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FDUS Fidus Investment

Filed: 6 May 21, 4:13pm
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

OR

 

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

For the transition period from                     to                     

Commission file number 814-00861

Fidus Investment Corporation

(Exact Name of Registrant as Specified in its Charter)

 

Maryland 27-5017321

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

1603 Orrington Avenue, Suite 1005

Evanston, Illinois

 60201
(Address of Principal Executive Offices) (Zip Code)

(847) 859-3940

(Registrant’s telephone number, including area code)

 

 

n/a

(Former name, former address and former fiscal year, if changed since last report)

 

 

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

 

Title of each class

 

Trading
Symbol

 

Name of each exchange
on which registered

Common Stock, par value $0.001 per share FDUS The NASDAQ Global Select Market
6.000% Notes due 2024 FDUSZ The NASDAQ Global Select Market
5.375% Notes due 2024 FDUSG The NASDAQ Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☐    No  ☐

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

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

Smaller reporting

company ☐

 

Emerging growth

company ☐

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

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

As of May 3, 2021, the Registrant had outstanding 24,437,400 shares of common stock, $0.001 par value.

 

 

 


Table of Contents


Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Assets and Liabilities

(in thousands, except shares and per share data)

 

  March 31,
2021
  December 31,
2020
 

ASSETS

  

Investments, at fair value:

  

Control investments (cost: $26,390 and $32,969, respectively)

 $22,566  $28,253 

Affiliate investments (cost: $42,504 and $31,836, respectively)

  96,014   81,394 

Non-control/non-affiliate  investments (cost: $587,727 and $622,222, respectively)

  593,304   633,222 
 

 

 

  

 

 

 

Total investments, at fair value (cost: $656,621 and $687,027, respectively)

  711,884   742,869 

Cash and cash equivalents

  60,175   124,308 

Interest receivable

  7,091   7,548 

Prepaid expenses and other assets

  1,733   1,015 
 

 

 

  

 

 

 

Total assets

 $780,883  $875,740 
 

 

 

  

 

 

 

LIABILITIES

  

SBA debentures, net of deferred financing costs (Note 6)

 $131,092  $144,004 

Notes, net of deferred financing costs (Note 6)

  202,576   300,294 

Borrowings under Credit Facility, net of deferred financing costs (Note 6)

  14,063   (1,048

Accrued interest and fees payable

  2,967   3,500 

Base management fee payable – due to affiliate

  3,176   3,244 

Income incentive fee payable – due to affiliate

  2,669   2,610 

Capital gains incentive fee payable – due to affiliate

  11,122   11,031 

Administration fee payable and other – due to affiliate

  194   576 

Taxes (receivable) payable

  (425  275 

Accounts payable and other liabilities

  437   494 
 

 

 

  

 

 

 

Total liabilities

  367,871   464,980 
 

 

 

  

 

 

 

Commitments and contingencies (Note 7)

  

NET ASSETS

  

Common stock, $0.001 par value (100,000,000 shares authorized, 24,437,400 and 24,437,400
shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)

  24   24 

Additional paid-in capital

  363,751   363,751 

Total distributable earnings

  49,237   46,985 
 

 

 

  

 

 

 

Total net assets

  413,012   410,760 
 

 

 

  

 

 

 

Total liabilities and net assets

 $780,883  $875,740 
 

 

 

  

 

 

 

Net asset value per common share

 $16.90  $16.81 
 

 

 

  

 

 

 

See Notes to Consolidated Financial Statements (unaudited).

 

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Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Operations (unaudited)

(in thousands, except shares and per share data)

 

   Three Months Ended
March 31,
 
   2021  2020 

Investment Income:

   

Interest income

   

Control investments

  $593  $432 

Affiliate investments

   848   983 

Non-control/non-affiliate  investments

   17,697   16,052 
  

 

 

  

 

 

 

Total interest income

   19,138   17,467 

Payment-in-kind interest income

   

Control investments

   341   425 

Affiliate investments

   111   40 

Non-control/non-affiliate  investments

   516   616 
  

 

 

  

 

 

 

Total payment-in-kind  interest income

   968   1,081 

Dividend income

   

Control investments

   —     —   

Affiliate investments

   —     107 

Non-control/non-affiliate  investments

   93   29 
  

 

 

  

 

 

 

Total dividend income

   93   136 

Fee income

   

Control investments

   400   —   

Affiliate investments

   183   —   

Non-control/non-affiliate  investments

   2,508   1,291 
  

 

 

  

 

 

 

Total fee income

   3,091   1,291 

Interest on idle funds

   —     8 
  

 

 

  

 

 

 

Total investment income

   23,290   19,983 
  

 

 

  

 

 

 

Expenses:

   

Interest and financing expenses

   5,194   4,960 

Base management fee

   3,176   3,272 

Incentive fee - income

   2,669   1,855 

Incentive fee (reversal) - capital gains

   91   (8,878

Administrative service expenses

   413   466 

Professional fees

   323   553 

Other general and administrative expenses

   345   335 
  

 

 

  

 

 

 

Total expenses

   12,211   2,563 
  

 

 

  

 

 

 

Net investment income before income taxes

   11,079   17,420 

Income tax provision (benefit)

   (2  3 
  

 

 

  

 

 

 

Net investment income

   11,081   17,417 
  

 

 

  

 

 

 

Net realized and unrealized gains (losses) on investments:

   

Net realized gains (losses):

   

Control investments

   957   —   

Affiliate investments

   —     24,332 

Non-control/non-affiliate  investments

   2,259   7,046 
  

 

 

  

 

 

 

Total net realized gain (loss) on investments

   3,216   31,378 
  

 

 

  

 

 

 

Income tax (provision) benefit from realized gains on investments

   —     (1,051

Net change in unrealized appreciation (depreciation):

   

Control investments

   892   (1,696

Affiliate investments

   3,952   (39,253

Non-control/non-affiliate  investments

   (5,423  (33,641
  

 

 

  

 

 

 

Total net change in unrealized appreciation (depreciation) on investments

   (579  (74,590
  

 

 

  

 

 

 

Net gain (loss) on investments

   2,637   (44,263

Realized losses on extinguishment of debt

   (2,180  (125
  

 

 

  

 

 

 

Net increase (decrease) in net assets resulting from operations

  $11,538  $(26,971
  

 

 

  

 

 

 

Per common share data:

   

Net investment income per share-basic and diluted

  $0.45  $0.71 
  

 

 

  

 

 

 

Net increase in net assets resulting from operations per share — basic and diluted

  $0.47  $(1.10
  

 

 

  

 

 

 

Dividends declared per share

  $0.38  $0.39 
  

 

 

  

 

 

 

Weighted average number of shares outstanding — basic and diluted

   24,437,400   24,457,634 
  

 

 

  

 

 

 

See Notes to Consolidated Financial Statements (unaudited).

 

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Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Changes in Net Assets (unaudited)

(in thousands, except shares)

 

   Common Stock  Additional  Total    
   Number of  Par  paid-in  distributable  Total net 
   shares  value  capital  earnings  assets 

Balances at December 31, 2019

   24,463,119  $24  $366,061  $46,225  $412,310 

Repurchases of common stock under Stock Repurchase Program (Note 8)

   (25,719  (0)*   (268  —     (268

Net investment income

   —     —     —     17,417   17,417 

Net realized gain (loss) on investments, net of taxes

   —     —     —     30,327   30,327 

Net unrealized appreciation (depreciation) on investments

   —     —     —     (74,590  (74,590

Realized losses on extinguishment of debt

   —     —     —     (125  (125

Dividends declared

   —     —     —     (9,537  (9,537
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances at March 31, 2020

   24,437,400  $24  $365,793  $9,717  $375,534 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances at December 31, 2020

   24,437,400  $24  $363,751  $46,985  $410,760 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net investment income

   —     —     —     11,081   11,081 

Net realized gain (loss) on investments, net of taxes

   —     —     —     3,216   3,216 

Net unrealized appreciation (depreciation) on investments

   —     —     —     (579  (579

Realized losses on extinguishment of debt

   —     —     —     (2,180  (2,180

Dividends declared

   —     —     —     (9,286  (9,286
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balances at March 31, 2021

   24,437,400  $24  $363,751  $49,237  $413,012 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

* amount is greater than zero but less than one

See Notes to Consolidated Financial Statements (unaudited).

 

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Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Statements of Cash Flows (unaudited)

(in thousands)

 

   Three Months Ended March 31, 
   2021  2020 

Cash Flows from Operating Activities:

   

Net increase (decrease) in net assets resulting from operations

  $11,538  $(26,971

Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash provided by (used for) operating activities:

   

Net change in unrealized (appreciation) depreciation on investments

   579   74,590 

Net realized (gain) loss on investments

   (3,216  (31,378

Interest and dividend income paid-in-kind

   (968  (1,081

Accretion of original issue discount

   (597  (87

Accretion of loan origination fees

   (747  (260

Purchase of investments

   (63,107  (68,192

Proceeds from sales and repayments of investments

   98,565   73,772 

Proceeds from loan origination fees

   476   615 

Realized losses on extinguishment of debt

   2,180   125 

Amortization of deferred financing costs

   583   550 

Changes in operating assets and liabilities:

   

Interest receivable

   457   889 

Prepaid expenses and other assets

   (652  224 

Accrued interest and fees payable

   (533  (1,283

Base management fee payable – due to affiliate

   (68  (63

Income incentive fee payable – due to affiliate

   59   358 

Capital gains incentive fee (reversal) – due to (from) affiliate

   91   (8,878

Administration fee payable and other – due to affiliate

   (382  160 

Taxes payable

   (700  (424

Accounts payable and other liabilities

   (57  480 
  

 

 

  

 

 

 

Net cash provided by (used for) operating activities

   43,501   13,146 
  

 

 

  

 

 

 

Cash Flows from Financing Activities:

   

Proceeds received from SBA debentures

   6,000   6,000 

Repayments of SBA debentures

   (19,200  (7,000

Principal payments on Notes

   (100,000   

Proceeds received from (repayments of) borrowings under Credit Facility, net

   15,000   10,000 

Payment of deferred financing costs

   (148  (128

Dividends paid to stockholders, including expenses

   (9,286  (9,537

Repurchases of common stock under Stock Repurchase Program

      (268
  

 

 

  

 

 

 

Net cash provided by (used for) financing activities

   (107,634  (933
  

 

 

  

 

 

 

Net increase (decrease) in cash and cash equivalents

   (64,133  12,213 

Cash and cash equivalents:

   

Beginning of period

   124,308   15,012 
  

 

 

  

 

 

 

End of period

  $60,175  $27,225 
  

 

 

  

 

 

 

Supplemental disclosure of cash flow information:

   

Cash payments for interest

  $5,144  $5,693 

Cash payments for taxes, net of tax refunds received

  $698  $1,478 

See Notes to Consolidated Financial Statements (unaudited).

 

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Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2021

(in thousands, except shares)

 

Portfolio Company (a)(b)    Variable Index Rate (e)  Investment     Principal     Fair  Percent of 

Investment Type (c)        

 Industry  

Spread / Floor (d)

 Cash/PIK  Date (f)  Maturity  Amount  Cost  Value (g)  Net Assets 

Control Investments (t)

         

US GreenFiber, LLC

  Building Products Manufacturing         

Second Lien Debt (j)

    8.00%/5.00%  7/3/2014  8/30/2024  $15,580  $15,576  $13,140  

Second Lien Debt (j)

    8.50%/6.50%   11/9/2018   8/30/2024   5,115   5,115   5,249  

Second Lien Debt (j)

    8.50%/6.50%   8/10/2020   8/30/2024   4,089   4,089   4,177  

Common Equity (2,522 units) (h)(j)

     7/3/2014     586   —    

Common Equity (425,508 units) (j)

     8/30/2019     1   —    

Common Equity (1,022,813 units) (h)(j)

     7/1/2020     1,023   —    
       

 

 

  

 

 

  
        26,390   22,566   5
       

 

 

  

 

 

  

Total Control Investments

       $26,390  $22,566   5
       

 

 

  

 

 

  

Affiliate Investments (l)

         

FAR Research Inc. (n)

  Specialty Chemicals         

Common Equity (1,396 units)

     3/31/2014    $—    $28   0

Fiber Materials, Inc. (n)

  Aerospace & Defense Manufacturing         

Common Equity (10 units)

     11/30/2016     —     42   0

Medsurant Holdings, LLC

  Healthcare Services         

Second Lien Debt (j)

    14.00%/0.00%  12/18/2015   3/10/2022   8,031   8,029   8,091  

Preferred Equity (63,331 units) (h)(j)

     4/12/2011     673   623  

Warrant (252,588 units) (h)(j)(m)

     4/12/2011     2,258   2,259  
       

 

 

  

 

 

  
        10,960   10,973   3

Mirage Trailers LLC

  Utility Equipment Manufacturing         

Second Lien Debt (k)

  (L + 10.00%) / (1.00%)  11.00%/5.00%   11/25/2015   11/25/2021   6,492   6,570   6,492  

Common Equity (2,500,000 shares)

     11/25/2015     2,188   1,277  
       

 

 

  

 

 

  
        8,758   7,769   2

Pfanstiehl, Inc.

  Healthcare Products         

Common Equity (4,250 units) (j)

     3/29/2013     425   34,018   8
         

Pinnergy, Ltd.

  Oil & Gas Services         

Common Equity - Class A-2 (42,500 units) (j)

     10/13/2016     3,000   20,895   5
         

Spectra A&D Acquisition, Inc. (fka FDS Avionics Corp.)

  Aerospace & Defense Manufacturing         

First Lien Debt (ag)

  (L + 5.50%) / (1.00%)  6.50%/0.00%   2/12/2021   2/11/2026   8,000   7,942   7,942  

Common Equity (41,290 units) (j)

     2/12/2021     2,609   4,240  
       

 

 

  

 

 

  
        10,551   12,182   3

Steward Holding LLC (dba Steward Advanced Materials)

  Aerospace & Defense Manufacturing         

Second Lien Debt

    12.00%/1.50%   11/12/2015   10/31/2021   7,812   7,810   7,812  

Common Equity (1,000,000 units)

     11/12/2015     1,000   2,295  
       

 

 

  

 

 

  
        8,810   10,107   2
       

 

 

  

 

 

  

Total Affiliate Investments

       $42,504  $96,014   23
       

 

 

  

 

 

  

 

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Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2021

(in thousands, except shares)

 

Portfolio Company (a)(b)   Variable Index Rate (e)  Investment     Principal     Fair  Percent of 

Investment Type (c)        

 

Industry

 

Spread / Floor (d)

 Cash/PIK  Date (f)  Maturity  Amount  Cost  Value (g)  Net Assets 

Non-control/Non-affiliate Investments

         

Allied 100 Group, Inc.

 Healthcare Products        

Subordinated Debt (k)

    11.25%/0.00%   7/31/2019   5/26/2023  $21,501  $21,439  $21,501  

Common Equity (625,000 units) (j)

     11/26/2014     626   1,039  
       

 

 

  

 

 

  
        22,065   22,540   6

Allredi, LLC (fka Marco Group International OpCo, LLC)

 Industrial Cleaning & Coatings        

Second Lien Debt

    10.50%/1.75%   3/2/2020   9/2/2026   10,125   10,041   7,858  

Common Equity (570,636 units) (h)(j)

     7/21/2017     637   159  
       

 

 

  

 

 

  
        10,678   8,017   2

Alzheimer’s Research and Treatment Center, LLC

 Healthcare Services        

Common Equity (500 units) (h)(j)

     10/23/2018     500   880   0
         

American AllWaste LLC (dba WasteWater Transport Services)

 Environmental Industries        

Second Lien Debt (j)

  (L + 11.00%) / (2.00%)  13.00%/0.00%   5/31/2018   11/30/2023   17,503   17,440   17,503  

Preferred Equity (500 units) (h)(j)

     5/31/2018     500   121  

Preferred Equity (207 units) (h)(j)

     8/6/2019     250   226  

Preferred Equity (141 units) (h)(j)

     11/2/2020     171   171  
       

 

 

  

 

 

  
        18,361   18,021   4

Applied Data Corporation

 Information Technology Services        

First Lien Debt (v)

  (L + 6.25%) / (1.50%)  7.75%/0.00%   11/6/2020   11/6/2025   8,000   7,951   7,951  

Common Equity (22 units)

     11/6/2020     —     —    

Preferred Equity (1,070,614 units)

     11/6/2020     1,071   1,071  
       

 

 

  

 

 

  
        9,022   9,022   2

Argo Turboserve Corporation

 Business Services        

Second Lien Debt (j)

  (L + 10.75%) / (2.00%)  12.75%/0.00%   12/26/2018   6/28/2023   12,750   12,713   12,750   3
         

AVC Investors, LLC (dba Auveco)

 Specialty Distribution        

Second Lien Debt (k)

    11.50%/0.00%   1/3/2018   7/3/2023   22,500   22,453   22,500  

Common Equity (5,000 units) (j)

     1/3/2018     487   481  
       

 

 

  

 

 

  
        22,940   22,981   6

B&B Roadway and Security Solutions, LLC

 Component Manufacturing        

Second Lien Debt

    11.25%/4.00%   2/27/2018   1/1/2022   11,019   11,004   10,399  

Common Equity (50,000 units) (h)(j)

    2/27/2018     497   —    
       

 

 

  

 

 

  
        11,501   10,399   3

Bandon Fitness (Texas), Inc.

 Retail        

Common Equity (545,810 units) (j)

    8/9/2019     931   328   0
        

BCM One Group Holdings, Inc.

 Information Technology Services        

Subordinated Debt (k)

    11.00%/0.00%   1/3/2019   7/3/2024   30,000   29,895   30,000  

Common Equity (1,281 shares)

    1/3/2019     48   653  

Preferred Equity (74 shares)

    1/3/2019     736   736  
       

 

 

  

 

 

  
        30,679   31,389   8

Bedford Precision Parts LLC

 Specialty Distribution        

First Lien Debt (j)(s)

  (L + 6.25%) / (2.00%)  8.25%/0.00%   3/12/2019   3/12/2024   4,531   4,509   4,216  

Common Equity (500,000 units) (h)(j)

    3/12/2019     500   247  
       

 

 

  

 

 

  
        5,009   4,463   1

Cardboard Box LLC (dba Anthony’s Coal Fired Pizza)

 Restaurants        

Common Equity (521,021 units) (j)

    12/15/2015     521   —    

Preferred Equity (1,043,133 units) (j)

    12/6/2019     96   22  
       

 

 

  

 

 

  
        617   22   0

Combined Systems, Inc.

 Aerospace & Defense Manufacturing        

First Lien Debt

  (L + 10.00%) / (2.00%)  12.00%/0.00%   1/31/2020   1/31/2025   7,500   7,456   7,369  

Revolving Loan ($550 unfunded commitment) (j)(ac)

 (L + 9.00%) / (2.00%)  11.00%/0.00%   1/31/2020   1/31/2025   3,450   3,431   3,450  
       

 

 

  

 

 

  
        10,887   10,819   3

Comply365, LLC

 Aerospace & Defense Manufacturing        

First Lien Debt (ad)

  (L + 8.00%) / (1.00%)  9.00%/0.00%   12/11/2020   12/11/2025   9,570   9,433   9,433  

Common Equity (1,000,000 units)

     12/11/2020     1,000   1,000  
       

 

 

  

 

 

  
        10,433   10,433   3

CRS Solutions Holdings, LLC (dba CRS Texas)

 Business Services        

Second Lien Debt

    10.50%/1.50%   3/14/2018   4/30/2024   11,347   11,315   11,347  

Common Equity ($74 unfunded commitment) (489,712 units) (h)(j)

    3/14/2018     547   347  
       

 

 

  

 

 

  
        11,862   11,694   3

Dataguise, Inc.

