Unrealized Appreciation (Depreciation)3,900,306 outstanding common shares for the three months ended March 31, 2021. These weighted average share amounts have been retroactively adjusted for the reverse stock split effected on Investments

During the three months ended March 31, 2021, net2022, gross unrealized appreciation was largely driven by increases inprimarily consisted of the fair valuereversal of previously recognized unrealized losses on our investments in Avanti’s 2^ndTru Taj common stock and CPK common stock, which were offset by corresponding realized losses as discussed above. Gross unrealized depreciation was driven by the write downs on our investments in the Avanti 1.125 lien secured loan, Avanti 1.25 lien secured loan and 1.5 lien secured loan, on which we collectively recognized $7.7 million in unrealized depreciation. In April 2022, Avanti announced a series of restructuring transactions pursuant to which certain creditors of Avanti (excluding GECC) contributed additional senior debt financing to Avanti, and the 2nd lien secured bond and Tru Taj (UK) Asia Limited (“Tru Taj”) common equity and Crestwood Equity Partners LP preferred equity which had net unrealized appreciation of $4.3 million, $2.8 million and $2.4 million respectively.  In addition, the sale of our investment in Boardriders 1^st1.5 lien secured loan resulted in the reversal approximately $3.5 million of unrealized depreciation previously recognized in prior periods.were converted to equity.

Unrealized depreciation for the three months ended March 31, 2021 was primarily due to a decrease in the fair value of our investment in PFS Holdings Corp. common equity for which we recognized $2.2 million in unrealized depreciation.

During the three months ended March 31, 2020, net unrealized depreciation was largely driven by decreases in portfolio company valuations as compared to the prior year end.  Most notably, we recognized unrealized depreciation of approximately $4.0 million on our investment in Avanti’s 2^nd lien secured bond, approximately $3.6 million on our investment in Tru Taj common equity and approximately $3.4 million and $2.6 million on our investment in California Pizza Kitchen, Inc. (“CPK”) 1^st lien loan and 2^nd lien loan, respectively.  The Avanti, Tru Taj and CPK investments are all level 3 investments for which the valuations include unobservable inputs such as discount rates and comparable company multiples which have experienced decreases as of March 31, 2020 as compared to December 31, 2019 due to general market volatility, including the impact of the COVID-19 pandemic during the three months ended March 31, 2020.  Additionally, we recognized unrealized losses of $2.3 million and $2.7 million on our investments in Finastra Group Holdings, Ltd. and ASP Chromaflo Technologies Corp., both of which were valued at March 31, 2020 based on active market prices. 

Unrealized appreciation for the three months ended March 31, 2020 was primarily due to the sale of Commercial Barge in February 2020, for which we realized approximately $6.3 million of previously unrealized losses. In the table above, the presentation of gross unrealized appreciation and depreciation amounts for the three months ended March 31, 2020 has been updated consistent with the current year presentation which groups the funded and unfunded portion of revolvers together.

As discussed under “—Recent Developments”, we cannot predict the duration of the COVID-19 pandemic and the resulting impact to our individual portfolio companies or the broader market.  It is likely that any recovery may be slow and/or volatile.  The current unrealized depreciation on our portfolio may not be reversed in the short-term or at all and we may see further declines in fair value before the pandemic is over.

Liquidity and Capital Resources

This “—Liquidity and Capital Resources” discussion should be read in conjunction with the discussion of COVID-19 under “—Recent Developments—COVID 19”.

At March 31, 2021,2022, we had approximately $26.6$8.5 million of cash and cash equivalents. At March 31, 2021,2022, we had investments in 3345 debt instruments across 2937 companies, totaling approximately $135.5$145.2 million at fair value and 135116 equity investments in 116 companies, totaling approximately $58.1$54.1 million at fair value.

In the normal course of business, we may enter into investment agreements under which we commit to make an investment in a portfolio company at some future date or over a specified period of time. As of March 31, 2021,2022, we had approximately $31.4$25.3 million in unfunded loan commitments, subject to our approval in certain instances, to provide debt financing to certain of our portfolio companies. We had sufficient cash and other liquid assets on our March 31, 20212022 balance sheet to satisfy the unfunded commitments.

