INVESTCORP CREDIT MANAGEMENT BDC, INC.

10-Q 1 d826240d10q.htm INVESTCORP CREDIT MANAGEMENT BDC, INC. INVESTCORP CREDIT MANAGEMENT BDC, INC.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2020

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

COMMISSION FILE NUMBER: 814-01054

INVESTCORP CREDIT MANAGEMENT BDC, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland

46-2883380

(State or other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

280 Park Avenue

39th Floor

New York, NY 10017

(Address of Principal Executive Offices) (Zip Code)

(212) 257-5199

(Registrant’s Telephone Number, Including Area Code)

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 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 ☒

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 $0.001 per share	ICMB	The NASDAQ Global Select Market
6.125% Notes due 2023	CMFNL	The NASDAQ Global Select Market

The number of shares of the issuer’s common stock, $0.001 par value, outstanding as of February 8, 2021 was 13,914,872.


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
	Consolidated Statements of Assets and Liabilities as of December 31, 2020 (unaudited) and June 30, 2020		1
	Consolidated Statements of Operations for the three and six months ended December 31, 2020 (unaudited) and December 31, 2019 (unaudited)		2
	Consolidated Statements of Changes in Net Assets for the three and six months ended December 31, 2020 (unaudited) and December 31, 2019 (unaudited)		3
	Consolidated Statements of Cash Flows for the three and six months ended December 31, 2020 (unaudited) and December 31, 2020 (unaudited)		4
	Consolidated Schedule of Investments as of December 31, 2020 (unaudited)		5
	Consolidated Schedule of Investments as of June 30, 2020		8
	Notes to Unaudited Consolidated Financial Statements		11

Investcorp Credit Management BDC, Inc. and Subsidiaries

Consolidated Statements of Assets and Liabilities


	December 31, 2020 (Unaudited)			June 30, 2020
Assets
Non-controlled, non-affiliated investments, at fair value (amortized cost of $303,922,586 and $316,924,638, respectively)	$	257,731,578		$	270,621,709
Cash		3,771,963			14,876,444
Cash, restricted		4,707,001			5,417,118
Receivable for investments sold		2,033,722			1,576,730
Interest receivable		2,219,364			2,301,641
Payment-in-kind interest receivable		532,680			514,643
Other receivables		427,208			1,135,563
Prepaid expenses and other assets		119,263			350,661

Total Assets	$	271,542,779		$	296,794,509

Liabilities
Notes payable:
Term loan	$	102,000,000		$	102,000,000
Revolving credit facility		4,000,000			30,000,000
2023 Notes payable		51,375,000			51,375,000
Deferred debt issuance costs		(870,365	)		(1,042,497	)

Notes payable, net		156,504,635			182,332,503
Dividend payable		2,503,272			2,499,360
Income-based incentive fees payable		649,122			707,796
Base management fees payable		1,095,082			1,196,937
Interest payable		977,229			1,000,452
Directors’ fees payable		23,809			24,559
Accrued expenses and other liabilities		718,316			907,907

Total Liabilities		162,471,465			188,669,514
Commitments and Contingencies (Note 6)
Net Assets
Common stock, par value $0.001 per share (100,000,000 shares authorized, 13,907,064 and 13,885,335 shares issued and outstanding, respectively)		13,907			13,885
Additional paid-in capital		200,850,429			200,779,949
Distributable earnings (loss)		(91,793,022	)		(92,668,839	)

Total Net Assets		109,071,314			108,124,995

Total Liabilities and Net Assets	$	271,542,779		$	296,794,509

Net Asset Value Per Share	$	7.84		$	7.79

See notes to unaudited consolidated financial statements.

Investcorp Credit Management BDC, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)


	For the three months ended December 31,						For the six months ended December 31,
	2020			2019			2020			2019
Investment Income:
Interest income	$	5,823,345		$	7,741,904		$	11,910,939		$	15,312,166
Payment in-kind interest income		891,417			1,454,214			1,731,744			2,361,991
Other fee income		373,004			235,331			416,064			315,726

Total investment income		7,087,766			9,431,449			14,058,747			17,989,883

Expenses:
Interest expense		1,837,775			2,533,278			3,819,500			4,885,023
Base management fees		1,189,440			1,369,983			2,410,212			2,725,061
Income-based incentive fees		—			851,842			—			851,842
Provision for tax expense		5,780			10,018			5,780			10,018
Professional fees		319,725			390,107			639,450			699,960
Allocation of administrative costs from advisor		354,000			330,000			708,000			682,000
Amortization of deferred debt issuance costs		—			195,377			—			390,754
Insurance expense		108,186			83,761			216,372			167,523
Directors’ fees		78,625			22,500			155,250			105,000
Custodian and administrator fees		63,822			77,597			129,749			207,469
Offering expense		86,906			85,604			172,133			137,354
Other expenses		119,828			120,590			245,100			276,860

Total expenses		4,164,087			6,070,657			8,501,546			11,138,864
Waiver of base management fees		(94,359	)		(57,852	)		(207,330	)		(102,035	)
Waiver of income-based incentive fees		—			(336,619	)		—			(336,619	)

Net expenses		4,069,728			5,676,186			8,294,216			10,700,210

Net investment income		3,018,038			3,755,263			5,764,531			7,289,673

Net realized and unrealized gain/(loss) on investments:
Net realized gain (loss) from investments		—			25,285			3,693			56,358
Net change in unrealized appreciation (depreciation) in value of investments		59,768			(813,105	)		111,899			(5,285,140	)

Total realized and unrealized gain (loss) on investments		59,768			(787,820	)		115,592			(5,228,782	)

Net increase (decrease) in net assets resulting from operations	$	3,077,806		$	2,967,443		$	5,880,123		$	2,060,891

Basic and diluted:
Net investment income per share	$	0.22		$	0.27		$	0.41		$	0.53
Earnings per share	$	0.22		$	0.22		$	0.42		$	0.15
Weighted average shares of common stock outstanding		13,905,173			13,668,027			13,899,449			13,646,653
Distributions paid per common share	$	0.18		$	0.25		$	0.36		$	0.50

See notes to unaudited consolidated financial statements.

Investcorp Credit Management BDC, Inc. and Subsidiaries

Consolidated Statements of Changes in Net Assets (Unaudited)


	For the three months ended December 31,
	2020			2019
Net assets at beginning of period	$	108,459,233		$	138,811,806
Increase (decrease) in net assets resulting from operations:
Net investment income		3,018,038			3,755,263
Net realized gain/(loss) on investments		—			25,285
Net change in unrealized appreciation (depreciation) on investments		59,768			(813,105	)

Net increase (decrease) in net assets resulting from operations		3,077,806			2,967,443
Stockholder distributions:
Distributions from net investment income		(2,503,272	)		(3,437,133	)
Distributions from capital gains		—			—

Net decrease in net assets resulting from stockholder distributions		(2,503,272	)		(3,437,133	)
Capital transactions:
Issuance of common shares ($0 and $113,500, respectively)		—			1,156,565
Reinvestments of stockholder distributions		37,547			58,633

Net increase (decrease) in net assets resulting from capital transactions		37,547			1,215,198

Net increase (decrease) in net assets		612,081			745,508

Net assets at end of period	$	109,071,314		$	139,557,314


	For the six months ended December 31,
	2020			2019
Net assets at beginning of year	$	108,124,995		$	143,083,890
Increase (decrease) in net assets resulting from operations:
Net investment income		5,764,531			7,289,673
Net realized gain/(loss) on investments		3,693			56,358
Net change in unrealized appreciation (depreciation) on investments		111,899			(5,285,140	)

Net increase (decrease) in net assets resulting from operations		5,880,123			2,060,891
Stockholder distributions:
Distributions from net investment income		(5,004,306	)		(6,843,516	)
Distributions from capital gains		—			—

Net decrease in net assets resulting from stockholder distributions		(5,004,306	)		(6,843,516	)
Capital transactions:
Issuance of common shares ($0 and $113,500, respectively)		—			1,156,565
Reinvestments of stockholder distributions		70,502			99,504

Net increase (decrease) in net assets resulting from capital transactions		70,502			1,256,069

Net increase (decrease) in net assets		946,319			(3,526,556	)

Net assets at end of period	$	109,071,314		$	139,557,334

See notes to unaudited consolidated financial statements.

