UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-Q

 

  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2021

 

  Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Commission
File Number
  Exact name of registrant as specified in its charter,
address of principal executive office, telephone number, and
state or other jurisdiction of incorporation or organization
  I.R.S. Employer
Identification Number
814-01022  

Capitala Finance Corp. 

4201 Congress St., Suite 360 

Charlotte, North Carolina 28209  

State of Incorporation: Maryland  

Telephone: (704) 376-5502  

  90-0945675

 

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

 

Title of Each Class   Trading symbol(s)   Name of Each Exchange on Which
Registered

Common Stock, par value $0.01 per share  

5.75% Convertible Notes due 2022  

6.00% Notes due 2022 

 

CPTA  

CPTAG

 CPTAL 

 

NASDAQ Global Select Market  

NASDAQ Capital Market  

NASDAQ Global Select Market 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

    Yes   ☒ No   ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

 

    Yes   ☐ No   ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer   Accelerated filer
         
  Non-accelerated filer 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  ☒

 

The number of shares of Capitala Finance Corp.’s common stock, $0.01 par value, outstanding as of April 30, 2021 was 2,711,068.

 

 

 

 TABLE OF CONTENTS

 

    Page
PART I. FINANCIAL INFORMATION 3
     
Item 1. Consolidated Financial Statements 3
     
  Consolidated Statements of Assets and Liabilities as of March 31, 2021 (unaudited) and December 31, 2020 3
     
  Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited) 4
     
  Consolidated Statements of Changes in Net Assets for the three months ended March 31, 2021 and 2020 (unaudited) 5
     
  Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited) 6
     
  Consolidated Schedules of Investments as of March 31, 2021 (unaudited) and December 31, 2020 7
     
  Notes to Consolidated Financial Statements as of and for the period ended March 31, 2021 (unaudited) 19
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 49
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 69
     
Item 4. Controls and Procedures 70
     
PART II. OTHER INFORMATION 70
     
Item 1. Legal Proceedings 70
     
Item 1A. Risk Factors 70
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 70
     
Item 3. Defaults Upon Senior Securities 70
     
Item 4. Mine Safety Disclosures 71
     
Item 5. Other Information 71
     
Item 6. Exhibits 71
   
Signatures 72

2

 

PART I. FINANCIAL INFORMATION  

 

Item 1. Consolidated Financial Statements 

 

Capitala Finance Corp.

           

Consolidated Statements of Assets and Liabilities

(in thousands, except share and per share data)

 

   As of 
   March 31, 2021   December 31, 2020 
   (unaudited)     
ASSETS        
Investments at fair value:          
Non-control/non-affiliate investments (amortized cost of $158,892 and $187,744, respectively)  $167,208   $172,848 
Affiliate investments (amortized cost of $66,180 and $80,961, respectively)   82,616    93,425 
Control investments (amortized cost of $8,898 and $8,947, respectively)   8,346    8,419 
Total investments at fair value (amortized cost of $233,970 and $277,652, respectively)   258,170    274,692 
Cash and cash equivalents   59,727    49,942 
Interest and dividend receivable   1,143    2,286 
Prepaid expenses   871    1,077 
Deferred tax asset, net   -    - 
Total assets  $319,911   $327,997 
           
LIABILITIES          
SBA-guaranteed debentures (net of deferred financing costs of $345 and $485, respectively)  $70,655   $90,515 
2022 Notes (net of deferred financing costs of $702 and $846, respectively)   72,131    71,987 
2022 Convertible Notes (net of deferred financing costs of $458 and $552, respectively)   51,630    51,536 
KeyBank Credit Facility (net of deferred financing costs of $499 and $546, respectively)   (499)   (546)
Management and incentive fees payable   3,762    3,842 
Interest and financing fees payable   931    1,688 
Accounts payable and accrued expenses   -    28 
Total liabilities  $198,610   $219,050 
           
Commitments and contingencies (Note 2)          
           
NET ASSETS          
Common stock, par value $0.01, 100,000,000 common shares authorized, 2,711,068 and 2,711,068 common shares issued and outstanding, respectively  $27   $27 
Additional paid in capital   229,481    229,481 
Total distributable loss   (108,207)   (120,561)
Total net assets  $121,301   $108,947 
Total liabilities and net assets  $319,911   $327,997 
           
Net asset value per share  $44.74   $40.19 

 

See accompanying notes to consolidated financial statements.

3

 

 

Capitala Finance Corp.

