,062    1,164,734 
TriMark, Senior Secured Second Amendment Tranche B Loan (Super Senior priority), 4.50% (Libor + 3.50%), maturity 8/28/24  1/31/2022   970,982    970,982    796,205 
Culligan, Senior Secured 2022 Refinancing Term B Loan, 4.96% (Libor + 4.00%), maturity 7/31/28 (i)  6/17/2021   562,500    559,828    557,506 
Restaurant Technologies, Senior Secured Initial Loan (Second Lien), 7.46% (Libor + 6.50%), maturity 10/1/26  2/11/2020   500,000    502,857    498,750 
Infinite Electronics, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 3/2/28  2/24/2021   496,250    495,205    493,769 
Flow Control Group, Senior Secured Amendment No. 1 Delayed Draw Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 3/31/28 (i)  7/27/2021   497,324    496,136    490,237 
SPX Flow, Senior Secured Term Loan, 5.46% (Libor + 4.50%), maturity 4/5/29 (i)  3/18/2022   500,000    477,500    487,500 
Duravant, Senior Secured Incremental Amendment No. 5 Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 5/19/28 (i)  3/5/2020   491,193    491,193    486,294 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/2/24 (i)  10/24/2018   482,368    484,632    480,846 

 

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

 

8

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2022

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Services: Consumer                  
Weld North, Senior Secured 2021 Term Loan, 4.75% (Libor + 3.75%), maturity 12/21/27 (i)  12/21/2020  $2,414,307   $2,414,307   $2,395,670 
A Place For Mom, Senior Secured Term Loan, 5.50% (Libor + 4.50%), maturity 2/10/26  7/28/2017   2,228,372    2,228,190    2,194,947 
Smart Start, Senior Secured Term B Loan (Second Lien), 8.71% (Libor + 7.75%), maturity 12/16/29  12/10/2021   2,000,000    1,962,000    1,985,000 
Smart Start, Senior Secured Term B Loan (First Lien), 5.46% (Libor + 4.50%), maturity 12/16/28  12/10/2021   1,995,000    1,976,000    1,980,038 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 3.96% (Libor + 3.00%), maturity 5/14/26 (i)  5/8/2019   1,528,610    1,526,411    1,510,498 
FullBloom, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 12/15/28  12/10/2021   1,500,000    1,485,750    1,488,750 
Ned Stevens, Senior Secured Term A Loan, 6.25% (Libor + 5.25%), maturity 9/30/25 (j)  9/30/2019   1,398,693    1,382,539    1,398,693 
Teaching Strategies, Senior Secured Initial Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 8/31/28 (i)  8/19/2021   997,500    988,057    996,168 
Spring Education, Senior Secured Initial Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 7/30/25 (i)  7/26/2018   965,000    963,686    936,593 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 6.50% (Libor + 5.50%), maturity 5/9/25  5/4/2018   647,324    642,073    647,324 
Ned Stevens, Senior Secured Revolving Loan, 6.25% (Libor + 5.25%), maturity 9/30/25 (j)  9/30/2019   -    (2,614)   - 
                   
Transportation: Cargo                  
Evans Network, Senior Secured Initial Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 8/19/28  8/6/2021   3,655,102    3,617,102    3,636,827 
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 10/12/24 (i)  11/20/2018   3,562,565    3,559,944    3,514,529 
Capstone Logistics, Senior Secured Closing Date Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 11/12/27  11/12/2020   2,111,672    2,093,592    2,106,393 
AIT Worldwide Logistics, Senior Secured Initial Term Loan (First Lien), 5.71% (Libor + 4.75%), maturity 4/6/28 (i)  12/9/2021   1,990,000    1,985,262    1,976,743 
Worldwide Express, Senior Secured Initial Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 7/26/28 (i)  7/23/2021   1,496,250    1,485,563    1,480,821 
Omni Logistics, Senior Secured Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 12/30/26  11/24/2021   1,159,719    1,148,336    1,156,819 
Magnate, Senior Secured Initial Term Loan (First Lien), 6.46% (Libor + 5.50%), maturity 12/29/28 (i)  3/11/2022   926,250    907,679    907,725 
Omni Logistics, Senior Secured Revolving Credit Loan (First Lien), 6.00% (Libor + 5.00%), maturity 12/30/25  11/24/2021   -    (1,119)   - 
                   
Beverage, Food & Tobacco                  
Bettcher Industries, Senior Secured Initial Term Loan (Second Lien), 7.93% (Libor + 7.25%), maturity 12/14/29  12/13/2021   2,500,000    2,476,250    2,481,250 
Sovos Brands, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 6/8/28 (i)  6/8/2021   2,033,001    2,033,001    2,019,702 
Bettcher Industries, Senior Secured Initial Term Loan (First Lien), 4.68% (Libor + 4.00%), maturity 12/14/28  12/13/2021   2,000,000    1,981,000    1,985,000 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 8/25/25  8/22/2018   1,930,000    1,925,371    1,908,288 
Dessert Holdings, Senior Secured Initial Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 6/9/28  6/7/2021   1,492,500    1,482,097    1,481,306 
Monogram Foods, Senior Secured Initial Term Loan, 4.96% (Libor + 4.00%), maturity 8/28/28 (i)  8/13/2021   997,500    988,000    993,809 
                   
Construction & Building                  
Tangent, Senior Secured Closing Date Term Loan (First Lien), 5.71% (Libor + 4.75%), maturity 11/30/27  10/2/2019   1,790,471    1,781,479    1,785,995 
PlayPower, Senior Secured Initial Term Loan, 6.46% (Libor + 5.50%), maturity 5/8/26  5/10/2019   1,752,056    1,752,056    1,629,412 
PlayCore, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 7.75%), maturity 9/29/25  2/7/2020   1,500,000    1,476,429    1,500,000 
Dodge Construction Network, Senior Secured Initial Term Loan (First Lien), 5.43% (Libor + 4.75%), maturity 2/23/29  2/10/2022   1,000,000    985,238    987,500 
PlayCore, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 9/30/24  9/18/2017   954,426    953,237    952,040 
Specialty Products & Insulation, Senior Secured Tranche B-1 Term Loan, 6.25% (Libor + 5.25%), maturity 12/21/27 (i)  3/16/2022   796,954    788,985    788,985 
CHI Overhead Doors, Senior Secured Third Amendment Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 7/31/25 (i)  7/28/2015   614,180    615,548    609,553 
Acuren, Senior Secured Initial Term Loan, 5.21% (Libor + 4.25%), maturity 1/23/27  1/17/2020   477,513    475,701    476,319 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.50% (Libor + 5.50%), maturity 8/14/23  5/16/2019   440,619    441,047    437,314 
                   
Automotive                  
Highline, Senior Secured Initial Term Loan (First Lien), 5.46% (Libor + 4.50%), maturity 11/9/27  10/29/2020   2,835,000    2,773,083    2,785,388 
Rough Country, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 3.50%), maturity 7/28/28  7/26/2021   1,975,000    1,970,250    1,960,188 
Truck Hero, Senior Secured Initial Term Loan, 4.21% (Libor + 3.25%), maturity 1/31/28 (i)  1/20/2021   1,485,000    1,485,000    1,435,178 
IXS, Senior Secured Initial Term Loan, 5.21% (Libor + 4.25%), maturity 3/5/27 (i)  2/27/2020   792,344    790,572    751,822 
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 7.75% (Libor + 6.75%), maturity 2/2/26  2/23/2022   500,000    500,000    496,250 
Wheel Pros, Senior Secured Initial Term Loan (First Lien), 5.46% (Libor + 4.50%), maturity 5/11/28 (i)  4/23/2021   497,500    493,320    475,356 
                   
Consumer Goods: Non-durable                  
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/21/23 (i)  11/9/2016   2,387,471    2,383,260    2,283,313 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 5.50% (Libor + 4.50%), maturity 10/26/23 (i)  11/2/2016   2,001,028    1,994,770    2,001,028 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.50%), maturity 9/11/23  9/29/2016   1,881,139    1,875,914    1,871,733 
Hoffmaster Group, Senior Secured Initial Term Loan (Second Lien), 10.50% (Libor + 9.50%), maturity 11/21/24  2/7/2020   1,250,000    1,250,000    1,209,375 
                   
Environmental Industries                  
Alliance Environmental Group, Unitranche, 7.00% (Libor + 6.00%), maturity 12/30/27 (i) (j)  12/30/2021   3,964,321    3,881,904    3,895,872 
Denali Water Solutions, Senior Secured Closing Date Term Loan, 5.21% (Libor + 4.25%), maturity 3/27/28  3/18/2021   1,985,000    1,966,000    1,962,669 
Keter Environmental Services, Unitranche, 7.50% (Libor + 6.50%), maturity 10/29/27  11/5/2021   500,000    495,250    496,250 
Alliance Environmental Group, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 12/30/27 (i) (j)  12/30/2021   115,894    109,272    113,893 
Keter Environmental Services, Unitranche, 7.50% (Libor + 6.50%), maturity 10/29/27  11/5/2021   27,360    26,586    27,155 
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 3.00%), maturity 3/20/25  3/16/2018   3,839,656    3,840,167    3,796,460 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 8/19/22 (i)  9/2/2015   1,870,184    1,864,905    1,764,283 
                   
Media: Diversified & Production                  
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 3.50%), maturity 2/9/26 (i)  1/16/2019   2,917,386    2,903,193    2,900,594 

 

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

 

9

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of March 31, 2022

(Expressed in U.S. Dollars)

(unaudited)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Hotels, Gaming & Leisure                  
Northstar, Senior Secured Term Loan, 7.21% (Libor + 6.25%) cash, 1.00% PIK, maturity 6/7/24  5/8/2017  $1,348,463   $1,348,463   $1,304,638 
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.00% (Libor + 5.00%), maturity 10/21/23  10/19/2016   1,119,231    1,115,316    895,385 
                   
Metals & Mining                  
Dynatect, Senior Secured Term B Loan, 5.50% (Libor + 4.50%), maturity 9/30/24  8/16/2019   1,932,059    1,922,056    1,927,229 
                   
Utilities: Electric                  
Systems Control, Senior Secured Initial Term Loan, 5.50% (Libor + 4.50%), maturity 3/28/25 (i)  6/15/2021   1,487,100    1,484,880    1,487,100 
                   
Forest Products & Paper                  
Loparex, Senior Secured Initial Term Loan (First Lien), 5.46% (Libor + 4.50%), maturity 7/31/26  7/29/2019   1,462,500    1,452,683    1,458,844 
                   
Retail                  
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/16/24 (i)  10/17/2018   964,770    968,755    929,315 
StubHub, Senior Secured USD Term B Loan, 4.46% (Libor + 3.50%), maturity 2/12/27 (i)  1/31/2020   488,750    486,938    481,051 
                   
Media: Advertising, Printing & Publishing                  
Ansira, Unitranche, 7.50% (Libor + 6.50%) PIK, maturity 12/20/24  12/20/2016   2,223,153    2,217,567    1,378,356 
                   
Utilities: Water                  
Aegion, Senior Secured Initial Term Loan, 5.71% (Libor + 4.75%), maturity 5/17/28  4/1/2021   995,000    990,535    992,513 
                   
Energy: Electricity                  
Franklin Energy, Senior Secured Term B Loan (First Lien), 4.96% (Libor + 4.00%), maturity 8/14/26  8/14/2019   975,000    973,221    960,375 
                   
Consumer Goods: Durable                  
Careismatic Brands, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 3.25%), maturity 1/6/28 (i)  1/22/2021   496,250    495,205    483,077 
                   
Total Bank Loans          $420,316,183   $417,348,904 

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
EQUITY AND PREFERRED SHARES:  NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.4%)(g)(h):                  
                   
High Tech Industries                  
PracticeTek, Class A Units (318,350 Class A units, Fair value of $348,843)(j)(k)(n)  11/22/2021        348,282    348,843 
Golden Source, Class A Units (117,371 Class A units, Fair value of $117,371)(j)(k)(o)  3/25/2022        117,371    117,371 
                   
Services: Business                  
InnovateMR, Class A Units (387,311 Class A Units, Fair value of $387,311)(j)(k)(p)  12/16/2021        387,311    387,311 
                   
Environmental Industries                  
Alliance Environmental Group, A-1 Preferred Units (331,126 A-1 Preferred Units, Fair value of $367,737)(j)(k)(q)  9/30/2019        331,126    367,737 
                   
Services: Consumer                  
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $319,753)(j)(k)(r)(t)  9/30/2019        261,438    319,753 
                   
Chemicals, Plastics & Rubber                  
Vertellus, Series A Units (1,651 Series A units, Fair value of $232,523)(j)(k)(s)(t)  12/22/2020        165,138    232,523 
                   
Total Equity and Preferred Shares          $1,610,666   $1,773,538 
                   
Total Portfolio Investments(u)         $421,926,849   $419,122,442 

 

(a)All companies are located in the United States of 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 investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.
(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.
(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).
(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)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)Investment is non-income producing.
(l)The borrower for UDG Healthcare, Congachant Limited, is located in Ireland.
(m)The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.
(n)Represents an investment in APD Ptek Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(o)Represents an investment in APD Gol Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(p)Represents an investment in APD INN Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(q)Represents an investment in APD AEG Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(r)Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(s)Represents an investment in ADP VERT Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(t)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.
(u)At March 31, 2022, the cost of investments for income tax purposes was $421,926,848, the gross unrealized depreciation for federal tax purposes was $4,198,548, the gross unrealized appreciation for federal income tax purposes was $1,394,141, and the net unrealized depreciation was $2,804,407.

 

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

 

10

 

 

Audax Credit BDC Inc.