For the three months ended March 31, 2021,2022, net cash used forprovided by operating activities was approximately $24.1$2.1 million, reflecting the purchases and repayments of investments offset by net investment income, including non-cash income related to accretion of discount and PIK income and proceeds from sales of investments and principal payments received. Net cash usedprovided by purchases and proceeds from sales of investments was approximately $23.2$0.9 million, reflecting payments for additional investments of $45.4$25.3 million, offset by proceeds from principal repayments and sales of $22.2$26.2 million. Such amounts include draws and repayments on revolving credit facilities.

For the three months ended March 31, 2021,2022, net cash used forby financing activities was $2.5$2.8 million, related toprimarily for distributions to investors.stockholders.

Contractual Obligations

A summary of our significant contractual payment obligations as of March 31, 20212022 is as follows:

We have certain contracts under which we have material future commitments. Under the Investment Management Agreement, GECM provides investment advisory services to us. For providing these services, we pay GECM a fee, consisting of two components: (1) a base management fee based on the average value of our total assets and (2) an incentive fee based on our performance.

We are also party to the Administration Agreement with GECM. Under the Administration Agreement, GECM furnishes us with, or otherwise arranges for the provision of, office facilities, equipment, clerical, bookkeeping, finance, accounting, compliance and record keeping services at such office facilities and other such services as our administrator.

If any of the contractual obligations discussed above are terminated, our costs under any new agreements that we enter into may increase. In addition, we would likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under our Investment Management Agreement and our Administration Agreement. Any new investment management agreement would also be subject to approval by our stockholders.

Both the Investment Management Agreement and the Administration Agreement may be terminated by either party without penalty upon no fewer than 60 days’ written notice to the other.

Off-Balance Sheet Arrangements

There were no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices, as of and for the three months ended March 31, 2021.

Notes PayableRevolver

On September 13, 2017,May 5, 2021, we sold $28.4entered into a Loan, Guarantee and Security Agreement (the “Loan Agreement”) with City National Bank (“CNB”). The Loan Agreement provides for a senior secured revolving line of credit of up to $25 million (subject to a borrowing base as defined in the Loan Agreement). We may request to increase the revolving line in an aggregate principal amount not to exceed $25 million, which increase is subject to the sole discretion of 6.50% notes due 2022 (the "GECCL Notes").  On September 29, 2017, we sold an additional $4.3 millionCNB. The maturity date of the GECCL Notes upon full exercise ofrevolving line is May 5, 2024. Borrowings under the underwriters’ over-allotment option.  The aggregate principal balance ofrevolving line bear interest at a rate equal to (i) the GECCL Notes outstandingLIBOR plus 3.50%, (ii) a base rate plus 2.00% or (iii) a combination thereof, as determined by us. As of March 31, 2021 is $30.3 million.2022, there were no borrowings outstanding under the revolving line.

The GECCL NotesBorrowings under the revolving line are our unsecured obligations and rank equal withsecured by a first priority security interest in substantially all of our outstandingassets, subject to certain specified exceptions. We have made customary representations and future unsecured unsubordinated indebtedness.  The GECCL Noteswarranties and are effectively subordinated, or junior in right of payment,required to any future secured indebtedness that we may incurcomply with various affirmative and structurally subordinated to all future indebtednessnegative covenants, reporting requirements and other obligationscustomary requirements for similar loan agreements. In addition, the Loan Agreement contains financial covenants requiring (i) net assets of our subsidiaries.  We pay interest onnot less than $65 million, (ii) asset coverage equal to or greater than 150% and (iii) bank asset coverage equal to or greater than 300%, in each case tested as of the GECCL Notes on January 31, April 30, July 31 and October 31last day of each year.  The GECCL Notes will mature on September 18,fiscal quarter of the Company. Borrowings are also subject to the leverage restrictions contained in the Investment Company Act. In May 2022, the Loan Agreement was amended to require an asset coverage equal to or greater than 150% as of the last day of each fiscal quarter except for the fiscal quarters ending March 31, 2022 and can be called on, or after, September 18, 2019.  Holders ofJune 30, 2022. In addition, the GECCL interest rate was amended to replace LIBOR with the secured overnight financing rate (“SOFR”).