 

Consolidated Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

   For the Three Months Ended March 31, 
   2021   2020 
INVESTMENT INCOME        
Interest and fee income:          
Non-control/non-affiliate investments  $3,196   $4,707 
Affiliate investments   1,306    1,679 
Control investments   98    103 
Total interest and fee income   4,600    6,489 
Payment-in-kind interest and dividend income:          
Non-control/non-affiliate investments   71    336 
Affiliate investments   99    180 
Total payment-in-kind interest and dividend income   170    516 
Dividend income:          
Affiliate investments   155    25 
Total dividend income   155    25 
Interest income from cash and cash equivalents   1    44 
Total investment income   4,926    7,074 
           
EXPENSES          
Interest and financing expenses   3,037    3,826 
Base management fee   1,398    1,757 
Administrative service fees   350    350 
General and administrative expenses   924    1,154 
Total expenses   5,709    7,087 
           
NET INVESTMENT LOSS   (783)   (13)
           
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS          
Net realized (loss) gain on investments:          
Non-control/non-affiliate investments   (14,023)   968 
Net realized (loss) gain on investments   (14,023)   968 
Net unrealized appreciation (depreciation) on investments:          
Non-control/non-affiliate investments   23,212    (28,525)
Affiliate investments   3,972    (13,728)
Control investments   (24)   (1,142)
Net unrealized appreciation (depreciation) on investments   27,160    (43,395)
Total net realized and unrealized gain (loss) on investments   13,137    (42,427)
           
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  $12,354   $(42,440)
           
NET INCREASE (DECREASE) IN NET ASSETS PER SHARE RESULTING FROM OPERATIONS – BASIC (SEE NOTE 10) (1)  $4.56   $(15.70)
           
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING  –  BASIC (1)   2,711,068    2,703,432 
           
NET INCREASE (DECREASE) IN NET ASSETS PER SHARE RESULTING FROM OPERATIONS – DILUTED (SEE NOTE 10) (1)  $4.04   $(15.70)
           
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING - DILUTED (1)   3,263,647    2,703,432 
           
DISTRIBUTIONS PAID PER SHARE (2)  $-   $1.50 

           

(1) Basic and diluted shares of Capitala Finance Corp.'s (the "Company") common stock have been adjusted for the three months ended March 31, 2020 to reflect the one-for-six reverse stock split effected on August 21, 2020 on a retroactive basis, as described in Note 1.

(2) Dividends paid per share of the Company's common stock have been adjusted for the three months ended March 31, 2020 to reflect the one-for-six reverse stock split effected on August 21, 2020 on a retroactive basis, as described in Note 1.

           

See accompanying notes to consolidated financial statements.

4

 

Capitala Finance Corp.

                   

Consolidated Statements of Changes in Net Assets

 (in thousands, except share data)

 (unaudited)

                   

    Common Stock (1)    

Additional Paid 

in Capital (1)

   

Total
Distributable Loss
 

         
For the Three Months Ended March 31, 2021 and 2020   Number of Shares      Par Value             Total  
BALANCE, December 31, 2020     2,711,068     $  27     $  229,481     $  (120,561 )   $  108,947  
Net investment loss     -       -       -       (783 )     (783 )
Net realized loss on investments     -       -       -       (14,023 )     (14,023 )
Net unrealized appreciation on investments     -       -       -       27,160       27,160  
BALANCE, March 31, 2021     2,711,068     $ 27     $ 229,481     $ (108,207 )   $ 121,301  
                                         
BALANCE, December 31, 2019     2,700,628     $ 27     $ 238,021     $ (89,935 )   $ 148,113  
Net investment loss     -       -       -       (13 )     (13 )
Net realized gain on investments     -       -       -       968       968  
Net unrealized depreciation on investments     -       -       -       (43,395 )     (43,395 )
Fractional shares settled in cash as part of one-for-six reverse stock split     (13 )     -       -       -       -  
Distributions to Shareholders:                                        
Stock issued under dividend reinvestment plan     10,453       -       335       -       335  
Distributions declared     -       -       -       (4,053 )     (4,053 )
BALANCE, March 31, 2020     2,711,068     $ 27     $ 238,356     $ (136,428 )   $ 101,955  

                   

(1) Shares of the Company's common stock have been adjusted for the three months ended March 31, 2020 to reflect the one-for-six reverse stock split effected on August 21, 2020 on a retroactive basis, as described in Note 1.

                   

See accompanying notes to consolidated financial statements.

5

 

Capitala Finance Corp.