Schedule of Investments

As of December 31, 2021

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS - (107.4%)(g)(h):                  
                   
Healthcare & Pharmaceuticals                  
Radiology Partners, Senior Secured Term B Loan (First Lien), 4.46% (Libor + 4.25%), maturity 7/9/25 (i)  6/28/2018  $4,215,792   $4,353,545   $4,168,783 
Advarra, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/26  6/26/2019   4,145,626    4,117,204    4,145,626 
Young, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/7/24  11/6/2017   3,755,525    3,748,227    3,717,970 
American Vision Partners, Senior Secured Term Loan, 6.50% (Libor + 5.75%), maturity 9/30/27 (i)(k)  9/22/2021   3,537,645    3,473,547    3,475,319 
InHealth Medical Alliance, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 6/28/28  6/25/2021   3,491,250    3,457,150    3,377,784 
PharMedQuest, Senior Secured Initial Term Loan, 6.75% (Libor + 5.75%), maturity 10/31/24 (k)  11/6/2019   3,290,898    3,262,290    3,266,217 
Zest Dental, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 3/14/25 (i)  5/30/2018   3,239,110    3,251,658    3,169,814 
Waystar, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 10/22/26 (i)  9/19/2019   2,949,975    2,942,792    2,955,024 
Physicians Endoscopy, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.75%) PIK, maturity 8/18/23  8/18/2016   2,860,384    2,847,320    2,831,780 
Zelis RedCard, Senior Secured Term B-1 Loan, 3.71% (Libor + 3.50%), maturity 9/30/26 (i)  9/27/2019   2,420,641    2,410,411    2,410,524 
Soliant, Senior Secured Initial Term Loan, 5.00% (Libor + 4.25%), maturity 3/31/28  3/26/2021   2,331,250    2,313,766    2,331,250 
Premise Health, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 7/10/25  8/15/2018   2,282,601    2,287,690    2,282,601 
nThrive, Senior Secured Initial Loan (Second Lien), 7.25% (Libor + 6.75%), maturity 12/17/29 (i)  11/19/2021   2,000,000    1,970,000    2,005,377 
Advanced Diabetes Supply, Senior Secured Term Loan December 2020, 6.25% (Libor + 5.25%), maturity 12/30/26  7/13/2021   1,995,000    1,975,300    1,995,000 
Upstream Rehabilitation, Senior Secured August 2021 Incremental Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 11/20/26 (i)  10/24/2019   1,971,344    1,968,456    1,975,578 
Alpaca, Senior Secured Term Loan, 5.75% (Libor + 4.75%), maturity 4/19/24 (i)(k)  4/19/2019   1,962,032    1,944,465    1,962,032 
Press Ganey, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 7/24/26 (i)  7/23/2019   1,955,000    1,949,852    1,949,129 
Gastro Health, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 7/3/28  7/2/2021   1,900,025    1,890,025    1,881,025 
Avalign Technologies, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 4.50%), maturity 12/22/25  12/19/2018   1,940,000    1,929,264    1,876,950 
CareCentrix, Senior Secured Initial Term Loan, 4.71% (Libor + 4.50%), maturity 4/3/25 (i) (j)  4/2/2018   1,604,069    1,599,839    1,600,168 
Symplr, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 12/22/27 (i)  11/23/2020   1,488,750    1,466,850    1,494,123 
Therapy Brands, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 5/18/28  5/12/2021   1,496,250    1,489,050    1,488,769 
Blue Cloud, Unitranche, 6.00% (Libor + 5.00%), maturity 12/31/27 (i)  12/13/2021   1,500,000    1,485,000    1,485,000 
Quantum Health, Senior Secured Amendment No. 1 Refinancing Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 12/22/27  12/18/2020   1,492,500    1,470,450    1,481,306 
Mission Veterinary Partners, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 4/27/28 (i)  12/15/2021   1,496,250    1,481,288    1,481,288 
CPS, Unitranche, 6.25% (Libor + 5.25%), maturity 2/28/25 (k)  3/1/2019   1,462,164    1,449,283    1,462,164 
Tecomet, Senior Secured 2017 Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/1/24  1/10/2019   1,155,903    1,153,742    1,124,116 
Solis Mammography, Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.75%), maturity 4/17/28 (i)  4/1/2021   1,060,833    1,051,433    1,059,560 
nThrive, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 4.00%), maturity 12/18/28 (i)  11/19/2021   1,000,000    995,000    1,002,016 
Wedgewood Pharmacy, Senior Secured Initial Term Loan, 5.00% (Libor + 4.25%), maturity 3/31/28  2/24/2021   997,500    987,800    997,500 
Solis Mammography, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 8.00%), maturity 4/16/29  4/1/2021   1,000,000    985,600    992,500 
Allied Benefit Systems, Senior Secured Initial Term B Loan, 5.50% (Libor + 4.50%), maturity 11/18/26  10/21/2020   990,000    977,586    990,000 
Athena, Senior Secured Term B-1 Loan (First Lien), 4.46% (Libor + 4.25%), maturity 2/11/26 (i)  9/18/2019   980,038    973,278    981,573 
Dermatologists of Central States, Senior Secured Term Loan, 9.50% (Libor + 8.50%), maturity 4/20/22 (i)(k)  3/12/2020   957,461    957,461    957,461 
Alcami, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 7/14/25  7/12/2018   967,500    964,765    928,800 
UDG, Senior Secured Initial Dollar Term Loan (First Lien), 4.75% (Libor + 4.25%), maturity 8/19/28 (i) (m)  8/6/2021   631,875    625,651    634,124 
ImageFirst, Senior Secured Initial Term Loan, 5.25% (Libor + 4.50%), maturity 4/27/28  4/26/2021   588,182    585,414    585,241 
MyEyeDr, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 8/31/26 (i)  8/2/2019   526,700    522,986    527,034 
MedRisk, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 5/10/28 (i)  4/1/2021   498,750    493,900    499,590 
Press Ganey, Senior Secured 2020 Incremental Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 7/24/26 (i)  10/1/2020   496,256    492,037    497,719 
AccentCare, Senior Secured 2021 Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 6/22/26 (i)  6/15/2021   497,500    497,500    496,317 
RMP & MedA/Rx, Senior Secured Term Loan, 5.50% (Libor + 4.50%), maturity 2/6/25  3/22/2021   490,625    485,865    489,398 
AmeriVet, Senior Secured Incremental Delayed Draw Term Loan, 5.75% (Libor + 4.75%), maturity 6/5/24  8/27/2021   463,710    449,085    461,391 
RMP & MedA/Rx, Senior Secured Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 2/6/25  2/27/2017   419,565    419,470    417,467 
ATI Physical Therapy, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/10/23 (i)  6/28/2016   343,442    343,870    332,194 
Alpaca, Senior Secured Revolver, 6.00% (Libor + 5.00%), maturity 4/19/24 (i)(k)  9/30/2019   129,426    125,543    129,426 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/24  6/26/2019   -    (7,619)   - 
                   
Services: Business                  
LegalShield, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 12/15/28 (i)  12/7/2021   4,500,000    4,455,000    4,496,243 
InnovateMR, Unitranche, 6.75% (Libor + 5.75%), maturity 1/20/28 (i)(k)  12/16/2021   4,247,302    4,172,974    4,172,974 
CoAdvantage, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 9/23/25 (i)  9/26/2019   3,910,000    3,884,414    3,910,000 
RevSpring, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 10/11/25 (i)  10/5/2018   3,880,000    3,877,022    3,891,124 
Alliance Environmental Group, Unitranche, 7.00% (Libor + 6.00%), maturity 12/30/27 (i) (k)  12/30/2021   3,675,497    3,588,742    3,601,987 
Veritext, Senior Secured Initial Term Loan (First Lien), 3.46% (Libor + 3.25%), maturity 8/1/25 (i)  8/14/2018   3,121,087    3,106,891    3,104,654 
Fleetwash, Senior Secured Incremental Term Loan, 5.75% (Libor + 4.75%), maturity 10/1/24  9/25/2018   2,903,063    2,888,125    2,888,547 
CoolSys, Senior Secured Closing Date Initial Term Loan, 5.50% (Libor + 4.75%), maturity 8/11/28 (i)  8/4/2021   2,590,278    2,559,670    2,578,679 
Duff & Phelps, Senior Secured Initial Dollar Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 4/9/27 (i)  3/6/2020   2,462,500    2,443,427    2,470,032 
Service Logic, Senior Secured Closing Date Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/29/27  10/23/2020   2,364,497    2,342,229    2,346,764 
Vistage, Senior Secured Term B Loan (First Lien), 5.00% (Libor + 4.00%), maturity 2/10/25  2/6/2018   2,323,414    2,320,751    2,317,605 

 

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

 

11

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2021

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Services: Business (continued)                  
The Facilities Group, Unitranche, 6.75% (Libor + 5.75%), maturity 11/30/27 (i)  12/10/2021  $2,258,671   $2,236,084   $2,236,084 
Mediaocean, Senior Secured Initial Term Loan, 4.00% (Libor + 3.50%), maturity 12/15/28 (i)  12/9/2021   2,000,000    1,980,000    2,001,789 
TRC Companies, Senior Secured Initial Term Loan (Second Lien), 7.25% (Libor + 6.75%), maturity 12/7/29  11/19/2021   2,000,000    1,980,000    1,985,000 
ECi Software, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 11/9/27 (i)  9/17/2020   1,980,000    1,972,543    1,984,655 
Veregy, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 11/3/27  11/2/2020   1,980,000    1,928,567    1,960,200 
Sterling Backcheck, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 6/19/24  6/30/2017   1,939,630    1,939,630    1,939,630 
Insight Global, Senior Secured Closing Date Term Loan, 6.75% (Libor + 6.00%), maturity 9/22/28 (j)  9/22/2021   1,496,250    1,463,626    1,492,509 
Epic Staffing Group, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 2/5/27  2/3/2021   1,489,968    1,460,568    1,489,968 
Eliassen Group, Senior Secured Initial Term B Loan, 4.46% (Libor + 4.25%), maturity 11/5/24  10/19/2018   1,478,116    1,474,158    1,478,116 
OSG Billing Services, Senior Secured Term B Loan (First Lien), 5.50% (Libor + 4.50%), maturity 3/27/24  3/26/2018   1,444,391    1,441,757    1,429,947 
First Advantage, Senior Secured Term B-1 Loan (First Lien), 2.96% (Libor + 2.75%), maturity 1/31/27 (i)  1/23/2020   1,100,312    1,089,150    1,097,467 
Veritext, Senior Secured Initial Term Loan (Second Lien), 6.96% (Libor + 6.75%), maturity 7/31/26  8/14/2018   1,000,000    996,678    997,500 
Divisions Maintenance Group, Senior Secured Term B Loan, 5.50% (Libor + 4.75%), maturity 5/27/28 (i)  5/21/2021   997,500    988,100    997,500 
TRC Companies, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 12/8/28 (i)  11/19/2021   1,000,000    995,000    996,581 
trustaff Management, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 3/6/28 (i)  12/9/2021   997,487    994,994    994,994 
eResearch (ERT), Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.50%), maturity 2/4/27 (i)  12/1/2020   989,956    989,956    994,805 
WCG, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 1/8/27 (i)  12/13/2019   985,000    977,291    989,251 
Diversified, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 12/23/23  4/19/2019   899,347    895,961    892,602 
Secretariat International, Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.75%), maturity 12/29/28 (i)  12/16/2021   850,000    845,750    845,750 
Therma Holdings, Senior Secured Initial Term Loan (2021), 4.75% (Libor + 4.00%), maturity 12/16/27 (i)  12/11/2020   498,750    497,600    499,234 
System One, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 3/2/28 (i)  1/28/2021   497,500    495,300    497,500 
Insight Global, Senior Secured Revolving Loan, 6.75% (Libor + 6.00%), maturity 9/22/27  9/23/2021   67,089    67,089    66,921 
Alliance Environmental Group, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 12/30/27 (i) (k)  12/30/2021   -    (6,623)   - 
                   
High Tech Industries                  
Qlik, Senior Secured 2021 Refinancing Term Loan, 4.21% (Libor + 4.00%), maturity 4/26/24 (i)  3/29/2019   3,900,600    3,886,181    3,910,108 
Netsmart, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 10/1/27 (i)  9/29/2020   3,473,750    3,460,658    3,487,188 
Jaggaer, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 8/14/26 (i)  8/9/2019   3,091,100    3,087,301    3,091,058 
Ivanti Software, Senior Secured 2021 Specified Refinancing Term Loan (First Lien), 5.25% (Libor + 4.25%), maturity 12/1/27 (i)  11/20/2020   2,985,000    2,947,757    2,988,121 
Infogroup, Senior Secured Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 4/3/23 (i)  3/28/2017   2,859,887    2,849,374    2,736,884 
Planview, Senior Secured Closing Date Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 12/17/27 (i)  12/11/2020   2,632,290    2,607,384    2,637,045 
Idera, Senior Secured Term B-1 Loan (First Lien), 4.50% (Libor + 3.75%), maturity 3/2/28 (i)  6/27/2017   2,599,317    2,598,562    2,600,118 
Precisely, Senior Secured Third Amendment Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 4/24/28 (i)  3/19/2021   2,493,750    2,481,850    2,492,448 
Flexera Software, Senior Secured Term B-1 Loan (First Lien), 4.50% (Libor + 3.75%), maturity 3/3/28 (i)  2/16/2020   2,390,742    2,390,742    2,396,181 
PracticeTek, Unitranche, 5.71% (Libor + 5.50%), maturity 11/23/27 (i)(k)  11/22/2021   2,275,763    2,210,067    2,230,248 
Sophos, Senior Secured Dollar Tranche Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 3/5/27 (i)(n)  1/16/2020   1,970,012    1,877,597    1,959,343 
QuickBase, Senior Secured Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 4/2/26  3/29/2019   1,950,000    1,943,834    1,940,250 
Intermedia , Senior Secured New Term Loan (First Lien), 7.00% (Libor + 6.00%), maturity 7/21/25 (i)  7/13/2018   1,940,000    1,931,203    1,931,121 
Bomgar, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 4/18/25 (i)  5/25/2018   1,641,251    1,647,580    1,642,542 
OEConnection, Senior Secured Initial Term Loan, 4.21% (Libor + 4.00%), maturity 9/25/26 (i)  9/24/2019   1,608,578    1,603,485    1,606,567 
Digital Room, Senior Secured Closing Date Term Loan (First Lien), 5.75% (Libor + 5.25%), maturity 12/21/28 (i)  12/16/2021   1,500,000    1,485,000    1,493,953 
Navex Global, Senior Secured Initial Term Loan (First Lien), 3.46% (Libor + 3.25%), maturity 9/5/25 (i)  8/15/2018   1,451,250    1,441,800    1,446,663 
ORBCOMM, Senior Secured Closing Date Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 9/1/28 (i)  6/17/2021   997,500    992,500    999,322 
Infoblox, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 12/1/27 (i)  10/7/2020   995,000    990,862    997,873 
Veracode, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 11/5/27  10/30/2020   992,500    984,143    992,500 
Barracuda, Senior Secured 2020 Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 2/12/25 (i)  3/2/2018   987,500    987,500    991,652 
SmartBear, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.25%), maturity 3/3/28  11/20/2020   995,000    985,600    990,025 
HelpSystems, Senior Secured Seventh Amendment Refinancing Loan (First Lien), 4.75% (Libor + 4.00%), maturity 11/19/26 (i)  12/19/2019   989,981    987,772    989,981 
Imperva, Senior Secured Term Loan, 5.00% (Libor + 4.00%), maturity 1/12/26 (i)  9/23/2020   986,095    978,665    986,963 
Unison, Unitranche, 8.00% (Libor + 7.00%), maturity 6/25/26 (k)  6/25/2020   985,000    965,242    985,000 
Cloudera, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 10/8/28 (i)  8/10/2021   500,000    495,030    499,716 
DigiCert, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 4.00%), maturity 10/16/26 (i)  3/13/2020   491,250    469,316    491,532 
PracticeTek, Senior Secured Revolving Loan, 5.71% (Libor + 5.50%), maturity 11/23/27 (i)(k)  11/22/2021   -    (7,156)   - 
                   