 Information Technology Services        

First Lien Debt (j)

    11.00%/0.00%   12/31/2020   12/31/2023   20,000   19,908   19,908  

Common Equity (909 shares) (j)

     12/31/2020     1,500   1,500  
       

 

 

  

 

 

  
        21,408   21,408   5

Diversified Search LLC

 Business Services        

First Lien Debt (k)(r)

  (L + 8.00%) / (1.75%)  9.75%/0.00%   2/7/2019   2/7/2024   17,355   17,175   17,355  

Common Equity (573 units) (h)(j)

     2/7/2019     593   657  
       

 

 

  

 

 

  
        17,768   18,012   4

EBL, LLC (EbLens)

 Retail        

Second Lien Debt (j)(p)

    12.00%/1.00%   7/13/2017   1/13/2023   9,253   9,218   5,709  

Common Equity (75,000 units) (j)

    7/13/2017     750   —    
       

 

 

  

 

 

  
        9,968   5,709   1

ECM Industries, LLC

 Component Manufacturing        

Subordinated Debt (j)

    11.50%/0.00%   4/30/2020   5/23/2026   11,500   11,305   11,500  

Common Equity (1,000,000 units) (h)(j)

    4/30/2020     1,000   1,830  
       

 

 

  

 

 

  
        12,305   13,330   3

Elements Brands, LLC

 Consumer Products        

First Lien Debt

    12.25%/0.00%   12/31/2020   12/31/2025   6,000   5,968   5,968  

Revolving Loan ($838 unfunded commitment) (i)(j)

   12.25%/0.00%   12/31/2020   12/31/2025   2,162   2,146   2,146  
       

 

 

  

 

 

  
        8,114   8,114   2

 

8


Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2021

(in thousands, except shares)

 

Portfolio Company (a)(b)   Variable Index Rate (e)  Investment     Principal     Fair  Percent of 

Investment Type (c)        

 

Industry

 

Spread / Floor (d)

 Cash/PIK  Date (f)  Maturity  Amount  Cost  Value (g)  Net Assets 

Frontline Food Services, LLC (f/k/a Accent Food Services, LLC)

 Vending Equipment Manufacturing        

Preferred Equity (Class A Units) (46 units) (j)

     12/31/2020     2,000   2,000  

Common Equity (Class B Units) (124 units) (j)

     12/31/2020     —     —    

Preferred Equity (Class C Units) (100 units) (j)

     12/31/2020     —     —    
       

 

 

  

 

 

  
        2,000   2,000   0

Global Plasma Solutions, Inc.

 Component Manufacturing        

Common Equity (947 shares) (j)

     9/21/2018     52   10,011   2
         

GP&C Operations, LLC (dba Garlock Printing and Converting)

 Component Manufacturing        

First Lien Debt (w)

  (L + 7.25%) / (1.00%)  8.25%/0.00%   1/22/2021   1/22/2026   11,000   10,841   10,841  

Common Equity (515,625 units) (h)(j)

     1/22/2021     516   516  
       

 

 

  

 

 

  
        11,357   11,357   3

Gurobi Optimization, LLC

 Information Technology Services        

Common Equity (3 shares)

     12/19/2017     607   1,824   0
         

Haematologic Technologies, Inc.

 Healthcare Services        

First Lien Debt (x)

  (L + 8.25%) / (2.00%)  10.25%/0.00%   10/11/2019   10/11/2024   5,500   5,471   5,093  

Common Equity (549 units) (h)(j)

     10/11/2019     549   112  
       

 

 

  

 

 

  
        6,020   5,205   1

Hallmark Health Care Solutions, Inc.

 Healthcare Services        

First Lien Debt (j)(ae)

  (L + 7.25%) / (1.50%)  8.75%/0.00%   12/4/2020   12/4/2025   8,500   8,440   8,440  

Common Equity (750,000 units) (j)

     12/4/2020     750   750  
       

 

 

  

 

 

  
        9,190   9,190   2

Healthfuse, LLC

 Healthcare Services        

First Lien Debt (af)

  (L + 7.25%) / (1.00%)  8.25%/0.00%   11/13/2020   11/13/2025   6,000   5,962   5,962  

Preferred Equity (197,980 units)

     11/13/2020     750   750  
       

 

 

  

 

 

  
        6,712   6,712   2

Hilco Plastics Holdings, LLC (dba Hilco Technologies)

 Component Manufacturing        

Second Lien Debt (j)

    11.50%/1.50%   9/23/2016   12/31/2019   10,346   10,346   10,148  

Revolving Loan (j)

  (L + 6.50%) / (0.00%)  6.62%/0.00%   12/20/2019   12/15/2019   5,962   5,962   5,962  

First Lien Debt (j)

  (L + 6.95%) / (0.00%)  7.07%/0.00%   12/20/2019   12/15/2019   4,707   4,707   4,707  

Preferred Equity (1,000,000 units) (h)(j)

     4/18/2018     1,000   —    

Common Equity (72,507 units) (h)(j)

     9/23/2016     473   —    
       

 

 

  

 

 

  
        22,488   20,817   5

Hub Acquisition Sub, LLC (dba Hub Pen)

 Promotional products        

Second Lien Debt (k)

    13.50%/0.00%   3/23/2016   3/31/2023   25,000   24,977   21,294  

Common Equity (3,750 units)

     3/23/2016     131   —    

Preferred Equity (868 units) (j)

     10/16/2020     154   55  
       

 

 

  

 

 

  
        25,262   21,349   5

IBH Holdings, LLC (fka Inflexxion, Inc.)

 Business Services        

Common Equity (150,000 units)

     6/20/2018     —     415   0
         

Ipro Tech, LLC

 Information Technology Services        

First Lien Debt (j)(u)

  (L + 8.50%) / (2.00%)  10.50%/0.00%   6/30/2020   6/30/2025   2,453   1,934   2,453   1
         

K2 Merger Agreement Agent, LLC (fka K2 Industrial Services, Inc.) (n)

 Industrial Cleaning & Coatings        

Second Lien Debt (j)

    0.00%/10.00%   1/28/2019   1/28/2023   2,194   2,194   2,194   1
         
The Kyjen Company, LLC (dba Outward Hound) Consumer Products        

Second Lien Debt (k)

    12.00%/0.00%   12/8/2017   6/8/2024   15,000   14,963   15,000  

Common Equity (765 shares) (j)

     12/8/2017     765   969  
       

 

 

  

 

 

  
        15,728   15,969   4

LifeSpan Biosciences, Inc.

 Healthcare Products        

Subordinated Debt (j)

    11.50%/0.00%   3/19/2021   9/19/2026   16,000   15,921   15,921  

Common Equity (100 shares) (j)

     3/19/2021     1,000   1,000  
       

 

 

  

 

 

  
        16,921   16,921   4

LNG Indy, LLC (dba Kinetrex Energy)

 Oil & Gas Distribution        

Second Lien Debt (k)

    11.50%/0.00%   12/28/2016   11/12/2021   10,127   10,114   10,127  

Common Equity (500 units)

     12/28/2016     500   1,052  
       

 

 

  

 

 

  
        10,614   11,179   3

Mesa Line Services, LLC

 Utilities: Services        

Second Lien Debt (j)

    10.50%/1.50%   11/30/2017   8/1/2024   17,561   17,498   15,321  

Common Equity (981 shares) (j)

     11/30/2017     1,148   215  
       

 

 

  

 

 

  
        18,646   15,536   4

Midwest Transit Equipment, Inc.

 Transportation services        

Warrant (7,192 shares) (j)(m)

     6/23/2017     180   140  

Warrant (4.79% of Junior Subordinated Notes) (j)(q)

     6/23/2017     190   253  
       

 

 

  

 

 

  
        370   393   0

NGT Acquisition Holdings, LLC (dba Techniks Industries)

 Component Manufacturing        

Common Equity (378 units) (j)

     5/24/2017     500   254   0
         

OMC Investors, LLC (dba Ohio Medical Corporation)

 Healthcare Products        

Second Lien Debt

    13.00%/0.00%   1/26/2021   6/30/2024   5,000   4,953   4,954  

Common Equity (5,000 units)

     1/15/2016     222   668  
       

 

 

  

 

 

  
        5,175   5,622   1

Palisade Company, LLC

 Information Technology Services        

Common Equity (50 shares) (j)

     11/15/2018     500   829   0

 

9


Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2021

(in thousands, except shares)

 

Portfolio Company (a)(b)    Variable Index Rate (e) Investment    Principal     Fair  Percent of 

Investment Type (c)        

 Industry  

Spread / Floor (d)

 

Cash/PIK

 

Date (f)

 Maturity  Amount    Cost    Value (g)  Net Assets 

Palmetto Moon, LLC

  Retail         

First Lien Debt (j)

   11.50%/2.50% 11/3/2016  10/31/2021   4,731   4,726   4,731  

Common Equity (499 units) (j)

    11/3/2016    494   307  
       

 

 

  

 

 

  
        5,220   5,038   1

Pool & Electrical Products, LLC

  Specialty Distribution         

Second Lien Debt (j)

   11.75%/0.00% 10/28/2020  4/28/2027   12,000   11,888   11,889  

Common Equity (15,000 units) (h)(j)

    10/28/2020    1,500   1,500  
       

 

 

  

 

 

  
        13,388   13,389   3

Power Grid Components, Inc.

  Specialty Distribution         

Second Lien Debt (k)

   11.00%/0.50% 4/12/2018  12/2/2025   17,466   17,394   17,466  

Preferred Equity (392 shares) (j)

    4/12/2018    392   522  

Preferred Equity (48 shares) (j)

    12/2/2019    48   64  

Common Equity (10,622 shares) (j)

    4/12/2018    462   777  
       

 

 

  

 

 

  
        18,296   18,829   5

Prime AE Group, Inc.

  Business Services         

First Lien Debt (j)

  (L + 6.25%) / (2.00%) 8.25%/0.00% 11/25/2019  11/25/2024   6,667   6,526   6,667  

Preferred Equity (500,000 shares) (j)

    11/25/2019    500   613  
       

 

 

  

 

 

  
        7,026   7,280   2

Pugh Lubricants, LLC (n)

  Specialty Distribution         

Common Equity (3,062 units) (h)(j)

    11/10/2016    —     23   0
         

Revenue Management Solutions, LLC

  Information Technology Services         

Common Equity (113 shares)

    1/4/2017    1,125   3,439   1
         

Rhino Assembly Company, LLC

  Specialty Distribution         

Second Lien Debt (k)

   12.00%/1.00% 8/11/2017  2/11/2023   10,708   10,686   10,708  

Delayed Draw Commitment ($875 unfunded commitment) (i)(j)

 

  12.00%/1.00% 

8/11/2017

  5/17/2022   —     —     —    

Common Equity (Class A Units) (8,864 units) (h)(j)

    8/11/2017    944   757  

Preferred Equity (Units N/A) (h)(j)

    12/10/2020    136   140  

Common Equity (Class F Units) (355 units) (h)(j)

    12/10/2020    —     —    
       

 

 

  

 

 

  
        11,766   11,605   3

Road Safety Services, Inc.

  Business Services         

Second Lien Debt

   11.25%/1.50% 9/18/2018  3/18/2024   10,418   10,392   10,418  

Common Equity (655 units)

    9/18/2018    621   1,101  
       

 

 

  

 

 

  
        11,013   11,519   3

Routeware, Inc.

  Information Technology Services         

First Lien Debt (k)(aa)

  (L + 6.75%) / (1.25%) 8.00%/0.00% 2/7/2020  2/7/2026   16,888   16,797   16,888   4
         

SES Investors, LLC (dba SES Foam)

  Building Products Manufacturing         

Second Lien Debt

   13.00%/0.00% 9/8/2016  12/29/2022   1,000   997   1,000  

Common Equity (6,000 units) (h)(j)

    9/8/2016    537   1,771  
       

 

 

  

 

 

  
        1,534   2,771   1

Specialized Elevator Services Holdings, LLC

  Business Services         

First Lien Debt (j)(y)

  (L + 5.25%) / (2.00%) 7.25%/0.00% 5/7/2019  5/3/2024   12,889   12,790   12,889  

Common Equity (596 units) (j)

    5/8/2019    596   600  
       

 

 

  

 

 

  
        13,386   13,489   3

SpendMend LLC

  Business Services         

Common Equity (1,000,000 units)

    1/8/2018    972   1,986   1
         

TransGo, LLC

  Component Manufacturing         

Common Equity (500 units) (j)

    2/28/2017    457   1,154   0
         

The Tranzonic Companies

  Specialty Distribution         

Subordinated Debt (j)

   10.00%/1.00% 3/27/2018  3/27/2025   7,019   6,979   7,019  

Preferred Equity (5,653 units) (j)

    3/27/2018    565   747  

Common Equity (1 units) (j)

    3/27/2018    —     999  
       

 

 

  

 

 

  
        7,544   8,765   2

UBEO, LLC

  Business Services         

Subordinated Debt (j)

   11.00%/0.00% 4/3/2018  10/3/2024   13,893   13,819   13,893  

Common Equity (705,000 units) (h)(j)

    4/3/2018    668   659  
       

 

 

  

 

 

  
        14,487   14,552   4

United Biologics, LLC

  Healthcare Services         

Preferred Equity (98,377 units) (h)(j)

    4/1/2012    1,008   —    

Warrant (57,469 units) (j)(m)

    3/5/2012    566   —    
       

 

 

  

 

 

  
        1,574   —     0

Virginia Tile Company, LLC

  Specialty Distribution         

Second Lien Debt (j)

   12.25%/0.00% 12/19/2014  4/7/2022   12,000   12,000   12,000  

Common Equity (17 units) (j)

    12/19/2014    342   706  
       

 

 

  

 

 

  
        12,342   12,706   3

Western’s Smokehouse, LLC

  Consumer Products         

First Lien Debt (j)(ab)

  (L + 6.50%) / (1.25%) 7.75%/0.00% 2/28/2020  12/23/2024   10,000   9,884   10,000   2
         

Wheel Pros, Inc.

  Specialty Distribution         

Preferred Equity (347,222 units) (j)

    5/15/2019    301   1,817   0
         

Wonderware Holdings, LLC (dba CORE Business Technologies)

  Information Technology Services         

First Lien Debt ($2,000 unfunded commitment) (k)(z)

  (L + 7.25%) / (1.00%) 8.25%/0.00% 2/10/2021  2/9/2026   6,500   6,453   6,453   2
         

Worldwide Express Operations, LLC

  Transportation services         

Second Lien Debt (j)

  (L + 8.00%) / (1.00%) 9.00%/0.00% 2/27/2017  2/3/2025   20,000   19,804   20,000  

Common Equity (2,000 units) (h)(j)

    2/27/2017    1,478   2,191  
       

 

 

  

 

 

  
        21,282   22,191   5

Xeeva, Inc.

  Information Technology Services         

First Lien Debt (j)

  (L + 10.50%) / (1.50%) 12.00%/0.00% 2/11/2021  2/11/2026   8,900   8,849   8,849  

Delayed Draw Commitment ($400 unfunded commitment) (j)(o)

 

   2/11/2021    —     —    
       

 

 

  

 

 

  
        8,849   8,849   2
       

 

 

  

 

 

  

Total Non-control/Non-affiliate Investments

       $587,727  $593,304   144
       

 

 

  

 

 

  

Total Investments

       $656,621  $711,884   172
       

 

 

  

 

 

  

 

10


Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments (unaudited)

March 31, 2021

(in thousands, except shares)

 

 

(a)

See Note 3 to the consolidated financial statements for portfolio composition by geographic location.

(b)

Equity ownership may be held in shares or units of companies related to the portfolio companies.

(c)

All debt investments are income producing, unless otherwise indicated. Equity investments are non-income producing unless otherwise noted.

(d)

Variable rate investments bear interest at a rate indexed to LIBOR (L), which is reset monthly, bimonthly, quarterly, or semi-annually. Certain variable rate investments also include a LIBOR interest rate floor. For each investment, the Company has provided the spread over the reference rate and the LIBOR floor, if any, as of March 31, 2021.

(e)

Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of March 31, 2021. Generally, payment-in-kind interest can be paid-in-kind or all in cash.

(f)

Investment date represents the date of the initial investment in the security.

(g)

The Company’s investment portfolio is comprised entirely of debt and equity securities of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the board of directors, using significant unobservable Level 3 inputs.

(h)

Investment is held by a taxable subsidiary of the Company.

(i)

The disclosed commitment represents the unfunded amount as of March 31, 2021. The Company is earning 0.50% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate which will be earned if the commitment is funded.

(j)

Investment pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the Credit Facility (see Note 6 to the consolidated financial statements).

(k)

The portion of the investment not held by the Funds is pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the Credit Facility (see Note 6 to the consolidated financial statements).

(l)

As defined in the 1940 Act, the Company is deemed to be an “Affiliated Person” of this portfolio company because it owns 5% or more of the portfolio company’s outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was an Affiliated Person are detailed in Note 3 to the consolidated financial statements.

(m)

Warrants entitle the Company to purchase a predetermined number of shares or units of common equity, and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

(n)

Investment in portfolio company that has sold its operations and is in the process of winding down.

(o)

The disclosed commitment represents the unfunded amount as of March 31, 2021. The Company is earning 5.20% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate which will be earned if the commitment is funded.

(p)

Investment was on PIK-only non-accrual status as of March 31, 2021, meaning the Company has ceased recognizing PIK interest income on the investment.

(q)

Warrant entitles the Company to purchase 4.79% of the outstanding principal of Junior Subordinated Notes prior to exercise, and is non-income producing.

(r)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 5.75% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(s)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.13% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(t)

As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” of and “Control” this portfolio company because it owns 25% or more of the portfolio company’s outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control are detailed in Note 3 to the consolidated financial statements.

(u)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.50% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(v)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.25% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(w)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 7.45% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(x)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.11% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(y)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.86% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(z)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 5.92% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(aa)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.09% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(ab)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.09% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(ac)

The disclosed commitment represents the unfunded amount as of March 31, 2021. The Company is earning 1.00% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate earned on the outstanding, funded balance of the commitment.

(ad)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.33% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(ae)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.31% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(af)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.03% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(ag)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 5.50% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

See Notes to Consolidated Financial Statements (unaudited).