         

Consolidated Statements of Cash Flows

 (in thousands)

 (unaudited)

         

 

   For the Three Months Ended March 31, 
   2021   2020 
CASH FLOWS FROM OPERATING ACTIVITIES          
Net increase (decrease) in net assets resulting from operations  $12,354   $(42,440)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:          
Purchase of investments   -    (8,267)
Repayments and sales of investments   29,906    7,768 
Net realized loss (gain) on investments   14,023    (968)
Net unrealized (appreciation) depreciation on investments   (27,160)   43,395 
Payment-in-kind interest and dividends   (170)   (516)
Accretion of original issue discount on investments   (77)   (107)
Amortization of deferred financing fees   425    506 
Changes in assets and liabilities:          
Interest and dividend receivable   1,143    230 
Prepaid expenses   206    (190)
Other assets   -    21 
Management and incentive fees payable   (80)   (92)
Interest and financing fees payable   (757)   (1,215)
Accounts payable and accrued expenses   (28)   (143)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES   29,785    (2,018)
           
CASH FLOWS FROM FINANCING ACTIVITIES          
Paydowns on SBA-guaranteed debentures   (20,000)   - 
Distributions paid to shareholders   -    (3,718)
Deferred financing fees paid   -    (154)
NET CASH USED IN FINANCING ACTIVITIES   (20,000)   (3,872)
           
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   9,785    (5,890)
CASH AND CASH EQUIVALENTS, beginning of period   49,942    62,321 
CASH AND CASH EQUIVALENTS, end of period  $59,727   $56,431 
           
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION          
Cash paid for interest  $3,291   $4,535 
           
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS          
Distributions paid through dividend reinvestment plan share issuances  $-   $335 

 

See accompanying notes to consolidated financial statements.

6

 

Capitala Finance Corp.  

   

Consolidated Schedule of Investments  

(in thousands, except for units/shares)  

March 31, 2021  

(unaudited)  

 

Portfolio Company, Country (1), (2), (3), (4), (5)   Industry  Type of Investment  Acquisition
Date
  Principal
Amount
   Cost   Fair Value   % of
Net Assets
 
Non-control/non-affiliated investments - 137.8%                             
                              
Non-control/non-affiliated investments - United States                             
                              
3 Bridge Solutions, LLC  IT Consulting  First Lien Debt (13.0% Cash, Due 12/4/22)  12/4/2017  $11,726   $11,726   $11,726    9.7%
                              
3 Bridge Solutions, LLC  IT Consulting  Preferred Units (965 units)  12/4/2017        1,090    1,248    1.0%
                              
3 Bridge Solutions, LLC  IT Consulting  Membership Units (39,000 units)  12/4/2017        10    1,455    1.2%
                              
                  12,826    14,429    11.9%
                              
Alternative Biomedical Solutions, LLC  Healthcare  First Lien Debt (8.0% Cash, Due 12/18/22)  6/25/2020   7,119    7,119    7,119    5.9%
                              
Alternative Biomedical Solutions, LLC  Healthcare  Series A Preferred Units (13,540 units)  6/25/2020        1,275    1,354    1.1%
                              
Alternative Biomedical Solutions, LLC  Healthcare  Series B Preferred Units (47,083 units)  6/25/2020        3,943    2,211    1.8%
                              
Alternative Biomedical Solutions, LLC  Healthcare  Series C Preferred Units (78,900 units)  6/25/2020        -    -    0.0%
                              
Alternative Biomedical Solutions, LLC  Healthcare  Membership Units (20,092 units)  12/18/2017        800    -    0.0%
                              
Alternative Biomedical Solutions, LLC  Healthcare  Membership Unit Warrants (49,295 units)  6/25/2020        -    -    0.0%
                              
                  13,137    10,684    8.8%
                              
American Clinical Solutions, LLC  Healthcare  First Lien Debt (7.0% Cash, Due 12/31/22)  12/31/2019   3,500    3,500    3,500    2.9%
                              
American Clinical Solutions, LLC  Healthcare  First Lien Debt (7.0% Cash, Due 6/30/21) (6)  4/13/2020   250    250    250    0.2%
                              
American Clinical Solutions, LLC  Healthcare  Class A Membership Units (6,030,384 units)  4/13/2020        3,198    4,905    4.0%
                              
                  6,948    8,655    7.1%
                              
AmeriMark Direct, LLC  Consumer Products  First Lien Debt (12.8% Cash, Due 9/8/21)  9/8/2016   9,645    9,623    9,623    7.9%
                              
                  9,623    9,623    7.9%
                              
BigMouth, Inc.  Consumer Products  First Lien Debt (9.0% Cash (1 month LIBOR + 8.5%, 0.5% Floor), Due 11/14/21) (7)  11/14/2016   1,866    1,268    998    0.8%
                              
                  1,268    998    0.8%
                              
BLST Operating Company, LLC  Online Merchandise Retailer  Second Lien Debt (10.0% (1 month LIBOR + 8.5%, 1.5% Floor), Due 8/28/25) (8)  8/28/2020   1,953    1,953    1,953    1.6%
                              
BLST Operating Company, LLC  Online Merchandise Retailer  Class A Common Units (217,013 units)  8/28/2020        286    1,963    1.6%
                              
                  2,239    3,916    3.2%
                              
Burke America Parts Group, LLC  Home Repair Parts Manufacturer  Membership Units (14 units)  4/30/2015        5    2,525    2.1%
                              
                  5    2,525    2.1%

7

 

Capitala Finance Corp.  