Investcorp Credit Management BDC, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Unaudited)


	For the six months ended December 31,
	2020			2019
Cash Flows from Operating Activities
Net increase (decrease) in net assets resulting from operations	$	5,880,123		$	2,060,891

Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Origination and purchase of investments		(30,884,953	)		(60,014,116	)
Dividends received		—			—
Payment in-kind interest		(1,724,116	)		(1,973,841	)
Sales and repayments of investments		47,120,176			59,421,100
Net realized (gain) loss on investments		(3,693	)		(56,358	)
Net change in unrealized (appreciation) depreciation on investments		(111,899	)		5,285,140
Amortization of discount/premium on investments		(1,505,384	)		(1,224,538	)
Amortization of deferred debt issuance costs		172,132			390,754
Net (increase) decrease in operating assets:
Interest receivable		82,277			908,892
Payment-in-kind interest receivable		(18,037	)		(388,150	)
Receivable for investments sold		(456,992	)		(4,596,833	)
Other receivables		708,355			—
Prepaid expenses and other assets		231,398			150,225
Net increase (decrease) in operating liabilities:
Payable for investments purchased		—			(2,146,343	)
Interest payable		(23,223	)		409,514
Accrued provision for income taxes		—			(13,778	)
Directors fees payable		(750	)		(80,408	)
Accrued expenses and other liabilities		(189,591	)		(34,488	)
Base management fees payable		(101,855	)		1,312,131
Income-based incentive fees payable		(58,674	)		515,222

Net cash provided by (used in) operating activities		19,115,294			(74,984	)

Cash Flows from Financing Activities:
Payment for deferred financing costs		—			(388,310	)
Issuance of common shares		—			1,156,565
Distributions to stockholders		(4,929,892	)		(6,711,802	)
Proceeds from 2023 Notes		—			16,875,000
Proceeds from borrowing on revolving credit facility		—			8,020,881
Repayments of borrowing on revolving credit facility		(26,000,000	)		(19,047,551	)

Net cash provided by (used in) financing activities		(30,929,892	)		(95,217	)

Net change in cash		(11,814,598	)		(170,201	)

Cash:
Cash and restricted cash at beginning of year		20,293,562			26,296,182

Cash and restricted cash at end of period	$	8,478,964		$	26,125,981

Supplemental and non-cash financing cash flow information:
Cash paid for interest	$	3,842,723		$	4,475,510
Cash paid for taxes	$	5,780		$	23,797
Issuance of shares pursuant to Dividend Reinvestment Plan	$	70,502		$	99,504
Non-cash purchase of investments	$	—		$	—
Non-cash sale of investments	$	—		$	—

See notes to unaudited consolidated financial statements.

Investcorp Credit Management BDC, Inc.

Consolidated Schedule of Investments

(Unaudited)

December 31, 2020


Investments⁽¹⁾⁽²⁾	Industry	Interest Rate	Initial Acquisition Date		Maturity Date		Principal Amount/ Shares⁽³⁾		Amortized Cost		Fair Value		% of Net Assets
Non-Controlled/Non-Affiliates
Senior Secured First Lien Debt Investments
1888 Industrial Services, LLC – Term A^(4)(10)	Energy Equipment & Services	3M L + 5.00% PIK (1.00% Floor)		9/30/2016		9/30/2021	$	5,564,897	$	5,564,897	$	5,564,897		5.10%
1888 Industrial Services, LLC – Term B^(4)(10)(11)	Energy Equipment & Services	3M L + 8.00% PIK (1.00% Floor)		9/30/2016		9/30/2021		13,970,775		8,196,669		—		0.00%
1888 Industrial Services, LLC – Term C^(4)(10)	Energy Equipment & Services	3M L + 5.00% PIK (1.00% Floor)		6/25/2019		9/30/2021		678,820		678,820		678,820		0.62%
1888 Industrial Services, LLC – Revolver^(4)(5)(10)	Energy Equipment & Services	3M L + 5.00% (1.00% Floor)		10/11/2016		9/30/2021		1,958,365		1,958,365		1,958,365		1.80%
4L Technologies Inc	Technology Hardware, Storage & Peripherals	3M L + 7.50% (1.00% Floor)		2/4/2020		2/3/2024		1,223,612		1,223,612		1,174,668		1.08%
ACProducts, Inc.	Household Durables	1M L + 6.50% (1.00% Floor)		2/14/2020		8/18/2025		4,906,250		4,999,533		4,930,781		4.52%
Adaptive Spectrum and Signal Alignment	Software	3M L + 9.50% (1.50% Floor)		12/2/2020		11/30/2025		7,500,000		7,277,720		7,275,000		6.67%
Advanced Solutions International	Software	3M L + 7.50% (1.00% Floor)		9/1/2020		9/16/2025		5,000,000		4,904,684		4,900,000		4.49%
Alta Equipment Group, Inc	Trading Companies & Distributors	3M L + 8.00% (1.80% Floor)		2/7/2020		8/13/2025		7,700,000		7,463,857		7,584,500		6.95%
Altern Marketing, LLC –Revolver⁽⁵⁾	Internet & Direct Marketing Retail	3M L + 6.00% (2.00% Floor)		10/7/2019		10/7/2024		1,384,247		1,357,931		1,377,325		1.26%
Altern Marketing, LLC	Internet & Direct Marketing Retail	3M L + 6.00% (2.00% Floor)		10/7/2019		10/7/2024		8,485,973		8,393,743		8,443,543		7.74%
Barri Financial Group, LLC	Consumer Finance	1M L + 7.75% (1.00% Floor)		10/21/2019		10/22/2024		8,470,000		8,297,951		8,385,300		7.69%
Bioplan USA, Inc.	Containers & Packaging	1M L + 4.75% (1.00% Floor)		8/9/2018		9/23/2021		13,552,685		13,367,102		10,401,686		9.54%
BW Gas & Convenience	Specialty Retail	1M L + 6.25% (1.00% Floor)		3/9/2020		11/18/2024		4,434,477		4,326,157		4,434,476		4.07%
CareerBuilder, LLC	Professional Services	1M L + 6.75% (1.00% Floor)		7/27/2017		7/31/2023		8,041,808		8,031,418		7,961,390		7.30%
CB URS Holdings Corporation	Road & Rail	1M L + 5.75% (1.00% Floor)		7/31/2019		9/1/2024		4,762,529		4,721,048		4,429,152		4.06%
Cook & Boardman Group LLC	Distributors	6M L + 5.75% (1.00% Floor)		10/12/2018		10/17/2025		9,800,443		9,726,084		9,604,434		8.81%
Deluxe Toronto Ltd.^(7)(11)	Media	1M L + 5.50% (1.00% Floor)		6/29/2018		6/30/2021		1,193,948		1,193,919		482,355		0.44%
Empire Office Inc	Commercial Services & Supplies	1M L + 6.75% (1.50% Floor)		3/28/2019		4/12/2024		12,680,455		12,500,864		11,666,018		10.70%
Empire Resorts, Inc.	Hotels, Restaurants & Leisure	3M L + 3.25% (0.00% Floor)		3/23/2020		3/22/2021		3,846,750		3,846,750		3,846,750		3.53%
Exela Intermedia LLC	IT Services	3M L + 6.50% (1.00% Floor)		6/5/2018		7/12/2023		5,435,562		5,465,129		1,902,447		1.74%
Exela Intermedia LLC	IT Services	Fixed 10.00%		5/22/2019		7/15/2023		1,000,000		935,059		310,000		0.28%
FR Flow Control CB LLC – Term B⁽⁸⁾	Trading Companies & Distributors	3M L + 6.00% (1.00% Floor)		5/10/2019		6/28/2026		5,319,000		5,230,532		5,212,620		4.78%
FR Flow Control CB LLC – Term C⁽⁸⁾	Trading Companies & Distributors	3M L + 6.00% (1.00% Floor)		5/10/2019		6/26/2026		2,100,000		2,065,064		2,058,000		1.89%
Fusion Connect Inc. – Exit Term Loan	Internet Software & Services	3M L + 1% + 3M L + 9.50% (2.00% Floor)		12/11/2019		1/14/2025		5,400,000		5,307,814		5,400,000		4.95%
Fusion Connect Inc. – Take-Back Term Loan	Internet Software & Services	3M L + 1.00% + 7.00% PIK (2.00% Floor)		1/14/2020		7/14/2025		4,919,025		4,919,025		3,246,557		2.98%
GEE Group, Inc.⁽⁶⁾	Professional Services	1M L + 10.00% + 8.00% PIK (1.00% Floor)		3/26/2018		6/30/2023		11,743,766		11,743,766		11,391,453		10.44%
GS Operating, LLC	Trading Companies & Distributors	3M L + 6.50% (1.50% Floor)		2/24/2020		2/28/2025		9,925,000		9,753,884		9,875,375		9.05%
Horus Infrastructure IA LLC	Energy Equipment & Services	1M L + 4.00%		11/8/2019		10/25/2022		4,750,000		4,431,014		4,465,000		4.09%
Hyperion Materials & Technologies, Inc.	Construction Materials	1M L + 5.50% (1.00% Floor)		8/16/2019		8/14/2026		4,950,000		4,864,724		4,653,000		4.27%

See notes to unaudited consolidated financial statements.

