The following tables show the fair
value of our portfolio of investments (excluding U.S. Treasury Bills, if any) by geography and industry as of March 31, 2019.
The following tables show the fair
value of our portfolio of investments (excluding U.S. Treasury Bills) by geography and industry as of December 31, 2018.
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
References herein to “we”,
“us” or “our” refer to Princeton Capital Corporation (the “Company” or “Princeton Capital”),
unless the context specifically requires otherwise.
Princeton Capital Corporation, a Maryland
corporation, was incorporated under the general laws of the State of Maryland on July 25, 2013. We are a non-diversified, closed-end
investment company that has filed an election to be regulated as a business development company (“BDC”), under the
Investment Company Act of 1940, as amended (the “1940 Act”). As a BDC, our goal is to annually qualify and elect to
be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended
(the “Code”). The Company, however, did not meet the requirements to qualify as a RIC for the 2018 tax year and will
be taxed as a corporation under Subchapter C of the Code for 2018. We invest primarily in private small and lower middle-market
companies through first lien loans, second lien loans, unsecured loans, unitranche and mezzanine debt financing, often times with
a corresponding equity investment. Our investment objective is to maximize the total return to our stockholders in the form of
current income and capital appreciation through debt and related equity investments.
Prior to March 13, 2015, Princeton Capital’s
predecessor operated under the name Regal One Corporation (“Regal One”). Regal One had been located in Scottsdale,
Arizona, and was a Florida corporation initially incorporated in 1959 as Electro-Mechanical Services Inc. Since inception, Regal
One had been involved in several industries. In 1998, Electro-Mechanical Services Inc. changed its name to Regal One Corporation.
On March 7, 2005, Regal One’s board
of directors determined it was in the shareholders’ best interest to change the focus of its operations to providing financial
consulting services through its network of advisors and professionals, and to be regulated as a BDC under the 1940 Act. On September
16, 2005, Regal One filed a Form N54A (Notification of Election by Business Development Companies) with the Securities and Exchange
Commission (“SEC”), which transformed Regal One into a BDC in accordance with sections 55 through 65 of the 1940 Act.
Regal One reported as an operating BDC from March 31, 2006 until March 13, 2015 and since March 13, 2015 (following the Reincorporation
described below) Princeton Capital has reported as an operating BDC.
On January 18, 2016, the Board conditionally
approved the investment advisory agreement with Princeton Advisory Group, Inc., a New Jersey corporation (“Princeton Advisory
Group”) (the “PAG Investment Advisory Agreement”), subject to the approval of the Company’s stockholders
at the 2016 Annual Meeting of Stockholders. At the 2016 Annual Meeting of Stockholders held on June 9, 2016, the Company’s
stockholders approved the PAG Investment Advisory Agreement, effective June 9, 2016. From June 9, 2016 through December 31, 2017,
Princeton Advisory Group acted as the Company’s investment advisor pursuant to the terms of the PAG Investment Advisory Agreement.
On December 27, 2017, the Board determined
that it would be in the best interests of the Company and its stockholders to terminate the PAG Investment Advisory Agreement and
terminated Princeton Advisory Group as the Company’s investment advisor, effective as of December 31, 2017 at 11:59 p.m.
Eastern Time. Also on December 27, 2017, the Board approved (specifically in accordance with Rule 15a-4(b)(1)(ii) of the Investment
Company Act) and authorized the Company to enter into an Interim Investment Advisory Agreement between the Company and House Hanover,
LLC, a Delaware limited liability company (“House Hanover”) (the “Interim Investment Advisory Agreement”),
in accordance with Rule 15a-4 of the Investment Company Act. The effective date of the Interim Investment Advisory Agreement was
January 1, 2018.
On April 5, 2018, the Board, including
a majority of the independent directors, conditionally approved the Investment Advisory Agreement between the Company and House
Hanover (the “House Hanover Investment Advisory Agreement”) subject to the approval of the Company’s stockholders
at the 2018 Annual Meeting of Stockholders. The House Hanover Investment Advisory Agreement replaced the Interim Investment Advisory
Agreement. On May 30, 2018, the Company’s stockholders approved the House Hanover Investment Advisory Agreement. The effective
date of the House Hanover Investment Advisory Agreement was May 31, 2018.
Since January 1, 2018, House Hanover has
acted as our investment advisor under the Interim Investment Advisory Agreement (from January 1, 2018 until May 31, 2018) and the
House Hanover Investment Advisory Agreement (since May 31, 2018).
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE 2 – SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying financial statements have
been prepared in accordance with accounting principles generally accepted in the United States of America, (“U.S. GAAP”).
In accordance with Regulation S-X under the Securities Act of 1933 and Securities Exchange Act of 1934, the Company does not consolidate
portfolio company investments. The accounting records of the Company are maintained in U.S. dollars. As an investment company,
as defined by the 1940 Act, the Company follows investment company accounting and reporting guidance of Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 – Financial Services - Investment
Companies, which is U.S. GAAP. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation are reflected in the interim financial statements. The reported amounts for the three months ended March
31, 2019 may not be indicative of the results ultimately achieved for the year ended December 31, 2019 which will be presented
in the Company’s annual report on form 10-K.
Reclassifications
Certain prior period amounts in the accompanying
financial statements have been reclassified to conform to the current period presentation. These reclassifications did not affect
previously reported amounts of net income.
Use of Estimates
The preparation of financial statements
in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period.
Changes in the economic environment, financial markets, creditworthiness of our portfolio companies and any other parameters used
in determining these estimates could cause actual results to differ. It is likely that changes in these estimates will occur in
the near term. The Company’s estimates are inherently subjective in nature and actual results could differ materially from
such estimates.
Portfolio Investment Classification
The Company classifies its investments
in accordance with the requirements of the 1940 Act. Under the 1940 Act, “Control Investments” are defined as investments
in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50% of the board representation.
Under the 1940 Act, “Affiliated Investments” are defined as those non-control investments in companies in which the
Company owns between 5% and 25% of the voting securities. Under the 1940 Act, “Non-affiliated Investments” are defined
as investments that are neither Control Investments nor Affiliated Investments. As of March 31, 2019, the Company had control investments
in Advantis Certified Staffing Solutions, Inc., PCC SBH Sub, Inc., Rockfish Holdings, LLC, Rockfish Seafood Grill, Inc., Integrated
Medical Partners, LLC and Dominion Medical Management, Inc. as defined under the 1940 Act. As of December 31, 2018, the Company
had control investments in Advantis Certified Staffing Solutions, Inc., PCC SBH Sub, Inc., Rockfish Holdings, LLC, Rockfish Seafood
Grill, Inc., Integrated Medical Partners, LLC and Dominion Medical Management, Inc. as defined under the 1940 Act.
Investments are recognized when we assume
an obligation to acquire a financial instrument and assume the risks for gains or losses related to that instrument. Investments
are derecognized when we assume an obligation to sell a financial instrument and forgo the risks for gains and losses related to
that instrument. Specifically, we record all security transactions on a trade date basis. Investments in other non-security financial
instruments, such as limited partnerships or private companies, are recorded on the basis of subscription date or redemption date,
as applicable. Amounts for investments recognized or derecognized but not yet settled are reported as receivables for investments
sold or payable for investments acquired, respectively, in the Statements of Assets and Liabilities.
Valuation of Investments
In accordance with U.S. GAAP, fair value
is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”)
in an orderly transaction between market participants at the measurement date.
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
In determining fair value, our board of
directors uses various valuation approaches. In accordance with U.S. GAAP, ASC 820 establishes a fair value hierarchy for inputs
and is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by
requiring that the most observable inputs be used when available.
Observable inputs are those that market
participants would use in pricing the asset or liability based on market data obtained from sources independent of the board of
directors. Unobservable inputs reflect our board of director’s assumptions about the inputs market participants would use
in pricing the asset or liability developed based on the best information available in the circumstances.
With respect to investments for which market
quotations are not readily available, our board of directors undertakes a multi-step valuation process each quarter, as described
below:
|
●
|
Our quarterly valuation process begins with each portfolio company or investment being initially valued by an independent valuation firm, except for those investments where market quotations are readily available;
|
|
●
|
Preliminary valuation conclusions are then documented and discussed with our senior management and our investment advisor
|
|
●
|
The valuation committee of our board of directors then reviews these preliminary valuations and approves them for recommendation to the board of directors;
|
|
●
|
The board of directors then discusses valuations and determines the fair value of each investment in our portfolio in good faith, based on the input of our investment advisor, the independent valuation firm and the valuation committee.
|
U.S. GAAP establishes a framework for measuring
fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs
to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair
value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels
of the fair value hierarchy are as follows:
Level 1 — Valuations based
on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation
adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily
and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 — Valuations based
on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 — Valuations based
on inputs that are unobservable and significant to the overall fair value measurement.
The availability of valuation techniques
and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security,
whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized
due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation,
those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities
existed. Accordingly, the degree of judgment exercised by the board of directors in determining fair value is greatest for securities
categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement
in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement.
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
Fair value is a market-based measure considered
from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are
not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing
the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date,
including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced
for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.