Notes do not have the option to have the GECCL Notes repaid prior to the stated maturity date.  The GECCL Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.Payable

On January 11, 2018, we soldissued $43.0 million in aggregate principal amount of 6.75% notes due 2025 (the “GECCM Notes” and, together with the GECCL Notes and GECCM Notes, the “Notes”). On January 19, 2018 and February 9, 2018, we soldissued an additional $1.9 million and $1.5 million, respectively, of the GECCM Notes upon partial exercise of the underwriters’ over-allotment option. The aggregate principal balance of the GECCM Notes outstanding as of March 31, 20212022 is $45.6 million.

The GECCM Notes are our unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness.  The GECCM Notes are effectively subordinated, or junior in right of payment, to any future secured indebtedness that we may incur and structurally subordinated to all future indebtedness and other obligations of our subsidiaries.  We pay interest on the GECCM Notes on March 31, June 30, September 30 and December 31 of each year.  The GECCM Notes will mature on January 31, 2025 and can be called on, or after, January 31, 2021.  Holders of the GECCM Notes do not have the option to have the GECCM Notes repaid prior to the stated maturity date.  The GECCM Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

On June 18, 2019, we soldissued $42.5 million in aggregate principal amount of the GECCN6.50% Notes due 2024 (the “GECCN Notes”), which included $2.5 million of GECCN Notes soldissued in connection with the partial exercise of the underwriters’ over-allotment option. On July 5, 2019, we soldissued an additional $2.5 million of the GECCN Notes upon another partial exercise of the underwriters’ over-allotment option. The aggregate principal balance of the GECCN Notes outstanding as of March 31, 20212022 is $42.8 million.

On June 23, 2021, we issued $50.0 million in aggregate principal amount of 5.875% notes due 2026 (the “GECCO Notes” and, together with the GECCM Notes and GECCN Notes, the “Notes”). On July 9, 2021, we issued an additional $7.5 million of the GECCO Notes upon full exercise of the underwriters’ over-allotment option.

The GECCN Notes are our unsecured obligations and rank equal with all of our outstanding and future unsecured unsubordinated indebtedness. The GECCN Notesunsecured notes are effectively subordinated, or junior in right of payment, to indebtedness under our Loan Agreement and any other future secured indebtedness that we may incur and structurally subordinated to all future indebtedness and other obligations of our subsidiaries. We pay interest on the GECCN Notes on March 31, June 30, September 30 and December 31 of each year beginning September 30, 2019.year. The GECCNGECCM Notes, GECCM Notes and GECCO Notes will mature on January 31, 2025, June 30, 2024 and June 30, 2026, respectively. The GECCM Notes and GECCN Notes are currently callable at the Company’s option and the GECCO Notes can be called on, or after, June 30, 2021.2023. Holders of the GECCN Notes do not have the option to have the GECCN Notes repaid prior to the stated maturity date. The GECCN Notes were issued in minimum denominations of $25 and integral multiples of $25 in excess thereof.

We may repurchase the Notes in accordance with the Investment Company Act of 1940 and the rules promulgated thereunder.

As of March 31, 2021,2022, our asset coverage ratio was approximately 177.1%147.5%. WeUnder the Investment Company Act, we are subject to a minimum asset coverage ratio of 150%. As a result of falling below the Minimum ACR, we will be subject to certain limitations on our ability to incur additional debt, make cash distributions on junior securities or repurchase junior securities, in each case, in accordance with the Investment Company Act of 1940, as amended and the indentures governing our outstanding notes, until such time we are above the Minimum ACR.

Recent Developments

Our Board authorized the distribution for the quarter ending September 30, 20212022 at $0.10$0.45 per share, with the record and payment dates to be set by the officers of GECC pursuant to authority granted by our Board.