Investcorp Credit Management BDC, Inc.

Consolidated Schedule of Investments – (continued)

(Unaudited)

December 31, 2020


Investments⁽¹⁾⁽²⁾	Industry	Interest Rate	Initial Acquisition Date		Maturity Date		Principal Amount/ Shares⁽³⁾		Amortized Cost		Fair Value			% of Net Assets
Senior Secured First Lien Debt Investments, continued
Infrastructure & Energy Alternatives, Inc.	Construction & Engineering	3M L + 6.75%		11/14/2018		9/25/2024	$	7,222,695	$	7,044,878	$	7,222,695			6.62%
Klein Hersh LLC	Professional Services	1M L + 8.00% (0.75% Floor)		11/16/2020		11/25/2025		5,000,000		4,950,972		4,950,000			4.54%
Liberty Oilfield Services LLC⁽⁷⁾	Energy Equipment & Services	1M L + 7.63% (1.00% Floor)		9/19/2017		9/19/2022		6,183,750		6,137,074		6,183,750			5.67%
Limbach Holdings Inc⁽⁵⁾	Construction & Engineering	1M L + 11.00% (2.00% Floor)		4/11/2019		4/12/2023		9,000,000		8,950,520		9,000,000			8.25%
One Sky Flight LLC	Airlines	1M L + 7.50% (1.00% Floor)		12/19/2019		12/19/2024		9,500,000		9,301,320		9,215,000			8.45%
Pixelle Specialty Solutions LLC	Containers & Packaging	3M L + 6.50% (1.00% Floor)		1/31/2020		10/31/2024		6,127,153		6,024,238		6,096,518			5.59%
Potpourri Group, Inc.	Retail	1M L + 8.25% (1.00% Floor)		6/27/2019		7/3/2024		11,788,087		11,684,324		11,552,325			10.59%
Premiere Global Services, Inc.	Diversified Telecommunication Services	2M L + 6.50% (1.00% Floor)		5/6/2016		9/6/2023		10,113,949		9,789,191		6,270,649			5.75%
ProFrac Services, LLC	Energy Equipment & Services	6M L + 7.50% (1.25% Floor)		9/7/2018		9/7/2023		7,794,391		7,761,561		7,404,671			6.79%
Qualtek USA LLC	Construction & Engineering	1M L + 6.25% (1.00% Floor)		7/15/2018		7/18/2025		9,437,500		9,314,781		8,682,500			7.96%
Techniplas LLC	Auto Components	Fixed 10.00%		6/19/2020		6/19/2027		572,659		572,659		1,160,595			1.06%
Veregy Consolidated, Inc.	Commercial Services & Supplies	1M L + 6.00% (1.00% Floor)		11/2/2020		10/31/2027		5,000,000		4,853,353		4,850,000			4.45%

Total Senior Secured First Lien Debt Investments								268,438,571		259,132,006		236,202,615			216.56%

Senior Secured Second Lien Debt Investments
Premiere Global Services, Inc.⁽³⁾	Diversified Telecommunication Services	3M L + 9.50% (1.00% Floor)		11/30/2016		6/6/2024		17,074,499		16,894,836		5,976,075			5.48%
ZeroChaos Parent, LLC	Professional Services	3M L + 8.25% (1.00% Floor)		11/21/2017		10/31/2023		8,000,000		7,924,179		6,640,000			6.09%

Total Senior Secured Second Lien Debt Investments								25,074,499		24,819,015		12,616,075			11.57%

1888 Industrial Services, LLC (Equity Interest)^(4)(9)(10)	Energy Equipment & Services							18,708		170,691		—			0.00%
4L Technologies Inc Common Stock⁽⁹⁾	Technology Hardware, Storage & Peripherals							149,918		2,171,581		17,990			0.02%
4L Technologies Inc Preferred Stock⁽⁹⁾	Technology Hardware, Storage & Peripherals							2,289		209,004		386,926			0.35%
Advanced Solutions International Preferred Stock	Software							888,170		1,000,000		999,991			0.92%
Fusion Connect Inc. Common Stock⁽⁹⁾	Internet Software & Services							22		306		—			0.00%
Fusion Connect Inc. (Warrants)⁽⁹⁾	Internet Software & Services							202,171		2,814,455		2,022			0.00%
Limbach Holdings, Inc.(Warrants)⁽⁹⁾	Construction & Engineering					4/12/2024		1		—		1			0.00%
PR Wireless, Inc., $0.01 strike (Warrants)⁽⁹⁾	Wireless Telecommunication Services					6/27/2027		201		1,374,009		—			0.00%
Techniplas LLC Common Stock^(9),(10)	Auto Components							540,126		12,231,541		7,505,958			6.88%

Total Equity, Warrants and Other Investments								1,801,606		19,971,587		8,912,888			8.17%

Total Non-Controlled/Non-Affiliates							$	295,314,676	$	303,922,608	$	257,731,578			236.30%

Liabilities in excess other assets												(148,660,264	)		(136.30)%

Net Assets											$	109,071,314			100.00%

See notes to unaudited consolidated financial statements.

Investcorp Credit Management BDC, Inc.

Consolidated Schedule of Investments – (continued)

(Unaudited)

December 31, 2020

(1)

The Company’s investments are generally acquired in private transactions exempt from registration under the Securities Act of 1933, as amended (the “ Securities Act”) and, therefore, are generally subject to limitations on resale, and may be deemed to be “restricted securities’’ under the Securities Act of 1933.

(2)

All investments are non-controlled and non-affiliated issuers. All investments are valued in good faith by the board of directors.

(3)

Principal amount includes capitalized PIK interest unless otherwise noted.

(4)

Effective October 1, 2017, AAR Intermediate Holdings, LLC changed its name to 1888 Industrial Services, LLC.

(5)

Refer to Note 6 for more detail on the unfunded commitments.

(6)

First Lien Unitranche Last Out Investment, which accounts for 4.42% of our investment portfolio at fair value.

(7)

The investment is not a qualifying asset under Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. Non-qualifying assets represent 5.10% of total assets.

(8)

A portfolio company domiciled in the Netherlands. The jurisdiction of the security issuer may be a different country than the domicile of the portfolio company.

(9)

Securities are non-income producing.

(10)

As defined in the 1940 Act, the Company is deemed to be an “Affiliated Person” of this portfolio company because it owns 5% or more of the portfolio company’s outstanding voting securities.

(11)

Classified as non-accrual asset.

1M L — 1-month LIBOR (0.14% as of December 31, 2020)

2M L — 2-month LIBOR (0.19% as of December 31, 2020)

3M L — 3-month LIBOR (0.24% as of December 31, 2020)

6M L — 6-month LIBOR (0.26% as of December 31, 2020)

PIK — Payment-In-Kind

See notes to unaudited consolidated financial statements.