Containers, Packaging & Glass                  
InMark, Senior Secured Incremental Term Loan, 7.00% (Libor + 6.00%), maturity 12/23/26 (i)(k)  12/10/2021   3,740,625    3,653,125    3,665,813 
Transcendia, Senior Secured 2017 Refinancing Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 5/30/24 (j)  5/11/2017   3,353,069    3,345,694    3,244,094 
Anchor Packaging, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 7/18/26 (i)  7/17/2019   2,879,678    2,868,302    2,861,680 
Brook & Whittle, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 4.00%), maturity 12/14/28 (i)  12/9/2021   2,500,000    2,477,355    2,495,651 
Packaging Coordinators, Senior Secured Term B Loan (First Lien), 4.50% (Libor + 3.75%), maturity 11/30/27 (i)  9/25/2020   2,468,813    2,460,773    2,473,420 
Paragon Films, Senior Secured Closing Date Term Loan (First Lien), 5.50% (Libor + 5.00%), maturity 12/16/28 (i)  12/15/2021   2,000,000    1,978,515    1,980,000 
Resource Label Group, Senior Secured Closing Date Initial Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 7/7/28 (i)  7/2/2021   1,879,747    1,870,648    1,881,331 
TricorBraun, Senior Secured Closing Date Initial Term Loan (First Lien), 3.75% (Libor + 3.25%), maturity 3/3/28 (i)  1/29/2021   1,828,762    1,820,245    1,819,627 
Potters Industries, Senior Secured Initial Term Loan, 4.21% (Libor + 4.00%), maturity 12/14/27 (i)  11/19/2020   1,488,750    1,476,336    1,494,204 
Technimark, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 7/7/28 (i)  6/30/2021   1,492,500    1,485,300    1,490,683 
Tekni-Plex, Senior Secured Tranche B-3 Initial Term Loan, 4.50% (Libor + 4.00%), maturity 9/15/28 (i)  7/29/2021   1,054,520    1,052,080    1,056,280 
Lacerta, Senior Secured Term Loan, 6.25% (Libor + 5.50%), maturity 12/30/26  2/8/2021   990,000    980,150    990,000 
Pregis Corporation, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 7/31/26 (i)  7/25/2019   980,000    978,319    979,185 
Tank Holding, Senior Secured 2020 Refinancing Term Loan (First Lien), 3.46% (Libor + 3.25%), maturity 3/26/26 (i)  3/21/2019   977,500    974,681    971,563 
Applied Adhesives, Senior Secured Term A Loan, 5.75% (Libor + 5.00%), maturity 3/12/27  3/12/2021   563,158    557,688    558,934 
Golden West Packaging, Senior Secured Initial Term Loan, 6.00% (Libor + 5.25%), maturity 12/1/27  11/29/2021   500,000    495,000    496,250 
Pregis Corporation, Senior Secured Third Amendment Refinancing Term Loan (First Lien), 4.50% (Libor + 4.00%), maturity 7/31/26  12/9/2020   498,750    496,681    492,516 
Applied Adhesives, Senior Secured Revolving Loan, 5.75% (Libor + 5.00%), maturity 3/12/27  3/12/2021   7,111    6,400    7,058 

 

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

 

12

 

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2021

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Banking, Finance, Insurance & Real Estate                  
Confluence, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 7/31/28 (i) (j)  7/22/2021  $4,000,000   $3,980,000   $3,980,000 
Ascensus, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 3.50%), maturity 8/2/28 (i)  11/17/2021   3,000,000    2,985,000    2,994,898 
AmeriLife, Senior Secured Initial Term Loan (First Lien), 4.21% (Libor + 4.00%), maturity 3/18/27 (i)  2/6/2020   2,462,828    2,449,570    2,460,960 
Newport Group, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 9/12/25 (i)  8/9/2018   2,421,181    2,412,499    2,419,686 
American Beacon Advisors, Senior Secured Tranche D Term Loan (Second Lien), 9.00% (Libor + 8.00%), maturity 4/30/25  10/31/2017   2,117,133    2,122,175    2,117,133 
Kestra Financial, Senior Secured Initial Term Loan, 4.46% (Libor + 4.25%), maturity 6/3/26 (i)  4/29/2019   1,955,000    1,941,773    1,949,240 
Integro Insurance Brokers, Senior Secured Initial Term Loan (First Lien), 6.75% (Libor + 5.75%), maturity 10/31/22  10/9/2015   1,930,484    1,932,912    1,867,743 
EPIC Insurance, Unitranche, 6.00% (Libor + 5.25%), maturity 9/29/28  8/27/2021   1,599,440    1,568,405    1,591,442 
Orion, Senior Secured 2021 Refinancing Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 9/24/27 (i)  8/4/2020   1,485,028    1,470,028    1,489,469 
SIAA, Unitranche, 7.25% (Libor + 6.25%), maturity 4/28/28  4/21/2021   1,172,517    1,152,547    1,172,517 
Advisor Group, Senior Secured Term B-1 Loan, 4.71% (Libor + 4.50%), maturity 7/31/26 (i)  1/31/2020   1,029,433    1,025,199    1,033,203 
LERETA, Senior Secured Initial Term Loan, 6.00% (Libor + 5.25%), maturity 7/30/28 (i)  7/27/2021   997,500    987,500    995,006 
Community Brands, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 12/2/22  5/2/2018   817,262    815,063    811,133 
Sedgwick Claims, Senior Secured Initial Term Loan, 3.46% (Libor + 3.25%), maturity 12/31/25 (i)  2/12/2020   489,899    489,422    486,901 
                   
Chemicals, Plastics & Rubber                  
DuBois Chemicals, Senior Secured Term Loan (Second Lien) - 2019, 8.71% (Libor + 8.50%), maturity 9/30/27  10/8/2019   3,000,000    2,975,353    2,985,000 
Vertellus, Senior Secured Initial Term Loan, 7.00% (Libor + 6.00%), maturity 12/22/27  12/18/2020   2,977,500    2,905,500    2,970,056 
Spectrum Plastics, Senior Secured Closing Date Term Loan (First Lien), 4.25% (Libor + 3.25%), maturity 1/31/25 (i)  1/26/2018   2,627,625    2,633,804    2,574,630 
Unifrax, Senior Secured USD Term Loan (First Lien), 3.96% (Libor + 3.75%), maturity 12/12/25 (i)  11/5/2018   2,426,216    2,407,584    2,403,249 
Boyd Corp, Senior Secured Initial Loan (Second Lien), 6.96% (Libor + 6.75%), maturity 9/6/26 (i)  8/16/2018   2,000,000    2,001,674    1,996,853 
USALCO, Senior Secured Term Loan A, 7.00% (Libor + 6.00%), maturity 10/19/27  10/26/2021   2,000,000    1,980,000    1,985,000 
Meridian Adhesives Group, Senior Secured Initial Term Loan, 4.75% (Libor + 4.00%), maturity 7/24/28  7/16/2021   2,000,000    1,980,300    1,985,000 
Q Holding, Senior Secured Term B Loan (2019), 6.00% (Libor + 5.00%), maturity 12/29/23  8/20/2019   1,955,000    1,948,615    1,935,450 
DuBois Chemicals, Senior Secured Term Loan B (First Lien), 4.71% (Libor + 4.50%), maturity 9/30/26  10/8/2019   1,777,250    1,745,650    1,763,920 
Prince Minerals, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 3/31/25 (i)  3/22/2018   962,500    959,965    959,012 
Vantage Specialty Chemicals, Senior Secured Closing Date Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 10/28/24 (i)  11/30/2018   967,254    956,813    951,552 
Polytek, Senior Secured Term Loan, 5.75% (Libor + 4.75%), maturity 9/20/24  12/23/2020   495,081    490,381    492,606 
Ascensus Specialties, Senior Secured Initial Term Loan, 5.00% (Libor + 4.25%), maturity 6/30/28 (i)  12/3/2021   498,744    488,744    488,770 
Boyd Corp, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 9/6/25 (i)  11/7/2018   492,366    465,615    487,876 
Vertellus, Senior Secured Revolving Credit Loan, 7.00% (Libor + 6.00%), maturity 12/22/25  12/18/2020   106,972    94,817    106,705 
USALCO, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 10/19/26  10/26/2021   24,194    20,968    24,012 
                   
Aerospace & Defense                  
CPI International, Senior Secured Second Amendment Incremental Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 7/26/24  10/1/2019   5,222,307    5,181,858    5,222,307 
HDT Global, Senior Secured Initial Term Loan, 6.50% (Libor + 5.75%), maturity 7/8/27  6/30/2021   3,412,500    3,307,500    3,378,375 
StandardAero, Senior Secured 2020 Term B-1 Loan, 3.71% (Libor + 3.50%), maturity 4/6/26 (i)  1/24/2019   3,271,155    3,264,358    3,197,669 
Consolidated Precision Products, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 7.75%), maturity 4/30/26  5/10/2018   2,000,000    2,007,007    1,920,000 
Whitcraft, Unitranche, 7.00% (Libor + 6.00%), maturity 4/3/23  3/6/2020   1,962,398    1,954,769    1,918,244 
StandardAero, Senior Secured 2020 Term B-2 Loan, 3.71% (Libor + 3.50%), maturity 4/6/26 (i)  1/24/2019   1,758,685    1,755,031    1,719,177 
Tronair, Senior Secured Initial Term Loan (First Lien), 6.75% (Libor + 5.75%) cash, 0.50% PIK, maturity 9/8/23  9/30/2016   1,372,158    1,369,408    1,325,504 
Peraton, Senior Secured Term B Loan (First Lien), 4.50% (Libor + 3.75%), maturity 2/1/28 (i)  2/23/2021   992,500    988,100    995,090 
Amentum, Senior Secured Tranche 2 Term Loan (First Lien), 5.50% (Libor + 4.75%), maturity 1/29/27 (i)  10/29/2020   992,500    975,947    994,823 
Amentum, Senior Secured Tranche 1 Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 1/29/27 (i)  1/24/2020   985,000    960,031    974,961 
API Technologies, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 5/9/26  1/15/2020   979,900    956,544    962,751 
BlueHalo, Unitranche, 7.00% (Libor + 6.00%), maturity 10/31/25  11/17/2021   499,027    491,527    495,284 
Consolidated Precision Products, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 4/30/25 (i)  7/18/2019   487,900    486,144    470,917 
Novaria Group, Senior Secured Initial Term Loan, 6.50% (Libor + 5.50%), maturity 1/27/27  1/24/2020   481,818    477,971    466,159 
BlueHalo, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 10/31/25  11/17/2021   25,305    23,815    25,115 
                   
Capital Equipment                  
FloWorks, Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 5.00%), maturity 12/27/28 (i)  12/27/2021   4,000,000    3,850,000    3,960,000 
Plaskolite, Senior Secured 2021-1 Refinancing Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 12/15/25 (i)  12/12/2018   3,880,675    3,836,318    3,850,705 
MW Industries, Senior Secured 2018 New Term Loan (First Lien), 3.96% (Libor + 3.75%), maturity 9/30/24 (i)  4/20/2018   2,037,185    2,037,185    2,011,277 
Excelitas, Senior Secured Initial Term Loan (Second Lien), 8.50% (Libor + 7.50%), maturity 12/1/25 (i)  2/19/2020   1,500,000    1,482,834    1,506,460 
Edward Don, Senior Secured Initial Term Loan, 5.25% (Libor + 4.25%), maturity 7/2/25  6/26/2018   1,370,943    1,367,973    1,302,395 
Flow Control Group, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 3/31/28 (i)  3/17/2021   1,184,544    1,181,906    1,184,320 
TriMark, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 8/28/24  6/13/2018   973,447    902,470    759,288 
Culligan, Senior Secured Initial Term B Loan, 4.50% (Libor + 4.00%), maturity 7/31/28 (i)  6/17/2021   500,000    497,500    502,107 
Restaurant Technologies, Senior Secured Initial Loan (Second Lien), 6.71% (Libor + 6.50%), maturity 10/1/26  2/11/2020   500,000    503,008    498,750 
Infinite Electronics, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 3/2/28 (i)  2/24/2021   497,500    496,400    496,938 
Duravant, Senior Secured Incremental Amendment No. 5 Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 5/19/28 (i)  3/5/2020   492,424    492,424    492,387 
Excelitas, Senior Secured Initial USD Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/2/24 (i)  10/24/2018   483,627    486,011    485,701 
Flow Control Group, Senior Secured Amendment No. 1 Delayed Draw Term Loan (First Lien), 4.25% (Libor + 3.75%), maturity 3/31/28 (i)  7/27/2021   421,493    420,243    421,414 

 

13

 

 Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2021

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Services: Consumer                  
A Place For Mom, Senior Secured Term Loan, 4.75% (Libor + 3.75%), maturity 2/10/26  7/28/2017  $2,611,593   $2,611,369   $2,565,890 
Weld North, Senior Secured 2021 Term Loan, 4.75% (Libor + 3.75%), maturity 12/21/27 (i)  12/21/2020   2,420,419    2,420,419    2,424,416 
Smart Start, Senior Secured Term B Loan (First Lien), 5.00% (Libor + 4.50%), maturity 12/16/28 (i)  12/10/2021   2,000,000    1,980,000    1,980,000 
Smart Start, Senior Secured Term B Loan (Second Lien), 8.25% (Libor + 7.75%), maturity 12/16/29 (i)  12/10/2021   2,000,000    1,960,000    1,960,000 
Mister Car Wash, Senior Secured Initial Term Loan (First Lien), 3.21% (Libor + 3.00%), maturity 5/14/26 (i)  5/8/2019   1,532,172    1,529,857    1,527,120 
FullBloom, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 12/15/28 (i)  12/10/2021   1,500,000    1,485,000    1,485,000 
Ned Stevens, Senior Secured Term A Loan, 6.50% (Libor + 5.50%), maturity 9/30/25 (k)  9/30/2019   1,405,229    1,388,225    1,405,229 
Teaching Strategies, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.25%), maturity 8/31/28  8/19/2021   1,000,000    990,060    1,000,000 
Spring Education, Senior Secured Initial Term Loan (First Lien), 4.46% (Libor + 4.25%), maturity 7/30/25 (i)  7/26/2018   967,500    966,117    941,386 
Aegis Sciences, Senior Secured Initial Term Loan (2018) (First Lien), 6.50% (Libor + 5.50%), maturity 5/9/25 (i)  5/4/2018   718,618    712,798    710,570 
Ned Stevens, Senior Secured Revolving Loan, 6.50% (Libor + 5.50%), maturity 9/30/25 (k)  9/30/2019   -    (2,614)   - 
                   