Valuation Processes
The Company establishes valuation processes
and procedures to ensure that the valuation techniques for investments that are categorized within Level 3 of the fair value hierarchy
are fair, consistent, and verifiable. The Company’s board of directors designates a Valuation Committee (the “Committee”)
to oversee the entire valuation process of the Company’s Level 3 investments. The Committee is comprised of independent directors
and reports to the Company’s board of directors. The Committee is responsible for developing the Company’s written
valuation processes and procedures, conducting periodic reviews of the valuation policies, and evaluating the overall fairness
and consistent application of the valuation policies.
The Committee meets on a quarterly basis,
or more frequently as needed, to determine the valuations of the Company’s Level 3 investments. Valuations determined by
the Committee are required to be supported by market data, third-party pricing sources, industry accepted pricing models, counterparty
prices, or other methods that the Committee deems to be appropriate.
The Company will periodically test its
valuations of Level 3 investments through performing back testing of the sales of such investments by comparing the amounts realized
against the most recent fair values reported, and if necessary, uses the findings to recalibrate its valuation procedures. On a
quarterly basis, the Company engages the services of a nationally recognized third-party valuation firm to perform an independent
valuation of the Company’s Level 3 investments.
Investment Valuation
We expect that most of our portfolio investments
will take the form of securities that are not publicly traded. The fair value of loans, securities and other investments that are
not publicly traded may not be readily determinable, and we will value these investments at fair value as determined in good faith
by our board of directors, including reflecting significant events affecting the value of our investments. Most, if not all, of
our investments (other than cash and cash equivalents) will be classified as Level 3 under Financial Accounting Standards Board
Accounting Standards Codification “Fair Value Measurements and Disclosures”, or ASC 820. This means that our portfolio
valuations will be based on unobservable inputs and our own assumptions about how market participants would price the asset or
liability in question. We expect that inputs into the determination of fair value of our portfolio investments will require significant
management judgment or estimation. Even if observable market data are available, such information may be the result of consensus
pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price in an actual
transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers materially reduces the reliability
of such information. We expect to retain the services of one or more independent service providers to review the valuation of these
loans and securities. The types of factors that the board of directors may take into account in determining the fair value of our
investments generally include, as appropriate, comparison to publicly traded securities including such factors as yield, maturity
and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral,
the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio
company does business and other relevant factors. Because such valuations, and particularly valuations of private securities and
private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations
of fair value may differ materially from the values that would have been used if a ready market for these loans and securities
existed. Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were
materially higher than the values that we ultimately realize upon the disposal of such loans and securities.
We will adjust the valuation of our portfolio
quarterly to reflect our board of directors’ determination of the fair value of each investment in our portfolio. Any changes
in fair value are recorded in our statement of operations as net change in unrealized gain or loss on investments.
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
Debt Securities
The Company’s portfolio consists
primarily of first lien loans, second lien loans, and unsecured loans. Investments for which market quotations are readily available
(“Level 2 Loans”) are generally valued using market quotations, which are generally obtained from an independent pricing
service or broker-dealers. For other debt investments (“Level 3 Loans”), market quotations are not available and other
techniques are used to determine fair value. The Company considers its Level 3 Loans to be performing if the borrower is not in
default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance or is otherwise not deemed to
be impaired. In determining the fair value of the performing Level 3 Loans, the Board considers fluctuations in current interest
rates, the trends in yields of debt instruments with similar credit ratings, financial condition of the borrower, economic conditions,
success and prepayment fees, and other relevant factors, both qualitative and quantitative. In the event that a Level 3 Loan instrument
is not performing, as defined above, the Board may evaluate the value of the collateral utilizing the same framework described
above for a performing loan to determine the value of the Level 3 Loan instrument.
Equity Investments
Our equity investments, including common
stock, membership interests, and warrants, are generally valued using a market approach and income approach. The income approach
utilizes primarily the discount rate to value the investment whereas the primary inputs for the market approach are the earnings
before interest, taxes, depreciation and amortization (“EBITDA”) multiple and revenue multiples. The Black-Scholes
Option Pricing Model, a valuation technique that follows the income approach, is used to allocate the value of the equity to the
investment. The pricing model takes into account the contract terms (including maturity) as well as multiple inputs, including
time value, implied volatility, equity prices, risk free rates, and interest rates.
Valuation of Other Financial Instruments
The carrying amounts of the Company’s
other, non-investment, financial instruments, consisting of cash, receivables, accounts payable, and accrued expenses, approximate
fair value due to their short-term nature.
Cash and Restricted Cash
The Company deposits its cash and restricted
cash in financial institutions and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation insured
limit; however, management does not believe it is exposed to any significant credit risk.
The following table provides a reconciliation
of cash and restricted cash reporting within the statements of assets and liabilities that sum to the total of the same such amounts
shown in the statements of cash flows:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
Cash
|
|
$
|
831,192
|
|
|
$
|
2,575,620
|
|
Restricted Cash
|
|
|
25,044
|
|
|
|
-
|
|
Total Cash and Restricted Cash
|
|
$
|
856,236
|
|
|
$
|
2,575,620
|
|
As of March 31, 2019 restricted cash consisted
of cash held for deposit with the law firm that represents the Company in its litigation with Great Value Storage, LLC. As of December
31, 2018, there was no restricted cash.
U.S. Treasury Bills
At the end of each fiscal quarter, we may
take proactive steps to be in compliance with the RIC diversification requirements under Subchapter M of the Code, which are dependent
upon the composition of our total assets at quarter end. We may accomplish this in several ways, including purchasing U.S. Treasury
Bills and closing out positions after quarter-end.
Revenue Recognition
Realized gains or losses on the sale of
investments are calculated using the specific identification method. The Company measures realized gains or losses by the difference
between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized
appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties.
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
Interest income, adjusted for amortization
of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with
senior and subordinated secured loans are accreted into interest income over the respective terms of the applicable loans. Upon
the prepayment of a senior or subordinated secured loan, any prepayment penalties and unamortized loan origination, closing and
commitment fees are recorded as interest income. Generally, when a payment default occurs on a loan in the portfolio, or if the
Company otherwise believes that borrower will not be able to make contractual interest payments, the Company may place the loan
on non-accrual status and cease recognizing interest income on the loan until all principal and interest is current through payment,
or until a restructuring occurs, and the interest income is deemed to be collectible. The Company may make exceptions to this policy
if a loan has sufficient collateral value, is in the process of collection or is viewed to be able to pay all amounts due if the
loan were to be collected on through an investment in or sale of the business, the sale of the assets of the business, or some
portion or combination thereof.
Dividend income is recorded on the ex-dividend
date.
Structuring fees, excess deal deposits,
prepayment fees and similar fees are recognized as income as earned, usually when paid.
Other fee income from investment sources,
includes annual fees and monitoring fees from our portfolio investments and are included in other income from non-control/non-affiliate
investments and other income from affiliate investments. Income from such sources was $6,190 and $12,323 for the three months ended
March 31, 2019, and 2018, respectively.
Other income from non-investment sources
is generally comprised of interest income earned on cash in the Company’s bank account. Income from such sources was $1,868
and $687 for the three months ended March 31, 2019 and 2018, respectively.
Payment-in-Kind Interest (“PIK”)
We have investments in our portfolio that
contain a PIK interest provision. Any PIK interest is added to the principal balance of such investments and is recorded as income,
if the portfolio company valuation indicates that such PIK interest is collectible. For the three months ended March 31, 2019 and
2018, PIK interest was $17,062 and $34,950, respectively. In order to qualify as a RIC, substantially all of this income must be
paid out to stockholders in the form of dividends, even if we have not collected any cash. For the three months ended March 31,
2019 and 2018 and through the date of issuance of this report, no dividends have been paid out to stockholders.
Net Change in Unrealized Gain or Loss
Net change in unrealized gain or loss will
reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized
appreciation or depreciation, when gains or losses are realized.
Legal Fees
Legal fees invoiced to the Company for
the three months ended March 31, 2019 and 2018, were incurred in the normal operating course of business and are included in professional
fees on the Statement of Operations.
Federal and State Income Taxes
The Company was taxed as a regular corporation
(a “C corporation”) under subchapter C of the Internal Revenue Code of 1986, as amended, for its 2017 taxable year.
The Company uses the liability method of accounting for income taxes. Deferred tax assets and liabilities are recorded for tax
loss carryforwards and temporary differences between the tax basis of assets and liabilities and their reported amounts in the
financial statements, using statutory tax rates in effect for the year in which the temporary differences are expected to reverse.
A valuation allowance is provided against deferred tax assets when it is more likely than not that some portion or all of the deferred
tax assets will not be realized.
The Company did not meet the qualifications
of a RIC for the 2018 tax year and will be taxed as a corporation under Subchapter C of the Code. The failure to qualify as a RIC,
however, should not impact the 2018 tax year as the Company has net operating losses and capital losses from 2017 that it can carry
forward to offset taxable income. The failure to qualify as a RIC also did not impact the 2017 tax year as the Company incurred
tax losses. As a result of the losses incurred for the year ended December 31, 2017, the Company intends to carry forward the net
operating losses to future periods in which the Company generates taxable income to reduce its tax liability.