On May 5, 2021,April 19, 2022, GECC filed an amendment to its registration statement with the Company entered intoSEC in connection with a Loan, Guarantee and Security Agreementnon-transferable rights offering to purchase shares of its common stock (the “Loan Agreement”) with City National Bank (“CNB”“Rights Offering”). The Loan Agreement provides for a senior secured revolving line of credit of upCompany's stockholders who fully exercise all rights issued to $25 million (subject to a borrowing base as definedthem in the Loan Agreement).Rights Offering are entitled to subscribe for additional shares that were not subscribed for by other stockholders of the Company. The Company may request to increaseregistration statement has not been declared effective by the revolving line in an aggregate amount not to exceed $25 million, which increaseSEC and the Rights Offering is subject to market and other conditions. There can be no assurance as to whether or when the sole discretion of CNB. The maturity dateRights Offering may be completed, if at all, or as to the actual size or terms of the revolving line is the earlier of (i) May 5, 2024 and (ii) May 15, 2022 if the Company’s 6.50% notes due 2022 are not refinanced on or prior to such date. Borrowings under the revolving line bear interest at a rate equal to (i) the London Inter-bank Offered Rate plus 3.50%, (ii) a base rate plus 2.00% or (iii) a combination thereof, as determined by the Company.

Borrowings under the revolving line are secured by a first priority security interest in substantially all of the Company’s assets, subject to certain specified exceptions. The Company has made customary representations and warranties and is required to comply with various affirmative and negative covenants, reporting requirements and other customary requirements for similar loan agreements. In addition, the Loan Agreement contains financial covenants requiring (i) net assets of not less than $65 million, (ii) asset coverage equal to or greater than 160% and (iii) bank asset coverage equal to or greater than 300%, in each case tested as of the last day of each fiscal quarter of the Company. Borrowings are also subject to the leverage restrictions contained in the Investment Company Act of 1940, as amended.

In April 2021:

In May 2021:

Rights Offering.

COVID-19

The global outbreak of the COVID-19 pandemic has disruptedcontinues to disrupt economic markets and themarkets. The economic impact, duration and spread of the COVID-19 virus, including new variants, is uncertain at this time. The operational and financial performance of some of the portfolio companies in which we make investments has been and may further be significantly impacted by COVID-19, which may in turn impact the valuation of our investments, results of our operations and cash flows.

Our investment manager prioritizes the health and safety of employees and in early March 2020, GECM moved to a remote-working model for all employees. In addition, the officers of GECC have maintained regular communications with key service providers, including the fund administration, legal and accounting professionals, noting that those firms have similarly moved to remote-working models to the extent possible. Our employees and key service providers have been able to effectively transition to working remotely while maintaining a consistent level of capabilities and service, however, we will continue to monitor and make adjustments as necessary.

While we have been carefully monitoring the COVID-19 pandemic and its impact on our business and the business of our portfolio companies, we have continued to fund our existing debt commitments. In addition, we have continued to make, and expect to continue to make, new investments.

We cannot predict the full impact of the COVID-19 pandemic, including its duration in the United States and worldwide and the magnitude of the economic impact of the outbreak, including with respect to the travel restrictions, business closures and other quarantine measures imposed on service providers and other individuals by various local, state, and federal governmental authorities, as well as non-U.S. governmental authorities. As such, we are unable to predict the duration of any business and supply-chain disruptions, the extent to which the COVID-19 pandemic will negatively affect our portfolio companies’ operating results or the impact that such disruptions may have on our results of operations and financial condition. Our portfolio is diversified across multiple industries and the direct and indirect impacts of the COVID-19 pandemic will be dependent on the specific circumstances for each portfolio company. For example, companies that derive revenues through in-person interactions with customers, such as restaurants and retail stores, have been and may be subject to reduced capacity or shutdowns based on local government advisories and regulations. For example, CPK filed for bankruptcy in July 2020.  Other companies may be better able to adapt to the changing environment by moving their workforce to a remote-working model and leveraging technology solutions to interact with customers.

Depending on the duration and extent of the disruption to the operations of our portfolio companies, we expect that certain portfolio companies may experience financial distress and possibly default on their financial obligations to us and their other capital providers. We also expectIt is possible that some of our portfolio companies may significantly curtail business operations, furlough or lay off employees and terminate service providers, and defer capital expenditures if subjected to prolonged and severe financial distress, which would likely impair their business on a permanent basis. These developments would likely result in a decrease in the value of our investment in any such portfolio company.