Transportation: Cargo                  
Evans Network, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 8/19/28 (i)  8/6/2021   3,664,286    3,624,286    3,652,180 
Odyssey Logistics & Technology , Senior Secured New Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 10/12/24 (i)  11/20/2018   3,571,843    3,569,083    3,546,929 
Capstone Logistics, Senior Secured Closing Date Term Loan (First Lien), 5.75% (Libor + 4.75%), maturity 11/12/27  11/12/2020   2,117,015    2,097,983    2,111,723 
AIT Worldwide Logistics, Senior Secured Initial Term Loan (First Lien), 5.50% (Libor + 4.75%), maturity 4/6/28 (i)  12/9/2021   1,995,000    1,990,013    1,995,707 
Worldwide Express, Senior Secured Initial Term Loan (First Lien), 5.00% (Libor + 4.25%), maturity 7/26/28 (i)  7/23/2021   1,500,000    1,488,750    1,505,619 
Omni Logistics, Senior Secured Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 12/30/26  11/24/2021   1,109,719    1,098,000    1,101,396 
Omni Logistics, Senior Secured Revolving Credit Loan (First Lien), 6.00% (Libor + 5.00%), maturity 12/30/25  11/24/2021   28,459    27,320    28,245 
                   
Beverage, Food & Tobacco                  
Bettcher Industries, Senior Secured Initial Term Loan (Second Lien), 7.75% (Libor + 7.25%), maturity 12/14/29 (i)  12/13/2021   2,500,000    2,475,000    2,475,000 
Sovos Brands, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.75%), maturity 6/8/28 (i)  6/8/2021   2,033,001    2,033,001    2,035,909 
Bettcher Industries, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 4.00%), maturity 12/14/28 (i)  12/13/2021   2,000,000    1,980,000    1,980,000 
Kettle Cuisine, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 8/25/25  8/22/2018   1,935,000    1,930,127    1,905,975 
Dessert Holdings, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 4.00%), maturity 6/9/28  6/7/2021   1,496,250    1,485,300    1,485,028 
Monogram Foods, Senior Secured Cov-Lite Term Loan B, 4.50% (Libor + 4.00%), maturity 8/28/28  8/13/2021   1,000,000    990,000    992,500 
                   
Automotive                  
Highline, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 11/9/27 (i)  10/29/2020   2,842,159    2,776,983    2,819,912 
Rough Country, Senior Secured Initial Term Loan (First Lien), 4.25% (Libor + 3.50%), maturity 7/28/28 (i)  7/26/2021   1,995,000    1,990,000    1,995,000 
Truck Hero, Senior Secured Initial Term Loan, 4.00% (Libor + 3.25%), maturity 1/31/28 (i)  1/20/2021   1,488,750    1,488,750    1,485,737 
Safe Fleet, Senior Secured Tranche B-1 Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 2/3/25  11/28/2018   967,500    950,885    960,244 
IXS, Senior Secured Initial Term Loan, 5.00% (Libor + 4.25%), maturity 3/5/27 (i)  2/27/2020   794,417    792,552    782,495 
Wheel Pros, Senior Secured Initial Term Loan (First Lien), 5.25% (Libor + 4.50%), maturity 5/11/28 (i)  4/23/2021   498,750    494,350    498,850 
Safe Fleet, Senior Secured Initial Term Loan (Second Lien), 7.75% (Libor + 6.75%), maturity 2/2/26  2/7/2020   500,000    491,417    496,250 
                   
Construction & Building                  
Tangent, Senior Secured Closing Date Term Loan (First Lien), 4.96% (Libor + 4.75%), maturity 11/30/24 (i)  10/2/2019   1,792,819    1,783,355    1,774,891 
PlayPower, Senior Secured Initial Term Loan, 5.71% (Libor + 5.50%), maturity 5/8/26  5/10/2019   1,756,917    1,756,917    1,686,640 
PlayCore, Senior Secured Initial Term Loan (Second Lien), 8.75% (Libor + 7.75%), maturity 9/29/25  2/7/2020   1,500,000    1,475,188    1,500,000 
PlayCore, Senior Secured Initial Term Loan (First Lien), 4.75% (Libor + 3.75%), maturity 9/30/24 (i)  9/18/2017   956,924    955,673    955,693 
CHI Overhead Doors, Senior Secured Third Amendment Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 7/31/25 (i)  7/28/2015   615,739    617,179    617,221 
Acuren, Senior Secured Initial Term Loan, 4.21% (Libor + 4.00%), maturity 1/23/27  1/17/2020   479,011    477,104    479,011 
Hoffman Southwest, Senior Secured Initial Term Loan, 6.50% (Libor + 5.50%), maturity 8/14/23  5/16/2019   446,460    446,911    441,437 
                   
Wholesale                  
Carlisle FoodService, Senior Secured Initial Term Loan (First Lien), 4.00% (Libor + 3.00%), maturity 3/20/25  3/16/2018   3,849,619    3,850,157    3,806,310 
PetroChoice, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 8/19/22  9/2/2015   1,875,184    1,869,627    1,814,241 
ABB Optical, Senior Secured Initial Term Loan (First Lien), 6.00% (Libor + 5.00%), maturity 6/15/23  6/14/2016   1,424,830    1,425,559    1,389,209 
                   
Hotels, Gaming & Leisure                  
Aimbridge, Senior Secured Initial Term Loan (2019) (First Lien), 3.96% (Libor + 3.75%), maturity 2/2/26 (i)  1/17/2019   2,922,725    2,915,974    2,871,577 
Northstar, Senior Secured Term Loan, 6.75% (Libor + 6.25%) cash, 1.00% PIK, maturity 6/7/24  5/8/2017   1,366,260    1,366,260    1,321,856 
Auto Europe, Senior Secured Initial Dollar Term Loan, 6.00% (Libor + 5.00%), maturity 10/21/23  10/19/2016   1,119,231    1,115,110    895,385 
                   
Consumer Goods: Non-durable                  
Hoffmaster Group, Senior Secured Tranche B-1 Term Loan (First Lien), 5.00% (Libor + 4.00%), maturity 11/21/23 (i)  11/9/2016   2,393,770    2,389,338    2,245,348 
Augusta Sportswear Group, Senior Secured Initial Term Loan, 5.50% (Libor + 4.50%), maturity 10/26/23 (j)  11/2/2016   2,029,843    2,023,255    1,994,321 
Badger Sportswear, Senior Secured Initial Term Loan (First Lien), 5.75% (Libor + 4.50%), maturity 9/11/23  9/29/2016   1,881,139    1,875,639    1,857,624 
Hoffmaster Group, Senior Secured Initial Term Loan (Second Lien), 10.50% (Libor + 9.50%), maturity 11/21/24  2/7/2020   1,250,000    1,250,000    1,209,375 

 

14

 

 

Audax Credit BDC Inc.

Schedule of Investments (Continued)

As of December 31, 2021

(Expressed in U.S. Dollars)

 

Portfolio Investments (a) (b) (c) (d) (e) (f)  Acquisition
Date		  Par   Cost   Value 
BANK LOANS: NON-CONTROL/NON-AFFILIATE INVESTMENTS(h) (Continued):                  
                   
Media: Diversified & Production                  
Cast & Crew, Senior Secured Initial Term Loan (First Lien), 3.71% (Libor + 3.50%), maturity 2/9/26 (i)  1/16/2019  $2,924,905   $2,909,965   $2,928,921 
                   
Environmental Industries                  
Denali Water Solutions, Senior Secured Closing Date Term Loan, 5.00% (Libor + 4.25%), maturity 3/27/28  3/18/2021   1,990,000    1,970,000    1,967,613 
Keter Environmental Services, Unitranche, 7.50% (Libor + 6.50%), maturity 10/29/27 (i)  11/5/2021   500,000    495,000    495,000 
Keter Environmental Services, Unitranche, 7.50% (Libor + 6.50%), maturity 10/29/27 (i)  11/5/2021   4,560    4,514    4,514 
                   
Metals & Mining                  
Dynatect, Senior Secured Term B Loan, 5.50% (Libor + 4.50%), maturity 9/30/22 (i)  8/16/2019   1,937,063    1,926,533    1,917,692 
                   
Utilities: Electric                  
Systems Control, Senior Secured Initial Term Loan, 5.75% (Libor + 4.75%), maturity 3/28/25  6/15/2021   1,490,973    1,488,636    1,472,336 
                   
Forest Products & Paper                  
Loparex, Senior Secured Initial Term Loan (First Lien), 4.71% (Libor + 4.50%), maturity 7/31/26  7/29/2019   1,466,250    1,455,917    1,462,584 
                   
Retail                  
Varsity Brands, Senior Secured Initial Term Loan (First Lien), 4.50% (Libor + 3.50%), maturity 12/16/24 (i)  10/17/2018   967,287    971,481    952,067 
StubHub, Senior Secured USD Term B Loan, 3.71% (Libor + 3.50%), maturity 2/12/27 (i)  1/31/2020   490,000    488,093    481,558 
                   
Media: Advertising, Printing & Publishing                  
Ansira, Unitranche, 7.50% (Libor + 6.50%) PIK, maturity 12/20/24  12/20/2016   2,171,946    2,166,066    1,346,607 
                   
Utilities: Water                  
Aegion, Senior Secured Initial Term Loan, 5.50% (Libor + 4.75%), maturity 5/17/28  4/1/2021   997,500    992,800    995,006 
                   
Energy: Electricity                  
Franklin Energy, Senior Secured Term B Loan (First Lien), 4.21% (Libor + 4.00%), maturity 8/14/26  8/14/2019   977,500    975,628    962,838 
                   
Consumer Goods: Durable                  
Careismatic Brands, Senior Secured Initial Term Loan (First Lien), 3.75% (Libor + 3.25%), maturity 1/6/28 (i)  1/22/2021   497,500    496,400    496,361 
Total Bank Loans          $403,106,122   $401,708,017 
                   
                   
EQUITY AND PREFERRED SHARES:  NON-CONTROL/NON-AFFILIATE INVESTMENTS- (0.4%)(g)(h):                  
                   
High Tech Industries                  
PracticeTek, Class A Units (318,350 Class A units, Fair value of $348,282)(k)(l)(o)  11/22/2021       $348,282   $348,282 
                   
Services: Business                  
Alliance Environmental Group, A-1 Preferred Units (331,126 A-1 Preferred Units, Fair value of $331,126)(k)(l)(p)  12/30/2021        331,126    331,126 
                   
Services: Consumer                  
Ned Stevens, Class B Common Units (261,438 Common B units, Fair value of $280,604)(k)(l)(q)(t)  9/30/2019        261,438    280,604 
                   
Healthcare & Pharmaceuticals                  
Alpaca, Class A Units (45,746 Class A Units, Fair value of $205,742)(k)(l)(r)(t)  4/19/2019        80,512    205,742 
                   
Chemicals, Plastics & Rubber                  
Vertellus, Series A Units (1,651 Series A units, Fair value of $180,603)(l)(m)(t)  12/22/2020        165,138    180,603 
                   
Total Equity and Preferred Shares          $1,186,496   $1,346,357 
                   
Total Portfolio Investments(u)          $404,292,618   $403,054,374 

 

(a)All companies are located in the United States of 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 investments are exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be “restricted securities” under the Securities Act.
(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.
(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).
(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)All or portion of this security has an open position related to short-term borrowings, as described in footnote 8.
(k)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.
(l)Investment is non-income producing.
(m)The borrower for UDG Healthcare, Congachant Limited, is located in Ireland.
(n)The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom.
(o)Represents an investment in APD Ptek Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(p)Represents an investment in APD AEG Equity Blocker, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(q)Represents an investment in APD NS Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(r)Represents an investment in APD ALP Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(s)Represents an investment in ADP VERT Equity, L.P., a holding company, made through an affiliated equity aggregator vehicle.
(t)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.
(u)At December 31, 2021, the cost of investments for income tax purposes was $404,292,618, the gross unrealized depreciation for federal tax purposes was $3,278,981, the gross unrealized appreciation for federal income tax purposes was $2,040,737, and the net unrealized depreciation was $1,238,244.

 

15

 

 

 

Audax Credit BDC Inc.

Notes to Financial Statements

March 31, 2022

(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, and intends to comply with the requirements to qualify annually, 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 was 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 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.

 

16

 

 

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 March 31, 2022 and December 31, 2021. At such dates, cash was not subject to any restrictions on withdrawal.

 

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 (the “Board of Directors”), with the assistance of the Company’s Audit Committee (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,” (“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.

 

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.

 

17

 

 

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 in accordance with 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 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. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available. 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. Additionally, as a part of the Company’s valuation process, the Adviser may employ the services of one or more independent valuation firms engaged by the Company;

 

(ii) Preliminary valuation conclusions are documented and discussed with the Company’s senior management and members of the Adviser’s valuation team;

 

(iii) The Audit Committee reviews the assessments of the Adviser or independent valuation firm (to the extent applicable) and provides the Board of Directors with recommendations with respect to the fair value of the investments in the Company’s portfolio; and

 

(iv) The Board of Directors discusses the valuation recommendations of the 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, the independent valuation firm (to the extent applicable) and in accordance with the Company’s valuation policy.

 

18

 

 

The 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.

 

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 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 (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.

 

In addition, on December 3, 2020, the SEC announced that it adopted Rule 2a-5 under the 1940 Act, which establishes an updated regulatory framework for determining fair value in good faith for purposes of the 1940 Act. The new rule clarifies how fund boards can satisfy their valuation obligations in light of recent market developments. The rule permits boards, subject to board oversight and certain other conditions, to designate certain parties to perform the fair value determinations. As of March 31, 2022, no changes to the valuation policy have occurred as a result of this new rule.

  

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

 

19

 

 

Interest Income Recognition

Interest income, adjusted for amortization of premium, acquisition costs, and amendment fees and the accretion of original issue discount (“OID”), are 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. As of March 31, 2022 and December 31, 2021, the Company did not hold any investment on non-accrual.