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
The Company does not expect to meet the
qualifications of a RIC for the 2019 tax year and is likely to be taxed as a corporation under Subchapter C of the Code. However,
in the event that the Company does meet the qualifications of a RIC for the 2019 tax year, it may not be in the best interests
of the Company’s stockholders to elect to be taxed as a RIC for the 2019 tax year due to the net operating losses and capital
loss carryforwards the Company currently has. Management will make a determination that is in the best interests of the Company
and its stockholders.
In order to qualify as a RIC, among other
things, the Company is required to distribute to its stockholders on a timely basis at least 90% of investment company taxable
income, as defined by the Code, for each year. So long as the Company achieves its status as a RIC, it generally will not pay corporate-level
U.S. federal and state income taxes on any ordinary income or capital gains that it distributes at least annually to its stockholders
as dividends. Rather, any tax liability related to income earned by the Company will represent obligations of the Company’s
investors and will not be reflected in the financial statements of the Company.
The Company evaluates tax positions taken
or expected to be taken while preparing its financial statements to determine whether the tax positions are “more-likely-than-not”
of being sustained by the applicable tax authority. The Company recognizes the tax benefits of uncertain tax positions only where
the position has met the “more-likely-than-not” threshold. The Company classifies penalties and interest associated
with income taxes, if any, as income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted
at a later date based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations thereof.
Dividends and Distributions
Dividends and distributions to common stockholders
are recorded on the ex-dividend date. The amount, if any, to be paid as a dividend is approved by our board of directors each quarter
and is generally based upon our management’s estimate of our earnings for the quarter. For the three months ended March 31,
2019 and 2018, and through the date of issuance of this report, no dividends have been declared or distributed to stockholders.
Per Share Information
Basic and diluted earnings (loss) per common
share is calculated using the weighted average number of common shares outstanding for the period presented.
Basic earnings (loss) per share is computed
by dividing earnings (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net
earnings (loss) per share is computed by dividing net earnings (loss) per share by the weighted average number of shares outstanding,
plus, any potentially dilutive shares outstanding during the period. For the three months ended March 31, 2019 and 2018, basic
and diluted earnings (loss) per share were the same, since there were no potentially dilutive securities outstanding.
Capital Accounts
Certain capital accounts including undistributed
net investment income, accumulated net realized gain or loss, accumulated net unrealized gain or loss, and paid-in capital in excess
of par, are adjusted, at least annually, for permanent differences between book and tax. In addition, the character of income and
gains to be distributed is determined in accordance with income tax regulations that may differ from U.S. GAAP.
Recent Accounting Pronouncements
In March 2018, the FASB issued ASU 2018-05,
“Income Taxes (Topic 740); Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118”. This ASU
provides accounting and disclosure guidance relating to the Tax Cuts and Jobs Act pursuant to the issuance of SEC Staff Accounting
Bulletin No. 118. The guidance allows a company to report provisional amounts when reasonable estimates are determinable for certain
income tax effects relating to the Act. These provisional amounts may give rise to new current or deferred taxes based on certain
provisions within the Act, as well as adjustments to existing current or deferred taxes that existed prior to the Act’s enactment
date. Adoption of ASU 2018-05 did not have a material impact on the Company’s financial statements.
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
In August 2018, the FASB issued ASU 2018-13
(“ASU 2018-13”), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The
amendments in ASU 2018-13 on this update eliminate, add and modify certain disclosure requirements on fair value measurements in
Topic 820, Fair Value Measurement. The amendments are effective for fiscal years beginning after December 15, 2019. Early adoption
is permitted upon issuance of this update. An entity is permitted to early adopt any removed or modified disclosures upon issuance
of this update and delay adoption of the additional disclosures until their effective date. Management is evaluating the new guidance,
but does not expect the adoption of this guidance to have a material impact on the Company’s financial statements.
The SEC recently
completed a project to streamline disclosure requirements in regulations S-X and S-K, as part of release 33-10532. The SEC adopted
amendments to certain of its disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded,
in light of other SEC disclosure requirements and U.S. GAAP. Management is evaluating the new guidance, but does not expect the
adoption of this guidance to have a material impact on the Company’s financial statements.
NOTE 3 – CONCENTRATION OF CREDIT RISK
In the normal
course of business, the Company maintains its cash balances in financial institutions, which at times may exceed federally insured
limits. The Company is subject to credit risk to the extent any financial institution with which it conducts business is unable
to fulfill contractual obligations on its behalf. Management monitors the financial condition of such financial institutions and
does not anticipate any losses from these counterparties.
NOTE 4 – NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS PER COMMON SHARE
The following information sets forth
the computation of basic and diluted net decrease in net assets resulting from operations per common share for the three
months ended March 31, 2019 and March 31, 2018.
|
|
Three Months Ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Per Share Data
(1)
:
|
|
|
|
|
|
|
Net decrease in net assets resulting from operations
|
|
$
|
(418,036
|
)
|
|
$
|
(173,365
|
)
|
Weighted average shares outstanding for period
|
|
|
|
|
|
|
|
|
Basic
|
|
|
120,486,061
|
|
|
|
120,486,061
|
|
Diluted
|
|
|
120,486,061
|
|
|
|
120,486,061
|
|
Basic and diluted net decrease in net assets resulting from operations per common share
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.003
|
)
|
|
$
|
(0.001
|
)
|
Diluted
|
|
$
|
(0.003
|
)
|
|
$
|
(0.001
|
)
|
|
(1)
|
Per share data based on weighted average shares outstanding.
|
NOTE
5 – FAIR VALUE OF INVESTMENTS
The
Company’s assets recorded at fair value have been categorized based upon a fair value hierarchy in accordance with ASC Topic
820 – Fair Value Measurements and Disclosures (“ASC 820”). See Note 2 for a discussion of the Company’s
policies.
The
following table presents information about the Company’s assets measured at fair value as of March 31, 2019 and December
31, 2018, respectively:
|
|
As
of March 31, 2019
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Portfolio Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
14,497,854
|
|
|
$
|
14,497,854
|
|
Second Lien Loans
|
|
|
-
|
|
|
|
-
|
|
|
|
19,154,273
|
|
|
|
19,154,273
|
|
Unsecured Loans
|
|
|
-
|
|
|
|
-
|
|
|
|
1,152,767
|
|
|
|
1,152,767
|
|
Equity
|
|
|
-
|
|
|
|
-
|
|
|
|
5,127,113
|
|
|
|
5,127,113
|
|
Total
Portfolio Investments
|
|
|
-
|
|
|
|
-
|
|
|
|
39,932,007
|
|
|
|
39,932,007
|
|
Total
Investments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
39,932,007
|
|
|
$
|
39,932,007
|
|
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
|
|
As
of December 31, 2018
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Total
|
|
Portfolio Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Loans
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
14,022,163
|
|
|
$
|
14,022,163
|
|
Second Lien Loans
|
|
|
-
|
|
|
|
-
|
|
|
|
18,103,815
|
|
|
|
18,103,815
|
|
Unsecured Loans
|
|
|
-
|
|
|
|
-
|
|
|
|
1,102,463
|
|
|
|
1,102,463
|
|
Equity
|
|
|
-
|
|
|
|
-
|
|
|
|
5,355,494
|
|
|
|
5,355,494
|
|
Total
Portfolio Investments
|
|
|
-
|
|
|
|
-
|
|
|
|
38,583,935
|
|
|
|
38,583,935
|
|
Total
Investments
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
38,583,935
|
|
|
$
|
38,583,935
|
|
During
the three months ended March 31, 2019 and the year ended December 31, 2018, there were no transfers between Level, 1, Level 2
or Level 3.
The
following table presents additional information about Level 3 assets measured at fair value. Both observable and unobservable
inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a
result, the unrealized gains and losses for assets within the Level 3 category may include changes in fair value that were attributable
to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities)
inputs.