The COVID-19 pandemic and the related disruption and financial distress experienced by our portfolio companies may have material adverse effects on our investment income, particularly our interest income, received from our investments. In connection with the adverse effects of the COVID-19 pandemic, we may need to restructure our investments in some of our portfolio companies, which could result in reduced interest payments, an increase in the amount of PIK interest we receive, or result in permanent write-downs on our investments.

We will continue to monitor the rapidly evolving situation relating to the COVID-19 pandemic and guidance from U.S. and international authorities, including federal, state and local public health authorities and may take additional actions based on their recommendations. In these circumstances, there may be developments outside our control requiring us to adjust our plan of operation. As such, given the dynamic nature of this situation, we cannot reasonably estimate the impacts of COVID-19 on our financial condition, results of operations or cash flows in the future. To the extent our portfolio companies are adversely impacted by the effects of the COVID-19 pandemic, it may have a material adverse impact on our future net investment income, the fair value of our portfolio investments, their financial condition and the results of operations and financial condition of our portfolio companies.

We are also subject to financial risks, including changes in market interest rates. As of March 31, 2021,2022, approximately $107.8$60.6 million in principal amount of our debt investments bore interest at variable rates, which are generally based on LIBOR, and many of which are subject to certain floors. In connection with the COVID-19 pandemic, the U.S. Federal Reserve and other central banks have reduced certain interest rates and LIBOR has decreased. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in LIBOR are not offset by a corresponding increase in the spread over LIBOR that we earn on any portfolio investments or a decrease in our operating expenses. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for an analysis of the impact of hypothetical base rate changes in interest rates.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in interest rates. As of March 31, 2021, 142022, 28 debt investments in our portfolio bore interest at a fixed rate, and the remaining 1917 debt investments were at variable rates, representing approximately $98.4$163.7 million and $107.8$85.8 million in principal debt, respectively. As of December 31, 2020, 102021, 26 debt investments in our portfolio bore interest at a fixed rate, and the remaining 2018 debt investments were at variable rates, representing approximately $85.6$148.0 million and $105.0$86.0 million in principal debt, respectively. The variable rates are based upon the LIBOR.LIBOR or US prime rate.

To illustrate the potential impact of a change in the underlying interest rate on our net investment income, we have assumed a 1%, 2%, and 3% increase and 1%, 2%, and 3% decrease in the underlying LIBOR,reference rate, and no other change in our portfolio as of March 31, 2021.2022. We have also assumed there are no outstanding floating rate borrowings by the Company. See the following table for the effect the rate changes would have on net investment income.

Although we believe that this analysis is indicative of our existing interest rate sensitivity at March 31, 2021,2022, it does not adjust for changes in the credit quality, size and composition of our portfolio, and other business developments, including borrowing under a credit facility, that could affect the net increase (decrease) in net assets resulting from operations. Accordingly, no assurances can be given that actual results would not differ materially from the results under this hypothetical analysis.

We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of March 31, 2021,2022, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic filings with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Changes in Internal Controls Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the quarter ended March 31, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we, our investment adviser or administrator may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. A description of our legal proceedings is included in Note 6 of the unaudited consolidated financial statements attached to this report.

Item 1A. Risk Factors.

There have been no material changes in risk factors in the period covered by this report. See discussion of risk factors in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2020.2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.On February 3, 2022, we purchased a majority ownership interest in Sterling Commercial Credit, LLC (“SCC”), a provider of asset-based loans to middle market companies throughout the United States. The aggregate purchase price was approximately $7.54 million, which consisted of $4.94 million in cash and 117,117 shares of the Company’s common stock issued at net asset value for aggregate consideration of $2.60 million. In connection with the acquisition, we also provided subordinated debt to SCC. Our common stock was issued in a private placement exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Not applicable.

Item 6. Exhibits.Exhibits.

Unless otherwise indicated, all references are to exhibits to the applicable filing by Great Elm Capital Corp. (the “Registrant”) under File No. 814-01211 with the Securities and Exchange Commission.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

GREAT ELM CAPITAL CORP.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

GREAT ELM CAPITAL CORP.

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES (unaudited)

Dollar amounts in thousands (except per share amounts)