 

11


Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2020

(in thousands, except shares)

 

Portfolio Company (a)(b)

Investment Type (c)

 

Industry

 

Variable Index

Spread / Floor (d)

 

Rate (e)

Cash/PIK

 Investment
Date (f)
  Maturity  Principal
Amount
  Cost  Fair
Value (g)
  Percent of
Net Assets
 

Control Investments (t)

         

FDS Avionics Corp. (dba Flight Display Systems)

 

Aerospace & Defense Manufacturing

       

Second Lien Debt

   6.00%/9.00%  11/5/2014   12/31/2021  $4,836  $4,836  $4,836  

Revolving Loan ($30 unfunded commitment)

   6.00%/9.00%  4/12/2018   12/31/2021   286   286   286  

Common Equity (7,478 shares) (j)

     11/10/2017     748   —    

Preferred Equity (2,550 shares)

     12/26/2019     2,550   2,269  
       

 

 

  

 

 

  
        8,420   7,391   2

US GreenFiber, LLC

 

Building Products Manufacturing

       

Second Lien Debt (j)

   8.00%/5.00%  7/3/2014   8/30/2024   15,382   15,378   13,078  

Second Lien Debt (j)

   8.50%/6.50%  11/9/2018   8/30/2024   5,028   5,028   5,183  

Second Lien Debt (j)

   8.50%/6.50%  8/10/2020   8/30/2024   2,533   2,533   2,601  

Common Equity (2,522 units) (h)(j)

     7/3/2014     586   —    

Common Equity (425,508 units) (j)

     8/30/2019     1   —    

Common Equity (1,022,813 units) (h)(j)

     7/1/2020     1,023   —    
       

 

 

  

 

 

  
        24,549   20,862   5
       

 

 

  

 

 

  

Total Control Investments

       $32,969  $28,253   7
       

 

 

  

 

 

  

Affiliate Investments (l)

         

FAR Research Inc. (n)

 

Specialty Chemicals

        

Common Equity (1,396 units)

     3/31/2014    $—    $28   0

Fiber Materials, Inc. (n)

 

Aerospace & Defense Manufacturing

       

Common Equity (10 units)

     11/30/2016     —     41   0

Medsurant Holdings, LLC

 

Healthcare Services

        

Second Lien Debt (j)

   14.00%/0.00%  12/18/2015   3/10/2022   8,031   8,028   8,091  

Preferred Equity (63,331 units) (h)(j)

     4/12/2011     673   620  

Warrant (252,588 units) (h)(j)(m)

     4/12/2011     2,258   2,249  
       

 

 

  

 

 

  
        10,959   10,960   3

Mirage Trailers LLC

 

Utility Equipment Manufacturing

        

Second Lien Debt (k)

  (L + 10.00%) / (1.00%) 11.00%/5.00%  11/25/2015   11/25/2021   6,410   6,483   6,410  

Common Equity (2,500,000 shares) (o)

     11/25/2015     2,188   84  
       

 

 

  

 

 

  
        8,671   6,494   2

Pfanstiehl, Inc.

 

Healthcare Products

       

Common Equity (4,250 units) (j)

     3/29/2013     425   33,505   8
         

Pinnergy, Ltd.

 

Oil & Gas Services

        

Common Equity - Class A-2 (42,500 units) (j)

     10/13/2016     3,000   20,589   5
         

Steward Holding LLC (dba Steward Advanced Materials)

 

Aerospace & Defense Manufacturing

       

Second Lien Debt

   12.00%/1.50%  11/12/2015   10/31/2021   7,783   7,781   7,783  

Common Equity (1,000,000 units)

     11/12/2015     1,000   1,994  
       

 

 

  

 

 

  
        8,781   9,777   2
       

 

 

  

 

 

  

Total Affiliate Investments

       $31,836  $81,394   20
       

 

 

  

 

 

  

 

12


Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2020

(in thousands, except shares)

 

Portfolio Company (a)(b)

Investment Type (c)

 

Industry

 

Variable Index

Spread / Floor (d)

 

Rate (e)

Cash/PIK

 Investment
Date (f)
  Maturity  Principal
Amount
  Cost  Fair
Value (g)
  Percent of
Net Assets
 

Non-control/Non-affiliate Investments

         

Frontline Food Services, LLC (f/k/a Accent Food Services, LLC)

 Vending Equipment Manufacturing        

Preferred Equity (Class A Units) (46 units) (j)

     12/31/2020    $2,000  $2,000  

Common Equity (Class B Units) (124 units) (j)

     12/31/2020     —     —    

Preferred Equity (Class C Units) (100 units) (j)

     12/31/2020     —     —    
       

 

 

  

 

 

  
        2,000   2,000   0

Allied 100 Group, Inc.

 Healthcare Products        

Subordinated Debt (k)

   11.25%/0.00%  7/31/2019   5/26/2023   21,500   21,432   21,500  

Common Equity (625,000 units) (j)

     11/26/2014     625   1,087  
       

 

 

  

 

 

  
        22,057   22,587   5

Allredi, LLC (fka Marco Group International OpCo, LLC)

 Industrial Cleaning & Coatings        

Second Lien Debt

   10.50%/1.75%  3/2/2020   9/2/2026   10,080   9,993   7,761  

Common Equity (570,636 units) (h)(j)

     7/21/2017     637   275  
       

 

 

  

 

 

  
        10,630   8,036   2

Alzheimer’s Research and Treatment Center, LLC

 Healthcare Services        

First Lien Debt (j)(w)

  (L + 5.75%) / (2.00%) 7.75%/0.00%  10/23/2018   10/23/2023   6,500   6,471   6,584  

Common Equity (500 units) (h)(j)

     10/23/2018     500   766  
       

 

 

  

 

 

  
        6,971   7,350   2

American AllWaste LLC (dba WasteWater Transport Services)

 Environmental Industries        

Second Lien Debt (j)

  (L + 11.00%) / (2.00%) 13.00%/0.00%  5/31/2018   11/30/2023   17,503   17,434   17,503  

Preferred Equity (500 units) (h)(j)

     5/31/2018     500   241  

Preferred Equity (207 units) (h)(j)

     8/6/2019     250   226  

Preferred Equity (141 units) (h)(j)

     11/2/2020     171   171  
       

 

 

  

 

 

  
        18,355   18,141   4

Applied Data Corporation

 Information Technology Services        

First Lien Debt (v)

  (L + 6.25%) / (1.50%) 7.75%/0.00%  11/6/2020   11/6/2025   8,000   7,949   7,949  

Common Equity (22 units)

     11/6/2020     —     —    

Preferred Equity (1,070,614 units)

     11/6/2020     1,071   1,071  
       

 

 

  

 

 

  
        9,020   9,020   2

Argo Turboserve Corporation

 Business Services        

Second Lien Debt (j)

  (L + 10.75%) / (2.00%) 12.75%/0.00%  12/26/2018   6/28/2023   13,031   12,990   13,031   3

AVC Investors, LLC (dba Auveco)

 Specialty Distribution        

Second Lien Debt (k)

   11.50%/0.00%  1/3/2018   7/3/2023   22,500   22,448   22,500  

Common Equity (5,000 units) (j)

     1/3/2018     487   464  
       

 

 

  

 

 

  
        22,935   22,964   6

B&B Roadway and Security Solutions, LLC

 Component Manufacturing        

Second Lien Debt

   11.25%/4.00%  2/27/2018   1/1/2022   10,910   10,890   10,782  

Common Equity (50,000 units) (h)(j)

     2/27/2018     497   —    
       

 

 

  

 

 

  
        11,387   10,782   3

Bandon Fitness (Texas), Inc.

 Retail        

First Lien Debt (j)(z)

  (L + 6.50%) /  (2.25%) 8.75%/0.25%  8/9/2019   8/9/2024   14,680   14,289   15,591  

Common Equity (545,810 units) (j)

     8/9/2019     931   554  
       

 

 

  

 

 

  
        15,220   16,145   4

BCM One Group Holdings, Inc.

 Information Technology Services        

Subordinated Debt (k)

   11.00%/0.00%  1/3/2019   7/3/2024   30,000   29,887   30,000  

Common Equity (1,281 shares)

     1/3/2019     48   458  

Preferred Equity (74 shares)

     1/3/2019     736   737  
       

 

 

  

 

 

  
        30,671   31,195   8

Bedford Precision Parts LLC

 Specialty Distribution        

First Lien Debt (j)(s)

  (L + 6.25%) / (2.00%) 8.25%/0.00%  3/12/2019   3/12/2024   4,531   4,507   4,531  

Common Equity (500,000 units) (h)(j)

     3/12/2019     500   263  
       

 

 

  

 

 

  
        5,007   4,794   1

Cardboard Box LLC (dba Anthony’s Coal Fired Pizza)

 Restaurants        

Common Equity (521,021 units) (j)

     12/15/2015     521   —    

Preferred Equity (1,043,133 units) (j)

     12/6/2019     96   34  
       

 

 

  

 

 

  
        617   34   0

Combined Systems, Inc.

 Aerospace & Defense Manufacturing        

First Lien Debt

  (L + 10.00%) / (2.00%) 12.00%/0.00%  1/31/2020   1/31/2025   7,600   7,553   7,600  

Revolving Loan ($1,050 unfunded commitment) (j)(ac)

  (L + 9.00%) /  (2.00%) 11.00%/0.00%  1/31/2020   1/31/2025   2,950   2,930   2,950  
       

 

 

  

 

 

  
        10,483   10,550   3

Comply365, LLC

 Aerospace & Defense Manufacturing        

First Lien Debt (ad)

  (L + 8.00%) /  (1.00%) 9.00%/0.00%  12/11/2020   12/11/2025   10,000   9,855   9,855  

Common Equity (1,000,000 units)

     12/11/2020     1,000   1,000  
       

 

 

  

 

 

  
        10,855   10,855   3

CRS Solutions Holdings, LLC (dba CRS Texas)

 Business Services        

Second Lien Debt

   10.50%/1.50%  3/14/2018   4/30/2024   11,305   11,270   11,305  

Common Equity (450,382 units) (h)(j)

     3/14/2018     488   321  
       

 

 

  

 

 

  
        11,758   11,626   3

Dataguise, Inc.

 Information Technology Services        

First Lien Debt (j)

   11.00%/0.00%  12/31/2020   12/31/2023   20,000   19,900   19,900  

Common Equity (909 shares) (j)

     12/31/2020     1,500   1,500  
       

 

 

  

 

 

  
        21,400   21,400   5

Diversified Search LLC

 Business Services        

First Lien Debt (k)(r)

  (L + 8.00%) /  (1.75%) 9.75%/0.00%  2/7/2019   2/7/2024   17,355   17,159   17,355  

Common Equity (573 units) (h)(j)

     2/7/2019     593   494  
       

 

 

  

 

 

  
        17,752   17,849   4

EBL, LLC (EbLens)

 Retail        

Second Lien Debt (j)(p)

   12.00%/1.00%  7/13/2017   1/13/2023   9,253   9,214   5,454  

Common Equity (75,000 units) (j)

     7/13/2017     750   —    
       

 

 

  

 

 

  
        9,964   5,454   1

 

13


Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2020

(in thousands, except shares)

 

Portfolio Company (a)(b)

Investment Type (c)

 

Industry

 

Variable Index

Spread / Floor (d)

 

Rate (e)

Cash/PIK

 Investment
Date (f)
  Maturity  Principal
Amount
  Cost  Fair
Value (g)
  Percent of
Net Assets
 

ECM Industries, LLC

 

Component Manufacturing

        

Subordinated Debt (j)

   11.50%/0.00%  4/30/2020   5/23/2026   11,500   11,295   11,500  

Common Equity (1,000,000 units) (h)(j)

     4/30/2020     1,000   1,562  
       

 

 

  

 

 

  
        12,295   13,062   3

Elements Brands, LLC

 

Consumer Products

        

First Lien Debt

   12.25%/0.00%  12/31/2020   12/31/2025   6,000   5,967   5,967  

Revolving Loan ($838 unfunded commitment) (i)(j)

   12.25%/0.00%  12/31/2020   12/31/2025   2,162   2,146   2,146  
       

 

 

  

 

 

  
        8,113   8,113   2

French Transit, LLC

 

Consumer Products

        

First Lien Debt (j)

  (L + 10.00%) / (2.25%) 12.25%/0.00%  6/21/2019   6/21/2024   4,116   4,088   4,116   1
         

Global Plasma Solutions, Inc.

 

Component Manufacturing

        

Common Equity (947 shares) (j)

     9/21/2018     —     9,995   2
         

Gurobi Optimization, LLC

 

Information Technology Services

        

Common Equity (3 shares)

     12/19/2017     592   1,660   0

Haematologic Technologies, Inc.

 

Healthcare Services

        

First Lien Debt (x)

  (L + 8.25%) / (2.00%) 10.25%/0.00%  10/11/2019   10/11/2024   5,500   5,469   5,500  

Common Equity (549 units) (h)(j)

     10/11/2019     549   255  
       

 

 

  

 

 

  
        6,018   5,755   1

Hallmark Health Care Solutions, Inc.

 

Healthcare Services

        

First Lien Debt (j)(ae)

  (L + 7.25%) / (1.50%) 8.75%/0.00%  12/4/2020   12/4/2025   8,500   8,437   8,437  

Common Equity (750,000 units) (j)

     12/4/2020     750   750  
       

 

 

  

 

 

  
        9,187   9,187   2

Healthfuse, LLC

 

Healthcare Services

        

First Lien Debt (af)

  (L + 7.25%) / (1.00%) 8.25%/0.00%  11/13/2020   11/13/2025   6,000   5,960   5,960  

Preferred Equity (197,980 units)

     11/13/2020     750   750  
       

 

 

  

 

 

  
        6,710   6,710   2

Hilco Plastics Holdings, LLC (dba Hilco Technologies)

 

Component Manufacturing

        

Second Lien Debt (j)

   11.50%/1.50%  9/23/2016   12/31/2019   10,301   10,301   8,878  

Revolving Loan (j)

  (L + 6.50%) / (0.00%) 6.65%/0.00%  12/20/2019   12/15/2019   5,962   5,962   5,962  

First Lien Debt (j)

  (L + 6.95%) / (0.00%) 7.10%/0.00%  12/20/2019   12/15/2019   5,092   5,092   5,092  

Preferred Equity (1,000,000 units) (h)(j)

     4/18/2018     1,000   —    

Common Equity (72,507 units) (h)(j)

     9/23/2016     473   —    
       

 

 

  

 

 

  
        22,828   19,932   5

Hub Acquisition Sub, LLC (dba Hub Pen)

 

Promotional products

        

Second Lien Debt (k)

   13.00%/0.00%  3/23/2016   3/31/2023   25,000   24,976   24,106  

Common Equity (3,750 units)

     3/23/2016     131   283  

Preferred Equity (868 units) (j)

     10/16/2020     154   158  
       

 

 

  

 

 

  
        25,261   24,547   6

IBH Holdings, LLC (fka Inflexxion, Inc.)

 

Business Services

        

Common Equity (150,000 units)

     6/20/2018     —     235   0
         

Ipro Tech, LLC

 

Information Technology Services

        

First Lien Debt (j)(u)

  (L + 8.50%) / (2.00%) 10.50%/0.00%  6/30/2020   6/30/2025   2,469   1,923   2,469   1

K2 Merger Agreement Agent, LLC (fka K2 Industrial Services, Inc.) (n)

 

Industrial Cleaning & Coatings

        

Second Lien Debt (j)

   0.00%/10.00%  1/28/2019   1/28/2021   2,140   2,140   2,140   1

The Kyjen Company, LLC (dba Outward Hound)

 

Consumer Products

        

Second Lien Debt (k)

   12.00%/0.00%  12/8/2017   6/8/2024   15,000   14,960   15,000  

Common Equity (765 shares) (j)

     12/8/2017     765   841  
       

 

 

  

 

 

  
        15,725   15,841   4

LNG Indy, LLC (dba Kinetrex Energy)

 

Oil & Gas Distribution

        

Second Lien Debt (k)

   11.50%/1.50%  12/28/2016   11/12/2021   10,127   10,108   10,127  

Common Equity (500 units)

     12/28/2016     500   959  
       

 

 

  

 

 

  
        10,608   11,086   3

Mesa Line Services, LLC

 

Utilities: Services

        

Second Lien Debt (j)

   10.50%/0.50%  11/30/2017   8/1/2024   17,511   17,442   17,511  

Common Equity (981 shares) (j)

     11/30/2017     1,148   1,076  
       

 

 

  

 

 

  
        18,590   18,587   5

Midwest Transit Equipment, Inc.

 

Transportation services

        

Warrant (7,192 shares) (j)(m)

     6/23/2017     180   118  

Warrant (4.79% of Junior Subordinated Notes) (j)(q)

    6/23/2017     190   248  
       

 

 

  

 

 

  
        370   366   0

NGT Acquisition Holdings, LLC (dba Techniks Industries)

 

Component Manufacturing

        

Common Equity (378 units) (j)

     5/24/2017     500   227   0
         

OMC Investors, LLC (dba Ohio Medical Corporation)

 

Healthcare Products

        

Second Lien Debt

   12.00%/0.00%  1/15/2016   6/30/2022   10,000   9,985   10,000  

Common Equity (5,000 units)

     1/15/2016     462   869  
       

 

 

  

 

 

  
        10,447   10,869   3

 

14


Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2020

(in thousands, except shares)

 

Portfolio Company (a)(b)

Investment Type (c)        

 

Industry

 

Variable Index
Spread / Floor (d)

 

Rate (e)
Cash/PIK

 

Investment
Date (f)

 

Maturity

 Principal
Amount
  Cost  Fair
Value (g)
  Percent of
Net Assets
 
         

Palisade Company, LLC

 

Information Technology Services

        

Common Equity (50 shares) (j)

    11/15/2018    500   630   0
         

Palmetto Moon, LLC

 

Retail

        

First Lien Debt (j)

   11.50%/2.50% 11/3/2016 10/31/2021  4,779   4,773   4,779  

Common Equity (499 units) (j)

    11/3/2016    494   159  
       

 

 

  

 

 

  
        5,267   4,938   1

Pool & Electrical Products, LLC

 

Specialty Distribution

        

Second Lien Debt (j)

    11.75%/0.00%  10/28/2020 4/28/2027  12,000   11,883   11,883  

Common Equity (15,000 units) (h)(j)

    10/28/2020    1,500   1,500  
       

 

 

  

 

 

  
        13,383   13,383   3

Power Grid Components, Inc.

 

Specialty Distribution

        

Second Lien Debt (k)

   11.00%/1.00% 4/12/2018 12/2/2025  22,433   22,357   22,433  

Preferred Equity (392 shares) (j)

    4/12/2018    392   509  

Preferred Equity (48 shares) (j)

    12/2/2019    48   63  

Common Equity (10,622 shares) (j)

    4/12/2018    462   740  
       

 

 

  

 

 

  
        23,259   23,745   6

Prime AE Group, Inc.

 

Business Services

        

First Lien Debt (j)

  (L + 6.25%)  / (2.00%) 8.25%/0.00% 11/25/2019 11/25/2024  6,833   6,683   6,833  

Preferred Equity (500,000 shares) (j)

    11/25/2019    500   566  
       

 

 

  

 

 

  
        7,183   7,399   2

Revenue Management Solutions, LLC

 

Information Technology Services

        

Common Equity (113 shares)

    1/4/2017    1,125   3,081   1
         

Rhino Assembly Company, LLC

 

Specialty Distribution

        

Second Lien Debt (k)

   12.00%/1.50% 8/11/2017 2/11/2023  10,682   10,655   10,682  

Delayed Draw Commitment ($875 unfunded commitment) (i)(j)

  12.00%/1.00% 8/11/2017 5/17/2022  —     —     —    

Common Equity (Class A Units) (8,864 units) (h)(j)

    8/11/2017    944   629  

Preferred Equity (Units N/A) (h)(j)

    12/10/2020    136   137  

Common Equity (Class F Units) (355 units) (h)(j)

    12/10/2020    —     —    
       

 

 

  

 

 

  
        11,735   11,448   3

Road Safety Services, Inc.