Changes
in Level 3 assets measured at fair value for the three months ended March 31, 2019 are as follows:
|
|
First
Lien
Loans
|
|
|
Second
Lien Loans
|
|
|
Unsecured
Loans
|
|
|
Equity
|
|
|
Total
|
|
Fair
value at beginning of period
|
|
$
|
14,022,163
|
|
|
$
|
18,103,815
|
|
|
$
|
1,102,463
|
|
|
$
|
5,355,494
|
|
|
$
|
38,583,935
|
|
Amortization
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Purchases of investments
|
|
|
100,000
|
|
|
|
1,586,128
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,686,128
|
|
Sales of investments
|
|
|
-
|
|
|
|
(184,667
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(184,667
|
)
|
Payment-in-kind
interest
|
|
|
-
|
|
|
|
17,062
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,062
|
|
Change
in unrealized gain (loss) on investments
|
|
|
375,691
|
|
|
|
(368,065
|
)
|
|
|
50,304
|
|
|
|
(228,381
|
)
|
|
|
(170,451
|
)
|
Transfer
due to restructuring
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Fair
value at end of period
|
|
$
|
14,497,854
|
|
|
$
|
19,154,273
|
|
|
$
|
1,152,767
|
|
|
$
|
5,127,113
|
|
|
$
|
39,932,007
|
|
Change
in unrealized gain (loss) on Level 3 investments still held as of March 31, 2019
|
|
$
|
375,691
|
|
|
$
|
(368,065
|
)
|
|
$
|
50,304
|
|
|
$
|
(228,381
|
)
|
|
$
|
(170,451
|
)
|
Changes
in Level 3 assets measured at fair value for the year ended December 31, 2018 are as follows:
|
|
First
Lien
Loans
|
|
|
Second
Lien Loans
|
|
|
Unsecured
Loans
|
|
|
Equity
|
|
|
Total
|
|
Fair
value at beginning of year
|
|
$
|
14,965,218
|
|
|
$
|
18,665,936
|
|
|
$
|
1,232,812
|
|
|
$
|
4,086,794
|
|
|
$
|
38,950,760
|
|
Amortization
|
|
|
(29,717
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(29,717
|
)
|
Purchases of investments
|
|
|
200,000
|
|
|
|
600,000
|
|
|
|
1,338,225
|
|
|
|
-
|
|
|
|
2,138,225
|
|
Sales of investments
|
|
|
-
|
|
|
|
(1,000,000
|
)
|
|
|
(879,891
|
)
|
|
|
-
|
|
|
|
(1,879,891
|
)
|
Payment-in-kind
interest
|
|
|
136,172
|
|
|
|
52,181
|
|
|
|
-
|
|
|
|
-
|
|
|
|
188,353
|
|
Realized
gain (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Change
in unrealized gain (loss) on investments
|
|
|
(1,249,510
|
)
|
|
|
(699,558
|
)
|
|
|
(103,427
|
)
|
|
|
1,268,700
|
|
|
|
(783,795
|
)
|
Transfer
due to restructuring
|
|
|
-
|
|
|
|
485,256
|
|
|
|
(485,256
|
)
|
|
|
-
|
|
|
|
-
|
|
Fair
value at end of year
|
|
$
|
14,022,163
|
|
|
$
|
18,103,815
|
|
|
$
|
1,102,463
|
|
|
$
|
5,355,494
|
|
|
$
|
38,583,935
|
|
Change
in unrealized gain (loss) on Level 3 investments still held as of December 31, 2018
|
|
$
|
(1,249,510
|
)
|
|
$
|
(699,559
|
)
|
|
$
|
(249,762
|
)
|
|
$
|
1,268,700
|
|
|
$
|
(930,131
|
)
|
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
The
following table provides quantitative information regarding Level 3 fair value measurements as of March 31, 2019:
Description
|
|
Fair
Value
|
|
|
Valuation Technique
|
|
Unobservable
Inputs
|
|
Range (Average)
|
|
|
|
|
|
|
|
|
|
|
First
Lien Loans
|
|
$
|
14,497,854
|
|
|
Discounted
Cash Flow
|
|
Discount
Rate
|
|
24.4%-67.4%
(47.4%)
|
Total
|
|
|
14,497,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Lien Loans
|
|
|
7,950,000
|
|
|
Market Approach
|
|
Real Estate Appraisal Values
|
|
N/A
|
|
|
|
10,204,273
|
|
|
Discounted
Cash Flow
|
|
Discount Rate
|
|
11.4-50.2%
(22.1%)
|
Total
|
|
|
18,154,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Loans
|
|
|
1,138,767
|
|
|
Discounted Cash Flow
|
|
Discount Rate
|
|
32.4%
|
|
|
|
14,000
|
|
|
Market Approach
|
|
Real Estate
Appraisal Values
|
|
N/A
|
Total
|
|
|
1,152,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
3,183,039
|
|
|
Discounted Cash Flow
|
|
Discount Rate
|
|
10.0%-12.6% (10.7%)
|
|
|
|
|
|
|
Market Approach
|
|
Enterprise Value/Revenue Multiples
|
|
0.7x
|
|
|
|
|
|
|
Market Approach
|
|
Enterprise Value/EBITDA Multiples
|
|
7.3x-8.8x
(8.0x)
|
|
|
|
|
|
|
Black-Scholes Option
|
|
Volatility
|
|
21.9%-26.9% (23.3%)
|
|
|
|
|
|
|
Pricing Model
|
|
Discount for Lack of Marketability
|
|
5.0%-20.0% (15.9%)
|
|
|
|
1,942,874
|
|
|
Market Approach
|
|
Real Estate
Appraisal Values
|
|
N/A
|
Total
|
|
|
5,125,913
|
|
|
|
|
|
|
|
Total
Level 3 Investments
|
|
$
|
38,930,807
|
|
|
|
|
|
|
|
The
Company’s remaining Level 3 investments aggregating approximately $1,001,200 have been valued using unadjusted third party
transactions. As a result, there were no unobservable inputs that have been internally developed by the Company in determining
the fair values of these investments as of March 31, 2019.
The
following table provides quantitative information regarding Level 3 fair value measurements as of December 31, 2018:
Description
|
|
Fair
Value
|
|
|
Valuation
Technique
|
|
Unobservable
Inputs
|
|
Range
(Average)
|
|
|
|
|
|
|
|
|
|
|
First
Lien Loans
|
|
$
|
14,022,163
|
|
|
Discounted
Cash Flow
|
|
Discount
Rate
|
|
35.6%-48.6%(44.3%)
|
Total
|
|
|
14,022,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Lien Loans
|
|
|
7,950,000
|
|
|
Market Approach
|
|
Real Estate Appraisal Values
|
|
N/A
|
|
|
|
10,153,815
|
|
|
Discounted Cash Flow
|
|
Discount Rate
|
|
10.6%-38.5%(19.6%)
|
Total
|
|
|
18,103,815
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Loans
|
|
|
1,088,463
|
|
|
Discounted Cash Flow
|
|
Discount Rate
|
|
31.6%
|
|
|
|
14,000
|
|
|
Market Approach
|
|
Real Estate
Appraisal Values
|
|
N/A
|
Total
|
|
|
1,102,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
3,428,572
|
|
|
Discounted Cash Flow
|
|
Discount Rate
|
|
10.1%-12.2%(10.7%)
|
|
|
|
|
|
|
Market Approach
|
|
Enterprise Value/Revenue Multiples
|
|
0.7x
|
|
|
|
|
|
|
Market Approach
|
|
Enterprise Value/EBITDA Multiples
|
|
6.2x-8.5x (7.4x)
|
|
|
|
|
|
|
Black-Scholes Option
|
|
Volatility
|
|
21.9%-31.1%(24.7%)
|
|
|
|
|
|
|
Pricing Model
|
|
Discount for Lack of Marketability
|
|
5.0%-20.0%(15.4%)
|
|
|
|
1,925,722
|
|
|
Market Approach
|
|
Real Estate
Appraisal Values
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5,354,294
|
|
|
|
|
|
|
|
Total
Level 3 Investments
|
|
$
|
38,582,735
|
|
|
|
|
|
|
|
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
The
Company’s remaining Level 3 investments aggregating approximately $1,200 have been valued using unadjusted third party transactions.
As a result, there were no unobservable inputs that have been internally developed by the Company in determining the fair values
of these investments as of December 31, 2018.
As
of March 31, 2019 and December 31, 2018, the Company used both market and income approaches to value certain equity investments
as the Company felt this approach better reflected the fair value of these investments. By considering multiple valuation approaches
(and consequently, multiple valuation techniques), the valuation approaches and techniques are not likely to change from one period
of measurement to the next; however, the weighting of each in determining the final fair value of a Level 3 investment may change
based on recent events or transactions. Refer to “Note 2—Significant Accounting Policies” for more detail.
The
Company considers all relevant information that can reasonably be obtained when determining the fair value of Level 3 investments.
Due to any given portfolio company’s information rights, changes in capital structure, recent events, transactions, or liquidity
events, the type and availability of unobservable inputs may change. Increases (decreases) in revenue multiples, earnings before
interest and taxes (“EBIT”) multiples, time to expiration, and stock price/strike price would result in higher (lower)
fair values all else equal. Decreases (increases) in discount rates, volatility, and annual risk rates, would result in higher
(lower) fair values all else equal. The market approach utilizes market value (revenue and EBIT) multiples of publicly traded
comparable companies and available precedent sales transactions of comparable companies. The Company carefully considers numerous
factors when selecting the appropriate companies whose multiples are used to value its portfolio companies. These factors include,
but are not limited to, the type of organization, similarity to the business being valued, relevant risk factors, as well as size,
profitability and growth expectations. In general, precedent transactions include recent rounds of financing, recent purchases
made by the Company, and tender offers. Refer to “Note 2—Significant Accounting Policies” for more detail.
The
primary significant unobservable input used in the fair value measurement of the Company’s debt securities (first lien loans,
second lien loans and unsecured loans), including income-producing investments in funds, is the discount rate. Significant increases
(decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. In determining
the discount rate, for the income (discounted cash flow) or yield approach, the Company considers current market yields and multiples,
portfolio company performance, leverage levels and credit quality, among other factors in its analysis. Changes in one or more
of these factors can have a similar directional change on other factors in determining the appropriate discount rate to use in
the income approach.