   

Consolidated Schedule of Investments  

(in thousands, except for units/shares)  

March 31, 2021  

(unaudited)  

 

Portfolio Company, Country (1), (2), (3), (4), (5)   Industry  Type of Investment  Acquisition
Date
  Principal
Amount
   Cost   Fair Value   % of
Net Assets
 
Chicken Soup for the Soul, LLC  Multi-platform media and consumer products  First Lien Debt (10.0% Cash (1 month LIBOR + 8.5%, 1.5% Floor), Due 2/22/22) (6)  12/14/2018  $ 10,045   $ 10,045   $ 10,045    8.3%
                              
                  10,045    10,045    8.3%
                              
Chief Fire Intermediate, Inc.  Security System Services  First Lien Debt (8.6% Cash (1 month LIBOR + 7.0%, 1.6% Floor), Due 11/8/24) (7)  11/8/2019   8,100    8,100    5,081    4.2%
                              
Chief Fire Intermediate, Inc.  Security System Services  Class A Preferred Units (34,740 units)  11/8/2019        913    -    0.0%
                              
Chief Fire Intermediate, Inc.  Security System Services  Class B Common Units (3,510 units)  11/8/2019        -    -    0.0%
                              
                  9,013    5,081    4.2%
                              
CIS Secure Computing, Inc.  Government Services  First Lien Debt (9.5% Cash (1 month LIBOR + 8.5%, 1.0% Floor), 1.0% PIK, Due 9/14/22)  9/14/2017   8,219    8,219    8,219    6.8%
                              
CIS Secure Computing, Inc.  Government Services  Common Stock (46,163 shares)  9/14/2017        1,000    3,710    3.1%
                              
                  9,219    11,929    9.9%
                              
Corporate Visions, Inc.  Sales & Marketing Services  Second Lien Debt (11.0%, Due 11/29/21) (9)  5/29/2015   19,425    19,425    19,425    16.0%
                              
Corporate Visions, Inc.  Sales & Marketing Services  Common Stock (15,750 shares)  5/29/2015        1,575    2,529    2.1%
                              
                  21,000    21,954    18.1%
                              
Freedom Electronics, LLC  Electronic Machine Repair  First Lien Debt (7.0% Cash (1 month LIBOR + 5.0%, 2.0% Floor), Due 12/20/23)  6/1/2020   2,684    2,684    2,684    2.2%
                              
Freedom Electronics, LLC  Electronic Machine Repair  First Lien Debt (8.7% Cash, Due 12/20/23) (10)(11)  12/20/2018   5,855    5,855    5,855    4.8%
                              
Freedom Electronics, LLC  Electronic Machine Repair  Membership Units (181,818 units)  12/20/2018        182    217    0.2%
                              
                  8,721    8,756    7.2%
                              
HUMC Opco, LLC  Healthcare  First Lien Debt (9.0% Cash, Due 4/15/21) (6)  8/8/2019   4,833    4,833    4,833    4.0%
                              
                  4,833    4,833    4.0%
                              
J5 Infrastructure Partners, LLC  Wireless Deployment Services  First Lien Debt (8.3% Cash (1 month LIBOR + 6.5%, 1.8% Floor), Due 12/20/24) (12)  12/20/2019   -    -    -    0.0%
                              
J5 Infrastructure Partners, LLC  Wireless Deployment Services  First Lien Debt (8.3% Cash (1 month LIBOR + 6.5%, 1.8% Floor), Due 12/20/24)  12/20/2019   5,844    5,844    5,844    4.8%
                              
                  5,844    5,844    4.8%
                              
Jurassic Quest Holdings, LLC  Entertainment  First Lien Debt (9.5% Cash (1 month LIBOR + 7.5%, 2.0% Floor), Due 5/1/24)  5/1/2019   9,540    9,540    9,540    7.9%
                              
Jurassic Quest Holdings, LLC  Entertainment  Preferred Units (467,784 units)  5/1/2019        480    1,327    1.1%
                              
                  10,020    10,867    9.0%

8

 

Capitala Finance Corp.  