 

Business Services

        

Second Lien Debt

   11.25%/1.50% 9/18/2018 3/18/2024  10,379   10,351   10,379  

Common Equity (655 units)

    9/18/2018    621   882  
       

 

 

  

 

 

  
        10,972   11,261   3

Rohrer Corporation

 

Packaging

        

Subordinated Debt (j)

   10.50%/1.00% 10/1/2018 4/1/2024  14,017   13,976   14,017  

Common Equity (400 shares) (j)

    7/18/2016    780   1,591  
       

 

 

  

 

 

  
        14,756   15,608   4

Routeware, Inc.

 

Information Technology Services

        

First Lien Debt (k)(aa)

  (L + 7.00%)  / (1.75%) 8.75%/0.00% 2/7/2020 2/7/2025  14,888   14,814   14,888   4
         

SES Investors, LLC (dba SES Foam)

 

Building Products Manufacturing

        

Second Lien Debt

   13.00%/0.00% 9/8/2016 12/29/2022  1,000   997   1,000  

Common Equity (6,000 units) (h)(j)

    9/8/2016    537   1,869  
       

 

 

  

 

 

  
        1,534   2,869   1

Software Technology, LLC

 

Information Technology Services

        

Subordinated Debt (k)

   11.00%/0.00% 12/23/2016 6/23/2023  10,000   9,980   10,000  

Common Equity (6 shares)

    12/23/2016    646   942  
       

 

 

  

 

 

  
        10,626   10,942   3

Specialized Elevator Services Holdings, LLC

 

Business Services

        

First Lien Debt (j)(y)

  (L + 5.25%)  / (2.00%) 7.25%/0.00% 5/7/2019 5/3/2024  12,889   12,782   12,889  

Common Equity (596 units) (j)

    5/8/2019    596   647  
       

 

 

  

 

 

  
        13,378   13,536   3

SpendMend LLC

 

Business Services

        

Common Equity (1,000,000 units)

    1/8/2018    972   1,915   0
         

TransGo, LLC

 

Component Manufacturing

        

Common Equity (500 units) (j)

    2/28/2017    474   996   0
         

The Tranzonic Companies

 

Specialty Distribution

        

Subordinated Debt (j)

   10.00%/1.00% 3/27/2018 3/27/2025  7,001   6,959   7,001  

Preferred Equity (5,653 units) (j)

    3/27/2018    565   730  

Common Equity (1 units) (j)

    3/27/2018    —     683  
       

 

 

  

 

 

  
        7,524   8,414   2

UBEO, LLC

 

Business Services

        

Subordinated Debt (j)

   11.00%/0.00% 4/3/2018 10/3/2024  13,893   13,814   13,893  

Common Equity (705,000 units) (h)(j)

    4/3/2018    668   661  
       

 

 

  

 

 

  
        14,482   14,554   3

United Biologics, LLC

 

Healthcare Services

        

Preferred Equity (98,377 units) (h)(j)

    4/1/2012    1,008   —    

Warrant (57,469 units) (j)(m)

    3/5/2012    566   —    
       

 

 

  

 

 

  
        1,574   —     0

Virginia Tile Company, LLC

 

Specialty Distribution

        

Second Lien Debt (j)

   12.25%/0.00% 12/19/2014 4/7/2022  12,000   11,998   12,000  

Common Equity (17 units) (j)

    12/19/2014    342   521  
       

 

 

  

 

 

  
        12,340   12,521   3

Western’s Smokehouse, LLC

 

Consumer Products

        

First Lien Debt (j)(ab)

  (L + 6.50%)  / (1.25%) 7.75%/0.00% 2/28/2020 12/23/2024  10,000   9,876   10,000   2

 

15


Table of Contents

FIDUS INVESTMENT CORPORATION

Consolidated Schedule of Investments

December 31, 2020

(in thousands, except shares)

 

Portfolio Company (a)(b)

Investment Type (c)        

 

Industry

  

Variable Index
Spread / Floor (d)

 

Rate (e)
Cash/PIK

 

Investment
Date (f)

  

Maturity

  

Principal
Amount

  Cost   Fair
Value (g)
   Percent of
Net Assets
 

Wheel Pros, Inc.

 Specialty Distribution              

Second Lien Debt (j)

   (L + 9.00%) / (1.00%) 10.00%/0.00% 11/10/2020  11/10/2028  20,000   19,411    19,411   

Preferred Equity (347,222 units) (j)

     5/15/2019       301    1,031   
           

 

 

   

 

 

   
            19,712    20,442    5

Worldwide Express Operations, LLC

 Transportation services              

Second Lien Debt (j)

   (L + 8.00%) / (1.00%) 9.00%/0.00% 2/27/2017  2/3/2025  20,000   19,791    20,000   

Common Equity (2,000 units) (h)(j)

     2/27/2017       1,478    1,942   
           

 

 

   

 

 

   
            21,269    21,942    5
           

 

 

   

 

 

   

Total Non-control/Non-affiliate Investments

           $622,222   $633,222    154
           

 

 

   

 

 

   

Total Investments

           $687,027   $742,869    181
           

 

 

   

 

 

   

 

(a)

See Note 3 to the consolidated financial statements for portfolio composition by geographic location.

(b)

Equity ownership may be held in shares or units of companies related to the portfolio companies.

(c)

All debt investments are income producing, unless otherwise indicated. Equity investments are non-income producing unless otherwise noted.

(d)

Variable rate investments bear interest at a rate indexed to LIBOR (L), which is reset monthly, bimonthly, quarterly, or semi-annually. Certain variable rate investments also include a LIBOR interest rate floor. For each investment, the Company has provided the spread over the reference rate and the LIBOR floor, if any, as of December 31, 2020.

(e)

Rate includes the cash interest or dividend rate and paid-in-kind interest or dividend rate, if any, as of December 31, 2020. Generally, payment-in-kind interest can be paid-in-kind or all in cash.

(f)

Investment date represents the date of the initial investment in the security.

(g)

The Company’s investment portfolio is comprised entirely of debt and equity securities of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the board of directors, using significant unobservable Level 3 inputs.

(h)

Investment is held by a taxable subsidiary of the Company.

(i)

The disclosed commitment represents the unfunded amount as of December 31, 2020. The Company is earning 0.50% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate which will be earned if the commitment is funded.

(j)

Investment pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the Credit Facility (see Note 6 to the consolidated financial statements).

(k)

The portion of the investment not held by the Funds is pledged as collateral for the Credit Facility and, as a result, is not directly available to the creditors of the Company to satisfy any obligations of the Company other than the Company’s obligations under the Credit Facility (see Note 6 to the consolidated financial statements).

(l)

As defined in the 1940 Act, the Company is deemed to be an “Affiliated Person” of this portfolio company because it owns 5% or more of the portfolio company’s outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was an Affiliated Person are detailed in Note 3 to the consolidated financial statements.

(m)

Warrants entitle the Company to purchase a predetermined number of shares or units of common equity, and are non-income producing. The purchase price and number of shares are subject to adjustment under certain conditions until the expiration date, if any.

(n)

Investment in portfolio company that has sold its operations and is in the process of winding down.

(o)

Income producing. Maturity date, if any, represents mandatory redemption date.

(p)

Investment was on PIK-only non-accrual status as of December 31, 2020, meaning the Company has ceased recognizing PIK interest income on the investment.

(q)

Warrant entitles the Company to purchase 4.79% of the outstanding principal of Junior Subordinated Notes prior to exercise, and is non-income producing.

(r)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 5.92% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(s)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.34% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(t)

As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” of and “Control” this portfolio company because it owns 25% or more of the portfolio company’s outstanding voting securities or it has the power to exercise control over the management or policies of such portfolio company. Transactions in which the issuer was both an Affiliated Person and a portfolio company that the Company is deemed to Control are detailed in Note 3 to the consolidated financial statements.

(u)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.50% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(v)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.25% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(w)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.27% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(x)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.13% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(y)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.93% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(z)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.21% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(aa)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 2.84% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(ab)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 2.95% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(ac)

The disclosed commitment represents the unfunded amount as of December 31, 2020. The Company is earning 1.00% interest on the unfunded balance of the commitment. The interest rate disclosed represents the rate earned on the outstanding, funded balance of the commitment.

(ad)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.33% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(ae)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 3.31% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

(af)

In addition to the interest earned based on the stated interest rate of this security, the Company is entitled to receive an additional interest amount of 4.03% on its “last out” tranche of the portfolio company’s senior term debt, which was previously syndicated into “first out” and “last out” tranches, whereby the “first out” tranche will have priority as to the “last out” tranche with respect to payments of principal, interest and any other amounts due thereunder.

See Notes to Consolidated Financial Statements.

 

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Table of Contents

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

Note 1. Organization and Nature of Business

Fidus Investment Corporation (“FIC,” and together with its subsidiaries, the “Company”), a Maryland corporation, operates as an externally managed, closed-end, non-diversified business development company (“BDC”) under the Investment Company Act of 1940, as amended (“1940 Act”). FIC completed its initial public offering, or IPO, in June 2011. In addition, for federal income tax purposes, the Company elected 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 provides customized debt and equity financing solutions to lower middle-market companies, and may make investments directly or through its two wholly-owned investment company subsidiaries, Fidus Mezzanine Capital II, L.P. (“Fund II”) and Fidus Mezzanine Capital III, L.P. (“Fund III”) (collectively, Fund II and Fund III are referred to as the “Funds”). The Funds are licensed by the U.S. Small Business Administration (the “SBA”) as small business investment companies (“SBIC”). The SBIC licenses allow the Funds to obtain leverage by issuing SBA-guaranteed debentures (“SBA debentures”), subject to the issuance of leverage commitments by the SBA and other customary procedures. As SBICs, the Funds are subject to a variety of regulations and oversight by the SBA under the Small Business Investment Act of 1958, as amended (the “SBIC Act”), concerning, among other things, the size and nature of the companies in which they may invest and the structure of those investments.

We believe that utilizing both FIC and the Funds as investment vehicles provides us with access to a broader array of investment opportunities. Given our access to lower cost capital through the SBA’s SBIC debenture program, we expect that we will continue to make investments through the Funds until the Funds reach their borrowing limit under the program. For two or more SBICs under common control, the maximum amount of outstanding SBA debentures cannot exceed $350,000.

Fund II and Fund III are not registered under the 1940 Act and rely on the exclusion from the definition of investment company contained in Section 3(c)(7) of the 1940 Act.

The Company pays a quarterly base management fee and an incentive fee to Fidus Investment Advisors, LLC, our investment advisor (the “Investment Advisor” or “Fidus Investment Advisors”) under an investment advisory agreement (the “Investment Advisory Agreement”).

Note 2. Significant Accounting Policies

Basis of presentation: The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) pursuant to the requirements for reporting on Form 10-Q, Accounting Standards Codification (“ASC”) 946, Financial Services – Investment Companies (“ASC 946”), and Articles 6 or 10 of Regulation S-X. In the opinion of management, the consolidated financial statements reflect all adjustments and reclassifications that are necessary for the fair presentation of financial results as of and for the periods presented. Certain prior period amounts have been reclassified to conform to the current period presentation. The current period’s results of operation are not necessarily indicative of results that ultimately may be achieved for the year. Therefore, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2020.

Use of estimates: The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Consolidation: Pursuant to Article 6 of Regulation S-X and ASC 946, the Company will generally not consolidate its investments in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. As a result, the consolidated financial statements of the Company include only the accounts of the Company and its wholly-owned subsidiaries, including the Funds. All significant intercompany balances and transactions have been eliminated.

Investment risks: The Company’s investments are subject to a variety of risks. These risks may include, but are not limited to the following:

 

  

Market risk - In contrast to investment-grade bonds (the market prices of which change primarily as a reaction to changes in interest rates), the market prices of high-yield bonds (which are also affected by changes in interest rates) are influenced much more by credit factors and financial results of the issuer as well as general economic factors that influence the financial markets as a whole. The portfolio companies in which the Company invests may be unseasoned, unprofitable and/or have little established operating history or earnings. These companies may also lack technical, marketing, financial, and other resources or may be dependent upon the success of one product or service, a unique distribution channel, or the effectiveness of a manager or management team, as compared to larger, more established entities. The failure of a single product, service or distribution channel, or the loss or the

 

17


Table of Contents

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

 

ineffectiveness of a key executive or executives within the management team may have a materially adverse impact on such companies. Furthermore, these companies may be more vulnerable to competition and to overall economic conditions than larger, more established entities.

 

  

Credit risk - Credit risk represents the risk that the Company would incur if the counterparties failed to perform pursuant to the terms of their agreements with the Company. Issues of high-yield debt securities in which the Company invests are more likely to default on interest or principal than are issues of investment-grade securities.

 

  

Liquidity risk - Liquidity risk represents the possibility that the Company may not be able to sell its investments quickly or at a reasonable price (given the lack of an established market).

 

  

Interest rate risk - Interest rate risk represents the likelihood that a change in interest rates could have an adverse impact on the fair value of an interest-bearing financial instrument.

 

  

Prepayment risk - Certain of the Company’s debt investments allow for prepayment of principal without penalty. Downward changes in market interest rates may cause prepayments to occur at a faster than expected rate, thereby effectively shortening the maturity of the debt investments and making the instrument less likely to be an income producing instrument through the stated maturity date.

 

  

Off-Balance sheet risk - Some of the Company’s financial instruments contain off-balance sheet risk. Generally, these financial instruments represent future commitments to purchase other financial instruments at defined terms at defined future dates. See Note 7 for further details.

Fair value of financial instruments: The Company measures and discloses fair value with respect to substantially all of its financial instruments in accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC Topic 820”). ASC Topic 820 defines fair value, establishes a framework used to measure fair value, and requires disclosures for fair value measurements, including the categorization of financial instruments into a three-level hierarchy based on the transparency of valuation inputs. See Note 4 to the consolidated financial statements for further discussion regarding the fair value measurements and hierarchy.

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 those companies where the Company owns more than 25% of the voting securities of such company or has rights to maintain greater than 50% of the board representation. Under the 1940 Act, “Affiliate Investments” are defined as investments in those companies where the Company owns between 5% and 25% of the voting securities of such company. “Non-Control/Non-Affiliate Investments” are those that neither qualify as Control Investments nor Affiliate Investments.

Segments: In accordance with ASC Topic 280 — Segment Reporting, the Company has determined that it has a single reporting segment and operating unit structure.

Cash and cash equivalents: Cash and cash equivalents are highly liquid investments with an original maturity of three months or less at the date of acquisition. The Company places its cash in financial institutions and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation insurance limits. The Company does not believe its cash balances are exposed to any significant credit risk.

Deferred financing costs: Deferred financing costs consist of fees and expenses paid in connection with the SBA debentures, the Credit Facility and the Notes (as defined in Note 6). Deferred financing costs are capitalized and amortized to interest and financing expenses over the term of the debt agreement using the effective interest method. Unamortized deferred financing costs are presented as an offset to the corresponding debt liabilities on the consolidated statements of assets and liabilities.

Realized losses on extinguishment of debt: Upon the repayment of debt obligations which are deemed to be extinguishments, the difference between the principal amount due at maturity, adjusted for any unamortized deferred financing costs, is recognized as a loss (i.e., the unamortized deferred financing costs are recognized as a loss upon extinguishment of the underlying debt obligation). There is no change in historical net increase in net assets resulting from operations due to this change in presentation.

Deferred offering costs: Deferred offering costs include registration expenses related to shelf filings. These expenses primarily consist of U.S. Securities and Exchange Commission (“SEC”) registration fees, legal fees and accounting fees incurred. These expenses are included in prepaid expenses and other assets on the consolidated statements of assets and liabilities. Upon the completion of an equity offering or a debt offering, the deferred expenses are charged to additional paid-in capital or deferred financing costs, respectively. If no offering is completed prior to the expiration of the registration statement, the deferred costs are charged to expense.

Realized gains or losses and unrealized appreciation or depreciation on investments: Realized gains or losses on investments are recorded upon the sale or disposition of a portfolio investment and are calculated as the difference between the net proceeds from the sale or disposition and the

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized. Net change in unrealized appreciation or depreciation on the consolidated statements of operations includes changes in the fair value of investments from the prior period, as determined in good faith by the Company’s board of directors (the “Board”) through the application of the Company’s valuation policy, as well as reclassifications of any prior period unrealized appreciation or depreciation on exited investments to realized gains or losses on investments.

Interest and dividend income: Interest and dividend income are recorded on the accrual basis to the extent that the Company expects to collect such amounts. Interest is accrued daily based on the outstanding principal amount and the contractual terms of the debt. Dividend income is recorded as dividends are declared or at the point an obligation exists for the portfolio company to make a distribution, and is generally recognized when received. Distributions from portfolio companies are evaluated to determine if the distribution is a distribution of earnings or a return of capital. Distributions of earnings are included in dividend income while a return of capital is recorded as a reduction in the cost basis of the investment. Estimates are adjusted as necessary after the relevant tax forms are received from the portfolio company.

PIK income: Certain of the Company’s investments contain a payment-in-kind (“PIK”) income provision. The PIK income, computed at the contractual rate specified in the applicable investment agreement, is added to the principal balance of the investment, rather than being paid in cash, and recorded as interest or dividend income, as applicable, on the consolidated statements of operations. Generally, PIK can be paid-in-kind or all in cash. The Company stops accruing PIK income when there is reasonable doubt that PIK income will be collected. PIK income that has been contractually capitalized to the principal balance of the investment prior to the non-accrual designation date is not reserved against interest or dividend income, but rather is assessed through the valuation of the investment (with corresponding adjustments to unrealized depreciation, as applicable). PIK income is included in the Company’s taxable income and, therefore, affects the amount the Company is required to pay to shareholders in the form of dividends in order to maintain the Company’s tax treatment as a RIC and to avoid corporate federal income tax, even though the Company has not yet collected the cash.

Non-accrual: Debt investments or preferred equity investments (for which the Company is accruing PIK dividends) are placed on non-accrual status when principal, interest or dividend payments become materially past due, or when there is reasonable doubt that principal, interest or dividends will be collected. Any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on full non-accrual status. Interest and dividend payments received on non-accrual investments may be recognized as interest or dividend income or may be applied to the investment principal balance based on management’s judgment. Non-accrual investments are restored to accrual status when past due principal, interest or dividends are paid and, in management’s judgment, payments are likely to remain current.

Origination and closing fees: The Company also typically receives debt investment origination or closing fees in connection with such investments. Such debt investment origination and closing fees are capitalized as unearned income and offset against investment cost basis on the consolidated statements of assets and liabilities and accreted into interest income over the life of the investment. Upon the prepayment of a debt investment, any unaccreted debt investment origination and closing fees are accelerated into interest income.