The
primary significant unobservable inputs used in the fair value measurement of the Company’s equity investments are the EBITDA
multiple and revenue multiple, which is used to determine the Enterprise Value. Significant increases (decreases) in the Enterprise
Value in isolation would result in a significantly higher (lower) fair value measurement. To determine the Enterprise Value for
the market approach, the Company considers current market trading and/or transaction multiples, portfolio company performance
(financial ratios) relative to public and private peer companies and leverage levels, among other factors. Changes in one or more
of these factors can have a similar directional change on other factors in determining the appropriate multiple to use in the
market approach.
The
primary unobservable inputs used in the fair value measurement of the Company’s equity investments, when using an option
pricing model to allocate the equity value to the investment, are the discount rate for lack of marketability and volatility.
Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value
measurement. Significant increases (decreases) in the volatility in isolation would result in a significantly higher (lower) fair
value measurement. Changes in one or more factors can have a similar directional change on other factors in determining the appropriate
discount rate or volatility to use in the valuation of equity using an option pricing model.
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
NOTE
6 – RELATED PARTY TRANSACTIONS
House
Hanover Investment Advisory Agreement
As
disclosed elsewhere in this 10-Q (including Note 1), House Hanover has served as the Company’s investment advisor since
January 1, 2018 pursuant to the Interim Investment Advisory Agreement (until May 31, 2018) and the House Hanover Investment Advisory
Agreement (since May 31, 2018).
Effective
as of January 1, 2018, House Hanover serves as our investment advisor. House Hanover is registered as an investment advisor under
the 1940 Act.
Material
Differences between Interim Investment Advisory Agreement and House Hanover Investment Advisory Agreement
The
terms and conditions of the House Hanover Investment Advisory Agreement and the Interim Investment Advisory Agreement are substantially
similar, except that (i) the Interim Investment Advisory Agreement did not require approval in accordance with Rule 15a-4 of the
1940 Act and (ii) the duration of the House Hanover Investment Advisory Agreement is one year from the effective date (May 31,
2018) and thereafter shall continue automatically for successive annual periods, provided that such continuance is specifically
approved at least annually by (a) the vote of the Board, or by the vote of a majority of the outstanding voting securities of
the Company and (b) the vote of a majority of the members of the Board who are not parties to the House Hanover Investment Advisory
Agreement or “interested persons” (as such term is defined in Section 2(a)(19) of the 1940 Act) of any such party,
in accordance with the requirements of the 1940 Act, as opposed to a 150-day limitation on the term, as set forth in the Interim
Investment Advisory Agreement.
Advisory
Services
House
Hanover is registered as an investment adviser under the 1940 Act and serves as the Company’s investment advisor pursuant
to the House Hanover Investment Advisory Agreement in accordance with the 1940 Act. House Hanover is owned by and an affiliate
of Mr. Mark DiSalvo, the Company’s Interim President, Interim Chief Executive Officer, and a director of the Company.
Subject
to supervision by the Company’s Board, House Hanover oversees the Company’s day-to-day operations and provide the
Company with investment advisory services. Under the terms of the House Hanover Investment Advisory Agreement, House Hanover,
among other things: (i) determines the composition and allocation of the portfolio of the Company, the nature and timing of the
changes therein and the manner of implementing such changes; (ii) identifies, evaluates and negotiates the structure of the investments
made by the Company; (iii) executes, closes, services and monitors the Company’s investments; (iv) determines the securities
and other assets that the Company shall purchase, retain, or sell; (v) performs due diligence on prospective portfolio companies;
(vi) provides the Company with such other investment advisory, research and related services as the Company may, from time to
time, reasonably require for the investment of its funds; and (vii) if directed by the Board, assists in the execution and closing
of the sale of the Company’s assets or a sale of the equity of the Company in one or more transactions. House Hanover’s
services under the House Hanover Investment Advisory Agreement may not be exclusive and it is free to furnish similar services
to other entities so long as its services to the Company are not impaired. At the request of the Company, House Hanover,
upon any transition of the Company’s investment advisory relationship to another investment advisor or upon any internalization,
shall provide reasonable transition assistance to the Company and any successor investment advisor.
Management
Fee
Pursuant
to the House Hanover Investment Advisory Agreement, the Company pays House Hanover a base management fee for investment advisory
and management services. The cost of the base management fee is ultimately borne by the Company’s stockholders. The House
Hanover Investment Advisory Agreement does not contain an incentive fee component.
The
base management fee is calculated at an annual rate of 1.00% of the Company’s gross assets, including assets purchased with
borrowed funds or other forms of leverage and excluding cash and cash equivalents net of all indebtedness of the Company for borrowed
money and other liabilities of the Company. The base management fee is payable quarterly in arrears, and determined as set forth
in the preceding sentence at the end of the two most recently completed calendar quarters. The Board may retroactively adjust
the valuation of the Company’s assets and the resulting calculation of the base management fee in the event the Company
or any of its assets are sold or transferred to an independent third party or the Company or House Hanover receives an audit report
or other independent third party valuation of the Company. To the extent that any such adjustment increases or decreases the base
management fee of any prior period, the Company will be obligated to pay the amount of increase to House Hanover or House Hanover
will be obligated to refund the decreased amount, as applicable.
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
Management
fees earned by House Hanover for the three months ended March 31, 2019 and March 31, 2018 were $98,279 and $116,827, respectively.
As of March 31, 2019 and December 31, 2018, management fees of $98,279 and $81,296, respectively, were payable to House Hanover.
As of March 31, 2019 and December 31, 2018, management fees of $19,282 and $19,282, respectively, were payable to Princeton Advisory
Group, Inc., our former investment advisor.
Incentive
Fee
The
House Hanover Investment Advisory Agreement does not obligate the Company to pay House Hanover an inventive fee. Incentive fees
are a typical component of investment advisory agreements with business development companies.
Payment
of Expenses
House
Hanover bears all compensation expense (including health insurance, pension benefits, payroll taxes and other compensation related
matters) of its employees and bear the costs of any salaries or directors’ fees of any officers or directors of the Company
who are affiliated persons (as defined in the 1940 Act) of House Hanover. However, House Hanover, subject to approval by the Board
of the Company, is entitled to reimbursement for the portion of any compensation expense and the costs of any salaries of any
such employees to the extent attributable to services performed by such employees for the Company. During the term of the House
Hanover Investment Advisory Agreement, House Hanover will also bear all of its costs and expenses for office space rental, office
equipment, utilities and other non-compensation related overhead allocable to performance of its obligations under the House Hanover
Investment Advisory Agreement.
Except
as provided in the preceding paragraph the Company reimburses House Hanover all direct and indirect costs and expenses incurred
by it during the term of the House Hanover Investment Advisory Agreement for: (i) due diligence of potential investments of the
Company, (ii) monitoring performance of the Company’s investments, (iii) serving as officers of the Company, (iv) serving
as directors and officers of portfolio companies of the Company, (v) providing managerial assistance to portfolio companies of
the Company, and (vi) enforcing the Company’s rights in respect of its investments and disposing of its investments; provided,
however, that, any third party expenses incurred by House Hanover in excess of $50,000 in the aggregate in any calendar quarter
will require advance approval by the Board of the Company.
In
addition to the foregoing, the Company will also be responsible for the payment of all of the Company’s other expenses,
including the payment of the following fees and expenses:
|
●
|
organizational
and offering expenses;
|
|
●
|
expenses
incurred in valuing the Company’s assets and computing its net asset value per
share (including the cost and expenses of any independent valuation firm);
|
|
●
|
subject
to the guidelines approved by the Board of Directors, expenses incurred by House Hanover
that are payable to third parties, including agents, consultants or other advisors, in
monitoring financial and legal affairs for the Company and in monitoring the Company’s
investments and performing due diligence on the Company’s prospective portfolio
companies or otherwise related to, or associated with, evaluating and making investments;
|
|
●
|
interest
payable on debt, if any, incurred to finance the Company’s investments and expenses
related to unsuccessful portfolio acquisition efforts;
|
|
●
|
offerings
of the Company’s common stock and other securities;
|
|
●
|
transfer
agent and custody fees and expenses;
|
|
●
|
U.S.
federal and state registration fees of the Company (but not House Hanover);
|
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
|
●
|
all
costs of registration and listing the Company’s shares on any securities exchange;
|
|
●
|
U.S.
federal, state and local taxes;
|
|
●
|
independent
directors’ fees and expenses;
|
|
●
|
costs
of preparing and filing reports or other documents required of the Company (but not House
Hanover) by the SEC or other regulators;
|
|
●
|
costs
of any reports, proxy statements or other notices to stockholders, including printing
costs;
|
|
●
|
the
costs associated with individual or group stockholders;
|
|
●
|
the
Company’s allocable portion of the fidelity bond, directors and officers/errors
and omissions liability insurance, and any other insurance premiums;
|
|
●
|
direct
costs and expenses of administration and operation of the Company, including printing,
mailing, long distance telephone, copying, secretarial and other staff, independent auditors
and outside legal costs; and
|
|
●
|
all
other non-investment advisory expenses incurred by the Company regarding administering
the Company’s business.
|
Duration
and Termination
Unless
terminated earlier as described below, the House Hanover Investment Advisory Agreement will continue in effect for a period of
one (1) year from its effective date. It will remain in effect from year to year thereafter if approved annually by the Company’s
Board or by the affirmative vote of the holders of a majority of the Company’s outstanding voting securities, and, in either
case, if also approved by a majority of the Company’s directors who are neither parties to the House Hanover Investment
Advisory Agreement nor “interested persons” (as defined under the 1940 Act) of any such party. The House Hanover Investment
Advisory Agreement may be terminated at any time, without the payment of any penalty, (i) upon written notice, effective on the
date set forth in such notice, by the vote of a majority of the outstanding voting securities of the Company or by the vote of
the Company’s directors, or (ii) upon 60 days’ written notice, by House Hanover. The House Hanover Investment Advisory
Agreement automatically terminates in the event of its “assignment,” as defined in the 1940 Act.
