Silver Spike Investment (US:SSIC)2024-11-07 22:40Investment Portfolio - As of September 30, 2024, the investment portfolio had an aggregate fair value of approximately $55.8 million, consisting of $43.4 million in first lien, senior secured loans, $11.7 million in senior secured notes, and $0.7 million in equity securities across seven portfolio companies[89]. - The investment portfolio as of December 31, 2023, had an aggregate fair value of approximately $54.1 million, with $46.0 million in first lien, senior secured loans and $8.1 million in senior secured notes across five portfolio companies[89]. - As of September 30, 2024, the investment portfolio's fair value was $55,788,511, compared to $54,120,000 on December 31, 2023, indicating an increase in portfolio value[94]. - The largest portfolio company represented 35.6% of the total fair values of investments as of September 30, 2024, down from 38.7% on December 31, 2023[93]. - The investment portfolio's industry composition as of September 30, 2024, was 96.6% in Wholesale Trade and 3.4% in Real Estate Services[92]. - The geographic distribution of the portfolio as of September 30, 2024, showed 43.8% in the West and 42.7% in the Midwest[91]. - The company had no loans in the portfolio placed on non-accrual status as of September 30, 2024, and December 31, 2023, indicating stable credit performance[97]. - The company’s investments may not have readily available market quotations, leading to potential fluctuations in fair value assessments[121]. - As of September 30, 2024, 100% of the company's portfolio investments are categorized at Level 3, requiring significant estimates for fair value assessment[106]. Investment Strategy - The company focuses on investing in the cannabis industry, with a strategy to partner with private equity firms and entrepreneurs to provide credit and equity financing alternatives[83]. - The investment strategy includes four primary sub-strategies: Cannabis, Growth Capital & Technology, Esoteric & Asset-Based Lending, and Liquidity Solutions[85]. - The company aims to maximize risk-adjusted returns on equity for shareholders by generating current income from debt investments and capital appreciation from equity investments[82]. - The company expects to invest in loans primarily to private leveraged lower middle-market and middle-market companies[82]. - The company may invest in "covenant-lite" loans, which provide borrowers more freedom and may increase the risk of loss compared to loans with complete financial maintenance covenants[82]. - The Company expanded its investment strategy to include investments outside of the cannabis and health and wellness sectors, effective April 22, 2024[114]. Financial Performance - Total investment income for the three months ended September 30, 2024, was approximately $3.2 million, up from $2.9 million in the same period of 2023, reflecting a growth of about 8.9%[98]. - The company reported a total interest income of $2,686,771 for the three months ended September 30, 2024, compared to $2,885,725 for the same period in 2023, showing a decrease of approximately 6.9%[98]. - The company generated fee income of $489,176 for the three months ended September 30, 2024, significantly higher than $31,250 in the same period of 2023, indicating improved fee generation capabilities[98]. - Total operating expenses for the nine months ended September 30, 2024, were $7,557,191, representing a 123% increase compared to $3,381,392 for the same period in 2023[99]. - Net investment income was approximately $0.0 million for the three months ended September 30, 2024, down from $1.6 million in the same period of 2023, primarily due to transaction fees of $2.4 million related to the Loan Portfolio Acquisition[99]. - The net change in unrealized appreciation on investments for the nine months ended September 30, 2024, was $187,324, compared to $166,012 in the same period of 2023, reflecting a positive trend[94]. - The company reported a gross unrealized appreciation of $282,329 and gross unrealized depreciation of $(95,005) for the nine months ended September 30, 2024[100]. Expenses and Fees - The company expects general and administrative expenses to increase in dollar terms during periods of asset growth but decline as a percentage of total assets during such periods[87]. - Management fees decreased by 2% to $745,876 for the nine months ended September 30, 2024, compared to $760,473 in the same period of 2023[99]. - Income-based incentive fees saw a significant decline of 69%, totaling $328,503 for the nine months ended September 30, 2024, down from $1,051,741 in 2023[99]. - Legal expenses decreased by 40% to $200,073 for the nine months ended September 30, 2024, compared to $334,308 in the same period of 2023[99]. - The Company entered into a new expense limitation agreement, capping operating expenses at an annualized rate of 2.15% of net assets through September 30, 2025[117]. Liquidity and Capital Structure - Cash resources as of September 30, 2024, were approximately $30.1 million, down from $32.6 million as of December 31, 2023, with no indebtedness reported[101]. - The company maintains adequate liquidity to fund its unfunded commitments through existing cash and cash equivalents[108]. - The company’s shares have traded at prices both above and below the net asset value per share, indicating potential market volatility[110]. - The company intends to pay quarterly distributions to stockholders, subject to the discretion of the Board of Directors and dependent on various financial factors[110]. - The company declared a quarterly dividend of $0.25 per share for the third quarter of 2024, with total dividends paid amounting to $1,553,676[113]. Market and Risk Factors - The Company is subject to financial market risks, including valuation risk, interest rate risk, and credit risk due to global political tensions[120]. - As of September 30, 2024, 75.6% of the company's debt investments were floating-rate based on PRIME, while 24.4% were fixed-rate investments[122]. - For the year ended December 31, 2023, a 300 basis points increase in interest rates would result in an increase of $1,264 in net income[124]. - A 200 basis points increase in interest rates would lead to an increase of $843 in net income for the same period[124]. - A 100 basis points increase in interest rates would result in an increase of $421 in net income[124]. - A 100 basis points decrease in interest rates would lead to a decrease of $400 in net income[124]. Corporate Governance and Changes - The Company has undergone a leadership change, with Andreas Bodmeier becoming CEO and Umesh Mahajan serving as Co-Chief Investment Officer[117]. - The Company has been renamed "Chicago Atlantic BDC, Inc." with a new ticker symbol "LIEN," effective October 2, 2024[119]. - The effectiveness of the company's disclosure controls and procedures was confirmed as of the end of the reporting period[126]. - The company reported no changes in internal control over financial reporting that materially affected its operations during the three months ended September 30, 2024[127]. - The company is not currently subject to any material legal proceedings that could materially affect its financial condition[128]. Shareholder and Investment Activities - The Company issued 16,605,372 shares of common stock to Chicago Atlantic Loan Portfolio, LLC in exchange for a Loan Portfolio valued at $219,621,125 as of September 28, 2024[114]. - The Company did not repurchase any equity securities during the nine months ended September 30, 2024[114]. - The Company has adopted an "opt out" dividend reinvestment plan (DRIP), issuing shares under this plan during the nine months ended September 30, 2023, with a total of 33 shares issued[115]. - The company has outstanding commitments to fund investments totaling $1.5 million as of September 30, 2024, with no unfunded commitments identified as of December 31, 2023[108].