Warrants: In connection with the Company’s debt investments, the Company will sometimes receive warrants or other equity-related securities from the borrower (“Warrants”). The Company determines the cost basis of Warrants based upon their respective fair values on the date of receipt in proportion to the total fair value of the debt and Warrants received. Any resulting difference between the face amount of the debt and its recorded fair value resulting from the assignment of value to the Warrants is treated as original issue discount (“OID”), and accreted into interest income using the effective interest method over the term of the debt investment. Upon the prepayment of a debt investment, any unaccreted OID is accelerated into interest income.

Fee income: Transaction fees earned in connection with the Company’s investments are recognized as fee income and are generally non-recurring. Such fees typically include fees for services, including structuring and advisory services, provided to portfolio companies. The Company recognizes income from fees for providing such structuring and advisory services when the services are rendered or the transactions are completed. Upon the prepayment of a debt investment, any prepayment penalties are recorded as fee income when earned. In 2020, the Company elected to change the manner in which it presents the recognition of management services fees income. Previously, the Company classified management services fees as a component of interest on idle funds and other income on the consolidated statements of operations. Currently management services fees are a component of fee income on the consolidated statements of operations. Comparative prior periods presented have been reclassified retrospectively to conform to the revised presentation. There is no change in historical net increase in net assets resulting from operations due to this change in presentation.

Partial loan and equity sales: The Company follows the guidance in ASC 860, Transfers and Servicing, when accounting for loan (debt investment) participations, equity assignments and other partial loan sales. Such guidance requires a participation, assignment or other partial loan or equity sale to meet the definition of a “participating interest,” as defined in the guidance, in order for sale treatment to be allowed. Participations, assignments or other partial loan or equity sales which do not meet the definition of a participating interest should remain on the Company’s

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

consolidated statements of assets and liabilities and the proceeds recorded as a secured borrowing until the definition is met. Management has determined that all participations, assignments and other partial loan or equity sale transactions entered into by the Company have met the definition of a participating interest. Accordingly, the Company uses sale treatment in accounting for such transactions.

Income taxes: The Company has elected to be treated as a RIC under Subchapter M of the Code, which will generally relieve the Company from U.S. federal income taxes with respect to all income distributed to stockholders. To maintain the tax treatment of a RIC, the Company is required to timely distribute to its stockholders at least 90.0% of “investment company taxable income,” as defined by Subchapter M of the Code, each year. Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year; however, the Company will pay a 4.0% excise tax if it does not distribute at least 98.0% of the current year’s ordinary taxable income. Any such carryover taxable income must be distributed through a dividend declared prior to the later of the date on which the final tax return related to the year in which the Company generated such taxable income is filed or the 15th day of the 10th month following the close of such taxable year. In addition, the Company will be subject to federal excise tax if it does not distribute at least 98.2% of its net capital gains realized, computed for any one year period ending October 31.

In the future, the Funds may be limited by provisions of the SBIC Act and SBA regulations governing SBICs from making certain distributions to FIC that may be necessary to enable FIC to make the minimum distributions required to maintain the tax treatment of a RIC.

The Company has certain wholly-owned taxable subsidiaries (the “Taxable Subsidiaries”), each of which generally holds one or more of the Company’s portfolio investments listed on the consolidated schedules of investments. The Taxable Subsidiaries are consolidated for financial reporting purposes, such that the Company’s consolidated financial statements reflect the Company’s investment in the portfolio company investments owned by the Taxable Subsidiaries. The purpose of the Taxable Subsidiaries is to permit the Company to hold equity investments in portfolio companies that are taxed as partnerships for U.S. federal income tax purposes (such as entities organized as limited liability companies (“LLCs”) or other forms of pass through entities) while complying with the “source-of-income” requirements contained in the RIC tax provisions. The Taxable Subsidiaries are not consolidated with the Company for U.S. federal corporate income tax purposes, and each Taxable Subsidiary will be subject to U.S. federal corporate income tax on its taxable income. Any such income or expense is reflected in the consolidated statements of operations.

U.S. federal income tax regulations differ from GAAP, and as a result, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized under GAAP. Differences may be permanent or temporary. Permanent differences may arise as a result of, among other items, a difference in the book and tax basis of certain assets and nondeductible federal income taxes. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.

ASC Topic 740 — Accounting for Uncertainty in Income Taxes (“ASC Topic 740”) provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the consolidated financial statements. ASC Topic 740 requires the evaluation of tax positions taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” to be respected by the applicable tax authorities. Tax benefits of positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current year. It is the Company’s policy to recognize accrued interest and penalties related to uncertain tax benefits included in the income tax provision, if any. There were no material uncertain income tax positions at March 31, 2021 and December 31, 2020. The Company’s tax returns are generally subject to examination by U.S. federal and most state tax authorities for a period of three years from the date the respective returns are filed, and, accordingly, the Company’s 2017 through 2019 tax years remain subject to examination.

Dividends to stockholders: Dividends to stockholders are recorded on the record date with respect to such distributions. The amount, if any, to be distributed to stockholders, is determined by the Board each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, may be distributed at least annually, although the Company may decide to retain such capital gains for investment.

The determination of the tax attributes for the Company’s distributions is made annually, and is based upon the Company’s taxable income and distributions paid to its stockholders for the full year. Ordinary dividend distributions from a RIC do not qualify for the preferential tax rate on qualified dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax characterization of the Company’s distributions generally includes both ordinary income and capital gains but may also include qualified dividends or return of capital.

The Company has adopted a dividend reinvestment plan (“DRIP”) that provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if the Company declares a cash dividend, the Company’s stockholders who have not “opted out” of the DRIP at least two days prior to the dividend payment date will have their cash dividend automatically reinvested into additional shares of the Company’s common stock. The Company has the option to satisfy the share requirements of the DRIP through the issuance

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

of new shares of common stock or through open market purchases of common stock by the DRIP plan administrator. Newly issued shares are valued based upon the final closing price of the Company’s common stock on a date determined by the Board. Shares purchased in the open market to satisfy the DRIP requirements will be valued based upon the average price of the applicable shares purchased by the DRIP plan administrator before any associated brokerage or other costs. See Note 9 to the consolidated financial statements regarding dividend declarations and distributions.

Earnings and net asset value per share: The earnings per share calculations for the three months ended March 31, 2021 and 2020, are computed utilizing the weighted average shares outstanding for the period. Net asset value per share is calculated using the number of shares outstanding as of the end of the period.

Stock Repurchase Program: The Company has an open market stock repurchase program (the “Stock Repurchase Program”) under which the Company may acquire up to $5,000 of its outstanding common stock. Under the Stock Repurchase Program, the Company may, but is not obligated to, repurchase outstanding common stock in the open market from time to time provided that the Company complies with the prohibitions under its insider trading policies and the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including certain price, market value and timing constraints. The timing, manner, price and amount of any share repurchases will be determined by the Company’s management, in its discretion, based upon the evaluation of economic and market conditions, stock price, capital availability, applicable legal and regulatory requirements and other corporate considerations. On October 26, 2020, the Board extended the Stock Repurchase Program through December 31, 2021, or until the approved dollar amount has been used to repurchase shares. The Stock Repurchase Program does not require the Company to repurchase any specific number of shares and the Company cannot assure that any shares will be repurchased under the Stock Repurchase Program. The Stock Repurchase Program may be suspended, extended, modified or discontinued at any time. The Company did not make any repurchases of common stock during the three months ended March 31, 2021. During the three months ended March 31, 2020, the Company repurchased 25,719 shares of common stock on the open market for $268. Refer to Note 8 for additional information concerning stock repurchases.

Recent accounting pronouncements:

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2020-04, “Reference Rate Reform (Topic 848),” which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2022, except for hedging transactions as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is evaluating the potential impact that the adoption of ASU 2020-04 will have on the Company’s consolidated financial statements.

SEC Rule 1-02(w)(2) Update:

In May 2020, the SEC adopted rule amendments that will impact the requirement of investment companies, including BDCs, to disclose the financial statements of certain of their portfolio companies or certain acquired funds (the “Final Rules”). The Final Rules adopted a new definition of “significant subsidiary” set forth in Rule 1-02(w)(2) of Regulation S-X under the Securities Act. Rules 3-09 and 4-08(g) of Regulation S-X require investment companies to include separate financial statements or summary financial information, respectively, in such investment company’s periodic reports for any portfolio company that meets the definition of “significant subsidiary.” The Final Rules adopt a new definition of “significant subsidiary” applicable only to investment companies that (i) modifies the investment test and the income test, and (ii) eliminates the asset test currently in the definition of “significant subsidiary” in Rule 1-02(w) of Regulation S-X. The new Rule 1-02(w)(2) of Regulation S-X is intended to more accurately capture those portfolio companies that are more likely to materially impact the financial condition of an investment company. The Final Rules became effective on January 1, 2021, however the Company elected to early adopt this rule change as of December 31, 2020. The adoption of this guidance did not have a material impact on the Company’s Consolidated Financial Statements.

SEC Regulation S-K Update:

In November 2020, the SEC issued a final rule that modernized and simplifies Management’s Discussion and Analysis and certain financial disclosure requirements in Regulation S-K (the “Amendments”). Specifically, the Amendments: (i) eliminate Item 301 of Regulation S-K (Selected Financial Data); (ii) simplify Item 302 of Regulation S-K (Supplementary Financial Information); and (iii) amend certain aspects of Item 303 of Regulation S-K (Management’s Discussion and Analysis of Financial Condition and Results of Operations). The Amendments became effective on February 10, 2021 and compliance will be required for the registrants’ fiscal year ending on or after August 9, 2021. Early adoption of the Amendments is permitted on an item-by-item basis after the effective date; however, a registrant must fully comply with each adopted item in its entirety. The Company adopted the Amendments on the effective date which did not have a material impact on the Company’s Consolidated Financial Statements.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

Note 3. Portfolio Company Investments

The Company’s portfolio investments principally consist of secured and unsecured debt, equity warrants and direct equity investments in privately held companies. The debt investments may or may not be secured by either a first or second lien on the assets of the portfolio company. The debt investments generally bear interest at fixed rates, and generally mature between five and seven years from the original investment. In connection with a debt investment, the Company also may receive nominally priced equity warrants and/or make a direct equity investment in the portfolio company. The Company’s warrants or equity investments may be investments in a holding company related to the portfolio company. In addition, the Company periodically makes equity investments in its portfolio companies through Taxable Subsidiaries. In both situations, the investment is generally reported under the name of the operating company on the consolidated schedules of investments.

As of March 31, 2021, the Company had active investments in 67 portfolio companies and residual investments in four portfolio companies that have sold their underlying operations. The aggregate fair value of the total portfolio was $711,884 and the weighted average effective yield on the Company’s debt investments was 12.3% as of such date. As of March 31, 2021, the Company held equity investments in 87.3% of its portfolio companies and the weighted average fully diluted equity ownership in those portfolio companies was 5.3%. The weighted average fully diluted equity ownership was computed using the fully diluted equity ownership for equity investments (including warrants) at cost as of March 31, 2021.

As of December 31, 2020, the Company had active investments in 66 portfolio companies and residual investments in three portfolio companies that have sold their underlying operations. The aggregate fair value of the total portfolio was $742,869 and the weighted average effective yield on the Company’s debt investments was 12.2% as of such date. As of December 31, 2020, the Company held equity investments in 88.4% of its portfolio companies and the weighted average fully diluted equity ownership in those portfolio companies was 5.8%. The weighted average fully diluted equity ownership was computed using the fully diluted equity ownership for equity investments (including warrants) at cost as of December 31, 2020.

The weighted average yield of the Company’s debt investments is not the same as a return on investment for its stockholders but, rather, relates to a portion of the Company’s investment portfolio and is calculated before the payment of all of the Company’s and its subsidiaries’ fees and expenses. The weighted average yields were computed using the effective interest rates for debt investments at cost as of March 31, 2021 and December 31, 2020, including accretion of OID and debt investment origination fees, but excluding investments on non-accrual status, if any.

Purchases of debt and equity investments for the three months ended March 31, 2021 and 2020 totaled $63,107 and $68,192, respectively. Proceeds from sales and repayments, including principal, return of capital distributions and realized gains, of portfolio investments for the three months ended March 31, 2021 and 2020 totaled $98,565 and $73,772, respectively.

Investments by type with corresponding percentage of total portfolio investments consisted of the following:

 

   Fair Value  Cost 
   March 31,
2021
  December 31,
2020
  March 31,
2021
  December 31,
2020
 

Second Lien Debt

  $295,546    41.5 $332,154    44.7 $309,579    47.2 $341,947    49.7

Subordinated Debt

   99,834    14.0   107,911    14.5   99,358    15.1   107,343    15.6 

First Lien Debt(1)

   195,673    27.5   187,353    25.2   195,261    29.7   184,585    26.9 

Equity

   118,179    16.6   112,836    15.2   49,229    7.5   49,958    7.3 

Warrants

   2,652    0.4   2,615    0.4   3,194    0.5   3,194    0.5 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $711,884    100.0 $742,869    100.0 $656,621    100.0 $687,027    100.0
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 
(1)

Includes unitranche investments, which account for 18.6% and 20.1% of our portfolio on a fair value and cost basis as of March 31, 2021, respectively. Includes unitranche investments, which account for 17.3% and 18.4% of our portfolio on a fair value and cost basis as of December 31, 2020, respectively.

All investments made by the Company as of March 31, 2021 and December 31, 2020 were made in portfolio companies headquartered in the U.S. The following table shows portfolio composition by geographic region at fair value and cost and as a percentage of total investments. The geographic composition is determined by the location of the corporate headquarters of the portfolio company, which may not be indicative of the primary source of the portfolio company’s business.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

   Fair Value  Cost 
   March 31,
2021
  December 31,
2020
  March 31,
2021
  December 31,
2020
 

Midwest

  $179,123    25.1 $225,745    30.4 $141,691    21.5 $189,560    27.6

Southeast

   172,972    24.3   153,291    20.6   145,692    22.2   129,974    18.9 

Northeast

   148,540    20.9   123,268    16.6   156,766    23.9   127,833    18.6 

West

   97,654    13.7   108,673    14.6   94,363    14.4   109,221    15.9 

Southwest

   113,595    16.0   131,892    17.8   118,109    18.0   130,439    19.0 
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

Total

  $711,884    100.0 $742,869    100.0 $656,621    100.0 $687,027    100.0
  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

  

 

 

   

 

 

 

The following table shows portfolio composition by type and by geographic region at fair value as a percentage of net assets.

 

By Type

  

By Geographic Region

 
   March 31,
2021
  December 31,
2020
     March 31,
2021
  December 31,
2020
 

Second Lien Debt

   71.6  80.9 Midwest   43.4  55.0

Subordinated Debt

   24.2   26.3  Southeast   41.9   37.3 

First Lien Debt

   47.4   45.6  Northeast   36.0   30.0 

Equity

   28.6   27.5  West   23.6   26.5 

Warrants

   0.6   0.6  Southwest   27.5   32.1 
  

 

 

  

 

 

    

 

 

  

 

 

 

Total

   172.4  180.9 Total   172.4  180.9
  

 

 

  

 

 

    

 

 

  

 

 

 

As of March 31, 2021 and December 31, 2020, the Company had no portfolio company investments that represented more than 10% of the total investment portfolio on a fair value or cost basis. As of March 31, 2021 and December 31, 2020, the Company had no portfolio company investments that represented more than 5% of our total assets.

As of March 31, 2021 and December 31, 2020, the Company had debt investments in one portfolio company on non-accrual status:

 

   March 31, 2021  December 31, 2020 

Portfolio Company

  Fair
Value
  Cost  Fair
Value
  Cost 

EBL, LLC (EbLens)

  $5,709(1)  $9,218(1)  $5,454(1)  $9,214(1) 
  

 

 

  

 

 

  

 

 

  

 

 

 

Total

  $5,709  $9,218  $5,454  $9,214 
  

 

 

  

 

 

  

 

 

  

 

 

 
(1)

Portfolio company was on PIK-only on non-accrual status at period end, meaning the Company has ceased recognizing PIK interest income on the investment.

Consolidated Schedule of Investments In and Advances To Affiliates

The table below represents the fair value of control and affiliate investments as of December 31, 2020 and any additions and reductions made to such investments during the three months ended March 31, 2021, the ending fair value as of March 31, 2021, and the total investment income earned on such investments during the period.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

                 Three Months Ended March 31, 2021 

Portfolio Company (1)

 March 31,
2021 Principal

Amount - Debt
Investments
  December 31,
2020
Fair Value
  Gross
Additions (2)
  Gross
Reductions (3)
  March 31,
2021 Fair

Value
  Net
Realized
Gains
(Losses) (4)
  Net Change in
Unrealized
Appreciation
(Depreciation)
  Interest
Income
  Payment-in-
kind
Interest
Income
  Dividend
Income
  Fee
Income
 

Control Investments

           

Spectra A&D Acquisition, Inc. (fka FDS Avionics Corp.)(5)

 $—    $7,391  $1,986  $(9,377 $—    $957  $1,028  $90  $—    $—    $400 

US GreenFiber, LLC

  24,784   20,862   1,841   (137  22,566   —     (136  503   341   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Control Investments

 $24,784  $28,253  $3,827  $(9,514 $22,566  $957  $892  $593  $341  $—    $400 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Affiliate Investments

           

FAR Research Inc.

 $—    $28  $—    $—    $28  $—    $—    $—    $—    $—    $—   

Fiber Materials, Inc.

  —     41   1   —     42   —     —     —     —     —     —   

Medsurant Holdings, LLC

  8,031   10,960   13   —     10,973   —     13   281   —     —     6 

Mirage Trailers LLC

  6,492   6,494   1,275   —     7,769   —     1,188   186   81   —     —   

Pfanstiehl, Inc.

  —     33,505   513   —     34,018   —     514   —     —     —     —   

Pinnergy, Ltd.

  —     20,589   306   —     20,895   —     306   —     —     —     —   

Spectra A&D Acquisition, Inc. (fka FDS Avionics Corp.)(5)

  8,000   —     12,241   (59  12,182   —     1,631   150   —     —     177 

Steward Holding LLC (dba Steward Advanced Materials)

  7,812   9,777   330   —     10,107   —     300   231   30   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Affiliate Investments

 $30,335  $81,394  $14,679  $(59 $96,014  $—    $3,952  $848  $111  $—    $183 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(1)

The investment type, industry, ownership detail for equity investments, and if the investment is income producing is disclosed in the consolidated schedule of investments.

(2)

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest and PIK dividend income, accretion of OID and origination fees, and net unrealized appreciation recognized during the period. Gross additions also include transfers of portfolio companies into the control or affiliate classification during the period, as applicable.

(3)

Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and net unrealized (depreciation) recognized during the period. Gross reductions also include include transfers of portfolio companies out of the control or affiliate classification during the period, as applicable.

(4)

The schedule does not reflect realized gains or losses on escrow receivables for investments which were previously exited and were not held during the period presented. Gains and losses on escrow receivables are classified in the consolidated statements of operations according to the control classification at the time the investment was exited. Escrow receivables are presented in prepaid expenses and other assets on the consolidated statements of assets and liabilities.