Investcorp Credit Management BDC, Inc. and Subsidiaries

Consolidated Schedule of Investments

June 30, 2020


Investments⁽¹⁾⁽²⁾	Industry	Interest Rate	Initial Acquisition Date		Maturity Date		Principal Amount/ Shares⁽³⁾		Amortized Cost		Fair Value		% of Net Assets
Non-Controlled/Non-Affiliates
Senior Secured First Lien Debt Investments
1888 Industrial Services, LLC – Term A^(4)(10)	Energy Equipment & Services	3M L + 5.00% PIK (1.00% Floor)		9/30/2016		9/30/2021	$	5,398,087	$	5,398,087	$	5,398,087		4.99%
1888 Industrial Services, LLC – Term B^(4)(10)	Energy Equipment & Services	3M L + 8.00% PIK (1.00% Floor)		9/30/2016		9/30/2021		13,970,775		8,196,669		2,794,155		2.58%
1888 Industrial Services, LLC – Term C^(4)(10)	Energy Equipment & Services	3M L + 5.00% PIK (1.00% Floor)		6/25/2019		9/30/2021		678,820		678,820		678,820		0.63%
1888 Industrial Services, LLC – Term D^(4)(10)	Energy Equipment & Services	3M L + 5.00% PIK (1.00% Floor)		9/19/2019		9/19/2020		104,607		104,607		104,607		0.10%
1888 Industrial Services, LLC – Term E^(4)(10)	Energy Equipment & Services	3M L + 5.00% PIK (1.00% Floor)		10/18/2019		9/19/2020		469,381		469,381		469,381		0.43%
1888 Industrial Services, LLC –Revolver^(4)(5)(10)	Energy Equipment & Services	3M L + 5.00% (1.00% Floor)		10/11/2016		9/30/2021		1,928,042		1,928,042		1,928,042		1.78%
4L Technologies Inc.	Technology Hardware, Storage & Peripheral	3M L + 7.50% (1.00% Floor)		2/4/2020		2/3/2024		1,229,925		1,229,925		1,186,877		1.10%
ACProducts, Inc.	Household Durables	1M L + 6.50% (1.00% Floor)		2/14/2020		8/18/2025		4,968,750		5,071,498		4,919,063		4.55%
Alta Equipment Group, Inc.	Trading Companies & Distributors	3M L + 8.00% (1.80% Floor)		2/7/2020		8/13/2025		7,900,000		7,637,767		7,663,000		7.09%
Altern Marketing, LLC – Revolver⁽⁵⁾	Internet & Direct Marketing Retail	3M L + 6.00% (2.00% Floor)		10/7/2019		10/7/2024		1,261,330		1,235,014		1,236,103		1.14%
Altern Marketing, LLC	Internet & Direct Marketing Retail	3M L + 6.00% (2.00% Floor)		10/7/2019		10/7/2024		5,059,053		5,014,210		4,957,872		4.59%
Barri Financial Group, LLC	Consumer Finance	1M L + 7.75% (1.00% Floor)		10/21/2019		10/22/2024		9,395,000		9,191,666		9,113,150		8.43%
Bioplan USA, Inc	Containers & Packaging	1M L + 4.75% (1.00% Floor)		8/9/2018		9/23/2021		13,552,685		13,246,307		9,486,879		8.77%
BW Gas & Convenience	Specialty Retail	1M L + 6.25% (1.00% Floor)		3/9/2020		11/18/2024		5,815,591		5,652,965		5,641,123		5.22%
CareerBuilder, LLC	Professional Services	1M L + 6.75% (1.00% Floor)		7/27/2017		7/31/2023		8,041,808		8,007,703		7,961,390		7.36%
CB URS Holdings Corporation	Road & Rail	1M L + 5.75% (1.00% Floor)		7/31/2019		9/1/2024		4,841,686		4,794,839		3,873,349		3.58%
Cook & Boardman Group, LLC	Distributors	6M L + 5.75% (1.00% Floor)		10/12/2018		10/17/2025		9,850,000		9,769,324		9,456,000		8.75%
Deluxe Toronto Ltd.⁽⁷⁾	Media	1M L + 5.80% (1.00% Floor)		6/29/2018		6/30/2021		4,913,111		4,902,911		4,176,144		3.86%
Empire Office Inc.	Commercial Services & Supplies	1M L + 6.75% (1.50% Floor)		3/28/2019		4/12/2024		13,055,455		12,846,896		12,402,682		11.47%
Empire Resorts, Inc.	Hotels, Restaurants & Leisure	3M L + 2.25%		3/23/2020		3/22/2021		3,846,750		3,846,750		3,846,750		3.55%
Exela Intermedia LLC	IT Services	3M L + 6.50% (1.00% Floor)		6/5/2018		7/12/2023		5,588,676		5,622,832		2,514,904		2.33%
Exela Intermedia LLC	IT Services	Fixed 10.00%		5/22/2019		7/15/2023		1,000,000		924,540		450,000		0.42%
FR Flow Control CB LLC – Term B⁽⁸⁾	Trading Companies & Distributors	3M L + 6.00% (1.00% Floor)		5/10/2019		6/28/2026		5,346,000		5,250,683		5,132,160		4.75%
FR Flow Control CB LLC – Term C⁽⁸⁾	Trading Companies & Distributors	3M L + 6.00% (1.00% Floor)		5/10/2019		6/26/2026		2,100,000		2,062,553		2,016,000		1.86%
Fusion Connect Inc. – Exit Term Loan	Internet Software & Services	3M L + 9.50% (2.00% Floor)		12/11/2019		1/14/2025		5,700,000		5,593,377		5,700,000		5.27%
Fusion Connect Inc. – Take-Back Term Loan	Internet Software & Services	3M L + 8.00% (2.00% Floor)		1/14/2020		7/14/2025		4,748,553		4,748,553		3,323,987		3.07%
GEE Group, Inc.⁽⁶⁾	Professional Services	1M L + 10.00% + 8.00% PIK		3/26/2018		6/30/2023		11,277,314		11,277,314		10,713,448		9.91%
GS Operating, LLC	Trading Companies & Distributors	3M L + 6.50% (1.50% Floor)		2/24/2020		2/28/2025		9,975,000		9,785,941		9,775,500		9.04%
Horus Infrastructure IA LLC	Energy Equipment & Services	1M L + 3.00%		11/8/2019		10/25/2022		4,875,000		4,462,442		4,631,250		4.28%
Hyperion Materials & Technologies, Inc.	Construction Materials	1M L + 5.50% (1.00% Floor)		8/16/2019		8/14/2026		4,975,000		4,883,396		4,676,500		4.32%
Infrastructure & Energy Alternatives, Inc.	Construction & Engineering	3M L + 6.75%		11/14/2018		9/25/2024		7,222,695		7,025,879		7,078,241		6.55%
KIK Custom Products Inc.	Chemicals	1M L + 4.00% (1.00% Floor)		3/11/2019		5/15/2023		5,000,000		4,792,021		4,800,000		4.44%

See notes to unaudited consolidated financial statements.

Investcorp Credit Management BDC, Inc. and Subsidiaries

Consolidated Schedule of Investments – (continued)

June 30, 2020


Investments⁽¹⁾⁽²⁾	Industry	Interest Rate	Initial Acquisition Date		Maturity Date		Principal Amount/ Shares⁽³⁾		Amortized Cost		Fair Value			% of Net Assets
Senior Secured First Lien Debt Investments, continued
Liberty Oilfield Services LLC⁽⁷⁾	Energy Equipment & Services	1M L + 7.625% (1.00% Floor)		9/19/2017		9/19/2022	$	6,233,750	$	6,173,631	$	6,171,413			5.71%
Limbach Holdings, Inc.⁽⁵⁾	Construction & Engineering	1M L + 11.00% (2.00% Floor)		4/11/2019		4/12/2023		9,461,538		9,397,473		9,272,308			8.58%
Northstar Group Services Inc.	Construction & Engineering	3M L + 5.00% (1.00% Floor)		9/5/2019		9/8/2025		4,962,500		4,918,209		4,912,875			4.54%
One Sky Flight LLC	Airlines	1M L + 7.50% (1.00% Floor)		12/19/2019		12/19/2024		9,750,000		9,525,503		9,067,500			8.39%
Pixelle Specialty Solutions LLC	Containers & Packaging	3M L + 6.50% (1.00% Floor)		1/31/2020		10/31/2024		6,911,616		6,782,657		6,566,035			6.07%
Potpourri Group, Inc.	Retail	1M L + 8.25% (1.00% Floor)		6/27/2019		7/3/2024		12,187,500		12,064,697		11,700,000			10.82%
Premiere Global Services, Inc.	Diversified Telecommunication Services	2M L + 6.50% (1.00% Floor)		5/6/2016		9/6/2023		10,123,065		9,723,867		6,883,684			6.37%
ProFrac Services LLC	Energy Equipment & Services	6M L + 7.50% (1.25% Floor)		9/7/2018		9/7/2023		8,021,376		7,977,811		7,379,666			6.83%
Qualtek USA LLC	Construction & Engineering	1M L + 6.25% (1.00% Floor)		7/15/2018		7/18/2025		9,562,500		9,427,039		8,988,750			8.31%
RPX Corporation	Professional Services	1M L + 6.00%		6/8/2018		6/19/2024		5,341,725		5,314,868		5,341,725			4.94%
Specialty Building Products Holdings LLC	Construction Materials	1M L + 5.75%		9/25/2018		9/25/2025		1,952,651		1,931,132		1,855,018			1.72%
Techniplas LLC	Auto Components	Fixed 10.00%		6/19/2020		6/19/2027		542,857		542,857		835,186			0.77%