   

Consolidated Schedule of Investments  

(in thousands, except for units/shares)  

March 31, 2021  

(unaudited)

 

Portfolio Company, Country (1), (2), (3), (4), (5)   Industry  Type of Investment  Acquisition
Date
  Principal
Amount
   Cost   Fair Value   % of
Net Assets
 
MicroHoldco, LLC  General Industrial  Preferred Units (838,042 units) (13)  7/25/2019       838   $ 838    0.7%
                              
                  838    838    0.7%
                              
Rapid Fire Protection, Inc.  Security System Services  First Lien Debt (5.5% Cash (1 month LIBOR + 3.8%, 1.7% Floor), Due 11/22/24) (14)  6/1/2020  $608    608    608    0.5%
                              
Rapid Fire Protection, Inc.  Security System Services  First Lien Debt (8.9% Cash, Due 11/22/24) (10)(15)  11/22/2019   7,111    7,111    7,111    5.9%
                              
Rapid Fire Protection, Inc.  Security System Services  Common Stock (363 shares)  11/22/2019        500    3,139    2.6%
                              
                  8,219    10,858    9.0%
                              
Seitel, Inc.  Data Services  First Lien Debt (9.3% Cash (3 month LIBOR + 8.3%, 1.0% Floor), 2.0% PIK, Due 3/15/23)  3/15/2019   4,685    4,685    4,041    3.3%
                              
                  4,685    4,041    3.3%
                              
Sequoia Healthcare Management, LLC  Healthcare Management  First Lien Debt (12.8% Cash, Due 4/15/21) (6)(7)  8/21/2018   11,935    11,935    10,531    8.7%
                              
                  11,935    10,531    8.7%
                              
Taylor Precision Products, Inc.  Household Product Manufacturer  Series C Preferred Stock (379 shares)  12/23/2014        758    758    0.6%
                              
                  758    758    0.6%
                              
U.S. BioTek Laboratories, LLC  Testing laboratories  First Lien Debt (7.0% Cash (3 month LIBOR + 5.0%, 2.0% Floor), Due 12/14/23)  6/1/2020   1,278    1,278    1,278    1.0%
                              
U.S. BioTek Laboratories, LLC  Testing laboratories  First Lien Debt (9.3% Cash, Due 12/14/23) (10) (11)  12/14/2018   3,975    3,975    3,975    3.3%
                              
U.S. BioTek Laboratories, LLC  Testing laboratories  Class A Preferred Units (500 Units)  12/14/2018        540    628    0.5%
                              
U.S. BioTek Laboratories, LLC  Testing laboratories  Class C Units (578 Units)  12/14/2018        1    22    0.0%
                              
U.S. BioTek Laboratories, LLC  Testing laboratories  Class D Preferred Units (78 Units)  4/3/2020        78    90    0.1%
                              
                  5,872    5,993    4.9%
                              
U.S. Well Services, Inc.  Oil & Gas Services  Class A Common Stock (1,202,499 shares) (16)  11/9/2018        1,244    1,251    1.0%
                              
                  1,244    1,251    1.0%
                              
Xirgo Technologies, LLC  Information Technology  Membership Units (600,000 units)  12/1/2016        600    2,799    2.3%
                              
                  600    2,799    2.3%
                              
Sub Total Non-control/non-affiliated investments - United States                $158,892   $167,208    137.8%

9

 

Capitala Finance Corp.  

   

Consolidated Schedule of Investments  

(in thousands, except for units/shares)  

March 31, 2021  

(unaudited)  

 

Portfolio Company, Country (1), (2), (3), (4), (5)   Industry  Type of Investment  Acquisition
Date
  Principal
Amount
   Cost   Fair Value   % of
Net Assets
 
Affiliate Investments - 68.1%                             
                              
Affiliate investments - United States                             
                              
Burgaflex Holdings, LLC  Automobile Part Manufacturer  Common Stock Class B (1,085,073 shares)  5/7/2019       $362 $  1,411    1.2%
                              
Burgaflex Holdings, LLC  Automobile Part Manufacturer  Common Stock Class A (1,253,198 shares)  7/15/2014        1,504    298    0.2%
                              
                  1,866    1,709    1.4%
                              
City Gear, LLC  Footwear Retail  Membership Unit Warrants (13)  6/28/2012        -    2,011    1.7%
                              
                  -    2,011    1.7%
                              
Eastport Holdings, LLC  Business Services  Second Lien Debt (13.5% Cash (3 month LIBOR + 13.0%, 0.5% Floor), Due 12/29/21) (6)  1/12/2016  $16,500    16,371    16,500    13.6%
                              