(5)

Portfolio company was transferred to Affiliate investments from Control investments during the three months ended March 31, 2021.

The table below represents the fair value of control and affiliate investments as of December 31, 2019 and any additions and reductions made to such investments during the year ended December 31, 2020, including the total investment income earned on such investments during the period.

 

                 Year Ended December 31, 2020 

Portfolio Company (1)

 December 31,
2020 Principal
Amount - Debt
Investments
  December 31,
2019
Fair Value
  Gross
Additions (2)
  Gross
Reductions (3)
  December 31,
2020 Fair

Value
  Net
Realized
Gains
(Losses) (4)
  Net Change in
Unrealized
Appreciation
(Depreciation)
  Interest
Income
  Payment-in-
kind
Interest
Income
  Dividend
Income
  Fee
Income
 

Control Investments

           

FDS Avionics Corp. (dba Fight Display Systems)

 $5,122  $5,403  $1,988  $—    $7,391  $—    $1,545  $298  $442  $—    $—   

US GreenFiber, LLC

  22,943   16,417   5,830   (1,385  20,862   —     (363  1,591   1,306   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Control Investments

 $28,065  $21,820  $7,818  $(1,385 $28,253  $—    $1,182  $1,889  $1,748  $—    $—   
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Affiliate Investments

           

FAR Research Inc.

 $—    $28  $—    $—    $28  $—    $—    $—    $—    $—    $—   

Fiber Materials, Inc.

  —     10,449   9,681   (20,089  41   9,681   (9,762)     —     —     354   —   

Medsurant Holdings, LLC

  8,031   16,980   1,721   (7,741  10,960   1,714   (2,304  1,145   —     —     79 

Microbiology Research Associates, Inc.(5)

  —     11,611   21   (11,632  —     —     (751  84   11   —     —   

Mirage Trailers LLC

  6,410   7,218   235   (959  6,494   —     (959  718   159   5   16 

Pfanstiehl, Inc.

  —     32,822   20,128   (19,445  33,505   12,812   7,309   630   —     478   —   

Pinnergy, Ltd.

  —     32,978   301   (12,690  20,589   301   (9,388  —     —     —     —   

Steward Holding LLC (dba Steward Advanced Materials)

  7,783   9,469   308   —     9,777   —     186   934   117   —     25 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total Affiliate Investments

 $22,224  $121,555  $32,395  $(72,556 $81,394  $24,508  $(15,669 $3,511  $287  $837  $120 
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

 

(1)

The investment type, industry, ownership detail for equity investment, and if the investment is income producing is disclosed in the consolidated schedule of investments.

(2)

Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments, accrued PIK interest and PIK dividend income, accretion of OID and origination fees, and net unrealized appreciation recognized during the period. Gross additions also include transfers of portfolio companies into the control or affiliate classification during the period, as applicable.

(3)

Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and net unrealized (depreciation) recognized during the period. Gross reductions also include include transfers of portfolio companies out of the control or affiliate classification during the period, as applicable.

(4)

The schedule does not reflect realized gains or losses on escrow receivables for investments which were previously exited and were not held during the period presented. Gains and losses on escrow receivables are classified in the consolidated statements of operations according to the control classification at the time the investment was exited. Escrow receivables are presented in prepaid expenses and other assets on the consolidated statements of assets and liabilities.

(5)

Portfolio company was transferred to Non-control/Non-affiliate investments from Affiliate investments during the twelve months ended December 31, 2020.

Note 4. Fair Value Measurements

Investments

The Board has established and documented processes and methodologies for determining the fair values of portfolio company investments on a recurring basis in accordance with ASC Topic 820 and consistent with the requirements of the 1940 Act. Fair value is the price, determined at the measurement date, that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available or reliable, valuation techniques described below are applied. Under ASC Topic 820, portfolio investments recorded at fair value in the consolidated financial statements are classified within the fair value hierarchy based upon the level of judgment associated with the inputs used to measure their value, as defined below:

Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets as of the measurement date.

Level 2 — Inputs include quoted prices for similar assets in active markets, or that are quoted prices for identical or similar assets in markets that are not active and inputs that are observable, either directly or indirectly, for substantially the full term, if applicable, of the investment.

Level 3 — Inputs include those that are both unobservable and significant to the overall fair value measurement.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

An investment’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s investment portfolio is comprised entirely of debt and equity securities of privately held companies for which quoted prices falling within the categories of Level 1 and Level 2 inputs are not available. Therefore, the Company values all of its portfolio investments at fair value, as determined in good faith by the Board, using Level 3 inputs. The degree of judgment exercised by the Board in determining fair value is greatest for investments classified as Level 3 inputs. Due to the inherent uncertainty of determining the fair values of investments that do not have readily available market values, the Board’s estimate of fair values may differ significantly from the values that would have been used had a ready market for the securities existed, and those differences may be material. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the amounts ultimately realized on these investments to be materially different than the valuations currently assigned.

With respect to investments for which market quotations are not readily available, the Board undertakes a multi-step valuation process each quarter, as described below:

 

  

the quarterly valuation process begins with each portfolio company or investment being initially evaluated and rated by the investment professionals of the Investment Advisor responsible for the portfolio investment;

 

  

preliminary valuation conclusions are then documented and discussed with the investment committee of the Investment Advisor;

 

  

the Board engages one or more independent valuation firm(s) to conduct independent appraisals of a selection of our portfolio investments for which market quotations are not readily available. Each portfolio company investment is generally appraised by the valuation firm(s) at least once every calendar year and each new portfolio company investment is appraised at least once in the twelve-month period following the initial investment. In certain instances, the Company may determine that it is not cost-effective, and as a result it is not in the Company’s stockholders’ best interest, to request the independent appraisal of certain portfolio company investments. Such instances include, but are not limited to, situations where the Company determines that the fair value of the portfolio company investment is relatively insignificant to the fair value of the total portfolio.

 

  

the audit committee of the Board reviews the preliminary valuations of the Investment Advisor and of the independent valuation firm(s) and responds and supplements the valuation recommendations to reflect any comments; and

 

  

the Board discusses these valuations and determines the fair value of each investment in our portfolio in good faith, based on the input of the Investment Advisor, the independent valuation firm(s) and the audit committee.

In making the good faith determination of the value of portfolio investments, the Board starts with the cost basis of the security. The transaction price is typically the best estimate of fair value at inception. When evidence supports a subsequent change to the carrying value from the original transaction price, adjustments are made to reflect the expected exit values.

Consistent with the policies and methodologies adopted by the Board, the Company performs detailed valuations of its debt and equity investments, including an analysis on the Company’s unfunded debt investment commitments, using both the market and income approaches as appropriate. Under the market approach, the Company typically uses the enterprise value methodology to determine the fair value of an investment. There is no one methodology to estimate enterprise value and, in fact, for any one portfolio company, enterprise value is generally best expressed as a range of values, from which the Company derives a single estimate of enterprise value. Under the income approach, the Company typically prepares and analyzes discounted cash flow models to estimate the present value of future cash flows of either an individual debt investment or of the underlying portfolio company itself.

The Company evaluates investments in portfolio companies using the most recent portfolio company financial statements and forecasts. The Company also consults with the portfolio company’s senior management to obtain further updates on the portfolio company’s performance, including information such as industry trends, new product development and other operational issues.

For the Company’s debt investments the primary valuation technique used to estimate the fair value is the discounted cash flow method. However, if there is deterioration in credit quality or a debt investment is in workout status, the Company may consider other methods in determining the fair value, including the value attributable to the debt investment from the enterprise value of the portfolio company or the proceeds that would be received in a liquidation analysis. The Company’s discounted cash flow models estimate a range of fair values by applying an appropriate discount rate to the future cash flow streams of its debt investments, based on future interest and principal payments as set forth in the associated debt investment agreements. The Company prepares a weighted average cost of capital for use in the discounted cash flow model for each investment, based on factors including, but not limited to: current pricing and credit metrics for similar proposed or executed investment transactions of private companies; the portfolio company’s historical financial results and outlook; and the portfolio company’s current leverage and credit quality as compared to leverage and credit quality as of the date the investment was made. The Company may also consider the following factors when determining the fair value of debt investments: the portfolio company’s ability to make future scheduled payments; prepayment penalties and other fees; estimated remaining life; the nature and realizable value of any collateral securing such debt investment; and changes in the interest rate environment and the credit markets

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

that generally may affect the price at which similar investments may be made. The Company estimates the remaining life of its debt investments to generally be the legal maturity date of the instrument, as the Company generally intends to hold its debt investments to maturity. However, if the Company has information available to it that the debt investment is expected to be repaid in the near term, it would use an estimated remaining life based on the expected repayment date.

For the Company’s equity investments, including equity and warrants, the Company generally uses a market approach, including valuation methodologies consistent with industry practice, to estimate the enterprise value of portfolio companies. Typically, the enterprise value of a private company is based on multiples of EBITDA, net income, revenues, or in limited cases, book value. In estimating the enterprise value of a portfolio company, the Company analyzes various factors consistent with industry practice, including but not limited to original transaction multiples, the portfolio company’s historical and projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the nature and realizable value of any collateral, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public.

The Company may also utilize an income approach when estimating the fair value of its equity securities, either as a primary methodology if consistent with industry practice or if the market approach is otherwise not applicable, or as a supporting methodology to corroborate the fair value ranges determined by the market approach. The Company typically prepares and analyzes discounted cash flow models based on projections of the future free cash flows (or earnings) of the portfolio company. The Company considers various factors, including, but not limited to, the portfolio company’s projected financial results, applicable market trading and transaction comparables, applicable market yields and leverage levels, the markets in which the portfolio company does business, and comparisons of financial ratios of peer companies that are public.

The Company reviews the fair value hierarchy classifications on a quarterly basis. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in or out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur. There were no transfers among Levels 1, 2, and 3 during the three months ended March 31, 2021 and 2020.

The following tables present a reconciliation of the beginning and ending balances for fair valued investments measured using significant unobservable inputs (Level 3) for the three months ended March 31, 2021 and 2020:

 

   Second Lien
Debt
  Subordinated
Debt
  First Lien
Debt
  Equity  Warrants  Total 

Balance, December 31, 2019

  $383,077  $140,843  $108,327  $126,564  $8,108  $766,919 

Net realized gains (losses) on investments

   100   —     (4  29,419   1,862   31,377 

Net change in unrealized appreciation (depreciation) on investments

   (18,819  (1,247  (2,676  (49,529  (2,319  (74,590

Purchase of investments

   20,000   2,000   45,940   252   —     68,192 

Proceeds from sales and repayments of investments

   (11,706  (1,567  (14,026  (41,982  (4,491  (73,772

Interest and dividend income paid-in-kind

   914   137   30   —     —     1,081 

Proceeds from loan origination fees

   (158  (20  (437  —     —     (615

Accretion of loan origination fees

   137   42   81   1   —     261 

Accretion of original issue discount

   15   —     72   —     —     87 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, March 31, 2020

  $373,560  $140,188  $137,307  $64,725  $3,160  $718,940 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, December 31, 2020

  $332,154  $107,911  $187,353  $112,836  $2,615  $742,869 

Net realized gains (losses) on investments

   —     —     —     3,216   —     3,216 

Net change in unrealized appreciation (depreciation) on investments

   (4,240  (92  (2,356  6,072   37   (579

Purchase of investments

   6,500   16,000   36,900   3,707   —     63,107 

Proceeds from sales and repayments of investments

   (40,403  (24,039  (26,471  (7,652  —     (98,565

Interest and dividend income paid-in-kind

   897   41   30   —     —     968 

Proceeds from loan origination fees

   (50  (80  (346  —     —     (476

Accretion of loan origination fees

   91   93   563   —     —     747 

Accretion of original issue discount

   597   —     —     —     —     597 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance, March 31, 2021

  $295,546  $99,834  $195,673  $118,179  $2,652  $711,884 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Net change in unrealized appreciation/(depreciation) of $1,018 and ($73,964) for the three months ended March 31, 2021 and 2020, was attributable to Level 3 investments held at March 31, 2021 and 2020, respectively.

The following tables summarize the significant unobservable inputs by valuation technique used to determine the fair value of the Company’s Level 3 debt and equity investments as of March 31, 2021 and December 31, 2020. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

   Fair Value at
March 31,
2021
   

Valuation Techniques

  

Unobservable Inputs

  Range (weighted average)(1)

Debt investments:

        

Second Lien Debt

  $274,891   Discounted cash flow  Weighted average cost of capital  9.3% - 26.4% (14.8%)
   5,710   Enterprise value  EBITDA multiples  4.4x - 4.4x (4.4x)
   14,945   Enterprise value  Asset Coverage  1.1x - 1.2x (1.2x)

Subordinated Debt

   99,834   Discounted cash flow  Weighted average cost of capital  11.5% - 13.0% (11.8%)

First Lien Debt

   195,673   Discounted cash flow  Weighted average cost of capital  6.9% - 16.4% (10.6%)

Equity investments:

        

Equity

   118,179   Enterprise value  EBITDA multiples  4.4x - 15.3x (7.5x)

Warrants

   2,652   Enterprise value  EBITDA multiples  4.5x - 7.0x (6.6x)

 

(1)

Unobservable inputs were weighted by the relative fair value of the instruments.    

 

   Fair Value at
 December 31,
2021
   

Valuation Techniques

  

Unobservable Inputs

  Range (weighted average)(1)

Debt investments:

        

Second Lien Debt

  $306,405   Discounted cash flow  Weighted average cost of capital  9.3% - 27.0% (14.0%)
   5,454   Enterprise value  EBITDA multiples  3.9x - 3.9x (3.9x)
   5,123   Enterprise value  Revenue multiples  2.1x - 2.1x (2.1x)
   15,172   Enterprise value  Asset Coverage  1.2x - 1.2x (1.2x)

Subordinated Debt

   107,911   Discounted cash flow  Weighted average cost of capital  11.5% - 12.0% (11.7%)

First Lien Debt

   183,238   Discounted cash flow  Weighted average cost of capital  6.8% - 16.3% (10.3%)
   4,115   Enterprise value  Asset Coverage  1.8x - 1.8x (1.8x)

Equity investments:

        

Equity

   110,568   Enterprise value  EBITDA multiples  3.9x - 15.3x (8.1x)
   2,268   Enterprise value  Revenue multiples  2.1x - 2.1x (2.1x)

Warrants

   2,615   Enterprise value  EBITDA multiples  4.5x - 6.5x (6.2x)

 

(1)

Unobservable inputs were weighted by the relative fair value of the instruments.

The significant unobservable input used in determining the fair value under the discounted cash flow technique is the weighted average cost of capital of each security. Significant increases (or decreases) in this input would likely result in significantly lower (or higher) fair value estimates.

The significant unobservable inputs used in determining fair value under the enterprise value technique are revenue and EBITDA multiples, as well as asset coverage. Significant increases (or decreases) in these inputs could result in significantly higher (or lower) fair value estimates.

Other Financial Assets and Liabilities

ASC Topic 820 requires disclosure of the fair value of financial instruments for which it is practical to estimate such value. The Company believes that the carrying amounts of its other financial instruments such as cash and cash equivalents, interest receivable and accounts payable and other liabilities approximate the fair value of such items due to the short maturity of such instruments. The Company’s borrowings under the Credit Facility (as defined in Note 6), SBA debentures, and Notes (as defined in Note 6) are recorded at their respective carrying values.

 

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Table of Contents

FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

The following tables summarize the carrying value and fair value of the Company’s debt obligations as of March 31, 2021 and December 31, 2020.

 

   March 31, 2021   December 31, 2020 
   Carrying Value (1)   Fair Value   Carrying Value (1)   Fair Value 

SBA debentures (2)

  $133,800   $133,800   $147,000   $147,000 

Credit Facility borrowings (3)

   15,000    15,000    —      —   

2023 Notes (4)

   —      —      50,000    50,620 

February 2024 Notes (4)

   19,000    19,312    69,000    69,745 

November 2024 Notes (4)

   63,250    64,996    63,250    64,389 

2026 Notes (5)

   125,000    125,302    125,000    125,000 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $356,050   $358,410   $454,250   $456,754 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Carrying value represents the outstanding principal balance of the debt obligation.                 

(2)

The fair value of the SBA debentures is estimated by discounting the remaining payments using current market rates for similar instruments and considering such factors as the legal maturity date and the ability of market participants to prepay the debentures, which are Level 3 inputs under ASC Topic 820.

(3)

The fair value of borrowings under the Credit Facility, if valued under ASC Topic 820, are based on a market yield approach and current interest rates, which are Level 3 inputs to the market yield model.

(4)

The Public Notes, if valued under ASC Topic 820, are valued using available market quotes, which is a Level 1 input.

(5)

The fair value of the 2026 Notes is estimated by discounting the remaining payments using current market rates for similar instruments and considering such factors as the legal maturity date, which are Level 3 inputs under ASC Topic 820.

The following table summarizes the inputs used to value the Company’s debt obligations if measured at fair value as of March 31, 2021 and December 31, 2020.

 

   Fair Value 

Valuation Inputs

  March 31,
2021
   December 31,
2020
 

Level 1

  $84,308   $184,754 

Level 2

   —      —   

Level 3

   274,102    272,000 
  

 

 

   

 

 

 

Total

  $358,410   $456,754 
  

 

 

   

 

 

 

Note 5. Related Party Transactions

Investment Advisory Agreement: The Company has entered into an Investment Advisory Agreement with the Investment Advisor. On June 4, 2020, the Board approved the renewal of the Investment Advisory Agreement through June 20, 2021. Pursuant to the Investment Advisory Agreement and subject to the overall supervision of the Board, the Investment Advisor provides investment advisory services to the Company. For providing these services, the Investment Advisor receives a fee, consisting of two components — a base management fee and an incentive fee.

The base management fee is calculated at an annual rate of 1.75% based on the average value of total assets (other than cash or cash equivalents but including assets purchased with borrowed amounts) at the end of the two most recently completed calendar quarters. The base management fee is payable quarterly in arrears. The base management fee under the Investment Advisory Agreement was $3,176 for the three months ended March 31, 2021, and $3,272 for the three months ended March 31, 2020, respectively. As of March 31, 2021 and December 31, 2020, the base management fee payable was $3,176 and $3,244, respectively.

The incentive fee consists of two parts. The first part is calculated and payable quarterly in arrears based on the Company’s pre-incentive fee net investment income for the quarter. Pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement (defined below) and any interest expense and dividends paid on any outstanding preferred stock, but excluding the incentive fee and excise taxes on realized gains). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as market discount, original issue discount, debt instruments with PIK income, preferred stock with PIK dividends and zero-coupon securities), accrued income the Company has not yet received in cash. The Investment Advisor is not under any obligation to reimburse the Company for any part of the incentive fee it receives that was based on accrued interest that the Company never collects.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

Pre-incentive fee net investment income does not include any realized capital gains, taxes associated with such realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Because of the structure of the incentive fee, it is possible that the Company may pay an incentive fee in a quarter where the Company incurs a loss. For example, if the Company generates pre-incentive fee net investment income in excess of the hurdle rate (as defined below) for a quarter, the Company will pay the applicable incentive fee even if the Company has incurred a loss in that quarter due to a net loss on investments.