The
House Hanover Investment Advisory Agreement was most recently approved by our Board and a majority of the Company’s directors
who are neither parties to the House Hanover Investment Advisory Agreement nor “interested persons” (as defined in
the 1940 Act) of any such party, on May 9, 2019.
Indemnification
The
House Hanover Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance
of their duties, or by reason of the material breach or reckless disregard of their duties and obligations under the House Hanover
Investment Advisory Agreement, House Hanover and its officers, managers, employees and members are entitled to indemnification
from the Company for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably
paid in settlement) arising from the rendering of House Hanover’s services under the House Hanover Investment Advisory Agreement
or otherwise as the Company’s investment advisor. The amounts payable for indemnification will be calculated net of payments
recovered by the indemnified party under any insurance policy with respect to such losses.
At
all times during the term of the House Hanover Investment Advisory Agreement and for one year thereafter, House Hanover is obligated
to maintain directors and officers/errors and omission liability insurance in an amount and with a provider reasonably acceptable
to the Board of the Company.
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
Administration
Services and Service Agreement
House
Hanover is entitled to reimbursement of expenses under the House Hanover Investment Advisory Agreement for administrative services
performed for the Company.
On
January 1, 2018, Princeton Capital Corporation directly entered into a service agreement with SS&C Technologies Holdings,
Inc. (the “Sub-Administrator”) to provide certain administrative services to the Company. In exchange for providing
services, the Company pays the Sub-Administrator an asset-based fee with a $150,000 annual minimum as adjusted for any reimbursement
of expenses. This asset-based fee will vary depending upon our gross assets, as adjusted, as follows:
Gross
Assets
|
|
Fee
|
first
$150 million of gross assets
|
|
20
basis points (0.20%)
|
next
$150 million of gross assets
|
|
15
basis points (0.15%)
|
next
$200 million of gross assets
|
|
10
basis points (0.10%)
|
in
excess of $500 million of gross assets
|
|
5
basis points (0.05%)
|
Administration
fees were $67,500 and fees to the Sub-Administrator were $37,500 for the three months ended March 31, 2019, as shown on the Statements
of Operations under administration fees. Administration fees were $61,500 and fees to the Sub-Administrator were $37,500 for the
three months ended March 31, 2018, as shown on the Statements of Operations under administration fees.
Managerial
Assistance
As
a BDC, we offer, and must provide upon request, managerial assistance to our portfolio companies. This assistance could involve
monitoring the operations of our portfolio companies, participating in board of directors and management meetings, consulting
with and advising officers of portfolio companies and providing other organizational and financial guidance. As of March 31, 2019,
none of the portfolio companies had accepted our offer for such services.
NOTE
7 – FINANCIAL HIGHLIGHTS
|
|
Three
Months Ended
March 31,
2019
|
|
|
Three
Months Ended
March 31,
2018
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
Per
Share Data
(1)
:
|
|
|
|
|
|
|
Net
asset value at beginning of period
|
|
$
|
0.345
|
|
|
$
|
0.344
|
|
Net
investment loss
|
|
|
(0.002
|
)
|
|
|
(0.001
|
)
|
Change
in unrealized loss
|
|
|
(0.002
|
)
|
|
|
(0.001
|
)
|
Net
asset value at end of period
|
|
$
|
0.341
|
|
|
$
|
0.342
|
|
Total
return based on net asset value
(2)
|
|
|
(1.2
|
)%
|
|
|
(0.6
|
)%
|
Weighted average
shares outstanding for period, basic
|
|
|
120,486,061
|
|
|
|
120,486,061
|
|
Ratio/Supplemental
Data:
|
|
|
|
|
|
|
|
|
Net
assets at end of period
|
|
$
|
41,136,915
|
|
|
$
|
41,234,174
|
|
Average net assets
|
|
$
|
41,550,306
|
|
|
$
|
40,950,606
|
|
Annualized
ratio of net operating expenses to average net assets
|
|
|
5.2
|
%
|
|
|
4.8
|
%
|
Annualized
ratio of net investment loss to average net assets
|
|
|
(2.4
|
)%
|
|
|
(0.7
|
)%
|
Annualized
ratio of net investment loss to average net assets, excluding other income from non-investment sources
|
|
|
(2.4
|
)%
|
|
|
(1.1
|
)%
|
Annualized
ratio of net operating expenses excluding management fees, incentive fees, and interest expense to average net assets
|
|
|
4.3
|
%
|
|
|
3.6
|
%
|
Annualized
ratio of net decrease in net assets resulting from operations to average net assets
|
|
|
(4.1
|
)%
|
|
|
(1.7
|
)%
|
Portfolio
Turnover
|
|
|
0.5
|
%
|
|
|
2.2
|
%
|
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
|
|
Year
Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2016
|
|
|
2015
|
|
|
2014
|
|
Per
Share Data
(1)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value at beginning of year
|
|
$
|
0.344
|
|
|
$
|
0.365
|
|
|
$
|
0.400
|
|
|
$
|
0.254
|
|
|
$
|
0.564
|
|
Net
investment income (loss)
|
|
|
0.009
|
|
|
|
0.008
|
|
|
|
(0.004
|
)
|
|
|
(0.013
|
)
|
|
|
(0.144
|
)
|
Change
in unrealized gain (loss)
|
|
|
(0.007
|
)
|
|
|
(0.035
|
)
|
|
|
(0.019
|
)
|
|
|
(0.081
|
)
|
|
|
(0.358
|
)
|
Realized
gain (loss)
|
|
|
(0.001
|
)
|
|
|
0.006
|
|
|
|
(0.012
|
)
|
|
|
0.002
|
|
|
|
0.192
|
|
Change
in capital share transactions
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
0.238
|
|
|
|
-
|
|
Net
asset value at end of year
|
|
$
|
0.345
|
|
|
$
|
0.344
|
|
|
$
|
0.365
|
|
|
$
|
0.400
|
|
|
$
|
0.254
|
|
Total
return (loss) based on net asset value
(2)
|
|
|
0.3
|
%
|
|
|
(5.8
|
)%
|
|
|
(8.8
|
)%
|
|
|
(36.2
|
)%
|
|
|
(55.0
|
)%
|
Weighted average
shares outstanding for year, basic
|
|
|
120,486,061
|
|
|
|
120,486,061
|
|
|
|
120,486,061
|
|
|
|
97,402,398
|
|
|
|
1,816,534
|
|
Ratio/Supplemental
Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
assets at end of year
|
|
$
|
41,554,951
|
|
|
$
|
41,407,539
|
|
|
$
|
43,985,319
|
|
|
$
|
48,225,563
|
|
|
$
|
462,022
|
|
Average net assets
|
|
$
|
41,416,562
|
|
|
$
|
42,634,685
|
|
|
$
|
46,991,446
|
|
|
$
|
45,472,971
|
|
|
$
|
743,758
|
|
Total
operating expenses to average net assets
|
|
|
5.4
|
%
|
|
|
3.8
|
%
|
|
|
5.8
|
%
|
|
|
9.5
|
%
|
|
|
35.2
|
%
|
Net
operating expenses to average net assets
(3)
|
|
|
5.4
|
%
|
|
|
3.3
|
%
|
|
|
5.8
|
%
|
|
|
9.5
|
%
|
|
|
35.2
|
%
|
Net
investment income (loss) to average net assets
|
|
|
2.5
|
%
|
|
|
2.4
|
%
|
|
|
(1.1
|
)%
|
|
|
(2.7
|
)%
|
|
|
(35.2
|
)%
|
Net
investment income (loss) to average net assets, excluding management fee waiver
|
|
|
2.5
|
%
|
|
|
1.9
|
%
|
|
|
(1.1
|
)%
|
|
|
(2.7
|
)%
|
|
|
(35.2
|
)%
|
Net
investment income (loss) to average net assets, excluding other income from non-investment sources
(4)
|
|
|
2.5
|
%
|
|
|
0.1
|
%
|
|
|
(1.1
|
)%
|
|
|
(2.7
|
)%
|
|
|
(35.2
|
)%
|
Net
investment income (loss) to average net assets, excluding other income from non-investment sources, excluding management
fee waiver
(4)
|
|
|
2.5
|
%
|
|
|
(0.4
|
)%
|
|
|
(1.1
|
)%
|
|
|
(2.7
|
)%
|
|
|
(35.2
|
)%
|
Net
operating expenses excluding management fees, incentive fees, and interest expense to average net assets
|
|
|
4.3
|
%
|
|
|
2.8
|
%
|
|
|
4.3
|
%
|
|
|
8.0
|
%
|
|
|
35.2
|
%
|
Net
operating expenses excluding management fees, incentive fees, and interest expense to average net assets, excluding management
fee waiver
|
|
|
4.3
|
%
|
|
|
3.2
|
%
|
|
|
4.3
|
%
|
|
|
8.0
|
%
|
|
|
35.2
|
%
|
Net
increase (decrease) in net assets resulting from operations to average net assets
|
|
|
0.4
|
%
|
|
|
(6.0
|
)%
|
|
|
(9.0
|
)%
|
|
|
(19.5
|
)%
|
|
|
(75.8
|
)
(5)
%
|
Portfolio
Turnover
|
|
|
0.5
|
%
|
|
|
7.0
|
%
|
|
|
1.1
|
%
|
|
|
0.7
|
%
|
|
|
31.2
|
(5)
%
|
(1)
|
Financial
highlights are based on weighted average shares outstanding.