Eastport Holdings, LLC  Business Services  Membership Units (22.9% ownership)  1/12/2016        3,263    21,906    18.1%
                              
                  19,634    38,406    31.7%
                              
GA Communications, Inc.  Advertising & Marketing Services  Series A-1 Preferred Stock (1,998 shares)  10/14/2011        3,477    4,145    3.4%
                              
GA Communications, Inc.  Advertising & Marketing Services  Series B-1 Common Stock (200,000 shares)  10/14/2011        2    297    0.3%
                              
                  3,479    4,442    3.7%
                              
LJS Partners, LLC  QSR Franchisor  Preferred Units (195,653 units)  8/12/2019        437    783    0.7%
                              
LJS Partners, LLC  QSR Franchisor  Common Membership Units (2,593,234 units)  1/1/2012        1,224    4,896    4.0%
                              
                  1,661    5,679    4.7%
                              
MMI Holdings, LLC  Medical Device Distributor  First Lien Debt (12.0% Cash, Due 9/30/21) (6)  10/17/2011   2,600    2,600    2,600    2.1%
                              
MMI Holdings, LLC  Medical Device Distributor  Second Lien Debt (6.0% Cash, Due 9/30/21) (6)  10/17/2011   400    388    400    0.3%
                              
MMI Holdings, LLC  Medical Device Distributor  Preferred Units (1,000 units, 6.0% PIK Dividend) (17)  10/17/2011        1,703    1,841    1.5%
                              
MMI Holdings, LLC  Medical Device Distributor  Common Membership Units (45 units)  10/17/2011        -    98    0.1%
                              
                  4,691    4,939    4.0%

10

 

Capitala Finance Corp.  

   

Consolidated Schedule of Investments  

(in thousands, except for units/shares)  

March 31, 2021  

(unaudited)  

 

Portfolio Company, Country (1), (2), (3), (4), (5)   Industry  Type of Investment  Acquisition
Date
  Principal
Amount
   Cost   Fair Value   % of
Net Assets
 
Navis Holdings, Inc.  Textile Equipment Manufacturer  First Lien Debt (9.0% Cash, 2.0% PIK, Due 6/30/23) (6)  2/1/2011  11,086   $ 11,086   $ 11,086    9.1%
                              
Navis Holdings, Inc.  Textile Equipment Manufacturer  Class A Preferred Stock (1,000 shares)  2/1/2011        1,000    1,000    0.8%
                              
Navis Holdings, Inc.  Textile Equipment Manufacturer  Common Stock (60,000 shares)  2/1/2011        -    463    0.4%
                              
                  12,086    12,549    10.3%
                              
Nth Degree Investment Group, LLC  Business Services  Membership Units (6,088,000 Units)  12/3/2019        6,088    -    0.0%
                              
                  6,088    -    0.0%
                              
RAM Payment, LLC  Financial Services  First Lien Debt (6.5% Cash (1 month LIBOR + 5.0%), 1.5% Floor), Due 1/4/24)  6/1/2020   2,109    2,109    2,109    1.7%
                              
RAM Payment, LLC  Financial Services  First Lien Debt (9.8% Cash, Due 1/4/24) (10)  1/4/2019   5,719    5,719    5,719    4.7%
                              
RAM Payment, LLC  Financial Services  Preferred Units (86,000 units, 8.0% PIK Dividend) (17)  1/4/2019        1,014    3,223    2.7%
                              
                  8,842    11,051    9.1%
                              
Sierra Hamilton Holdings Corporation  Oil & Gas Engineering and Consulting Services  Second Lien Debt (15.0%, Due 9/12/23) (18)  9/12/2019   394    385    385    0.3%
                              
Sierra Hamilton Holdings Corporation  Oil & Gas Engineering and Consulting Services  Common Stock (15,068,000 shares)  7/31/2017        6,958    955    0.8%
                              
                  7,343    1,340    1.1%
                              
V12 Holdings, Inc.  Data Processing & Digital Marketing  Second Lien Debt (13)  11/21/2016        490    490    0.4%
                              
                  490    490    0.4%
                              
Sub Total Affiliate investments - United States                $66,180   $82,616    68.1%
                              
Control Investments - 6.9%                             
                              
Control investments - United States                             
                              
                              
Vology, Inc.  Information Technology  First Lien Debt (10.5% Cash (1 month LIBOR + 8.5%, 2.0% Floor), Due 12/31/21)  11/25/2019  $3,683   $3,683   $3,683    3.1%
                              
Vology, Inc.  Information Technology  Class A Preferred Units (9,041,810 Units)  11/25/2019        5,215    4,663    3.8%
                              
Vology, Inc.  Information Technology  Membership Units (5,363,982 Units)  11/25/2019        -    -    0.0%
                              
                  8,898    8,346    6.9%
                              
Sub Total Control investments - United States                $8,898   $8,346    6.9%
                              
TOTAL INVESTMENTS - 212.8%                $233,970   $258,170    212.8%

11

 

Capitala Finance Corp.  