Pre-incentive fee net investment income, expressed as a rate of return on the value of the Company’s net assets (defined as total assets less indebtedness and before taking into account any incentive fees payable during the period) at the end of the immediately preceding calendar quarter, is compared to a fixed “hurdle rate” of 2.0% per quarter. If market interest rates rise, the Company may be able to invest funds in debt instruments that provide for a higher return, which would increase the Company’s pre-incentive fee net investment income and make it easier for the Investment Advisor to surpass the fixed hurdle rate and receive an incentive fee based on such net investment income.

The Company pays the Investment Advisor an incentive fee with respect to pre-incentive fee net investment income in each calendar quarter as follows:

 

  

no incentive fee in any calendar quarter in which the pre-incentive fee net investment income does not exceed the hurdle rate of 2.0%;

 

  

100.0% of the Company’s pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than 2.5% in any calendar quarter. This portion of the pre-incentive fee net investment income (which exceeds the hurdle rate but is less than 2.5%) is referred to as the “catch-up” provision. The catch-up is meant to provide the Investment Advisor with 20.0% of the pre-incentive fee net investment income as if a hurdle rate did not apply if this net investment income exceeds 2.5% in any calendar quarter; and

 

  

20.0% of the amount of the Company’s pre-incentive fee net investment income, if any, that exceeds 2.5% in any calendar quarter.

The sum of the calculations above equals the income incentive fee. The income incentive fee is appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the calendar quarter. The income incentive fee was $2,669 for the three months ended March 31, 2021, and $1,855 for the three months ended March 31, 2020, respectively. As of March 31, 2021 and December 31, 2020, the income incentive fee payable was $2,669 and $2,610, respectively.

The second part of the incentive fee is a capital gains incentive fee that is determined and paid in arrears as of the end of each fiscal year (or upon termination of the Investment Advisory Agreement, as of the termination date), and equals 20.0% of the net capital gains as of the end of the fiscal year. In determining the capital gains incentive fee to be paid in cash to the Investment Advisor, the Company calculates the cumulative aggregate realized capital gains and losses since the Formation Transactions (realized capital gains and losses include realized gains and losses on investments, net of income tax provision from realized gains on investments, and realized losses on extinguishment of debt), and the aggregate unrealized capital depreciation on investments as of the date of the calculation. At the end of the applicable year, the amount of capital gains that serves as the basis for the calculation of the capital gains incentive fee to be paid equals the cumulative aggregate realized capital gains on investments, less cumulative aggregate realized capital losses on investments, less aggregate unrealized capital depreciation on investments, and less cumulative aggregate realized losses on extinguishment of debt. If this number is positive at the end of such year, then the capital gains incentive fee to be paid in cash for such year equals 20.0% of such amount, less the aggregate amount of any capital gains incentive fees paid in all prior years. As of March 31, 2021 and December 31, 2020, the capital gains incentive fee payable in cash was $0 (as cumulative aggregate realized capital gains and losses on investments plus aggregate unrealized capital depreciation on investments plus realized losses on extinguishment of debt was negative as of each period). The aggregate amount of capital gains incentive fees paid from the IPO through March 31, 2021 was $348.

In addition, the Company accrues, but does not pay in cash, a capital gains incentive fee in connection with any unrealized capital appreciation on investments, as applicable. If, on a cumulative basis, the sum of (i) net realized gains/(losses) on investments plus (ii) net unrealized appreciation/(depreciation) on investments plus (iii) realized losses on extinguishment of debt decreases during a period, the Company will reverse any excess capital gains incentive fee previously accrued such that the amount of capital gains incentive fee accrued is no more than 20.0% of the sum of (i) net realized gains/(losses) on investments plus (ii) net unrealized appreciation/(depreciation) on investments plus (iii) realized losses on extinguishment of debt. The capital gains incentive fee accrued (reversed) during the three months ended March 31, 2021 was $91, and $(8,878) for the three months ended March 31, 2020. As of March 31, 2021 and December 31, 2020, the accrued capital gains incentive fee payable was $11,122 and $11,031, respectively.

Unless terminated earlier as described below, the Investment Advisory Agreement will continue in effect from year to year if approved annually by the 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 directors who are not “interested persons” of the Company, as such term is defined under Section 2(a)(19) of the 1940 Act (the “Independent Directors”). The Investment Advisory Agreement automatically terminates in the event of its assignment, as defined in the 1940 Act,

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

by the Investment Advisor and may be terminated by either party without penalty upon not less than 60 days’ written notice to the other. The holders of a majority of the Company’s outstanding voting securities may also terminate the Investment Advisory Agreement without penalty.

Administration Agreement: The Company also entered into an administration agreement (the “Administration Agreement”) with the Investment Advisor. On June 4, 2020, the Board approved the renewal of the Administration Agreement through June 20, 2021. Under the Administration Agreement, the Investment Advisor furnishes the Company with office facilities and equipment, provides clerical, bookkeeping, and record keeping services at such facilities and provides the Company with other administrative services necessary to conduct its day-to-day operations. The Company reimburses the Investment Advisor for the allocable portion of overhead expenses incurred in performing its obligations under the Administration Agreement, including rent and the Company’s allocable portion of the cost of its chief financial officer and chief compliance officer and their respective staffs. Under the Administration Agreement, the Investment Advisor also provides managerial assistance to those portfolio companies to which the Company is required to provide such assistance and the Company reimburses the Investment Advisor for fees and expenses incurred with providing such services. In addition, the Company reimburses the Investment Advisor for fees and expenses incurred while performing due diligence on the Company’s prospective portfolio companies, including “dead deal” expenses. Under the Administration Agreement, administrative service expenses for the three months ended March 31, 2021 were $413, and $466 for the three months ended March 31, 2020. As of March 31, 2021 and December 31, 2020, the accrued administrative service expense payable was $214 and $593, respectively.

Fidus Equity Fund I, L.P.: On February 25, 2020, the Company entered into a Limited Partnership Agreement (the “Agreement”) with Fidus Equity Fund I, L.P. (“FEF I”). Pursuant to the Agreement, the Company will serve as the General Partner of FEF I. Owned by third-party investors, FEF I was formed to purchase 50% of select equity investments from the Company. On February 25, 2020, the Company sold 50% of its equity investments in 20 portfolio companies to FEF I and received net proceeds of $35,903, resulting in a realized gain, net of estimated taxes, of $20,404. The Company will not receive any fees from FEF I for any services provided in its capacity as the General Partner of FEF I.

Note 6. Debt

Revolving Credit Facility: On June 16, 2014, FIC entered into a senior secured revolving credit agreement (the “Credit Facility”) with ING Capital LLC (“ING”), as the administrative agent, collateral agent, and lender. The Credit Facility is secured by certain portfolio investments held by the Company, but portfolio investments held by the Funds are not collateral for the Credit Facility. On April 24, 2019, the Company entered into an Amended & Restated Senior Secured Revolving Credit Agreement (the “Amended Credit Agreement”) among the Company, as borrower, the lenders party thereto, and ING Capital LLC, as administrative agent. The Amended Credit Agreement amends, restates, and replaces the Credit Facility. On June 26, 2020, the Company amended the Amended Credit Agreement, however the material terms were unchanged. Among other revisions, the amendment to the Amended Credit Agreement modifies certain covenants therein, including to amend the minimum consolidated interest coverage ratio to be 2.25 to 1.00 for the four quarter period ending on June 30, 2020, 2.00 to 1.00 for the four quarter periods ending on each of September 30, 2020 and December 31, 2020, and 1.75 to 1.00 for each four quarter period ending at the end of each quarter thereafter.

Under the Amended Credit Agreement, (i) revolving commitments by lenders were increased from $90,000 to $100,000, with an accordion feature that allows for an increase in total commitments up to $250,000, subject to satisfaction of certain conditions at the time of any such future increase, (ii) the maturity date of the Credit Facility was extended from June 16, 2019 to April 24, 2023, and (iii) borrowings under the credit facility bear interest, at our election, at a rate per annum equal to (a) 3.00% (or 2.75% if certain conditions are satisfied, including if (x) no equity interests are included in the borrowing base, (y) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans is greater than or equal to 35%, and (z) the contribution to the borrowing base of eligible portfolio investments that are performing first lien bank loans, performing last out loans, or performing second lien loans is greater than or equal to 60%) plus the one, two, three or six month LIBOR rate, as applicable, or (b) 2.00% (or 1.75% if the above conditions are satisfied) plus the highest of (A) a prime rate, (B) the Federal Funds rate plus 0.5%, (C) three month LIBOR plus 1.0%, and (D) zero. The Company pays a commitment fee that varies depending on the size of the unused portion of the Credit Facility: 3.00% per annum on the unused portion of the credit facility at or below 35% of the commitments and 0.50% per annum on any remaining unused portion of the Credit Facility between the total commitments and the 35% minimum utilization. The Amended Credit Agreement also modifies certain covenants in the credit facility, including to provide for a minimum asset coverage ratio of 2.00 to 1 (on a regulatory basis). The Credit Facility is secured by a first priority security interest in all of our assets, excluding the assets of our SBIC subsidiaries.

Amounts available to borrow under the Credit Facility are subject to a minimum borrowing/collateral base that applies an advance rate to certain investments held by the Company, excluding investments held by the Funds. The Company is subject to limitations with respect to the investments securing the Credit Facility, including, but not limited to, restrictions on sector concentrations, loan size, payment frequency and status and collateral interests, as well as restrictions on portfolio company leverage, which may also affect the borrowing base and therefore amounts available to borrow.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

The Company has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. These covenants are subject to important limitations and exceptions that are described in the documents governing the Credit Facility. As of March 31, 2021 and December 31, 2020, the Company was in compliance in all material respect with the terms of the Credit Facility.

SBA debentures: The Company uses debenture leverage provided through the SBA to fund a portion of its investment purchases.

Under the SBA debenture program, the SBA commits to purchase debentures issued by SBICs; such debentures have 10-year terms with the entire principal balance due at maturity and are guaranteed by the SBA. Interest on SBA debentures is payable semi-annually on March 1 and September 1. As of March 31, 2021 and December 31, 2020, approved and unused SBA debenture commitments were $5,500 and $11,500, respectively. The SBA may limit the amount that may be drawn each year under these commitments, and each issuance of leverage is conditioned on the Company’s full compliance, as determined by the SBA, with the terms and conditions set forth in the SBIC Act.

As of March 31, 2021 and December 31, 2020, the Company’s issued and outstanding SBA debentures mature as follows:

 

Pooling
Date (1)
  Maturity
Date
  Fixed
Interest
Rate
  March 31,
2021
  December 31,
2020
 
 3/25/2015   3/1/2025   3.277 $22,500  $22,500 
 9/23/2015   9/1/2025   3.571   15,000   16,700 
 3/23/2016   3/1/2026   3.267   1,500   1,500 
 3/23/2016   3/1/2026   3.249   21,800   21,800 
 9/21/2016   9/1/2026   2.793   500   500 
 3/29/2017   3/1/2027   3.587   10,000   10,000 
 9/20/2017   9/1/2027   3.260   1,000   1,000 
 9/20/2017   9/1/2027   3.190   33,000   33,000 
 3/21/2018   3/1/2028   3.859   —     16,000 
 3/21/2018   3/1/2028   3.534   9,000   10,500 
 9/25/2019   9/1/2029   2.377   7,500   7,500 
 3/25/2020   3/1/2030   2.172   6,000   6,000 
 (2)   (2)   (2)   6,000   —   
   

 

 

  

 

 

 
 

Total outstanding SBA debentures

   $133,800  $147,000 
   

 

 

  

 

 

 

 

(1)

The SBA has two scheduled pooling dates for debentures (in March and in September). Certain debentures funded during the reporting periods may not be pooled until the subsequent pooling date.

(2)

The Company issued $6,000 in SBA debentures which will pool in September 2021. Until the pooling date, the debentures bear interest at a fixed rate interim interest rate of 0.60%. The Company expects the current interim interest rate will reset to a higher long-term fixed rate on the pooling date.

Notes: On February 2, 2018, the Company closed the public offering of approximately $43,478 in aggregate principal amount of its 5.875% notes due 2023, or the “2023 Notes.” On February 22, 2018, the underwriters exercised their option to purchase an additional $6,522 in aggregate principal of the 2023 Notes. The total net proceeds to the Company from the 2023 Notes, including the exercise of the underwriters’ option, after deducting underwriting discounts of approximately $1,500 and offering expenses of $438, were approximately $48,062.

The 2023 Notes mature on February 1, 2023 and bear interest at a rate of 5.875%. The 2023 Notes may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after February 1, 2020. Interest on the 2023 Notes is payable quarterly on February 1, May 1, August 1 and November 1 of each year. The 2023 Notes are listed on the NASDAQ Global Select Market under the trading symbol “FDUSL.”

On January 19, 2021, the Company redeemed $50,000 of the aggregate principal amount on the 2023 Notes, resulting in a realized loss on extinguishment of debt of approximately $794.

On February 8, 2019, the Company closed the public offering of approximately $60,000 in aggregate principal amount of its 6.000% notes due 2024, or the “February 2024 Notes”. On February 19, 2019, the underwriters exercised their option to purchase an additional $9,000 in aggregate principal of the February 2024 Notes. The total net proceeds to the Company from the February 2024 Notes, including the exercise of the underwriters’ option, after deducting underwriting discounts of approximately $2,070 and estimated offering expenses of $409, were approximately $66,521.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

The February 2024 Notes mature on February 15, 2024 and bear interest at a rate of 6.000%. The February 2024 Notes may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after February 15, 2021. Interest on the February 2024 Notes is payable quarterly on February 15, May 15, August 15 and November 15 of each year, beginning May 15, 2019. The February 2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol “FDUSZ.”

On February 16, 2021, the Company redeemed $50,000 of the $69,000 aggregate principal amount on the February 2024 Notes, resulting in a realized loss on extinguishment of debt of approximately $1,081.

On October 16, 2019, the Company closed the public offering of approximately $55,000 in aggregate principal amount of its 5.375% notes due 2024, or the “November 2024 Notes” (and collectively with the 2023 Notes and February 2024 Notes, the “Public Notes”). On October 23, 2019, the underwriters exercised their option to purchase an additional $8,250 in aggregate principal of the November 2024 Notes. The total net proceeds to the Company from the November 2024 Notes, including the exercise of the underwriters’ option, after deducting underwriting discounts of approximately $1,898 and estimated offering expenses of $300, were approximately $61,053.

The November 2024 Notes will mature on November 1, 2024 and bear interest at a rate of 5.375%. The November 2024 Notes may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after November 1, 2021. Interest on the November 2024 Notes is payable quarterly on February 1, May 1, August 1 and November 1 of each year, beginning February 1, 2020. The November 2024 Notes are listed on the NASDAQ Global Select Market under the trading symbol “FDUSG.”

On December 23, 2020, the Company closed the offering of approximately $125,000 in aggregate principal amount of its 4.75% notes due 2026, or the “2026 Notes” (collectively with the Public Notes, the “Notes”). The total net proceeds to the Company from the 2026 Notes after deducting underwriting discounts of approximately $2,500 and estimated offering expenses of $400, were approximately $122,100.

The 2026 Notes will mature on January 31, 2026 and bear interest at a rate of 4.75%. The 2026 Notes may be redeemed in whole or in part at any time or from time to time at our option subject to a make whole provision if redeemed more than three months prior to maturity. Interest on the 2026 Notes is payable on January 31 and July 31 of each year, beginning July 31, 2021. The Company does not intend to list the 2026 Notes on any securities exchange or automated dealer quotation system.

The Notes are unsecured obligations of the Company and rank pari passu with the Company’s future unsecured indebtedness; effectively subordinated to all of the Company’s existing and future secured indebtedness; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, financing vehicles, or similar facilities the Company may form in the future, with respect to claims on the assets of any such subsidiaries, financing vehicles, or similar facilities.

As of March 31, 2021, the aggregate amount outstanding of the senior securities issued by the Company was $222,250, for which our asset coverage was 285.8%. The SBA-guaranteed debentures are not subject to the asset coverage requirements of the 1940 Act as a result of exemptive relief granted to us by the SEC effective June 30, 2014. The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by total senior securities representing indebtedness.

Interest and Financing Expenses

Interest and fees related to the Company’s debt for the three months ended March 31, 2021 and 2020 which are included in interest and financing expenses on the consolidated statements of operations, were as follows:

 

   Three Months Ended March 31, 2021  Three Months Ended March 31, 2020 
   SBA  Credit        SBA  Credit       
   debentures  Facility  Notes  Total  debentures  Facility  Notes  Total 

Stated interest expense

  $1,133  $362  $3,116  $4,611  $1,332  $459  $2,619  $4,410 

Amortization of deferred financing costs

   130   112   341   583   141   83   326   550 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total interest and financing expenses

  $1,263  $474  $3,457  $5,194  $1,473  $542  $2,945  $4,960 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Weighted average stated interest rate, period end

   3.102  4.117  5.055  4.282  3.333  3.855  5.749  4.560

Unused commitment fee rate, period end

   N/A   1.088  N/A   1.088  N/A   0.500  N/A   0.500

Realized Losses on Extinguishment of Debt

During the three months ended March 31, 2021 and 2020, the Company prepaid $19,200 and $7,000 of SBA debentures, respectively, which were scheduled to mature on dates ranging from 2025 to 2028 and 2024 to 2028, respectively. As a result of the prepayments, the Company recognized realized losses on extinguishment of debt of $305 and $125, respectively, equal to the write-off of the related unamortized deferred financing costs, during the three months ended March 31, 2021 and 2020.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

Deferred Financing Costs

Deferred financing costs are amortized into interest and financing expenses on the consolidated statements of operations, using the effective interest method, over the term of the respective financing instrument. Deferred financing costs related to the Credit Facility, SBA debentures, and Notes as of March 31, 2021 and December 31, 2020 were as follows:

 

   March 31, 2021  December 31, 2020 
   SBA  Credit        SBA  Credit       
   debentures  Facility  Notes  Total  debentures  Facility  Notes  Total 

SBA debenture commitment fees

  $1,750  $—    $—    $1,750  $1,750  $—    $—    $1,750 

SBA debenture leverage fees

   4,112   —     —     4,112   3,966   —     —     3,966 

Credit Facility upfront fees

   —     3,238   —     3,238   —     3,238   —     3,238 

Notes underwriting discounts

   —     —     6,468   6,468   —     —     7,968   7,968 

Notes debt issue costs

   —     —     1,076   1,076   —     —     1,579   1,579 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total deferred financing costs

   5,862   3,238   7,544   16,644   5,716   3,238   9,547   18,501 

Less: accumulated amortization

   (3,154  (2,301  (2,870  (8,325  (2,720  (2,190  (2,591  (7,501
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Unamortized deferred financing costs

  $2,708  $937  $4,674  $8,319  $2,996  $1,048  $6,956  $11,000 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Unamortized deferred financing costs are presented as a direct offset to the SBA debentures, Credit Facility and Notes liabilities on the consolidated statements of assets and liabilities. The following table summarizes the outstanding debt net of unamortized deferred financing costs as of March 31, 2021 and December 31, 2020:

