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Item 3. Legal Proceedings

2021-03-04 compared with 2020-03-03 · 96 added, 1 removed, 6 unchanged (94% of the section changed)

Legal Proceedings

We and Stellus Capital Management are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us.

We, Stellus Capital Management or our subsidiaries are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, Stellus Capital Management or our subsidiaries.

From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies.

3 unchanged sentences

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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on the New York Stock Exchange (“NYSE”) under the symbol “SCM.” As of January 31, 2021, we had nine stockholders of record, which did not include stockholders for whom shares are held in nominee or street name.

We generally intend to pay distributions to our stockholders out of assets legally available for distribution.

Our distributions and their frequency, if any, will be determined by our board of directors.

From January 2014 through March 2020, we paid aggregate monthly distributions of $0.1133 per share on our common shares.

For the period April 2020 through December 2020, we paid quarterly distributions of $0.25 per share on our common shares.

Payment of dividends on our common shares is within the discretion of the Board, and depends on, among other factors, net earnings, capital requirements and the financial condition of the Company.

However, the Company intends to continue to pay comparable dividends to shareholders in the future.

Recent Sales of Unregistered Securities

During the year ended December 31, 2020, we issued a total of 21,666 shares of common stock under the distribution reinvestment program (“DRIP”).

During the year ended December 31, 2019, we did not issue shares of common stock under the DRIP.

During the year ended December 31, 2018, we issued a total of 7,931 shares of common stock under the DRIP.

Issuances under the DRIP are not subject to the registration requirements of the Securities Act of 1933, as amended.

The aggregate value of the shares of our common stock issued under the DRIP for the years ended December 31, 2020 and 2018 was $228,943 and $94,788, respectively.

Use of Proceeds from Recent Sales of Registered Securities

In January 2020, the Company sold 332,591 shares of common stock through an at-the-market sales program (the “ATM Program”) for net proceeds of $4,771,144, which was used to repay borrowings under the Credit Facility.

Purchases of Equity Securities

Dividend Reinvestment Plan

During the year ended December 31, 2020, as a part of our DRIP, we purchased 117,687 shares of our common stock for an average price per share of $9.58 in the open market in order to satisfy the reinvestment portion of our dividends.

The following chart outlines such purchases of our common stock during the year ended December 31, 2020:

January 1, 2020 through January 31, 2020

February 1, 2020 through February 29, 2020

March 1, 2020 through March 31, 2020

April 1, 2020 through April 30, 2020

May 1, 2020 through May 31, 2020

June 1, 2020 through June 30, 2020

July 1, 2020 through July 31, 2020

August 1, 2020 through August 31, 2020

September 1, 2020 through September 30, 2020

October 1, 2020 through October 31, 2020

November 1, 2020 through November 30, 2020

December 1, 2020 through December 31, 2020

Price Range of Common Stock

Our shares of common stock are traded on the NYSE under the symbol “SCM.” In connection with our initial public offering, our shares of common stock began trading on November 8, 2012, and before that date, there was no established trading market for shares of our common stock.

The following table sets forth, for each fiscal quarter of the three most recent fiscal years, the range of high and low closing prices of our shares of common stock as reported on the NYSE and the sales price as a percentage of our net asset value (“NAV”).

Fiscal Year Ended

Closing Sales Price (2)

Premium or Discount

of High Sales NAV (3)

Premium or Discount

of Low Sales NAV (3)

December 31, 2020

Fourth quarter

Third quarter

Second quarter

First quarter

December 31, 2019

Fourth quarter

Third quarter

Second quarter

First quarter

December 31, 2018

Fourth quarter

Third quarter

Second quarter

First quarter

NAV is determined as of the last date in the relevant quarter and therefore may not reflect the NAV per share on the date of the high and low sales prices.

The NAVs shown are based on outstanding shares at the end of each period.

Closing sales price is determined as the high or low closing sales price noted within the respective quarter, not adjusted for dividends.

Calculated as of the respective high or low sales price divided by the quarter end NAV.

Shares of BDCs’ common stock may trade at a market price that is less than the value of the net assets attributable to those shares of common stock.

The possibility that our shares of common stock will trade at a discount from NAV or at premiums that are unsustainable over the long term are separate and distinct from the risk that our NAV will decrease.

Since our shares of common stock began trading on November 8, 2012, in connection with our initial public offering, our shares of common stock have traded at times at a discount to the net assets attributable to those shares of common stock.

Stock Performance Graph

This graph compares the return on our shares of common stock with that of the Standard & Poor’s 500 Stock Index, the Russell 2000 Financial Services Index, and the Raymond James BDC Index, for the period from inception through March 1, 2021.

The graph assumes that, at inception, a person invested $100 in each share of our common stock, the S&P 500 Index, the Russell 2000 Financial Services Index, and the Raymond James BDC Index.

The graph measures total stockholder return, which takes into account both changes in stock price and dividends.

It assumes that dividends paid are invested in like securities.

The graph and other information furnished under this Part II Item 5 of this Annual Report on Form 10-K shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Securities Exchange Act of 1934 (the “1934 Act”).

The stock price performance included in the above graph is not necessarily indicative of future stock price performance.

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Selected Financial Data

The selected financial data for the years ended December 31, 2020, 2019, 2018, 2017 and 2016 set forth below was derived from our financial statements.

The data should be read in conjunction with our financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report.

Statement of Operations Data:

Total investment income

Total expenses, net of fee

Net investment income

Net increase in net assets resulting from operations

Per Share Data:

Net asset value

Net investment income

Net increase in net assets resulting from operations

Distributions declared

Balance Sheet Data:

Investments at fair value

Cash and cash

Total liabilities

Total net assets

Number of portfolio companies at period end

Weighted average yield on debt investments at period

Computed using the effective interest rates for all of our debt investments, including accretion of original issue discount.

The weighted average yield of our debt investments is not the same as a return on investment for our stockholders, rather, relates to a portion of our investment portfolio and is calculated before the payment of all of our subsidiaries’ fees and expenses.

The weighted average yield was computed using the effective interest rates for all of our debt investment restated as an interest rate payable annually in arrears and is computed including cash and payment in kind, or PIK interest, as well as accretion of original issue discount.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 3. Legal Proceedings