   

Consolidated Schedule of Investments  

(in thousands, except for units/shares)  

March 31, 2021  

(unaudited)  

 

 

(1) All investments valued using unobservable inputs (Level 3), unless otherwise noted.  

(2) All investments valued by Capitala Finance Corp.'s (the "Company") board of directors.  

(3) All debt investments are income producing, unless otherwise noted. Equity and warrant investments are non-income producing, unless otherwise noted.  

(4) Percentages are based on net assets of $121,301 as of March 31, 2021.  

(5) The Company generally acquires its investments in private transactions exempt from registration under the Securities Act of 1933, as amended (the "Securities Act"). These investments are generally subject to certain limitations on resale, and may be deemed to be "restricted securities" under the Securities Act.  

(6) The maturity date of the original investment has been extended.  

(7) Non-accrual investment.  

(8) 1.0% interest rate payable in cash.  9.0% interest rate payable in cash or paid-in-kind at borrower's election. The borrower is currently paying all interest in cash.  

(9) 9.0% interest rate payable in cash.  2.0% interest rate payable in cash or paid-in-kind at borrower's election. The borrower is currently paying all interest in cash.  

(10) The cash rate equals the approximate current yield on our last-out portion of the unitranche facility.  

(11) The investment has a $1.0 million unfunded commitment.  

(12) The investment has a $3.5 million unfunded commitment.

(13) The investment has been exited or sold. The residual value reflects estimated earnout, escrow, or other proceeds expected post-closing.

(14) The investment has a $3.0 million unfunded commitment.

(15) The investment has a $1.3 million unfunded commitment.

(16) Investment is valued using observable inputs (Level 1). The stock of the company is traded on the NASDAQ Capital Market under the ticker "USWS."

(17) The equity investment is income producing, based on rate disclosed.

(18) 15.0% interest rate payable in cash or paid-in-kind at borrower's election.  The borrower is currently paying all interest in cash.

12

 

Capitala Finance Corp.

 

Consolidated Schedule of Investments

(in thousands, except for units/shares)

December 31, 2020

 

Portfolio Company, Country (1), (2), (3), (4), (5)   Industry  Type of Investment  Acquisition
Date
  Principal
Amount
   Cost   Fair Value   % of
Net Assets
 
Non-control/non-affiliated investments - 158.7%                             
                              
Non-control/non-affiliated investments - United States                             
                              
3 Bridge Solutions, LLC  IT Consulting  First Lien Debt (13.0% Cash, Due 12/4/22)  12/4/2017  $12,083   $12,083   $12,083    11.1%
                              
3 Bridge Solutions, LLC  IT Consulting  Preferred Units (965 units)  12/4/2017        1,090    1,116    1.0%
                              
3 Bridge Solutions, LLC  IT Consulting  Membership Units (39,000 units)  12/4/2017        10    -    0.0%
                              
                  13,183    13,199    12.1%
                              
Alternative Biomedical Solutions, LLC  Healthcare  First Lien Debt (8.0% Cash, Due 12/18/22)  6/25/2020   7,119    7,119    7,119    6.5%
                              
Alternative Biomedical Solutions, LLC  Healthcare  Series A Preferred Units (13,275 units)  6/25/2020        1,275    1,327    1.2%
                              
Alternative Biomedical Solutions, LLC  Healthcare  Series B Preferred Units (46,160 units)  6/25/2020        3,943    2,898    2.7%
                              
Alternative Biomedical Solutions, LLC  Healthcare  Series C Preferred Units (78,900 units)  6/25/2020        -    -    0.0%
                              
Alternative Biomedical Solutions, LLC  Healthcare  Membership Units (20,092 units)  12/18/2017        800    -    0.0%
                              
Alternative Biomedical Solutions, LLC  Healthcare  Membership Unit Warrants (49,295 units)  6/25/2020        -    -    0.0%
                              
                  13,137    11,344    10.4%
                              
American Clinical Solutions, LLC  Healthcare  First Lien Debt (7.0% Cash, Due 12/31/22)  12/31/2019   3,500    3,500    3,474    3.2%
                              
American Clinical Solutions, LLC  Healthcare  First Lien Debt (7.0% Cash, Due 6/30/21) (6)  4/13/2020   250    250    250    0.2%
                              