 

   March 31, 2021  December 31, 2020 
   SBA  Credit        SBA  Credit       
   debentures  Facility  Notes  Total  debentures  Facility  Notes  Total 

Outstanding debt

  $133,800  $15,000  $207,250  $356,050  $147,000  $—    $307,250  $454,250 

Less: unamortized deferred financing costs

   (2,708  (937  (4,674  (8,319  (2,996  (1,048  (6,956  (11,000
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Debt, net of deferred financing costs

  $131,092  $14,063  $202,576  $347,731  $144,004  $(1,048 $300,294  $443,250 
  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

As of March 31, 2021, the Company’s debt liabilities are scheduled to mature as follows (1):

 

   SBA   Credit         

Year

  debentures   Facility   Notes   Total 

2021

  $—     $—     $—     $—   

2022

   —      —      —      —   

2023

   —      15,000    —      15,000 

2024

   —      —      82,250    82,250 

2025

   37,500    —      —      37,500 

Thereafter

   96,300    —      125,000    221,300 
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $133,800   $15,000   $207,250   $356,050 
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

The table above presents scheduled maturities of the Company’s outstanding debt liabilities as of a point in time pursuant to the terms of those instruments. The timing of actual repayments of outstanding debt liabilities may not ultimately correspond with the scheduled maturity dates depending on the terms of the underlying instruments and the potential for earlier prepayments.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

Note 7. Commitments and Contingencies

Commitments: The Company had outstanding commitments to portfolio companies to fund various undrawn revolving loans, other debt investments and capital commitments totaling $7,589 and $5,645 as of March 31, 2021 and December 31, 2020, respectively. Such outstanding commitments are summarized in the following table:

 

  March 31, 2021  December 31, 2020 
  Total  Unfunded  Total  Unfunded 

Portfolio Company - Investment

 Commitment  Commitment  Commitment  Commitment 

Combined Systems, Inc. - Revolving Loan

 $4,000  $550  $4,000  $1,050 

CRS Solutions Holdings, LLC (dba CRS Texas) - Common Equity (Units)

  246   74   —     —   

Elements Brands, LLC - Revolving Loan

  3,000   838   3,000   838 

Rhino Assembly Company, LLC - Delayed Draw Commitment

  875   875   875   875 

Safety Products Group, LLC - Common Equity (Units)

  2,852 (1)   2,852 (1)   2,852 (1)   2,852 (1) 

Spectra A&D Acquisition, Inc. (fka FDS Avionics Corp.) - Revolving Loan

  —     —     250   30 

Wonderware Holdings, LLC (dba CORE Business Technologies) - Delayed Draw Term Loan

  2,000   2,000   —     —   

Xeeva, Inc. - Delayed Draw Term Loan

  400   400   —     —   
 

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $13,373  $7,589  $10,977  $5,645 
 

 

 

  

 

 

  

 

 

  

 

 

 

 

(1)

Portfolio company was no longer held at period end. The commitment represents the Company’s maximum potential liability related to certain guaranteed obligations stemming from the prior sale of the portfolio company’s underlying operations.

Additional detail for each of the commitments above is provided in the Company’s consolidated schedules of investments.

The commitments are generally subject to the borrowers meeting certain criteria such as compliance with financial and nonfinancial covenants. Since commitments may expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements.

Indemnifications: In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties that provide indemnifications under certain circumstances. In addition, in connection with the disposition of an investment in a portfolio company, the Company may be required to make representations about the business and financial affairs of such portfolio company typical of those made in connection with the sale of a business. The Company may also be required to indemnify the purchasers of such investment to the extent that any such representations are inaccurate. The Company’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Company that have not yet occurred. The Company expects the risk of future obligation under these indemnifications to be remote.

Legal proceedings: In the normal course of business, the Company may be subject to legal and regulatory proceedings that are generally incidental to its ongoing operations. While the outcome of any such legal proceedings cannot be predicted with certainty, the Company does not believe any such legal proceedings will have a material adverse effect on the Company’s consolidated financial statements.

Note 8. Common Stock

Public Offerings of Common Stock

The following table summarizes the cumulative total shares issued, net proceeds received, and weighted average offering price in public offerings of the Company’s common stock since the IPO.

 

Period

  Cumulative
Number of Shares
   Cumulative Gross
Proceeds
   Cumulative Underwriting Fees and
Commissions and Offering
Costs (1)
   Weighted Average
Offering Price
 

Cumulative since IPO

   14,388,414   $236,597   $8,989   $16.44 

 

(1)

Fidus Investment Advisors, LLC agreed to bear a cumulative of $1,925 of underwriting fees and commissions and offering costs associated with these offerings (such amounts are not included in the number reported above). All such payments made by Fidus Investment Advisors, LLC are not subject to reimbursement by the Company.

No shares have been issued for the three months ended March 31, 2021 and 2020.

Common Stock ATM Program

On August 21, 2014, the Company entered into an equity distribution agreement with Raymond James & Associates, Inc. and Robert W. Baird & Co. Incorporated through which the Company could sell, by means of at-the-market offerings from time to time, shares of the Company’s common stock having an aggregate offering price of up to $50,000 (the “ATM Program”). There were no issuances of common stock under the ATM program during the last two fiscal years and for the three months ended March 31, 2021.

Stock Repurchase Program

As described in Note 2, the Company has a Stock Repurchase Program under which the Company may acquire up to $5,000 of its outstanding common stock. The Company did not make any repurchases of common stock during the three months ended March 31, 2021. During the three months ended March 31, 2020, the Company repurchased 25,719 shares of common stock, on the open market for $268. The Company’s NAV per share

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

increased by approximately $0.01 for the three months ended March 31, 2020, as a result of the share repurchases. The following table summarizes the Company’s share repurchases under the Stock Repurchase Program for the three months ended March 31, 2021 and 2020:

 

   Three Months Ended March 31, 

Repurchases of Common Stock

  2021   2020 

Number of shares repurchased

   —      25,719 

Cost of shares repurchased, including commissions

  $—     $268 

Weighted average price per share

  $—     $10.37 

Net asset value per share at prior quarter end

  $—     $16.85 

Weighted average discount to net asset value at quarter end prior to repurchases

   N/A    38.5
    

Refer to Note 9 for additional information regarding the issuance of shares under the DRIP.

The Company had 24,437,400 shares of common stock outstanding as of March 31, 2021 and December 31, 2020.

Note 9. Dividends and Distributions

The Company’s dividends and distributions are recorded on the record date. The following table summarizes the dividends paid during the last two fiscal years and for the three months ended March 31, 2021.

 

Date

Declared

  Record
Date
   Payment
Date
   Amount
Per Share
   Total
Distribution
   Cash
Distribution
   DRIP
Shares
Value
  DRIP
Shares
  DRIP
Share
Issue
Price
 

Year Ended December 31, 2019:

              

1/31/2019

   3/8/2019    3/22/2019   $0.39   $9,541   $9,541   $—  (3)   —  (3)   —   

4/29/2019

   6/7/2019    6/21/2019    0.39    9,540    9,540    —  (3)   —  (3)   —   

7/29/2019

   9/6/2019    9/20/2019    0.39    9,541    9,541    —  (3)   —  (3)   —   

10/29/2019

   12/6/2019    12/20/2019    0.39    9,541    9,541    —  (3)   —  (3)   —   

10/29/2019 (1)

   12/6/2019    12/20/2019    0.04    978    978    —  (3)   —  (3)   —   
      

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  
      $1.60   $39,141   $39,141   $—     —    
      

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

Year Ended December 31, 2020:

              

2/14/2020

   3/13/2020    3/27/2020   $0.39   $9,537   $9,537   $—  (3)   —  (3)   —   

4/29/2020

   6/12/2020    6/26/2020    0.30    7,331    7,331    —  (3)   —  (3)   —   

8/03/2020

   9/11/2020    9/25/2020    0.30    7,331    7,331    —  (3)   —  (3)   —   

10/26/2020

   12/4/2020    12/18/2020    0.30    7,331    7,331    —  (3)   —  (3)   —   

10/26/2020 (2)

   12/4/2020    12/18/2020    0.04    978    978    —  (3)   —  (3)   —   
      

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  
      $1.33   $32,508   $32,508   $—     —    
      

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

Three Months Ended March 31, 2021:

              

2/09/2021

   3/12/2021    3/26/2021   $0.31   $7,575   $7,575   $—  (3)   —  (3)   —   

2/09/2021 (2)

   3/12/2021    3/26/2021    0.07    1,711    1,711    —  (3)   —  (3)   —   
      

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  
      $0.38   $9,286   $9,286   $—     —    
      

 

 

   

 

 

   

 

 

   

 

 

  

 

 

  

 

(1)

Special dividend.

(2)

Supplemental dividend

(3)

During the three months ended March 31, 2021 and the years ended December 31, 2020 and 2019, the Company directed the DRIP program plan administrator to repurchase shares on the open market in order to satisfy the DRIP obligation to deliver shares of common stock in lieu of issuing new shares. Accordingly, the Company purchased and reissued shares to satisfy the DRIP obligation as follows:

 

Fiscal Year Ended December 31, 2019:

  Number of
Shares
Purchased
and Reissued
   Average
Price Paid

Per Share
   Total
Amount Paid
 

January 1, 2019 through March 31, 2019

   21,855   $15.25   $333 

April 1, 2019 through June 30, 2019

   14,067    16.23    228 

July 1, 2019 through September 30, 2019

   15,289    15.35    235 

October 1, 2019 through December 31, 2019

   17,525    15.27    268 
  

 

 

   

 

 

   

 

 

 

Total

   68,736   $15.48   $1,064 
  

 

 

   

 

 

   

 

 

 

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

Fiscal Year Ended December 31, 2020:

  Number of
Shares
Purchased
and Reissued
   Average
Price Paid
Per Share
   Total
Amount Paid
 

January 1, 2020 through March 31, 2020

   31,586   $7.58   $239 

April 1, 2020 through June 30, 2020

   21,904    9.04    198 

July 1, 2020 through September 30, 2020

   28,871    10.18    294 

October 1, 2020 through December 31, 2020

   20,222    12.91    261 
  

 

 

   

 

 

   

 

 

 

Total

   102,583   $9.67   $992 
  

 

 

   

 

 

   

 

 

 

 

Three Months Ended March 31, 2021:

  Number of
Shares
Purchased
and Reissued
   Average
Price Paid
Per Share
   Total
Amount Paid
 

January 1, 2021 through March 31, 2021

   15,562   $15.62   $243 
  

 

 

   

 

 

   

 

 

 

Total

   15,562   $15.62   $243 
  

 

 

   

 

 

   

 

 

 

Note 10. Financial Highlights

The following is a schedule of financial highlights for the three months ended March 31, 2021 and 2020:

 

   Three Months Ended March 31, 
   2021  2020 

Per share data:

   

Net asset value at beginning of period

  $16.81  $16.85 

Net investment income (1)

   0.45   0.71 

Net realized gain (loss) on investments, net of tax (provision) (1)

   0.13   1.25 

Net unrealized appreciation (depreciation) on investments (1)

   (0.02  (3.05

Realized losses on extinguishment of debt (1)

   (0.09  (0.01
  

 

 

  

 

 

 

Total increase from investment operations (1)

   0.47   (1.10

Accretive (dilutive) effect of share issuances and repurchases

   —     0.01 

Dividends to stockholders

   (0.38  (0.39
  

 

 

  

 

 

 

Net asset value at end of period

  $16.90  $15.37 
  

 

 

  

 

 

 

Market value at end of period

  $15.55  $6.62 
  

 

 

  

 

 

 

Shares outstanding at end of period

   24,437,400   24,437,400 

Weighted average shares outstanding during the period

   24,437,400   24,457,634 

Net assets at end of period

  $413,012  $375,534 

Average net assets (6)

  $411,886  $393,922 

Ratios to average net assets:

   

Total expenses (2)(4)(9)

   11.9  2.6

Net investment income (2)(5)

   10.8  17.7

Total return based on market value (3)

   24.6  (52.9%) 

Total return based on net asset value (8)

   2.8  (6.5%) 

Portfolio turnover ratio (2)

   34.8  36.8

Supplemental Data:

   

Average debt outstanding (7)

  $405,150  $369,250 

Average debt per share (1)

  $16.58  $15.10 

 

(1)

Weighted average per share data.

(2)

Annualized.

(3)

Total return based on market value equals the change in the market value of the Company’s common stock per share during the period divided by the market value per share at the beginning of the period, and assumes reinvestment of dividends at prices obtained by our dividend reinvestment plan during the period. The return does not reflect any sales load that may be paid by an investor.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

(4)

The total expenses to average net assets ratio is calculated using the total expenses and the income tax provision (benefit) captions as presented on the consolidated statements of operations.

(5)

The net investment income to average net assets ratio is calculated using the net investment income caption as presented on the consolidated statements of operations, which includes incentive fee.

(6)

Average net assets is calculated as the average of the net asset balances as of each quarter end during the fiscal year and the prior year end.

(7)

Average debt outstanding is calculated as the average of the outstanding debt balances as of each quarter end during the fiscal year and the prior year end.

(8)

Total return based on net asset value per share equals the change in net asset value per share during the period, plus dividends paid per share during the period, less other non-operating changes during the period, and divided by beginning net asset value per share for the period. Non-operating changes include any items that affect net asset value per share other than increase from investment operations, such as the effects of share issuances and repurchases and other miscellaneous items.

(9)

The following is a schedule of supplemental expense ratios to average net assets:

 

   Three Months Ended March 31, 

Ratio to average net assets:

  2021  2020 

Expenses other than incentive fee (2)

   9.2  9.7

Incentive fee (2)

   2.7  (7.1%) 
  

 

 

  

 

 

 

Total expenses (2)(4)

   11.9  2.6
  

 

 

  

 

 

 

Note 11. Subsequent Events

On April 1, 2021, the Company invested $11,000 in first lien debt of Winona Foods, Inc., a leading provider of natural and processed cheese products, sauces, and plant-based alternatives.

On April 1, 2021, the Company invested $5,500 in first lien debt and $1,000 in common equity of Level Education Group, LLC (dba CE4Less), a leading provider of online continuing education for mental health and nursing professionals.

On April 5, 2021, the Company exited its debt investment in The Kyjen Company, LLC (dba Outward Hound). The Company received payment in full of $15,005 on its second lien debt, which includes a prepayment fee.

On April 5, 2021, the Company invested $25,500 in first lien debt and common equity, and made a commitment up to $2,000 of additional first lien debt of ISI PSG Holdings, LLC (dba Incentive Solutions, Inc.), a tech-enabled incentive rewards and digital marketing firm that facilitates and optimizes its clients’ indirect sales channel strategies.

On April 14, 2021, the Company exited its debt investment in Medsurant Holdings, LLC. The Company received payment in full of $8,031 on its second lien debt.

On April 29, 2021, the Company exited its debt investment in Virginia Tile Company, LLC. The Company received payment in full of $12,000 on its second lien debt.

On May 3, 2021, the Board declared a base quarterly dividend of $0.31 per share and a supplemental dividend of $0.08 per share payable June 28, 2021 to stockholders of record as of June 14, 2021.

COVID-19

Subsequent to March 31, 2021, the global outbreak of the coronavirus (“COVID-19”) pandemic, and the related effect on the U.S. and global economies, has continued to have adverse consequences for the business operations of some of the Company’s portfolio companies. The ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers, remain uncertain. The operational and financial performance of the issuers of securities in which the Company invests depends on future developments, including the duration and spread of the outbreak, and such uncertainty may in turn adversely affect the value and liquidity of the Company’s investments and negatively impact the Company’s performance.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Fidus Investment Corporation’s consolidated financial statements and related notes appearing in our annual report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 25, 2021. The information contained in this section should also be read in conjunction with our unaudited consolidated financial statements and related notes thereto appearing elsewhere in this quarterly report on Form 10-Q.

Except as otherwise specified, references to “we,” “us,” “our,” “Fidus” and “FIC” refer to Fidus Investment Corporation and its consolidated subsidiaries.

Forward Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about Fidus Investment Corporation, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects” and variations of these words and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q involve risks and uncertainties, including statements as to:

 

  

our future operating results and the impact of the COVID-19 pandemic thereon;

 

  

our business prospects and the prospects of our portfolio companies, including our and their ability to achieve our respective objectives as a result of the current COVID-19 pandemic;

 

  

the impact of investments that we expect to make;

 

  

pandemics or other serious public health events, such as the recent global outbreak of COVID-19;

 

  

our contractual arrangements and relationships with third parties;

 

  

the dependence of our future success on the general economy and its impact on the industries in which we invest and the impact of the COVID-19 pandemic thereon;

 

  

the ability of our portfolio companies to achieve their objectives;

 

  

our expected financing and investments;

 

  

the adequacy of our cash resources and working capital;

 

  

the timing of cash flows, if any, from the operations of our portfolio companies and the impact of the COVID-19 pandemic thereon;

 

  

the ability of the Investment Advisor to locate suitable investments for us and to monitor and administer our investments and the impacts of the COVID-19 pandemic thereon;

 

  

the ability of our investment advisor to attract and retain highly talented professionals;

 

  

our regulatory structure and tax status;

 

  

our ability to operate as a BDC, a SBIC and a RIC;

 

  

the timing, form and amount of any dividend distributions;

 

  

the impact of fluctuations in interest rates on our business;

 

  

the valuation of any investments in portfolio companies, particularly those having no liquid trading market; and

 

  

our ability to recover unrealized losses.

These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

 

  

an economic downturn, including as a result of the current COVID-19 pandemic, could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

 

  

a contraction of available credit and/or an inability to access the equity markets, including as a result of the COVID-19 pandemic, could impair our lending and investment activities;

 

  

interest rate volatility could adversely affect our results, particularly because we use leverage as part of our investment strategy;

 

  

currency fluctuations could adversely affect the results of our investments in foreign companies, particularly to the extent that we receive payments denominated in foreign currency rather than the U.S. dollars; and

 

  

the risks, uncertainties and other factors we identify in Item 1A. – Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2020, elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the SEC.

 

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FIDUS INVESTMENT CORPORATION

Notes to Consolidated Financial Statements (unaudited)

(in thousands, except shares and per share data)

 

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new debt investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Quarterly Report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in Item 1.A – Risk Factors contained in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 25, 2021. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Quarterly Report on Form 10-Q.

 

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Overview

General and Corporate Structure

We provide customized debt and equity financing solutions to lower middle-market companies, which we define as U.S. based companies having revenues between $10.0 million and $150.0 million. Our investment objective is to provide attractive risk-adjusted returns by generating both current income from our debt investments and capital appreciation from our equity related investments. Our investment strategy includes partnering with business owners, management teams and financial sponsors by providing customized financing for ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives. Although we are classified as a non-diversified investment company within the meaning of the 1940 Act, we maintain the flexibility to operate as a diversified investment company and have done so for an extended period of time. We seek to maintain a diversified portfolio of investments in order to help mitigate the potential effects of adverse economic events related to particular companies, regions or industries.

FIC was formed as a Maryland corporation on February 14, 2011. We completed our initial public offering, or IPO, in June 2011. FIC has elected to b