|
(2)
|
Total
return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset
values per share in the period. The total returns are not annualized.
|
(3)
|
Net
Operating expenses includes a management fee waiver in the amount of $216,559 for the year ended December 31, 2017.
|
(4)
|
Other
income from non-investment sources only includes the reduction of previously accrued expenses totaling $968,256 for the year
ended December 31, 2017.
|
(5)
|
Unaudited
|
NOTE
8 – COMMITMENTS AND CONTINGENCIES
In
the normal course of business, the Company may enter into investment agreements under which it commits to make an investment in
a portfolio company at some future date or over a specified period of time. The Company maintains sufficient assets to provide
adequate cover to allow it to satisfy its unfunded commitment amount as of March 31, 2019. The unfunded commitment is accounted
for under ASC 820. As of the date of this report, all commitments have been funded.
On
June 2, 2015, the Company entered into a Lease Guaranty Agreement to guaranty a portion of a lease entered into by Rockfish Seafood
Grill, Inc. The Company’s guaranty is limited to the total tenant improvement allowance and the total amount of commissions
that the landlord provided in connection with the lease. The total guaranteed amount by the Company is approximately $292,701
and reduces proportionally after each of the first sixty months of the lease, which commenced in November 2015, so long as no
uncured event of default exists. As of March 31, 2019, the guaranteed amount was reduced to $92,689.
Legal
Proceedings
As
of March 31, 2019, there were no material legal proceedings against the Company or any of its officers or directors.
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
Great
Value Storage Litigation
On
March 14, 2019, we filed a complaint against Great Value Storage, LLC (“GVS”), World Class Capital Group, LLC, and
Natin Paul, which we refer to collectively as the GVS Defendants, in the District Court for Harris County, Texas. GVS is one of
the Company’s portfolio companies. The complaint alleges that the GVS defendants are in breach of certain contractual obligations
under a Note Purchase Agreement entered into between the parties on July 31, 2012, as amended (the “Note Purchase Agreement”),
including failure to make payments owed to the Company under the Note Purchase Agreement. The Company seeks (i) actual damages,
(ii) special, statutory, or exemplary damages, (iii) pre-judgment interest, (iv) post-judgment interest, (v) court costs, (vi)
reasonable attorneys’ fees, and (vii) all other relief to which the Company may be entitled to under law or equity. On April
15, 2019, the GVS Defendants filed an Answer with Request for Disclosure. The action is pending in the Harris County District
Court.
General
From
time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings
relating to the enforcement of the Company’s rights under contracts with its portfolio companies. Other than as described
above, the Company is not currently involved in any material legal proceedings, nor, to our knowledge, is any material legal proceeding
threatened against us.
NOTE
9 – UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES
The
Company’s investments are primarily in private small and lower middle-market companies. In accordance with Rules 3.09 and
4.08(g) of Regulation S-X, the Company must determine which of its unconsolidated controlled portfolio companies are considered
“significant subsidiaries”, if any. In evaluating these investments, there are three tests utilized to determine if
any of the Company’s control investments are considered significant subsidiaries; the investment, the asset, and the income
significant tests. Rule 3.09 of Regulation S-X, as interpreted by the SEC, requires the Company to include separate audited financial
statements of any unconsolidated majority-owned or controlled subsidiary in an annual report if either the investment or income
significant test exceeds 20% of the Company’s total investments at fair value or total income, respectively. Rule 4-08(g)
of Regulation S-X requires summarized financial information of an unconsolidated subsidiary in an annual report if it does not
qualify under Rule 3.09 of Regulation S-X and any of the three significant tests exceeds 10% of the Company’s total investments
at fair value, total assets or total income, respectively. Rule 10-01(b)(1) of Regulation S-X requires summarized financial information
for interim financial statements, if either the investment or income significant test exceeds 20% of the Company’s total
investments at fair value or total income, respectively.
The
Company has determined that Rockfish Seafood Grill, Inc., Integrated Medical Partners, LLC, and Advantis Certified Staffing Solutions,
Inc., three of its four majority owned or control portfolio companies were considered significant subsidiaries at the 20% level
at March, 31, 2019 as prescribed under Rule 10-01(b)(1) of Regulation S-X.
The
following tables show the summarized financial information for Rockfish Seafood Grill, Inc., Integrated Medical Partners, LLC,
and Advantis Certified Staffing Solutions, Inc. (numbers in thousands):
Three
Months Ended March 31, 2019 (unaudited)
|
|
Rockfish
Seafood Grill, Inc.
|
|
|
Integrated
Medical Partners, LLC
|
|
|
Advantis
Certified Staffing Solutions, Inc.
|
|
Income Statement
|
|
|
|
|
|
|
|
|
|
Net Revenue
|
|
$
|
5,077
|
|
|
$
|
2,495
|
|
|
$
|
3,978
|
|
Gross Profit
|
|
|
3,563
|
|
|
|
537
|
|
|
|
1,082
|
|
Net Income (Loss)
|
|
|
(579
|
)
|
|
|
(282
|
)
|
|
|
(186
|
)
|
Three Months Ended
March 31, 2018
(unaudited)
|
|
Rockfish Seafood Grill, Inc.
|
|
|
Integrated Medical Partners, LLC
|
|
|
Advantis Certified Staffing Solutions, Inc.
|
|
Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Revenue
|
|
$
|
5,355
|
|
|
$
|
3,314
|
|
|
$
|
3,922
|
|
Gross Profit
|
|
|
3,724
|
|
|
|
826
|
|
|
|
893
|
|
Net Income (Loss)
|
|
|
(195
|
)
|
|
|
(538
|
)
|
|
|
(425
|
)
|
NOTE
10 – SUBSEQUENT EVENTS
From
April 1, 2019 through May 15, 2019, there was no portfolio activity or other events to report.
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
Schedule
12-14
The
table below represents the fair value of control and affiliate investments at December 31, 2018 and any amortization, purchases,
sales, and realized and change in unrealized gain (loss) made to such investments, as well as the ending fair value as of March
31, 2019.