Total Senior Secured First Lien Debt Investments								269,140,172		259,432,656		237,079,624			219.26%

Senior Secured Second Lien Debt Investments
AP NMT Acquisition BV⁽⁷⁾⁽⁸⁾	Media	3M L + 9.00% (1.00% Floor)		8/12/2014		8/13/2022		15,000,000		14,603,326		15,000,000			13.87%
Premiere Global Services, Inc.⁽³⁾	Diversified Telecommunication Services	3M L + 9.50% (1.00% Floor)		11/30/2016		6/6/2024		16,226,093		16,004,515		5,679,133			5.26%
ZeroChaos Parent, LLC	Professional Services	3M L + 8.25% (1.00% Floor)		11/21/2017		10/31/2023		8,000,000		7,912,554		7,040,000			6.51%

Total Senior Secured Second Lien Debt Investments								39,226,093		38,520,395		27,719,133			25.64%

Equity, Warrants and Other Investments
1888 Industrial Services, LLC (Equity Interest)^(4)(9)(10)	Energy Equipment & Services							18,708		170,691		—			0.00%
4L Technologies Inc Common Stock⁽⁹⁾	Technology Hardware, Storage & Peripherals							149,918		2,171,581		10,494			0.01%
4L Technologies Inc Preferred Stock⁽⁹⁾	Technology Hardware, Storage & Peripherals							2,289		209,004		209,004			0.19%
Fusion Connect Inc., Common Stock⁽⁹⁾	Internet Software & Services							22		306		22			0.00%
Fusion Connect Inc., (Warrants)⁽⁹⁾	Internet Software & Services							202,171		2,814,455		202,171			0.19%
Limbach Holdings, Inc. (Warrants)⁽⁹⁾	Construction & Engineering					4/12/2024		1		—		1			0.00%
PR Wireless, Inc., $0.01 strike (Warrants)⁽⁹⁾	Wireless Telecommunication Services					6/27/2027		201		1,374,009		—			0.00%
Techniplas LLC Common Stock^(9)(10)	Auto Components							540,126		12,231,541		5,401,260			5.00%

Total Equity, Warrants and Other Investments								913,436		18,971,587		5,822,952			5.39%

Total Non-Controlled/Non-Affiliates							$	309,279,701	$	316,924,638	$	270,621,709			250.29%

Liabilities in excess other assets												(162,496,714	)		(150.29%)

Net Assets											$	108,124,995			100.00%

See notes to unaudited consolidated financial statements.

Investcorp Credit Management BDC, Inc. and Subsidiaries

Consolidated Schedule of Investments – (continued)

June 30, 2020

(1)

The Company’s investments are generally acquired in private transactions exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”) and, therefore, are generally subject to limitations on resale, and may be deemed to be “restricted securities’’ under the Securities Act of 1933.

(2)

All investments are non-controlled and non-affiliated issuers. All investments are valued in good faith by the board of directors.

(3)

Principal amount includes capitalized PIK interest unless otherwise noted.

(4)

Effective 10/1/17, AAR Intermediate Holdings, LLC changed its name to 1888 Industrial Services, LLC.

(5)

Refer to Note 6 for more detail on the unfunded commitments.

(6)

First Lien Unitranche Last Out Investment, which accounts for 3.96% of our investment portfolio at fair value.

(7)

(8)

A portfolio company domiciled in the Netherlands. The jurisdiction of the security issuer may be a different country than the domicile of the portfolio company.

(9)

Securities are non-income producing.

(10)

As defined in the 1940 Act, the Company is deemed to be an “Affiliated Person” of this portfolio company because it owns 5% or more of the portfolio company’s outstanding voting securities.

1M L — 1 month LIBOR (0.16 % as of June 30, 2020)

2M L — 2 month LIBOR (0.24 % as of June 30, 2020)

3M L — 3 month LIBOR (0.30 % as of June 30, 2020)

6M L — 6 month LIBOR (0.37 % as of June 30, 2020)

PIK — Payment-In-Kind

See notes to unaudited consolidated financial statements.

Investcorp Credit Management BDC, Inc. and subsidiaries

Notes to Consolidated Financial Statements (unaudited)

December 31, 2020

Note 1. Organization

Investcorp Credit Management BDC, Inc. (“ICMB” or the “Company”), a Maryland corporation formed in May 2013, is a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), and has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code (the “Code”) for U.S. federal income tax purposes. The Company is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 946 Financial Services – Investment Companies.

On February 11, 2014, the Company completed its initial public offering (the “Offering”), selling 7,666,666 shares of its common stock, par value $0.001, including the underwriters’ over-allotment, at a price of $15.00 per share with net proceeds of approximately $111.5 million.

CM Finance LLC, a Maryland limited liability company, commenced operations in March 2012. Immediately prior to the Offering, CM Finance LLC was merged with and into the Company (the “Merger”). In connection with the Merger, the Company issued 6,000,000 shares of common stock and $39.8 million in debt to the pre-existing CM Finance LLC investors, consisting of funds managed by Cyrus Capital Partners, L.P. (the “Original Investors” or the “Cyrus Funds”). The Company had no assets or operations prior to completion of the Merger and, as a result, the books and records of CM Finance LLC became the books and records of the Company, as the surviving entity. Immediately after the Merger, the Company issued 2,181,818 shares of its common stock to Stifel Venture Corp. (“Stifel”) in exchange for $32.7 million in cash. The Company used all of the proceeds of the sale of shares to Stifel to repurchase 2,181,818 shares of common stock from the Original Investors. Immediately after the completion of the Offering, the Company had 13,666,666 shares outstanding. The Company used a portion of the net proceeds of the Offering to repay 100% of the debt issued to the Original Investors in connection with the Merger.

On August 30, 2019, Investcorp Credit Management US LLC (“Investcorp”), a subsidiary of Investcorp Bank Holdings B.S.C., acquired the interests in CM Investment Partners LLC, the Company’s investment adviser (the “Adviser”), which were previously held by the Cyrus Funds and Stifel and paid off certain debt owed by the Adviser, resulting in Investcorp having a majority ownership interest in the Adviser (the “Investcorp Transaction”).

In connection with the Investcorp Transaction, on June 26, 2019, the Company entered into a definitive stock purchase and transaction agreement with Investcorp BDC Holdings Limited (“Investcorp BDC”), an affiliate of Investcorp (the “Stock Purchase Agreement”). Under the Stock Purchase Agreement, Investcorp BDC is required by August 30, 2021 to purchase (i) 680,985 newly issued shares of the Company’s common stock, par value $0.001 per share, at the most recently determined net asset value per share of the Company’s common stock at the time of such purchase, as adjusted as necessary to comply with Section 23 of the 1940 Act, and (ii) 680,985 shares of the Company’s common stock in open-market or secondary transactions.

In connection with the Investcorp Transaction, on June 26, 2019, the Company’s board of directors, including all of the directors who are not “interested persons” of the Company, as defined in Section 2(a)(19) of the 1940 Act (each, an “Independent Director”), unanimously approved a new investment advisory agreement (the “Advisory Agreement”), which was subsequently approved by the Company’s stockholders at a special meeting of stockholders held on August 28, 2019. In connection with the closing of the Investcorp Transaction, on August 30, 2019, the Company entered into the Advisory Agreement and a new administration agreement (the

“Administration Agreement”) with the Adviser as its investment adviser and administrator, respectively. The Advisory Agreement and the Administration Agreement are substantially similar to the Company’s prior investment advisory agreement, dated February 5, 2014, between the Company and the Adviser and the Company’s prior administration agreement, respectively. In addition, on August 30, 2019, the Company changed its name from CM Finance Inc to Investcorp Credit Management BDC, Inc.

The Company’s primary investment objective is to maximize total return to stockholders in the form of current income and capital appreciation by investing directly in debt and related equity of privately held middle-market companies to help these companies fund acquisitions, growth or refinancing. The Company invests primarily in middle-market companies in the form of unitranche loans, standalone first and second lien and mezzanine loans. The Company may also invest in unsecured debt, bonds and in the equity of portfolio companies through warrants and other instruments.