 

The Company currently holds loans in the portfolio that contain OID and 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.

 

As of March 31, 2022, the Company held 236 investments in loans with OID. The Company accrued OID income of $144,919 for the three months ended March 31, 2022. The unamortized balance of OID on debt investments as of March 31, 2022 totaled $3,236,618. As of December 31, 2021, the Company held 231 investments in loans with OID. The Company accrued OID income of $118,551 for the three months ended March 31, 2021. The unamortized balance of OID investments as of December 31, 2021, totaled $3,028,962.

 

As of March 31, 2022, the Company held three investments which had a PIK interest component. The Company recorded $61,319 in PIK interest income for the three months ended March 31, 2022. As of March 31, 2021, the Company held three investments which had a PIK interest component. The Company recorded $40,499 in PIK interest income for the three months ended March 31, 2021.

 

As of March 31, 2022 and December 31, 2021, the Company held $11,581,409 and $11,058,796 in cash and cash equivalents, respectively. For the three months ended March 31, 2022 and 2021 the Company earned $384 and $274, 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 and amendment fees upon receipt of cash or as soon as the Company becomes aware of the prepayment or amendment.

 

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, amendment fees and dividend income are accrued in other income in the accompanying statements of operations.

 

For the three months ended March 31, 2022 and 2021, the Company accrued $38,118 and $47,514 of other income, respectively, related to amendment fees.

 

20

 

 

New Accounting Pronouncements

In March 2020, FASB issued Accounting Standards Update No. 2020-04 (“ASU 2020-04”), “Reference Rate Reform (Topic 848)”. In response to concerns about structural risks of interbank offered rates, and particularly the risk of cessation of the London Interbank Offered Rate (“LIBOR”), regulators have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. ASU 2020-04 provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. ASU 2020-04 is elective and applies to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating the impact of the guidance.

 

Note 3. Investments

 

Fair Value

 

In accordance with ASC 820, the fair value of the Company’s investments 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 March 31, 2022, $198,328,921 of the Company’s investments were valued using unobservable inputs, and $220,793,521 were valued using observable inputs. During the three months ended March 31, 2022, $73,772,933 transferred into Level 3 due to a decrease in observable prices in the market and $25,475,053 transferred out of Level 3 due to the liquidity in the market and transparency of inputs.

 

As of December 31, 2021, $153,189,910 of the Company’s investments were valued using unobservable inputs, and $249,864,464 were valued using observable inputs. During the year ended December 31, 2021, $12,547,774 transferred into Level 3 due to a decrease in observable prices in the market and $42,450,172 transferred out of Level 3 due to the liquidity in the market and transparency of inputs

 

The following table presents the Company’s investments carried at fair value as of March 31, 2022 and December 31, 2021, by caption on the Company’s accompanying statements of assets and liabilities and by security type.

 

   Assets at Fair Value as of March 31, 2022 
   Level 1   Level 2   Level 3   Total 
First lien debt  $-   $214,844,615   $177,892,307   $392,736,921 
Second lien debt   -    5,444,224    19,167,758    24,611,983 
Equity and Preferred Shares   -    504,682    1,268,856    1,773,538 
Total  $-   $220,793,521   $198,328,921   $419,122,442 

 

   Assets at Fair Value as of December 31, 2021 
   Level 1   Level 2   Level 3   Total 
First lien debt  $-   $239,920,774   $137,142,045   $377,062,819 
Second lien debt   -    9,943,690    14,701,508    24,645,198 
Equity and Preferred Shares   -    -    1,346,357    1,346,357 
Total  $-   $249,864,464   $153,189,910   $403,054,374 

 

21

 

 

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 March 31, 2022. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

 

   Fair   Valuation  Unobservable     Weighted
   Value   Technique    Inputs (1)    Range (2)    Average (3)
                 
First lien debt  $170,073,657    Matrix Pricing   Senior Leverage  0.78x - 11.80x  5.25x
            Total Leverage  0.78x - 16.06x  6.11x
            Interest Coverage  (1.00)x - 13.32x  2.66x
            Debt Service Coverage  (0.92)x - 11.85x  2.12x
            TEV Coverage  0.76x - 12.28x  2.47x
            Liquidity  25.36% - 330.00%  132.80%
            Spread Comparison  300bps - 700bps  463bps
                  
    7,818,650    Market Analysis   Senior Leverage  4.82x - 28.11x  15.80x
            Total Leverage  4.82x - 35.36x  18.00x
            Interest Coverage  0.36x - 2.57x  1.06x
            Debt Service Coverage  0.29x - 2.24x  0.78x
            TEV Coverage  0.29x - 3.23x  0.95x
            Liquidity  35.79% - 220.79%  86.76%
            Spread Comparison  350bps - 650bps  560bps
                  
Second lien debt   19,167,758    Matrix Pricing   Senior Leverage  4.05x - 11.68x  6.91x
            Total Leverage  4.05x - 11.68x  6.91x
            Interest Coverage  0.67x - 5.98x  2.83x
            Debt Service Coverage  0.53x - 4.66x  2.24x
            TEV Coverage  0.68x - 3.08x  1.72x
            Liquidity  56.63% - 353.33%  153.21%
            Spread Comparison  650bps - 950bps  774bps
                  
Total  $197,060,065             

  

(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 $1,268,856of debt, 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.

 

22

 

 

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, 2021. The weighted average calculations in the table below are based on the fair value balances for all debt related calculations for the particular input.

 

             As of December 31, 2021
   Fair   Valuation  Unobservable     Weighted
    Value   Technique  Inputs (1)  Range (2)  Average (3)
First lien debt  $131,493,405   Matrix Pricing  Senior Leverage  2.66x - 19.28x  5.48x
           Total Leverage  2.66x - 19.28x  6.35x
           Interest Coverage  (1.00)x - 7.01x  2.53x
           Debt Service Coverage  (0.92)x - 5.85x  2.03x
           TEV Coverage  0.48x - 6.32x  2.44x
           Liquidity  28.32% - 871.75%  140.19%
           Spread Comparison  300bps - 700bps  468bps
                 
Second lien debt   14,701,508   Matrix Pricing  Senior Leverage  4.05x - 11.68x  7.04x
           Total Leverage  4.05x - 11.68x  7.04x
           Interest Coverage  0.67x - 5.98x  2.84x
           Debt Service Coverage  0.53x - 4.66x  2.24x
           TEV Coverage  0.68x - 3.08x  1.70x
           Liquidity  56.63% - 353.33%  168.01%
           Spread Comparison  650bps - 950bps  782bps
                  
Total  $146,194,913             

 

(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 $6,994,997 of debt, equity and preferred shares which management values using other unobservable inputs, such as EBITDA and EBITDA multiples, as well as other qualitative information, including company specific information.

 

Fair value measurements can be sensitive to changes in one or more of the valuation inputs. Changes in market yields, discounts rate, leverage, 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 an increase/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.

 

23

 

 

 

The following tables provide the changes in fair value, broken out by security type, during the three months ended March 31, 2022 and 2021 for all investments for which the Company determines fair value using unobservable (Level 3) factors.

 

Three Months Ended March 31, 2022  First lien debt   Second lien debt   Equity and Preferred Shares   Total 
Fair Value as of December 31, 2021  $137,142,045   $14,701,508   $1,346,357   $153,189,910 
Transfers into Level 3   69,337,933    4,435,000    -    73,772,933 
Transfers out of Level 3   (25,475,053)   -    -    (25,475,053)
Total gains:                    
Net realized gain(a)     108,706    8,440    107,938    225,084 
Net unrealized (depreciation) appreciation(b)   (258,207)   15,811    3,011    (239,385)
New investments, repayments and settlements:(c)                    
Purchases     3,211,396    500,000    -    3,711,396 
Settlements/repayments   (5,951,979)   (500,000)   -    (6,451,979)
Net amortization of premiums, PIK, discounts and fees   137,866    6,999    -    144,865 
Sales   (360,400)   -    (188,450)   (548,850)
Fair Value as of March 31, 2022  $177,892,307   $19,167,758   $1,268,856   $198,328,921 

 

(a)Included in net realized gain on the accompanying Statement of Operations for the three months ended March 31, 2022.
(b)Included in net change in unrealized appreciation on the accompanying Statement of Operations for the three months ended March 31, 2022.

(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.

 

Three Months Ended March 31, 2021  First lien debt   Second lien debt   Equity and Preferred Shares   Total 
Fair Value as of December 31, 2020  $170,910,171   $27,290,845   $799,189   $199,000,205 
Transfers into Level 3   23,210,180    -    165,138    23,375,318 
Transfers out of Level 3   (43,035,264)   (3,596,250)   -    (46,631,514)
Total gains:                    
Net realized gain(a)    52,639    123    -    52,762 
Net unrealized appreciation (depreciation)(b)   217,423    29,877    (42,039)   205,261 
New investments, repayments and settlements:(c)                    
Purchases   4,460,138    1,470,000    19,536    5,949,674 
Settlements/repayments   (6,783,665)   (1,000,000)   -    (7,783,665)
Net amortization of premiums, PIK, discounts and fees   96,926    5,000    -    101,926 
Sales   -    -    -    - 
Fair Value as of March 31, 2021  $149,128,548   $24,199,595   $941,824   $174,269,967 

 

(a)Included in net realized gain on the accompanying Statement of Operations for the three months ended March 31, 2021.
(b)Included in net change in unrealized depreciation on the accompanying Statement of Operations for the three months ended March 31, 2021.

(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.

 

The change in unrealized value attributable to investments still held at March 31, 2022 and 2021 was $270,973 and $200,397, respectively.

 

Investment Activities

 

The Company held a total of 242 investments with an aggregate fair value of $419,122,442 as of March 31, 2022. During the three months ended March 31, 2022, the Company invested in 22 new investments for a combined $30,097,098 and in existing investments for a combined $3,471,687. The Company also received $12,318,646 in repayments from investments and $4,047,932 from investments sold during the three months ended March 31, 2022.

 

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The Company held a total of 251 investments with an aggregate fair value of $403,054,374 as of December 31, 2021. During the three months ended March 31, 2021, the Company invested in 24 new investments for a combined $24,915,797 and in existing investments for a combined $6,842,697. The Company also received $16,092,791 in repayments from investments and $5,113,536 from investments sold during the three months ended March 31, 2021.

 

Investment Concentrations

 

As of March 31, 2022, the Company’s investment portfolio consisted of investments in 223 companies located in 36 states across 26 different industries, with an aggregate fair value of $419,122,442. The five largest investments at fair value as of March 31, 2022 totaled $22,432,350, or 5.35%, of the Company’s total investment portfolio as of such date. As of March 31, 2022, the Company’s average investment was $1,629,061 at cost.

 

As of December 31, 2021, the Company’s investment portfolio consisted of investments in 215 companies located in 35 states across 26 different industries, with an aggregate fair value of $403,054,374. The five largest investments at fair value as of December 31, 2021 totaled $22,205,933, or 5.51%, of the Company’s total investment portfolio as of such date. As of December 31, 2021, the Company’s average investment was $1,610,728 at cost.

 

The following table outlines the Company’s investments by security type as of March 31, 2022 and December 31, 2021:

 

   March 31, 2022   December 31, 2021 
   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  $395,622,536    93.77%  $392,736,921    93.71%  $378,430,188    93.60%  $377,062,819    93.55%
Second lien debt   24,693,647    5.85%   24,611,983    5.87%   24,675,934    6.10%   24,645,198    6.11%
Total Debt Investments   420,316,183    99.62%   417,348,904    99.58%   403,106,122    99.71%   401,708,017    99.67%
Equity and Preferred Shares   1,610,666    0.38%   1,773,538    0.42%   1,186,496    0.29%   1,346,357    0.33%
Total Equity Investments   1,610,666    0.38%   1,773,538    0.42%   1,186,496    0.29%   1,346,357    0.33%
Total Investments  $421,926,849    100.00%  $419,122,442    100.00%  $404,292,618    100.00%  $403,054,374    100.00%

 

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Investments at fair value consisted of the following industry classifications as of March 31, 2022 and December 31, 2021:

 

   March 31, 2022   December 31, 2021 
Industry  Fair Value   Percentage of
Total Investments		   Fair Value   Percentage of
Total Investments		 
Healthcare & Pharmaceuticals  $74,942,396    17.86%  $76,579,770    19.01%
Services: Business   68,688,958    16.39    63,977,738    15.87 
High Tech Industries   54,020,118    12.89    49,862,684    12.37 
Containers, Packaging & Glass   29,283,935    6.99    28,958,289    7.18 
Banking, Finance, Insurance & Real Estate   26,210,862    6.25    25,369,331    6.29 
Aerospace & Defense   24,905,206    5.94    24,066,376    6.03 
Chemicals, Plastics & Rubber   24,133,228    5.76    24,290,294    5.97 
Capital Equipment   23,375,548    5.58    17,471,742    4.33 
Services: Consumer   15,853,434    3.78    16,280,215    4.04 
Transportation: Cargo   14,779,857    3.53    13,941,799    3.46 
Beverage, Food & Tobacco   10,869,355    2.59    10,874,412    2.70 
Construction & Building   9,167,118    2.19    7,454,893    2.24 
Automotive   7,904,182    1.89    9,038,488    1.85 
Consumer Goods: Non-durable   7,365,449    1.76    7,306,668    1.81 
Environmental Industries   6,863,576    1.64    2,467,127    1.26 
Wholesale   5,560,743    1.33    7,009,760    0.61 
Media: Diversified & Production   2,900,594    0.69    2,928,921    0.73 
Hotels, Gaming & Leisure   2,200,023    0.52    5,088,818    1.74 
Metals & Mining   1,927,229    0.46    1,917,692    0.48 
Utilities: Electric   1,487,100    0.35    1,472,336    0.37 
Forest Products & Paper   1,458,844    0.35    1,462,584    0.36 
Retail   1,410,366    0.34    1,433,625    0.36 
Media: Advertising, Printing & Publishing   1,378,356    0.33    1,346,607    0.33 
Utilities: Water   992,513    0.24    995,006    0.25 
Energy: Electricity   960,375    0.23    962,838    0.24 
Consumer Goods: Durable   483,077    0.12    496,361    0.12 
   $419,122,442    100.00%  $403,054,374    100.00%

 

Investments at fair value were included in the following geographic regions of the United States as of March 31, 2022 and December 31, 2021:

 

   March 31, 2022   December 31, 2021 
Geographic Region  Fair Value   Percentage of
Total
Investments		   Fair Value   Percentage of
Total
Investments		 
Northeast  $104,073,711    24.83%  $96,521,842    23.95%
Midwest   91,724,159    21.88    86,519,372    21.47 
West   60,888,098    14.53    60,016,533    14.89 
Southeast   57,405,234    13.70    57,007,985    14.14 
Southwest   53,597,625    12.79    57,181,529    14.19 
East   39,084,706    9.33    33,945,083    8.42 
Northwest   5,029,901    1.20    4,501,322    1.12 
South   4,742,932    1.13    4,767,241    1.18 
Other(a)   2,576,076    0.61    2,593,467    0.64 
Total Investments  $419,122,442    100.00%  $403,054,374    100.00%

 

(a) The borrower for Sophos, Surf Holdings S.a.r.l., is located in United Kingdom. The borrower for UDG Healthcare, Congachant Limited, is located in Ireland.