American Clinical Solutions, LLC  Healthcare  Class A Membership Units (6,030,384 units)  4/13/2020        3,198    3,831    3.5%
                              
                  6,948    7,555    6.9%
                              
AmeriMark Direct, LLC  Consumer Products  First Lien Debt (14.0% Cash, 1.3% PIK, Due 9/8/21)  9/8/2016   14,705    14,649    14,649    13.5%
                              
                  14,649    14,649    13.5%
                              
BigMouth, Inc.  Consumer Products  First Lien Debt (9.0% Cash (1 month LIBOR + 8.5%, 0.5% Floor), Due 11/14/21) (7)  11/14/2016   1,866    1,268    1,000    0.9%
                              
                  1,268    1,000    0.9%
                              
BLST Operating Company, LLC  Online Merchandise Retailer  Second Lien Debt (10.0% (1 month LIBOR + 8.5%, 1.5% Floor), Due 8/28/25) (8)  8/28/2020   1,953    1,953    1,953    1.8%
                              
BLST Operating Company, LLC  Online Merchandise Retailer  Class A Common Units (217,013 units)  8/28/2020        286    300    0.3%
                              
                  2,239    2,253    2.1%

13

 

Capitala Finance Corp.

 

Consolidated Schedule of Investments

(in thousands, except for units/shares)

December 31, 2020

 

 

Portfolio Company, Country (1), (2), (3), (4), (5)   Industry  Type of Investment  Acquisition
Date
  Principal
Amount
   Cost   Fair Value   % of
Net Assets
 
Burke America Parts Group, LLC  Home Repair Parts Manufacturer  Membership Units (14 units)  4/30/2015       5   2,461    2.3%
                              
                  5    2,461    2.3%
                              
Chicken Soup for the Soul, LLC  Multi-platform media and consumer products  First Lien Debt (10.0% Cash (1 month LIBOR + 8.5%, 1.5% Floor), Due 2/22/22) (6)  12/14/2018  13,000    13,000    13,000    11.9%
                              
                  13,000    13,000    11.9%
                              
Chief Fire Intermediate, Inc.  Security System Services  First Lien Debt (8.6% Cash (1 month LIBOR + 7.0%, 1.6% Floor), Due 11/8/24) (7)  11/8/2019   8,100    8,100    5,344    4.9%
                              
Chief Fire Intermediate, Inc.  Security System Services  Class A Preferred Units (34,740 units)  11/8/2019        913    -    0.0%
                              
Chief Fire Intermediate, Inc.  Security System Services  Class B Common Units (3,510 units)  11/8/2019        -    -    0.0%
                              
                  9,013    5,344    4.9%
                              
CIS Secure Computing, Inc.  Government Services  First Lien Debt (9.5% Cash (1 month LIBOR + 8.5%, 1.0% Floor), 1.0% PIK, Due 9/14/22)  9/14/2017   8,322    8,322    8,322    7.6%
                              
CIS Secure Computing, Inc.  Government Services  Common Stock (46,163 shares)  9/14/2017        1,000    3,059    2.8%
                              
                  9,322    11,381    10.4%
                              
Corporate Visions, Inc.  Sales & Marketing Services  Second Lien Debt (11.0%, Due 11/29/21) (9)  5/29/2015   19,425    19,425    19,425    17.8%
                              
Corporate Visions, Inc.  Sales & Marketing Services  Common Stock (15,750 shares)  5/29/2015        1,575    1,522    1.4%
                              
                  21,000    20,947    19.2%
                              
Currency Capital, LLC  Financial Services  First Lien Debt (12.5% Cash (1 month LIBOR + 12.0%, 0.5% Floor), 4.0% PIK, Due 7/20/21) (6)(7)(10)  1/20/2017   16,500    16,172    3,750    3.5%
                              
Currency Capital, LLC  Financial Services  Class A Preferred Units (2,000,000 units) (10)  1/20/2017        2,000    -    0.0%
                              
                  18,172    3,750    3.5%
                              
Freedom Electronics, LLC  Electronic Machine Repair  First Lien Debt (7.0% Cash (1 month LIBOR + 5.0%, 2.0% Floor), Due 12/20/23)  6/1/2020   2,691    2,691    2,691    2.5%
                              
Freedom Electronics, LLC  Electronic Machine Repair  First Lien Debt (8.7% Cash, Due 12/20/23) (11)(12)  12/20/2018   5,870    5,870    5,870    5.4%
                              
Freedom Electronics, LLC  Electronic Machine Repair  Membership Units (181,818 units)  12/20/2018        182    198    0.2%
                              
                  8,743    8,759    8.1%
                              
HUMC Opco, LLC&n