As a BDC, the Company is required to comply with certain regulatory requirements. For instance, as a BDC, the Company must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of total assets are qualifying assets. Qualifying assets include investments in “eligible portfolio companies.” Under the relevant Securities and Exchange Commission (“SEC”) rules, the term “eligible portfolio company” includes all private operating companies, operating companies whose securities are not listed on a national securities exchange, and certain public operating companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case organized and with their principal of business in the United States.

From time-to-time, the Company may form taxable subsidiaries that are taxed as corporations for U.S. federal income tax purposes (the “Taxable Subsidiaries”). At December 31, 2020 and June 30, 2020, the Company had no Taxable Subsidiaries. The Taxable Subsidiaries, if any, allow the Company to hold equity securities of portfolio companies organized as pass-through entities while continuing to satisfy the requirements applicable to a RIC under the Code.

Note 2. Significant Accounting Policies

The following is a summary of significant accounting policies followed by the Company.

a. Basis of Presentation

The accompanying consolidated financial statements are prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) and all values are stated in U.S. dollars, unless noted otherwise. The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the periods included herein as required by U.S. GAAP. These adjustments are normal and recurring in nature.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the fair value of investments and other amounts reported in the consolidated financial statements and accompanying notes. Management believes that the estimates utilized in preparing the Company’s consolidated financial statements are reasonable and prudent. Actual results could differ materially from these estimates. All material inter-company balances and transactions have been eliminated.

As permitted under Regulation S-X and ASC Topic 946, the Company will generally not consolidate its investment in a portfolio company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly-owned subsidiaries, CM Finance SPV Ltd. (“SPV”) and CM Finance SPV LLC (“LLC”), which are special purpose vehicles used to finance certain investments in its consolidated financial statements. All intercompany balances and transactions have been eliminated.

b. Revenue Recognition, Security Transactions, and Realized/Unrealized Gains or Losses

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing, commitment and amendment fees, and purchase and original issue discounts associated with loans to portfolio companies are accreted into interest income over the respective terms of the applicable loans. Accretion of discounts or premiums is calculated by the effective interest or straight-line method, as applicable, as of the purchase date and adjusted only for material amendments or prepayments. Upon the prepayment of a loan or debt security, any prepayment penalties are included in other fee income and unamortized fees and discounts are recorded as interest income and are non-recurring in nature.

Management reviews all loans that become 90 days or more past due on principal or interest or when there is reasonable doubt that principal or interest will be collected for possible placement on non-accrual status. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current, although management may make exceptions to this general rule if the loan has sufficient collateral value and is in the process of collection. As of December 31, 2020, the Company had two loans on non-accrual status, 1888 Industrial Services, LLC – Term B and Deluxe Toronto Ltd., which represented 0.19% of the Company’s portfolio at fair value. As of June 30, 2020, the Company had no loans on non-accrual status.

Dividend income is recorded on the ex-dividend date.

Origination, closing, commitment and amendment fees, and purchase and original issue discounts associated with loans to portfolio companies are accreted into interest income over the respective terms of the applicable loans. Accretion of discounts or premiums is calculated by the effective interest or straight-line method, as applicable, as of the purchase date and adjusted only for material amendments or prepayments. Upon the prepayment of a loan or debt security, any prepayment penalties are included in other fee income and unamortized fees and discounts are recorded as interest income and are non-recurring in nature. During the three and six months ended December 31, 2020, $287,232 and $811,162, respectively, of prepayment penalties and unamortized discounts upon prepayment were recorded as interest income. During the three and six months ended December 31, 2019, $236,998 and $399,474, respectively, of prepayment penalties and unamortized discounts upon prepayment were recorded as interest income.

Investment transactions are accounted for on a trade-date basis. Realized gains or losses on investments are determined by calculating the difference between the net proceeds from the disposition and the amortized cost basis of the investments, without regard to unrealized gains or losses previously recognized. Realized gains or losses on the sale of investments are calculated using the specific identification method. The Company reports changes in fair value of investments as a component of the net change in unrealized appreciation (depreciation) on investments in the Unaudited Consolidated Statements of Operations.

The Company holds debt investments in its portfolio that contain a payment-in-kind (“PIK”) interest provision. PIK interest, which represents contractually deferred interest added to the investment balance that is generally due at maturity, is recorded on an accrual basis to the extent that such amounts are expected to be collected. PIK interest is not accrued if the Company does not expect the issuer to be able to pay all principal and interest when due. The Company earned PIK interest of $891,417and $1,731,744 during the three and six months ended December 31, 2020, respectively. The Company earned PIK interest of $1,454,214 and $2,361,991 during the three and six months ended December 31, 2019, respectively.

The Company may hold equity investments in its portfolio that contain a PIK dividend provision. PIK dividends, which represent contractual dividend payments added to the investment balance, are recorded on an accrual basis to the extent that such amounts are expected to be collected. The Company earned no PIK dividends during the three and six months ended December 31, 2020. The Company earned no PIK dividends during the three and six months ended December 31, 2019.

c. Paid In Capital

The Company records the proceeds from the sale of its common stock to common stock and additional paid-in capital, net of commissions and marketing support fees.

d. Net Increase in Net Assets Resulting from Operations per Share

The net increase in net assets resulting from operations per share is calculated based upon the weighted average number of shares of common stock outstanding during the reporting period.

e. Distributions

Dividends and distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid out as a dividend or distribution is determined by the Company’s board of directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, are generally distributed annually, although the Company may decide to retain such capital gains for investment.

The Company has adopted a dividend reinvestment plan that provides for reinvestment of any distributions the Company declares in cash on behalf of the Company’s stockholders, unless a stockholder elects to receive cash. As a result, if the Company’s board of directors authorizes, and the Company declares, a cash distribution, then the Company’s stockholders who have not “opted out” of the Company’s dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution.

f. Cash and Restricted Cash

Cash and restricted cash consist of bank demand deposits. The Company deposits its cash in financial institutions and, at times, such balance may be in excess of the Federal Deposit Insurance Corporation insurance limits. All of the Company’s cash deposits are held at large established high credit quality financial institutions and management believes that the risk of loss associated with any uninsured balances is remote. The Company has restrictions on the uses of the cash held by SPV and LLC based on the terms of the Notes Payable. For more information on the Notes Payable, see Note 5.

g. Deferred Offering Costs

Deferred offering costs consist of fees and expenses incurred in connection with the offer and sale of the Company’s common stock and bonds, including legal, accounting, printing fees, and other related expenses, as well as costs incurred in connection with the filing of a shelf registration statement. These costs are capitalized when incurred and recognized as a reduction of offering proceeds when the offering is completed.

h. Investment Transactions and Expenses

Purchases of loans, including revolving credit agreements, are recorded on a fully committed basis until the funded and unfunded portions are known or estimable, which in many cases may not be until settlement.

Expenses are accrued as incurred.

Deferred debt issuance costs, incurred in connection with the Company’s Notes Payable, are amortized using the straight-line method over the life of the notes.

Offering costs were charged to paid-in capital upon the sale of shares in the Offering.

i. Investment Valuation

The Company applies fair value accounting to all of its financial instruments in accordance with the 1940 Act and ASC Topic 820 – Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework used to measure fair value and requires disclosures for fair value measurements. In accordance with ASC 820, the Company has categorized its investments and financial instruments carried at fair value, based on the priority of the valuation technique, into a three-level fair value hierarchy as discussed in Note 4. Fair value is a market-based measure considered from the perspective of the market participant who holds the financial instrument rather than an entity specific measure. Therefore, when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that management believes market participants would use in pricing the financial instrument at the measurement date.

Fair value is defined as the price that would be received upon a sale of an asset in an orderly transaction between market participants at the measurement date. Market participants are buyers and sellers in the principal (or most advantageous) market for the asset that (a) are independent of us, (b) are knowledgeable, having a reasonable understanding about the asset based on all available information (including information that might be obtained through due diligence efforts that are usual and customary), (c) are able to transact for the asset, and (d) are willing to transact for the asset or liability (that is, they are motivated but not forced or otherwise compelled to do so).

Securities that are traded on securities exchanges (including such securities traded in the after hours market) are valued on the basis of the closing price on the valuation date (if such prices are available). Securities that are traded on more than one securities exchange are valued at the closing price on the primary securities exchange on which such securities are traded on the valuation date (or if reported on the consolidated tape, then their last sales price on the consolidated tape). Listed options for which the last sales price falls between the last “bid” and “ask” prices for such options are valued at their last sales price on the date of the valuation on the primary securities exchange on which such options are traded. Options for which the last sales price on the valuation date does not fall between the last “bid” and “ask” prices are valued at the average of the last “bid” and “ask” prices for such options on that date. To the extent these securities are actively traded, and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. The Company held no Level 1 investments as of December 31, 2020 or June 30, 2020.