 

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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 March 31, 2022:

 

For the Fiscal Years Ending December 31:  Amount 
2022  $8,943,625 
2023   21,577,690 
2024   48,185,677 
2025   70,806,944 
2026   2,832,182 
Thereafter   271,206,683 
Total contractual repayments   423,552,801 
Equity investments     
Adjustments to cost basis on debt investments(a)   (3,236,618)
Total Cost Basis of Debt Investments Held at March 31, 2022:  $420,316,183 

 

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

 

COVID-19 Developments

 

During the three months ended March 31, 2022 and subsequent to March 31, 2022, the COVID-19 pandemic has had a significant impact on the U.S. economy. Certain of the Company's portfolio companies have been adversely impacted by the effects of the COVID-19 pandemic, including by the effects of related shutdowns in Shanghai and elsewhere in China, which have resulted in a material adverse impact on the Company's net asset value, net investment income, the fair value of its portfolio investments, its financial condition and the results of operations and financial condition of the Company's portfolio companies and may continue to adversely affect the Company’s future net asset value, net investment income, the fair value of its portfolio investments, its financial condition and the results of operations and financial condition of the Company's portfolio companies.

 

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 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.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.

 

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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 months ended March 31, 2022, the Company recorded base management fees of $1,038,439 and waivers to the base management fees of $363,454, as set forth within the accompanying statements of operations. For the three months ended March 31, 2021, the Company recorded base management fees of $914,050 and waivers to the base management fees of $319,917, as set forth within the accompanying statements of operations.

 

Incentive Fee

The Incentive Fee has two parts, as follows: the first part of the Incentive Fee 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 (as defined below) 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 debt instruments with PIK interest,  OID securities and 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 1.0% 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 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 Adviser.

 

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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 10.0% (instead of 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 15.0% of the Company’s realized capital gains, if any, on a cumulative basis from June 16, 2015, the effective date of the Company’s registration statement on Form 10 (file no. 000-55426), 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 10.0% (instead of 15.0%).

 

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 12.0% in any calendar quarter.

 

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

 

Under the Investment Advisory Agreement, we do not pay any Capital Gains Incentive Fee in respect of unrealized capital appreciation in our portfolio.  However, under U.S. generally accepted accounting principles, or GAAP, we are required to accrue for the Capital Gain Incentive Fee on a quarterly basis as if such unrealized capital appreciation were realized in full at the end of each period. If the Capital Gain Incentive Fee Base, adjusted as required by GAAP to include unrealized appreciation, is positive at the end of a period, then GAAP and the terms of the Investment Advisory Agreement require us to accrue a capital gain incentive fee equal to 20% of such amount, less the aggregate amount of actual capital gain incentive fees paid or capital gain incentive fees accrued under GAAP in all prior periods. If such amount is negative, then there is no accrual for such period. The resulting accrual under GAAP for a capital gain incentive fee payable in any period will result in additional expense if such cumulative amount is greater than in the prior period, or in a reversal of previously recorded expense if such cumulative amount is less than in the prior period. We can offer no assurance that any unrealized capital appreciation will be realized in the future.

 

For the three months ended March 31, 2022, the Company recorded incentive fees related to net investment income of $426,322. Offsetting the incentive fees were waivers of the incentive fees of $383,690 for the three months ended March 31, 2022, as set forth within the accompanying statements of operations. For the three months ended March 31, 2021, the Company recorded incentive fees related to net investment income of $291,293. Offsetting the incentive fees were waivers of the incentive fees of $262,164 for the three months ended March 31, 2021, as set forth within the accompanying statements of operations.

 

Administration Agreement and Administrative Fee

The Company has also entered into an administration agreement (the “Administration Agreement”) with Audax Management Company, LLC (the “Administrator”) pursuant to 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.

 

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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, for both the three months ended March 31, 2022 and 2021, as set forth within the accompanying statements of operations.

 

Related Party Fees

Fees due to related parties as of March 31, 2022 and December 31, 2021 on the Company’s accompanying statements of assets and liabilities were as follows:

 

   March 31, 2022   December 31, 2021 
Net base management fee due to Adviser  $674,985   $620,269 
Net incentive fee due to Adviser   42,632    20,060 
Total fees due to Adviser, net of waivers   717,617    640,329 
Fee due to Administrator, net of waivers   66,250    66,250 
Total Related Party Fees Due  $783,867   $706,579 

 

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 the Company’s common stock, par value $0.001 per share (the “Common Stock”), for the three months ended March 31, 2022 and 2021:

 

   Three Months Ended
March 31, 2022		   Three Months Ended
March 31, 2021		 
Numerator for basic and diluted net increase in net assets resulting from operations per common share  $3,045,808   $5,077,354 
Denominator for basic and diluted weighted average common shares   42,774,798    38,957,735 
Basic and diluted net increase in net assets resulting from operations per common share  $0.07   $0.13 

 

30

 

 

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, and intends to comply with the requirements to qualify annually, 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 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.

  

The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2021 of $15,794,187, or $0.40 per share. The tax character of the distributions declared and paid represented $15,541,807from ordinary income and $252,380from tax return of capital. The Company had aggregate distributions declared and paid to its stockholders for the year ended December 31, 2020 of $16,177,757, or $0.43 per share. The tax character of the distributions declared and paid represented $15,911,638 from ordinary income and $266,119 from tax return of capital.

 

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 be reported to the Company’s stockholders subject to information reporting after the close of each calendar year on Form 1099-DIV.

 

U.S. GAAP requires adjustments to certain components of net assets to reflect permanent differences between financial and tax reporting. These adjustments have no effect on net asset value per share. For the year ended December 31, 2021 and 2020, the Company recorded the following adjustments for permanent book to tax differences to reflect their tax characteristics. The adjustments only change the classification in net assets in the statements of assets and liabilities. During the year ended December 31, 2021 and 2020, the Company reclassified for book purposes amounts arising from permanent book/tax differences primarily related to distribution redesignations and return of capital distributions.

 

   Year Ended
December 31, 2021		   Year Ended
December 31, 2020		 
Capital in excess of par value  $          -   $- 
Accumulated net investment income   -    (37,662)
Accumulated net realized gain (loss)   -    37,662 

 

At December 31, 2021 and 2020, the components of distributable taxable earnings 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.

 

31

 

 

   As of
December 31,
2021		   As of
December 31,
2020		 
Other temporary book/tax differences  $(172,677)  $(192,992)
Net tax basis unrealized depreciation   (1,238,244)   (3,630,949)
Accumulated net realized loss   (3,353,867)   (3,157,649)
Components of tax distributable (deficit) earnings at period end  $(4,764,788)  $(6,981,590)

 

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, 2021.

 

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. As of December 31, 2021, the Company has long-term capital loss carryforward of $3,353,867. 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. federal tax returns for fiscal years 2019, 2020, and 2021 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 years ended December 31, 2021, 2020, and 2019, no tax expense or any related interest or penalties were incurred.

 

Note 7. Equity

 

An investor made capital commitments to the Company in the amounts set forth below as of the date opposite each capital commitment:

 

Amount   Date
$140,000,000   June 23, 2015
$50,000,000   December 2, 2016
$100,000,000   On December 7, 2017
$40,000,000   March 22, 2019
$30,000,000   September 23, 2019
$11,200,000   March 20, 2020
$8,900,000   May 28, 2021
$110,000,000   December 15, 2021

 

As of March 31, 2022, $80,000,000 of total capital commitments remained unfunded by the Company’s investors.

 

The number of shares of Common Stock issued and outstanding as of March 31, 2022 and December 31, 2021, were 43,166,536 and 39,961,408, respectively.

 

32

 

 

The following table details the activity of Stockholders’ Equity for the three months ended March 31, 2022 and 2021:

 

Three Months Ended March 31, 2022  Common Stock   Capital in Excess
of Par Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders’
Equity		 
Balance as of December 31, 2021  $39,961   $378,672,161   $(4,764,788)  $373,947,334 
Net investment income   -    -    4,386,185    4,386,185 
Net realized gains from investment transactions   -    -    225,786    225,786 
Net change in unrealized depreciation on investments   -    -    (1,566,163)   (1,566,163)
Issuance of shares   3,206    29,996,794    -    30,000,000 
Balance as of March 31, 2022  $43,167   $408,668,955   $(1,718,980)  $406,993,142 

 

Three Months Ended March 31, 2021  Common Stock   Capital in Excess
of Par Value		   Total
Distributable
(Loss) Earnings		   Total
Stockholders’
Equity		 
Balance as of December 31, 2020  $38,343   $363,826,108   $(6,981,590)  $356,882,861 
Net investment income   -    -    3,888,170    3,888,170 
Net realized gains from investment transactions   -    -    63,270    63,270 
Net change in unrealized appreciation on investments   -    -    1,125,914    1,125,914 
Issuance of shares   666    6,199,334    -    6,200,000 
Balance as of March 31, 2021  $39,009   $370,025,442   $(1,904,236)  $368,160,215 

 

Note 8. Borrowings

 

Short-Term Borrowings

From time to time, the Company finances the purchase of certain investments through repurchase agreements. In the repurchase agreements, the Company enters into a trade to sell an investment and contemporaneously enters into a trade to buy the same investment back on a specified date in the future with the same counterparty. Investments sold under repurchase agreements are accounted for as collateralized borrowings as the sale of the investment does not qualify for sale accounting under ASC Topic 860—Transfers and Servicing and remains as an investment on the Statement of Assets and Liabilities. The Company uses repurchase agreements as a short-term financing alternative. As of March 31, 2022, the Company had no short-term borrowings outstanding. For the three months ended March 31, 2022, the Company recorded interest expense of $41,166 in connection with short-term borrowings. The Company’s short-term borrowings bore interest at a weighted average rate of 2.90% for the three months ended March 31, 2022. As of December 31, 2021, the company had short-term borrowing outstanding of $8,224,250. As of December 31, 2021, the Company recorded no interest expense in connection with short-term borrowings.

 

Note 9. 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.

 

33

 

 

The following table summarizes the Company’s significant contractual payment obligations as of March 31, 2022 and December 31, 2021:

 