Portfolio
Company/Type of Investment
(1)
|
|
Principal
Amount/Shares/
Ownership
% at March 31, 2019
|
|
|
Amount
of Interest and Dividends Credited in Income
|
|
|
Fair
Value at December 31, 2018
|
|
|
Purchases
(2)
|
|
|
Sales
|
|
|
Change
in Unrealized Gains/(Losses)
|
|
|
Fair
Value at March 31, 2019
|
|
Control
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advantis
Certified Staffing Solutions, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Lien Loan, 6.0% Cash, due 11/30/2021
(3)
|
|
$
|
4,500,000
|
|
|
$
|
-
|
|
|
$
|
2,457,887
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(308,511
|
)
|
|
$
|
2,149,376
|
|
Unsecured
loan 5%, due 12/31/2019
|
|
$
|
813,225
|
|
|
|
10,026
|
|
|
|
652,277
|
|
|
|
-
|
|
|
|
-
|
|
|
|
32,625
|
|
|
|
684,902
|
|
Unsecured
loan 5%, due 12/31/2019
|
|
$
|
90,000
|
|
|
|
1,110
|
|
|
|
72,188
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,610
|
|
|
|
75,798
|
|
Unsecured
loan 8%, due 12/31/2019
|
|
$
|
150,000
|
|
|
|
2,959
|
|
|
|
124,115
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,165
|
|
|
|
129,280
|
|
Unsecured
loan 8%, due 12/31/2019
|
|
$
|
110,000
|
|
|
|
2,170
|
|
|
|
91,017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,789
|
|
|
|
94,806
|
|
Unsecured
loan 10.75%, due 12/31/2019
|
|
$
|
175,000
|
|
|
|
4,639
|
|
|
|
148,866
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,115
|
|
|
|
153,981
|
|
Common
Stock – Series A
(3)
|
|
|
225,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Common
Stock – Series B
(3)
|
|
|
9,500,000
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrant
for 250,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027
(3)
|
|
|
1
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Warrant
for 700,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027
(3)
|
|
|
1
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Dominion
Medical Management, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Lien Loan, 12.0% Cash, 6% PIK due, 3/31/2020
|
|
$
|
1,555,961
|
|
|
|
57,385
|
|
|
|
1,029,756
|
|
|
|
603,190
|
|
|
|
(184,667
|
)
|
|
|
(16,939
|
)
|
|
|
1,431,340
|
|
Integrated
Medical Partners, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
Membership – Class A units
(3)
|
|
|
800
|
|
|
|
-
|
|
|
|
997,272
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(155,736
|
)
|
|
|
841,536
|
|
Preferred
Membership – Class B units
(3)
|
|
|
760
|
|
|
|
-
|
|
|
|
42,611
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,537
|
)
|
|
|
32,074
|
|
Common
Units
(3)
|
|
|
14,082
|
|
|
|
-
|
|
|
|
6,723
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,448
|
)
|
|
|
5,275
|
|
PCC
SBH Sub, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
loan, 12% Cash, due 12/31/2019
|
|
$
|
14,000
|
|
|
|
420
|
|
|
|
14,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,000
|
|
Common
Stock
(3)
|
|
|
100
|
|
|
|
-
|
|
|
|
1,925,722
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,152
|
|
|
|
1,942,874
|
|
Rockfish
Seafood Grill, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Loan, 8% Cash, 6.0% PIK, due 3/31/2018
(3)
|
|
$
|
6,352,944
|
|
|
|
-
|
|
|
|
6,689,793
|
|
|
|
-
|
|
|
|
-
|
|
|
|
53,854
|
|
|
|
6,743,647
|
|
Revolving
Loan, 8% Cash, due 12/31/2020
|
|
$
|
1,921,000
|
|
|
|
36,642
|
|
|
|
1,465,452
|
|
|
|
100,000
|
|
|
|
-
|
|
|
|
68,587
|
|
|
|
1,634,039
|
|
Rockfish
Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
for Membership Interest, exercise price $0.001 per 1% membership interest, expires 7/28/2028
(3)
|
|
|
10.000
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Membership
Interest – Class A
(3)
|
|
|
99.997
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
Control Investments
|
|
|
|
|
|
$
|
115,351
|
|
|
$
|
15,717,679
|
|
|
$
|
703,190
|
|
|
$
|
(184,667
|
)
|
|
$
|
(303,274
|
)
|
|
$
|
15,932,928
|
|
(1)
|
Represents
an illiquid investment.
|
(2)
|
Includes
PIK interest.
|
(3)
|
Non-income
producing security.
|
PRINCETON CAPITAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)
The
table below represents the fair value of control and affiliate investments at December 31, 2017 and any amortization, purchases,
sales, and realized and change in unrealized gain (loss) made to such investments, as well as the ending fair value as of March
31, 2018.
Portfolio
Company/Type of Investment
(1)
|
|
Principal
Amount/Shares/
Ownership
% at March 31, 2018
|
|
|
Amount
of Interest and Dividends Credited in Income
|
|
|
Fair
Value at December 31, 2017
|
|
|
Purchases
(2)
|
|
|
Sales
|
|
|
Change
in Unrealized Gains/(Losses)
|
|
|
Fair
Value at March 31, 2018
|
|
Control
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advantis
Certified Staffing Solutions, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second
Lien Loan, 6.0% Cash, due 11/30/2021
(3)
|
|
$
|
4,500,000
|
|
|
$
|
-
|
|
|
$
|
3,826,477
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(609,585
|
)
|
|
$
|
3,216,892
|
|
Unsecured
loans 5%, due 10/31/2017
|
|
$
|
-
|
|
|
|
-
|
|
|
|
76,839
|
|
|
|
-
|
|
|
|
(89,224
|
)
|
|
|
12,385
|
|
|
|
-
|
|
Unsecured
loans 5%, due 12/31/2017
|
|
$
|
-
|
|
|
|
-
|
|
|
|
623,499
|
|
|
|
|
|
|
|
(724,000
|
)
|
|
|
100,501
|
|
|
|
-
|
|
Unsecured
loan 5%, due 12/31/2018
|
|
$
|
813,225
|
|
|
|
9,915
|
|
|
|
-
|
|
|
|
813,225
|
|
|
|
-
|
|
|
|
(118,916
|
)
|
|
|
694,309
|
|
Unsecured
loan 5%, due 12/31/2018
|
|
$
|
90,000
|
|
|
|
801
|
|
|
|
-
|
|
|
|
90,000
|
|
|
|
-
|
|
|
|
(13,160
|
)
|
|
|
76,840
|
|
Unsecured
loan 8%, due 12/31/2018
|
|
$
|
150,000
|
|
|
|
1,085
|
|
|
|
-
|
|
|
|
150,000
|
|
|
|
|
|
|
|
(18,958
|
)
|
|
|
131,042
|
|
Common
Stock – Series A
(3)
|
|
|
225,000
|
|
|
|
-
|
|
|
|
3,713
|
|
|
|
-
|
|
|
|
-
|
|
|
|
231
|
|
|
|
3,944
|
|
Common
Stock – Series B
(3)
|
|
|
9,500,000
|
|
|
|
-
|
|
|
|
156,757
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,877
|
)
|
|
|
149,880
|
|
Warrant
for 250,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027
(3)
|
|
|
1
|
|
|
|
-
|
|
|
|
4,125
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(575
|
)
|
|
|
3,550
|
|
Warrant
for 700,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027
(3)
|
|
|
1
|
|
|
|
-
|
|
|
|
11,551
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(507
|
)
|
|
|
11,044
|
|
Rockfish
Seafood Grill, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Lien Loan, 8% Cash, 6.0% PIK, due 3/31/2018
(3)
|
|
$
|
6,352,944
|
|
|
|
-
|
|
|
|
6,637,883
|
|
|
|
-
|
|
|
|
-
|
|
|
|
350,831
|
|
|
|
6,988,714
|
|
Revolving
Loan, 8% Cash, due 12/31/2018
|
|
$
|
1,621,000
|
|
|
|
32,420
|
|
|
|
1,663,335
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28,783
|
|
|
|
1,692,118
|
|
Rockfish
Holdings, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
for Membership Interest, exercise
price
$0.001 per 1% membership interest,
expires
7/28/2018
(3)
|
|
|
1
|
|
|
|
-
|
|
|
|
257,647
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(229,732
|
)
|
|
|
27,915
|
|
Membership
Interest – Class A
(3)
|
|
|
1,000
|
|
|
|
-
|
|
|
|
28,628
|
|
|
|
-
|
|
|
|
-
|
|
|
|
222,601
|
|
|
|
251,229
|
|
Integrated
Medical Partners, LLC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured
Loan, 6.0% Cash, due 9/30/2019
|
|
$
|
-
|
|
|
|
6,017
|
|
|
|
437,085
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(437,085
|
)
|
|
|
-
|
|
Unsecured
Loan, 6.0% Cash, due 5/20/2018
|
|
$
|
-
|
|
|
|
860
|
|
|
|
81,389
|
|
|
|
-
|
|
|
|
(66,667
|
)
|
|
|
(14,722
|
)
|
|
|
-
|
|
Second
Lien Loan, 12.0% Cash, 6% PIK due, 3/1/2019
|
|
$
|
1,085,256
|
|
|
|
4,884
|
|
|
|
-
|
|
|
|
600,000
|
|
|
|
-
|
|
|
|
469,237
|
|
|
|
1,069,237
|
|
Preferred
Membership – Class A units
(3)
|
|
|
800
|
|
|
|
-
|
|
|
|
1,844,856
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(296,631
|
)
|
|
|
1,548,225
|
|
Preferred
Membership – Class B units
(3)
|
|
|
760
|
|
|
|
-
|
|
|
|
34,514
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(18,439
|
)
|
|
|
16,075
|
|
Common
Units
(3)
|
|
|
14,082
|
|
|
|
-
|
|
|
|
307
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(211
|
)
|
|
|
96
|
|
PCC
SBH Sub, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
(3)
|
|
|
100
|
|
|
|
-
|
|
|
|
1,570,755
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44,065
|
|
|
|
1,614,820
|
|
Unsecured
loan, 12% Cash, due 2/15/2018
|
|
$
|
14,000
|
|
|
|
420
|
|
|
|
14,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,000
|
|
Total
Control Investments
|
|
|
|
|
|
$
|
56,402
|
|
|
$
|
17,273,360
|
|
|
$
|
1,653,225
|
|
|
$
|
(879,891
|
)
|
|
$
|
(536,764
|
)
|
|
$
|
17,509,930
|
|
|
(1)
|
Represents
an illiquid investment.
|
|
(2)
|
Includes
PIK interest.
|
|
(3)
|
Non-income
producing security.
|
End
of notes to financial statements.