Investments that are not traded on securities exchanges but are traded on the over-the-counter (“OTC”) markets (such as term loans, notes and warrants) are valued using various techniques, which may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (when observable) and fundamental data relating to the issuer. These investments are categorized in Level 2 of the fair value hierarchy, or in instances when lower relative weight is placed on transaction prices, quotations, or similar observable inputs, they are categorized in Level 3.

Investments for which market quotations are not readily available or may be considered unreliable are fair valued, in good faith, using a method determined to be appropriate in the given circumstances. The valuation methods used include the Cost Approach, the Market Approach and the Income Approach. Inputs used in these approaches may include, but are not limited to, interest rate yield curves, credit spreads, recovery rates, comparable company transactions, trading multiples, and volatilities. The valuation method of the Company may change as changes in the underlying company dictates, such as moving from the Cost Approach to Market Approach when underlying conditions change at the company. Because of the inherent uncertainty of valuation in these circumstances, the fair values for the aforementioned investments may differ significantly from values that would have been used had a ready and liquid market for such investments existed or from the amounts that might ultimately be realized, and such differences could be material.

The Company’s valuation policies and procedures are developed by the Adviser, which is also responsible for ensuring that the valuation policies and procedures are consistently applied across all investments

of the Company, and approved by the Company’s board of directors. The valuations are continuously monitored and the valuation process for Level 3 investments is completed on a quarterly basis and is designed to subject the valuation of Level 3 investments to an appropriate level of consistency, oversight and review. The valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Adviser responsible for the portfolio investment. These investment professionals prepare the preliminary valuations based on their evaluation of financial and operating data, company specific developments, market valuations of comparable securities from the same company or that of comparable companies as well as any other relevant factors including recent purchases and sales that may have occurred preceding month-end.

Valuation models are typically calibrated upon initial funding, and are re-calibrated as necessary upon subsequent material events (including, but not limited to additional financing activity, changes in comparable companies, and recent trades). The preliminary valuation conclusions are then documented and discussed with senior management of the Adviser. On a periodic basis and at least once annually, independent valuation firm(s) engaged by the Company conduct independent appraisals and review the Adviser’s preliminary valuations and make their own independent assessment. The Valuation Committee of the Company’s board of directors then reviews the preliminary valuations of the Adviser and that of the independent valuation firms. The Valuation Committee discusses the valuations and makes a recommendation to the Company’s board of directors regarding the fair value of each investment in good faith based on the input of the Adviser and the independent valuation firm(s). Upon recommendation by the Valuation Committee and a review of the valuation materials of the Adviser and the third-party independent valuation firm(s), the board of directors of the Company determines, in good faith, the fair value of each investment.

For more information on the classification of the Company’s investments by major categories, see Note 4.

The fair value of the Company’s assets and liabilities that qualify as financial instruments under U.S. GAAP approximates the carrying amounts presented in the Unaudited Consolidated Statements of Assets and Liabilities.

j. Income Taxes

The Company has elected to be treated, for U.S. federal income tax purposes, as a RIC under Subchapter M of the Code. To qualify, and maintain qualification, as a RIC, the Company must, among other things, meet certain source of income and asset diversification requirements and distribute to stockholders, for each taxable year, at least 90% of the Company’s “investment company taxable income,” which is generally the Company’s net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses. If the Company continues to qualify as a RIC and continues to satisfy the annual distribution requirement, the Company will not have to pay corporate level U.S. federal income taxes on any income that the Company distributes to its stockholders. The Company intends to make distributions in an amount sufficient to maintain RIC status each year and to avoid any federal income taxes on income. The Company will also be subject to nondeductible U.S. federal excise taxes if the Company does not distribute to its stockholders at least 98% of net ordinary income, 98.2% of capital gains, if any, and any recognized and undistributed income from prior years for which it paid no U.S. federal income taxes. Additionally, certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state income taxes. The Company recorded a provision for taxes of $5,780 for the three and six months ended December 31, 2020 for U.S. federal and state income taxes. At December 31, 2020, we had no Taxable Subsidiaries. At June 30, 2020, we had no Taxable Subsidiaries. The Company recorded a provision for taxes of $10,018 for the three and six months ended December 31, 2019 for U.S. federal and state income taxes related to the Taxable Subsidiaries.

Book and tax basis differences that are permanent differences are reclassified among the Company’s capital accounts, as appropriate at year-end. Additionally, the tax character of distributions is determined in accordance with the Code, which differs from U.S. GAAP. During the three and six months ended December 31, 2020, the Company recorded distributions of $2.5 million and $5.0 million, respectively. During the three and six

months ended December 31, 2019, the Company recorded distributions of $3.4 million and $6.8 million, respectively. The tax character of a portion of these distributions may be return of capital.

U.S. GAAP requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in the current year. The Company’s policy is to recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision.

The Company has analyzed such tax positions and has concluded that no unrecognized tax benefits should be recorded for uncertain tax positions for any tax year since inception. Each of the tax years since inception remains subject to examination by taxing authorities. This conclusion may be subject to review and adjustment at a later date based on factors, including but not limited to, ongoing analysis and changes to laws, regulations, and interpretations thereof.

Permanent differences between investment company taxable income and net investment income for financial reporting purposes are reclassified among capital accounts in the financial statements to reflect their tax character. Differences in classification may also result from the treatment of short-term gains as ordinary income for U.S. federal income tax purposes. During the year ended June 30, 2020, the Company reclassified for book purposes amounts arising from permanent book/tax differences related to the different tax treatment of paydown gains and losses, Taxable Subsidiary partnership investments, nondeductible taxes paid and income/(loss) from wholly owned subsidiaries as follows:


	As of June 30, 2020
Additional paid-in capital		$ (126,635)
Distributable earnings		126,635

The tax character of all distributions paid by the Company during the year ended June 30, 2020 was ordinary income.

At June 30, 2020, the components of distributable earnings on a tax basis detailed below differ from the amounts reflected in the Company’s Consolidated Statement of Assets and Liabilities by temporary and other book/tax differences, primarily relating to the tax treatment of dividends payable and non-deductible incentive fee income unvested, as follows:


	As of June 30, 2019
Undistributed net investment income	$	8,108,113
Accumulated capital gains (losses) and other		(8,189,230)
Capital loss carryover		(43,077,639)
Unrealized appreciation (depreciation)		(46,302,927)
Distributions payable		(2,499,360)

Components of tax distributable earnings at year end	$	(91,961,043)

For U.S. federal income tax purposes, net realized capital losses may be carried over to offset future capital gains, if any. These capital losses can be carried forward for an indefinite period and will retain their character as either short-term or long-term capital losses. As of June 30, 2020, the Company had a net short-term capital loss carryforward of $1,345,961 and a net long-term capital loss carryforward of $41,731,678 available to be carried forward for an indefinite period.

A RIC may elect to defer any capital losses incurred after October 31, 2019 (“post-October”) to the beginning of the following fiscal year. As of June 30, 2020, the Company had a post-October short-term capital loss deferral of $1,068,646 and a post-October long-term capital loss deferral of $7,120,584. These losses are deemed to arise on July 1, 2020.

k. Capital Gains Incentive Fee

The Advisory Agreement went into effect on August 30, 2019 (the “Commencement Date”). Under the Advisory Agreement, the Company has agreed to pay the Adviser a fee for investment advisory and management services consisting of two components — a base management fee (the “Base Management Fee”) and an incentive fee (the “Incentive Fee”). The Incentive Fee, which provides the Adviser with a share of the income that it generates for the Company, has two components, ordinary income (the “Income-Based Fee”) and capital gains (the “Capital Gains Fee”).

Under U.S. GAAP, the Company calculates the Capital Gains Fee payable to the Adviser as if the Company had realized all investments at their fair values as of the reporting date. Accordingly, the Company accrues a provisional Capital Gains Fee taking into account any unrealized gains or losses. As the provisional Capital Gains Fee is subject to the performance of investments until there is a realization event, the amount of provisional Capital Gains Fee accrued at a reporting date may vary from the incentive fee that is ultimately realized and the differences could be material.