Investment  Industry  March 31, 2022   December 31, 2021 
PracticeTek, Senior Secured Delayed Draw Term Loan, 6.50% (Libor + 5.50%), maturity 11/23/27  High Tech Industries  $1,889,313   $2,862,595 
American Vision Partners, Senior Secured Delayed Draw Term Loan, 6.71% (Libor + 5.75%), maturity 9/30/27  Healthcare & Pharmaceuticals   1,453,488    1,453,488 
EdgeCo, Senior Secured Delayed Draw Term D Loan, 5.75% (Libor + 4.75%), maturity 6/1/26  Banking, Finance, Insurance & Real Estate   1,200,000    - 
Paradigm Oral Health, Senior Secured Delayed Draw Term Loan, 5.75% (Libor + 4.75%), maturity 7/9/26  Healthcare & Pharmaceuticals   920,000    - 
Discovery Education, Senior Secured Delayed Draw Term Loan, 6.50% (Libor + 5.75%), maturity 3/10/29  Services: Business   807,692    - 
Advarra, Senior Secured Initial Revolving Loan (First Lien), 5.25% (Libor + 4.25%), maturity 7/9/24  Healthcare & Pharmaceuticals   761,905    761,905 
The Facilities Group, Senior Secured Delayed Draw Term Loan, 6.75% (Libor + 5.75%), maturity 11/30/27  Services: Business   654,624    758,671 
Brook & Whittle, Senior Secured Delayed Draw Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 12/14/28  Containers, Packaging & Glass   598,545    529,101 
Vertellus, Senior Secured Revolving Credit Loan, 7.00% (Libor + 6.00%), maturity 12/22/25  Chemicals, Plastics & Rubber   486,239    379,266 
CoolSys, Senior Secured Delayed Draw Term Loan, 5.71% (Libor + 4.75%), maturity 8/11/28  Services: Business   465,278    465,278 
Blue Cloud, Senior Secured Delayed Draw Term Loan, 6.00% (Libor + 5.00%), maturity 1/21/28  Healthcare & Pharmaceuticals   400,000    - 
Therapy Brands, Senior Secured Delayed Draw Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 5/18/28  Healthcare & Pharmaceuticals   382,979    382,979 
Micro Merchant Systems, Senior Secured Delayed Draw Term Loan, 6.71% (Libor + 5.75%), maturity 12/14/27  Healthcare & Pharmaceuticals   370,370    - 
InMark, Senior Secured Initial Delayed Draw Term Loan, 7.00% (Libor + 6.00%), maturity 12/23/26  Containers, Packaging & Glass   365,388    1,250,000 
Alliance Environmental Group, Senior Secured Delayed Draw Term Loan, 7.00% (Libor + 6.00%), maturity 12/30/27  Environmental Industries   364,238    662,252 
PracticeTek, Senior Secured Revolving Loan, 6.46% (Libor + 5.50%), maturity 11/23/27  High Tech Industries   357,824    357,824 
Alliance Environmental Group, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 12/30/27  Environmental Industries   331,126    331,126 
Ivy Rehab, Senior Secured Delayed Draw Term Loan (First Lien), 5.50% (Libor + 4.75%), maturity 3/15/29  Healthcare & Pharmaceuticals   326,797    - 
Evans Network, Senior Secured Delayed Draw Term Loan (First Lien), 5.21% (Libor + 4.25%), maturity 8/19/28  Transportation: Cargo   326,531    326,531 
USALCO, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 10/19/26  Chemicals, Plastics & Rubber   298,387    298,387 
Paragon Films, Senior Secured Delayed Draw Term Loan (First Lien), 5.96% (Libor + 5.00%), maturity 12/16/28  Containers, Packaging & Glass   297,030    297,030 
Dessert Holdings, Senior Secured Delayed Draw Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 6/9/28  Beverage, Food & Tobacco   281,250    281,250 
Ivy Rehab, Senior Secured Revolving Credit (First Lien), 5.50% (Libor + 4.75%), maturity 3/15/28  Healthcare & Pharmaceuticals   257,732    - 
Discovery Education, Senior Secured Revolving Facility, 6.50% (Libor + 5.75%), maturity 4/7/28  Services: Business   230,769    - 
Blue Cloud, Senior Secured Revolving Loan, 6.00% (Libor + 5.00%), maturity 1/21/28  Healthcare & Pharmaceuticals   227,273    - 
Capstone Logistics, Senior Secured Initial DDTL Loan (First Lien), 5.75% (Libor + 4.75%), maturity 11/12/27  Transportation: Cargo   221,132    221,132 
Specialty Products & Insulation, Senior Secured Delayed Draw Term Loan, 6.25% (Libor + 5.25%), maturity 12/21/27  Construction & Building   203,046    - 
Radwell, Senior Secured Delayed Draw Term Loan, 6.50% (Libor + 5.75%), maturity 4/1/29  Capital Equipment   200,001    - 
Service Logic, Senior Secured Delayed Draw Term Loan (First Lien), 4.96% (Libor + 4.00%), maturity 10/29/27  Services: Business   196,154    196,154 
EPIC Insurance, Senior Secured Delayed Draw Term Loan, 6.21% (Libor + 5.25%), maturity 9/29/28  Banking, Finance, Insurance & Real Estate   181,609    241,379 
Forefront, Senior Secured Delayed Draw Term Loan, 4.93% (Libor + 4.25%), maturity 4/2/29  Healthcare & Pharmaceuticals   157,480    - 
Tank Holding, Senior Secured Revolving Credit Loan, 6.75% (Libor + 6.00%), maturity 3/31/28  Capital Equipment   147,692    - 
Secretariat International, Senior Secured Delayed Draw Term Loan (First Lien), 5.71% (Libor + 4.75%), maturity 12/29/28  Services: Business   134,211    - 
Insight Global, Senior Secured Revolving Loan, 6.96% (Libor + 6.00%), maturity 9/22/27  Services: Business   134,178    67,089 
Ned Stevens, Senior Secured Revolving Loan, 6.25% (Libor + 5.25%), maturity 9/30/25  Services: Consumer   130,719    130,719 
EPIC Insurance, Senior Secured Revolving Loan, 6.21% (Libor + 5.25%), maturity 9/30/27  Banking, Finance, Insurance & Real Estate   125,909    125,909 
Community Brands, Senior Secured Delayed Draw Term Loan, 6.50% (Libor + 5.75%), maturity 2/24/28  Banking, Finance, Insurance & Real Estate   117,647    - 
Omni Logistics, Senior Secured Revolving Credit Loan (First Lien), 6.00% (Libor + 5.00%), maturity 12/30/25  Transportation: Cargo   113,834    85,376 
Micro Merchant Systems, Senior Secured Revolving Loan, 6.71% (Libor + 5.75%), maturity 12/14/27  Healthcare & Pharmaceuticals   111,111    - 
Therma Holdings, Senior Secured Initial DDTL (2021), 4.96% (Libor + 4.00%), maturity 12/16/27  Services: Business   94,239    - 
Radwell, Senior Secured Revolving Facility, 6.50% (Libor + 5.75%), maturity 4/1/28  Capital Equipment   79,998    - 
Keter Environmental Services, Unitranche, 7.50% (Libor + 6.50%), maturity 10/29/27  Environmental Industries   77,520    - 
Paradigm Oral Health, Senior Secured Revolving Loan, 5.75% (Libor + 4.75%), maturity 7/9/26  Healthcare & Pharmaceuticals   74,074    - 
BlueHalo, Senior Secured Revolving Loan, 7.00% (Libor + 6.00%), maturity 10/31/25  Aerospace & Defense   73,967    73,967 
Magnate, Senior Secured Delayed Draw Term Loan (First Lien), 6.46% (Libor + 5.50%), maturity 12/29/28  Transportation: Cargo   71,429    - 
Omni Logistics, Senior Secured Tranche 2 DDTL (First Lien), 6.00% (Libor + 5.00%), maturity 12/30/26  Transportation: Cargo   68,750    118,750 
Applied Adhesives, Senior Secured Revolving Loan, 5.96% (Libor + 5.00%), maturity 3/12/27  Containers, Packaging & Glass   66,844    64,000 
Community Brands, Senior Secured Revolving Loan, 6.50% (Libor + 5.75%), maturity 2/24/28  Banking, Finance, Insurance & Real Estate   58,824    - 
Tekni-Plex, Senior Secured Tranche B-3 DDTL Term Loan, 4.96% (Libor + 4.00%), maturity 9/15/28  Containers, Packaging & Glass   52,766    84,681 
Applied Adhesives, Senior Secured Delayed Draw Term Loan, 5.96% (Libor + 5.00%), maturity 3/12/27  Containers, Packaging & Glass   48,931    62,963 
AmeriVet, Senior Secured Incremental Delayed Draw Term Loan, 5.75% (Libor + 4.75%), maturity 6/5/24  Healthcare & Pharmaceuticals   -    536,000 
Alpaca, Senior Secured Revolver, 6.00% (Libor + 5.00%), maturity 4/19/24  Healthcare & Pharmaceuticals   -    129,426 
Therma Holdings, Senior Secured Initial DDTL (2021), 4.71% (Libor + 3.75%), maturity 12/16/27  Services: Business   -    96,880 
Gastro Health, Senior Secured Delayed Draw Term Loan (First Lien), 5.46% (Libor + 4.50%), maturity 7/3/28  Healthcare & Pharmaceuticals   -    94,975 
Flow Control Group, Senior Secured Amendment No. 1 Delayed Draw Term Loan (First Lien), 4.71% (Libor + 3.75%), maturity 3/31/28  Capital Equipment   -    77,083 
Alpaca, Senior Secured Delayed Draw Term A-2 Loan, 5.75% (Libor + 4.75%), maturity 4/19/24  Healthcare & Pharmaceuticals   -    66,723 
ImageFirst, Senior Secured Delayed Draw Tranche A Term Loan, 5.46% (Libor + 4.50%), maturity 4/27/28  Healthcare & Pharmaceuticals   -    22,727 
Solis Mammography, Senior Secured Delayed Draw Term Loan (First Lien), 5.71% (Libor + 4.75%), maturity 4/17/28  Healthcare & Pharmaceuticals   -    20,000 
      $16,996,843   $13,913,615 

 

Unfunded commitments represent all amounts unfunded as of March 31, 2022 and December 31, 2021. These amounts may or may not be funded to the borrowing party now or in the future.

 

34

 

 

   

Note 10. Financial Highlights

 

    Three Months Ended
March 31, 2022		     Three Months Ended
March 31, 2021		  
Per Share Data:                
Net asset value, beginning of period   $ 9.36     $ 9.31  
Net investment income(a)     0.10       0.10  
Net realized (loss) gain on investments and change in unrealized (depreciation) appreciation on investments(a)(b)     (0.03 )     0.03  
Net increase in net assets resulting from operations   $ 0.07     $ 0.13  
                 
Net asset value at end of period   $ 9.43     $ 9.44  
Total return(c)(g)     0.75 %     1.40 %
Shares of common stock outstanding at end of period     43,166,536       39,009,531  
                 
Statement of Assets and Liabilities Data:                
Net assets at end of period   $ 406,993,142     $ 368,160,215  
Average net assets(d)     406,436,056       366,230,150  
                 
Ratio/Supplemental Data:                
Ratio of gross expenses to average net assets-annualized(e)     1.79 %     1.67 %
Ratio of net expenses to average net assets-annualized(f)     1.04 %     1.03 %
Ratio of net investment income to average net assets-annualized     4.38 %     4.31 %
Portfolio turnover(g)     0.99 %     1.41 %

 

(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)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)Average net assets are computed using the average balance of net assets at the end of each month of the reporting  period.
(e)Ratio of gross expenses to average net assets is computed using expenses before waivers from the Adviser and Administrator.
(f)Ratio of net expenses to average net assets is computed using total expenses net of waivers from the Adviser and Administrator.
(g)Not annualized.

  

Note 11. 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 12. Subsequent Events

 

Subsequent to March 31, 2022 through May 12, 2022, the Company invested $3,423,959 at cost in 10 different portfolio companies.

 

On March 21, 2022, the Company delivered a capital drawdown notice to one of its investors relating to the sale of 2,651,113 shares of Common Stock, for an aggregate offering price of $25.0 million. The sale closed on April 5, 2022. On April 22, 2022, the Company issued a Tender Offer to repurchase $20.0 million worth of Common Stock from the Stockholder. The Offer will expire on May 19, 2022.

 

35

 

 

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 quarterly report.

 

This quarterly 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;

  ● our ability to continue to effectively manage our business due to COVID-19 and similar pandemics;

  ● supply chain disruptions in connection with shutdowns in China and similar factors related to COVID-19;

  ● uncertainty surrounding financial and political stability of the United States, the United Kingdom, the European Union, and China, and the war between Russia and Ukraine;

  ● 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;

  ● changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, which could result in changes to the value of our assets;

  ● 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 filed on March 25, 2022 (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 quarterly 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 entitled “Item 1A. Risk Factors” of this quarterly report and our Annual Report as well as risk factors described or identified in other filings we may make with the SEC from time to time. 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 quarterly report are excluded from the safe harbor protection provided by Section 27A of the Securities Act and provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

36

 

  

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, and intends to comply with the requirements to qualify annually, 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 (the “SBCAA”), 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 permits 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.

 

COVID-19 Developments

 

The market disruptions caused by the ongoing COVID-19 pandemic may continue to adversely affect the business operations of some of our portfolio companies and may continue to affect our operations and the operations of our Adviser. As the COVID-19 outbreak to evolve, we cannot predict its continuing impact on our business operations, including its duration in the United States and worldwide, the uncertainty surrounding the various vaccination mandates as more contagious strains of the virus emerge in various countries, including the United States (particularly the “Delta variant”). Such contagious variants, in conjunction with more frequent and concentrated social gatherings, including the re-opening of many schools and colleges across the country, and more relaxed mask requirements and social distancing norms have resulted in surges in the rates of COVID-19 infections worldwide. Furthermore, large portions of the population in the United States and elsewhere remain unvaccinated due to limited access to vaccines, the politicization of the vaccine mandates, the general public distrust of the safety and efficacy of the vaccine and the potential future adverse reactions to the vaccine. Such developments may increase the risk that the pandemic will continue for a prolonged period of time. As such, the extent to which COVID-19 and/or other health pandemics may affect negatively our operating results and financial condition and the operating results and financial condition of some of our portfolio companies, as well as the duration of any potential business or supply-chain disruption for our portfolio companies, is uncertain.

 

37

 

 

We will continue to monitor developments relating to the COVID-19 pandemic and guidance from U.S. and international authorities, including federal, state and local public health officials and may take additional actions based on their recommendations. In these circumstances, there may be developments beyond our control requiring us to adjust our plan of operation. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. However, we expect that it may continue to have an adverse impact on our future net asset value, net investment income, the fair value of our portfolio investments, and the results of operations and financial condition of some of our portfolio companies, and that such adverse effects may persist for the duration of the pandemic and potentially for some time thereafter.

 

PORTFOLIO COMPOSITION AND INVESTMENT ACTIVITY

 

Portfolio Composition

 

The fair value of our investments, comprised of syndicated loans and equity, as of March 31, 2022, was approximately $419,122,442 and held in 223 portfolio companies as of March 31, 2022. The fair value of our investments, comprised of syndicated loans and equity, as of December 31, 2021, was approximately $403,054,374 and held in 215 portfolio companies as of December 31, 2021.

 

During the three months ended March 31, 2022, we invested in 22 new syndicated investments for a combined $30,097,098 and in existing investments for a combined $3,471,687. We also received $12,318,646 in repayments from investments and $4,047,932 from investments sold during the three months ended March 31, 2022. During the three months ended March 31, 2021, we invested in 24 new syndicated investments for a combined $24,915,797 and in existing investments for a combined $6,842,697. We also received $16,092,791 in repayments from investments and $5,113,536 from investments sold during the three months ended March 31, 2021.

 

In addition, for the three months ended March 31, 2022, we had a change in unrealized depreciation of approximately $1,566,163 and realized gains of $225,786. For the three months ended March 31, 2021, we had a change in unrealized appreciation of approximately $1,125,914 and realized gains of $63,270.

 

Our investment activity for the three months ended March 31, 2022 and 2021, is presented below:

 

   Three Months Ended
March 31, 2022		   Three Months Ended
March 31, 2021		 
Beginning investment portfolio, at fair value  $403,054,374   $355,359,843 
Investments in new portfolio investments   30,097,098    24,915,797 
Investments in existing portfolio investments   3,471,687    6,842,697 
Principal repayments   (12,318,646)   (16,092,791)
Proceeds from investments sold   (4,047,932)   (5,113,536)
Change in premiums, discounts and amortization   206,238    159,050 
Net change in unrealized (depreciation) appreciation on investments   (1,566,163)   1,125,914 
Realized gain on investments   225,786    63,270 
Ending portfolio investment activity, at fair value  $419,122,442   $367,260,244 
Number of portfolio investments   242    223 
Average investment amount, at cost  $1,743,499   $1,658,140 
Percentage of  investments at floating rates   100.00%   99.63%

 

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As of March 31, 2022 and December 31, 2021, our entire portfolio consisted of non-controlled/non-affiliated investments.

 

RECENT DEVELOPMENTS

 

Subsequent to March 31, 2022 through May 12, 2022, the Company invested $3,423,959 at cost in 10 different portfolio companies.

 

On March 21, 2022, the Company delivered a capital drawdown notice to one of its investors relating to the sale of 2,651,113 shares of Common Stock, for an aggregate offering price of $25.0 million. The sale closed on April 5, 2022. On April 22, 2022, the Company issued a Tender Offer to repurchase $20.0 million worth of Common Stock from the Stockholder. The Offer will expire on May 19, 2022.

 

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. This “Results of Operations” section should be read in conjunction with the “COVID-19 Developments” section above.

 

Revenue

 

Total investment income for the three months ended March 31, 2022 and 2021 is presented in the table below.