Under the Advisory Agreement, the Capital Gains Fee is determined and payable in arrears as of the end of each fiscal year (or upon termination of the Advisory Agreement, as of the termination date), commencing with the fiscal year ending June 30, 2021, and will be equal to 20.0% of the Company’s cumulative aggregate realized capital gains from the Commencement Date through the end of that fiscal year, computed net of the Company’s aggregate cumulative realized capital losses and the Company’s aggregate cumulative unrealized capital depreciation through the end of such year, less the aggregate amount of any previously paid Capital Gains Fees. If such amount is negative, then no Capital Gains Fee will be payable for such year. Additionally, if the Advisory Agreement is terminated as of a date that is not a fiscal year end, the termination date will be treated as though it were a fiscal year end for purposes of calculating and paying the Capital Gains Fee. Therefore, under the Advisory Agreement, the Capital Gains Fee will not be charged until the fiscal year ending June 30, 2021.

As of December 31, 2020 and June 30, 2020, there was no capital gains incentive fee payable to the Adviser under the Advisory Agreement.

Note 3. Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial statements upon adoption.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which changes the fair value measurement disclosure requirements of ASC 820. The key provisions of ASU 2018-13 include new, eliminated and modified disclosure requirements. ASU 2018-13 is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period, with early adoption permitted. The Company adopted ASU 2018-13 effective July 1, 2020. The adoption of this accounting standard had no material effect on the Company’s consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04

provide optional expedients and exceptions for applying GAAP to certain contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The Company has agreements that have LIBOR as a reference rate with certain portfolio companies and also with certain lenders. These agreements include language for choosing an alternative successor rate if LIBOR reference is no longer considered to be appropriate. Such contract modifications are required to be evaluated in determining whether the modifications result in the establishment of new contracts or the continuation of existing contracts. The standard is effective as of March 12, 2020 through December 31, 2022. Management is currently evaluating its effective date for adoption and the impact of the adoption of ASU 2020-04 on the Company’s consolidated financial statements and disclosures, however the impact of the adoption is not expected to be material.

Note 4. Investments

The Company’s investments, at any time, may include securities and other financial instruments, including, without limitation, corporate and government bonds, convertible securities, collateralized loan obligations, term loans, trade claims, equity securities, privately negotiated securities, direct placements, working interests, warrants and investment derivatives (such as credit default swaps, recovery swaps, total return swaps, options, forward contracts, and futures) (all of the foregoing collectively referred to in these financial statements as “investments”).

a. Certain Risk Factors

In the ordinary course of business, the Company manages a variety of risks including market risk, liquidity risk and credit risk. The Company identifies, measures and monitors risk through various control mechanisms, including trading limits and diversifying exposures and activities across a variety of instruments, markets and counterparties.

Market risk is the risk of potential adverse changes to the value of financial instruments because of changes in market conditions, including as a result of changes in the credit quality of a particular issuer, credit spreads, interest rates, and other movements and volatility in security prices or commodities. In particular, the Company may invest in issuers that are experiencing or have experienced financial or business difficulties (including difficulties resulting from the initiation or prospect of significant litigation or bankruptcy proceedings), which involves significant risks. The Company manages its exposure to market risk through the use of risk management strategies and various analytical monitoring techniques.

The Company’s assets may, at any time, include securities and other financial instruments or obligations that are illiquid or thinly traded, making purchase or sale of such securities and financial instruments at desired prices or in desired quantities difficult. Furthermore, the sale of any such investments may be possible only at substantial discounts, and it may be extremely difficult to value any such investments accurately.

Credit risk is the potential loss the Company may incur from a failure of an issuer to make payments according to the terms of a contract. The Company is subject to credit risk because of its strategy of investing in the debt of leveraged companies and its involvement in derivative instruments. The Company’s exposure to credit risk on its investments is limited to the fair value of the investments. With regard to derivatives, the Company attempts to limit its credit risk by considering its counterparty’s (or its guarantor’s) credit rating.

b. Investments

Investment purchases, sales and principal payments/paydowns are summarized below for the three and six months ended December 31, 2020 and December 31, 2019, respectively. These purchase and sale amounts exclude derivative instruments.


	Three months ended December 31,				Six months ended December 31,
	2020		2019		2020		2019
Investment purchases, at cost (including PIK interest)	$	18,419,749	$	40,797,499	$	32,609,069	$	61,987,957
Investment sales and repayments		22,723,303		37,921,314		47,120,176		59,421,100

The composition of the Company’s investments as of December 31, 2020, as a percentage of the total portfolio, at amortized cost and fair value, are as follows:


	Investment at Amortized Cost		Percentage		Investments at Fair Value		Percentage
Senior Secured First Lien Debt Investments	$	247,388,240		81.40%	$	224,811,162		87.23%
Unitranche First Lien Debt Investment		11,743,766		3.86		11,391,453		4.42
Senior Secured Second Lien Debt Investment		24,819,015		8.17		12,616,075		4.89
Equity, Warrants and Other Investments		19,971,587		6.57		8,912,888		3.46

Total	$	303,922,608		100.00%	$	257,731,578		100.00%

The composition of the Company’s investments as of June 30, 2020, as a percentage of the total portfolio, at amortized cost and fair value, are as follows:


	Investment at Amortized Cost		Percentage		Investments at Fair Value		Percentage
Senior Secured First Lien Debt Investments	$	248,155,342		78.30%	$	226,366,176		83.65%
Unitranche First Lien Debt Investment		11,277,314		3.56		10,713,448		3.96
Senior Secured Second Lien Debt Investments		38,520,395		12.15		27,719,133		10.24
Equity, Warrants and Other Investments		18,971,587		5.99		5,822,952		2.15

Total	$	316,924,638		100.00%	$	270,621,709		100.00%

The Company uses Global Industry Classification Standard (“GICS”) codes to identify the industry groupings in its portfolio. The following table shows the portfolio composition by industry grouping at fair value at December 31, 2020:


Industry Classification	Investments at Fair Value		Percentage of Total Portfolio
Professional Services	$	30,942,843		12.01%
Energy Equipment & Services		26,255,503		10.19
Construction & Engineering		24,905,196		9.66
Trading Companies & Distributors		24,730,495		9.60
Commercial Services & Supplies		16,516,018		6.41
Containers & Packaging		16,498,203		6.40
Software		13,174,991		5.11
Diversified Telecommunication Services		12,246,723		4.75
Retail		11,552,326		4.48
Internet & Direct Marketing Retail		9,820,868		3.81
Distributors		9,604,435		3.73
Airlines		9,215,000		3.57
Auto Components		8,666,553		3.36
Internet Software & Services		8,648,578		3.36
Consumer Finance		8,385,300		3.25
Household Durables		4,930,781		1.91
Construction Materials		4,653,000		1.81
Specialty Retail		4,434,477		1.72
Road & Rail		4,429,152		1.72
Hotels, Restaurants & Leisure		3,846,750		1.49
IT Services		2,212,447		0.86
Technology Hardware, Storage & Peripherals		1,579,584		0.61
Media		482,355		0.19
Wireless Telecommunication Services		—		—

Total	$	257,731,578		100.00%

The following table shows the portfolio composition by industry grouping at fair value at June 30, 2020:


Industry Classification	Investments at Fair Value		Percentage of Total Portfolio
Professional Services	$	31,056,563		11.48%
Construction & Engineering		30,252,174		11.18
Energy Equipment & Services		29,555,420		10.92
Trading Companies & Distributors		24,586,660		9.09
Media		19,176,144		7.09
Containers & Packaging		16,052,915		5.93
Diversified Telecommunication Services		12,562,817		4.64
Commercial Services & Supplies		12,402,682		4.58
Retail		11,700,000		4.32
Distributors		9,456,000		3.49
Internet Software & Services		9,226,180		3.41
Consumer Finance		9,113,150		3.37
Airlines		9,067,500		3.35
Construction Materials		6,531,518		2.41
Auto Components		6,236,446		2.31
Internet & Direct Marketing Retail		6,193,975		2.29
Specialty Retail		5,641,123		2.08
Household Durables		4,919,063		1.82
Chemicals		4,800,000		1.77
Road & Rail		3,873,349		1.43
Hotels, Restaurants & Leisure		3,846,750		1.42
IT Services		2,964,904		1.10
Technology Hardware, Storage & Peripherals		1,406,376		0.52
Wireless Telecommunication Services		—		—

Total	$	270,621,709		100.00%

The following table shows the portfolio composition by geographic grouping at fair value at December 31, 2020:


	Fair Value		Percentage Total Portfolio
U.S. Northeast	$	68,600,305		26.62%
U.S. Midwest		62,345,624

SEC Form 10-Q filed