 

   Three Months Ended
March 31, 2022		   Three Months Ended
March 31, 2021		 
Total interest income from non-controlled/non-affiliated investments  $5,389,818   $4,768,685 
Total other interest income   384    274 
Total other income   38,118    47,514 
Total investment income  $5,428,320   $4,816,473 

 

Total investment income for the three months ended March 31, 2022 increased to $5,428,320 from $4,816,473 for the three months ended March 31, 2021, and was primarily driven by the increase in our investment balance. As of March 31, 2022 and 2021, the size of our debt portfolio was $420,316,183 and $368,457,656 at amortized cost, respectively, with total debt principal amount outstanding of $423,552,801 and $370,814,581, respectively.

  

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Expenses

 

Total expenses net of waivers for the three months ended March 31, 2022 and 2021, were as follows:

 

   Three Months Ended
March 31, 2022		   Three Months Ended
March 31, 2021		 
Base management fee(a)  $1,038,439   $914,050 
Incentive fee(a)   426,322    291,293 
Administrative fee(a)   66,250    66,250 
Directors' fees   56,250    56,250 
Professional fees   81,675    93,318 
Other expenses   79,177    89,223 
Interest expense   41,166    - 
Total expenses   1,789,279    1,510,384 
Base management fee waivers(a)   (363,454)   (319,917)
Incentive fee waivers(a)   (383,690)   (262,164)
Total expenses, net of waivers  $1,042,135   $928,303 

 

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

 

The increase in base management fees before waivers for the three months ended March 31, 2022 in comparison to the three months ended March 31, 2021 was driven by our increasing invested balance. For the three months ended March 31, 2022 and 2021, we accrued gross base management fees before waivers of $1,038,439 and $914,050, respectively. Offsetting those fees, we recognized base management fee waivers of $363,454 and $319,917 for three months ended March 31, 2022 and 2021, respectively. For the three months ended March 31, 2022 and 2021, we accrued incentive fees related to net investment income before waivers of $426,322 and $291,293, respectively. Offsetting those fees, we recognized incentive fee waivers of $383,690 and $262,164, respectively. Additionally, we accrued $66,250 of administrative fees for each of the three months ended March 31, 2022 and 2021. Refer to Note 4 — Related Party Transactions in the notes accompanying our financial statements for more information related to base management fees, incentive fees and waivers.

 

During the three months ended March 31, 2022 and 2021, we incurred professional fees of $81,675 and $93,318, respectively, related to audit fees, tax fees, and legal fees. We also incurred expenses related to fees paid to our independent directors of $56,250 and $56,250 for the three months ended March 31, 2022 and 2021, respectively.

 

Realized and Unrealized Gains and Losses

 

We recognized $225,786 and $63,270 in net realized gains for the three months ended March 31, 2022 and 2021, respectively.

 

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Net change in unrealized (depreciation) appreciation on investments for the three months ended March 31, 2022 and 2021 was as follows:

 

Type  Three Months Ended
March 31, 2022		   Three Months Ended
March 31, 2021		 
First Lien Debt  $(1,518,245)  $1,134,942 
Second Lien Debt   (50,930)   33,010 
Equity and Preferred Shares   3,012    (42,038)
Net change in unrealized (depreciation) appreciation on investments  $(1,566,163)  $1,125,914 

 

Net change in unrealized depreciation on investments during the three months ended March 31, 2022 was primarily due to the change in the results and financial position of the portfolio companies. Net change in unrealized appreciation on investments during the three months ended March 31, 2021 was primarily due to a increase in performance of our 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, 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 March 31, 2022 and December 31, 2021, we had cash of $11,581,409 and $11,058,796, respectively. This “Financial Condition, Liquidity and Capital Resources” section should be read in conjunction with the “COVID-19 Developments” section above.

 

Operating Activities

 

Net cash used in operating activities for the three months ended March 31, 2022 was $29,477,387. The primary operating activities during this period were investments in portfolio companies. The Company invested $30,097,098 in new portfolio investments and $3,471,687 in existing portfolio investments during the three months ended March 31, 2022. This was offset by repayments of bank loans and sales of investments of $12,318,646 and $4,047,932, respectively. Net cash provided by operating activities for the three months ended March 31, 2021 was $3,133,714. The primary operating activities during this period were investments in portfolio companies. The Company invested $24,915,797 in new portfolio investments and $6,842,697 in existing portfolio investments for the three months ended March 31, 2021. This was offset by repayments of bank loans and sales of investments of $16,092,791 and $5,113,536, respectively.

 

As of March 31, 2022, we had 50 investments with unfunded commitments of $16,996,843. As of December 31, 2021, we had 36 investments with unfunded commitments of $13,913,615. We believe that, as of both March 31, 2022 and December 31, 2021, 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 three months ended March 31, 2022 and 2021:

 

   Three Months Ended
March 31, 2022		   Three Months Ended
March 31, 2021		 
Beginning investment portfolio  $403,054,374   $355,359,843 
Investments in new portfolio investments   30,097,098    24,915,797 
Investments in existing portfolio investments   3,471,687    6,842,697 
Principal repayments   (12,318,646)   (16,092,791)
Proceeds from sales of investments   (4,047,932)   (5,113,536)
Net change in unrealized (depreciation) appreciation on investments   (1,566,163)   1,125,914 
Net realized gain on investments   225,786    63,270 
Net change in premiums, discounts and amortization   206,238    159,050 
Investment Portfolio, at Fair Value  $419,122,442   $367,260,244 

 

Financing Activities

 

Net cash provided by our financing activities for the three months ended March 31, 2022 was $30,000,000 from issuances of 3,205,128 shares of Common Stock to our stockholders in connection with our capital calls during the period. Net cash provided by our financing activities for the three months ended March 31, 2021 was $6,200,000 from issuances of 665,951 shares of Common Stock to our stockholders in connection with our capital calls during the period.

 

Equity Activity

 

An investor made capital commitments to us in the amounts set forth below as of the date opposite each capital commitment:

 

Amount   Date 
$140,000,000   June 23, 2015 
$50,000,000   December 2, 2016 
$100,000,000   On December 7, 2017 
$40,000,000   March 22, 2019 
$30,000,000   September 23, 2019 
$11,200,000   March 20, 2020 
$8,900,000   May 28, 2021 
$110,000,000   December 15, 2021 

 

As of March 31, 2022, $80,000,000 of total capital commitments remained unfunded by the Company’s investors.

 

The number of shares of our Common Stock issued and outstanding as of March 31, 2022 and December 31, 2021, were 43,166,536 and 39,961,408, respectively.

 

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Distributions to Stockholders – Common Stock Distributions

 

We have elected to be treated, and intends to comply with the requirements to qualify annually, 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 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 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.

  

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 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 did not declare or pay distributions for the three months ended March 31, 2022 and 2021.

 

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 March 31, 2022 and 2021, we recorded base management fees of $1,038,439 and $914,050, respectively. Offsetting these fees were waivers to the base management fees of $363,454 and $319,917, respectively, as set forth within the accompanying statements of operations.

 

For the three months ended March 31, 2022 and 2021, we recorded incentive fees of $426,322 and $291,293, respectively. Offsetting these waivers to the incentive fees of $383,690 and $262,164, respectively, as set forth within the accompanying statements of operations.

 

For both of the three months ended March 31, 2022 and 2021, we recorded administrative fees of $62,500, respectively, as set forth within the accompanying statements of operations.

 

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Fees due to related parties as of March 31, 2022 and December 31, 2021 on our accompanying statements of assets and liabilities were as follows:

 

   March 31, 2022   December 31, 2021 
Net base management fee due to Adviser  $674,985   $620,269 
Net incentive fee due to Adviser   42,632    20,060 
Total fees due to Adviser, net of waivers   717,617    640,329 
Fee due to Administrator, net of waivers   66,250    66,250 
Total Related Party Fees Due  $783,867   $706,579 

  

Tender Offers

 

To provide our stockholders with limited liquidity, we may, in the absolute discretion of our Board of Directors, conduct a tender offer. Our tenders for the shares of Common Stock, 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. On April 22, 2022, the Company issued a Tender Offer to repurchase $20.0 million worth of Common Stock from the Stockholder. The Offer will expire on May 19, 2022.

 

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).

 

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.

 

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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.

 

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. Inputs for these valuation techniques include relative credit information, observed market movement, industry sector information, and other market data, which may include benchmarking of comparable securities, issuer spreads, reported trades, and reference data, such as market research publications, when available. 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. Additionally, as a part of our valuation process, the Adviser may employ the services of one or more independent valuation firms engaged by us;

 

(ii) Preliminary valuation conclusions are documented and discussed with our senior management and members of the Adviser’s valuation team;

  

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(iii) Our Audit Committee reviews the assessments of the Adviser or independent valuation firm (to the extent applicable) 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, the independent valuation firm (to the extent applicable) and in accordance with our valuation policy.

 

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.

 

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 (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.

 

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In addition, on December 3, 2020, the SEC announced that it adopted Rule 2a-5 under the 1940 Act, which establishes an updated regulatory framework for determining fair value in good faith for purposes of the 1940 Act. The new rule clarifies how fund boards can satisfy their valuation obligations in light of recent market developments. The rule will permit boards, subject to board oversight and certain other conditions, to designate certain parties to perform the fair value determinations. We will continue to review the new rule and its impact on us and our valuation policies.

 

Refer to Note 3 — Investments in 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.

 

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.

 

U.S. 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, 2021, 2020, and 2019.

 

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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 any relevant tax positions would “more-likely-than-not” be 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 expensed 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.

 

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 March 31, 2022, we had 50 investments with unfunded commitments of $16,996,843. As of December 31, 2021, we had 36 investments with unfunded commitments of $13,913,615. We believe that, as of March 31, 2022 and December 31, 2021, we had sufficient assets to adequately cover any obligations under our unfunded commitments.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are subject to financial market risks, including changes in interest rates. During the period covered by our financial statements, many of the loans in our portfolio had floating interest rates, and we expect that many of our loans to portfolio companies in the future will also have floating interest rates based on LIBOR or an equivalent risk-free index rate. Interest rate fluctuations may have a substantial negative impact on our investments, the value of our Common Stock and our rate of return on invested capital. In addition, U.S. and global capital markets and credit markets have experienced a higher level of stress due to the global COVID-19 pandemic, which has resulted in an increase in the level of volatility across such markets and a general decline in value of the securities held by us. 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.

 

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Debt investments that we make may be based on floating rates, such as SOFR (as defined below), LIBOR, the Euro Interbank Offered Rate, the Federal Funds Rate or the Prime Rate. General interest rate fluctuations may have a substantial negative impact on our investments, the value of our securities and our rate of return on invested capital. It is unclear how increased regulatory oversight and the future of LIBOR may affect market liquidity and the value of the financial obligations to be held by or issued to us that are linked to LIBOR, or how such changes could affect our investments and transactions and financial condition or results of operations. Central banks and regulators in a number of major jurisdictions (for example, the United States, United Kingdom, European Union, Switzerland and Japan) have convened working groups to find, and implement the transition to, suitable replacements for interbank offered rates. On March 5, 2021, the Financial Conduct Authority and ICE Benchmark Authority announced that the publication of all EUR and CHF LIBOR settings, the Spot Next/Overnight, 1 week, 2 month and 12 month JPY and GBP LIBOR settings, and the 1 week and 2 months US dollar LIBOR settings ceased to be published as of December 31, 2021, while the publication of the overnight, 1 month, 3 month, 6 month, and 12 months U.S. dollar (“USD”) LIBOR settings will cease after June 30, 2023. To identify a successor rate for USD LIBOR, the Alternative Reference Rates Committee (“ARRC”), a U.S.-based group convened by the Federal Reserve and the Federal Reserve Bank of New York, was formed. The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by the U.S. Treasury securities, and is based on directly observable U.S. Treasury-backed repurchase transactions. On December 6, 2021, the ARRC released a statement selecting and recommending forms of SOFR, along with associated spread adjustments and conforming changes, to replace references to 1-week and 2-month USD LIBOR. We expect that a substantial portion of our future floating rate investments will be linked to SOFR. At this time, it is not possible to predict the effect of the transition to SOFR.

 

In addition, the COVID-19 pandemic has resulted in a decrease in LIBOR and a general reduction of certain interest rates by the U.S. Federal Reserve and other central banks. A continued decline in interest rates, including LIBOR, could result in a reduction of our gross investment income.

 

Change in interest rates  Increase (decrease) in
investment income		 
Up 300 basis points   11,511,384 
Up 200 basis points   7,275,856 
Up 100 basis points   3,040,328 
Down 100 basis points   (457,680)
Down 200 basis points   (457,680)
Down 300 basis points   (457,680)

 

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.

 

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 the period covered by this report, 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.

 

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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 our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 25, 2022.

 

Legislation passed in 2018 allows us to incur additional leverage and would require us to offer liquidity to our stockholders.

 

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 SBCAA, 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 permits 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.

 

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 over the next year following the calendar quarter in which the approval was obtained. On April 22, 2022, the Company issued a Tender Offer to repurchase $20.0 million worth of Common Stock from the Stockholder. The Offer will expire on May 19, 2022.

 

Political, social and economic uncertainty, including uncertainty related to Russia’s military invasion of Ukraine, create and exacerbate risks.

 

Russia’s invasion of Ukraine in February 2022 and corresponding events have had, and could continue to have, severe adverse effects on regional and global economic markets. Following Russia’s actions, various governments, including the United States, have issued broad-ranging economic sanctions against Russia, including, among other actions, a prohibition on doing business with certain Russian companies, large financial institutions, officials and oligarchs; a commitment by certain countries and the European Union to remove selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications, the electronic banking network that connects banks globally; and restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions. The duration of hostilities and the vast array of sanctions and related events (including cyberattacks and espionage) cannot be predicted. Those events present material uncertainty and risk with respect to markets globally, which pose potential adverse risks to us and the performance of our investments and operations. Any such market disruptions could affect our portfolio companies’ operations and, as a result, could have a material adverse effect on our business, financial condition and results of operations.

 

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

 

Refer to our Current Report on Form 8-K filed on January 12, 2022 for issuances of our Common Stock during the quarter ended March 31, 2022. Such issuances were exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and Regulation D thereunder.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

Not applicable.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

Not applicable.

 

ITEM 6. EXHIBITS

 

3.1 Amended 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).
   
3.2 Form 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).
   
31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
   
31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended.
   
32.1* 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).
   
32.2* 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).
   
99.1 Code 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 report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  Audax Credit BDC Inc.
     
Date: May 12, 2022   By: /s/ Michael P. McGonigle
      Michael P. McGonigle
      Chief Executive Officer
     
Date: May 12, 2022   By: /s/ Richard T. Joseph
      Richard T. Joseph
      Chief Financial Officer

 

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