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An investment in our securities involves a number of significant risks and other factors relating to our structure and investment objectives. As a result, we cannot assure you that we will achieve our investment objectives. You should consider carefully the following information before making an investment in our securities.
Risks Related to the Economy
The current state of the economy and the capital markets increases the possibility of adverse effects on our financial position and results of operations. Continued economic adversity could impair our portfolio companies financial positions and operating results and affect the industries in which we invest, which could, in turn, harm our operating results. Continued adversity in the capital markets could impact our ability to raise capital and reduce our volume of new investments.
We may experience fluctuations in our quarterly and annual results based on the impact of inflation in the United States.
Risks Related to Our External Management
We are dependent upon our key management personnel and the key management personnel of our Adviser, particularly David Gladstone, George Stelljes III and Terry Lee Brubaker, and on the continued operations of our Adviser, for our future success.
Our incentive fee may induce our Adviser to make certain investments, including speculative investments.
We may be obligated to pay our Adviser incentive compensation even if we incur a loss.
Our Adviser s failure to identify and invest in securities that meet our investment criteria or perform its responsibilities under the Advisory Agreement may adversely affect our ability for future growth.
There are significant potential conflicts of interest which could impact our investment returns.
Our Adviser is not obligated to provide a waiver of the base management fee, which could negatively impact our earnings and our ability to maintain our current level of distributions to our stockholders.
Our business model is dependent upon developing and sustaining strong referral relationships with investment bankers, business brokers and other intermediaries.
Risks Related to Our External Financing
Committed funding has been reduced from $162 million under our prior facility to $107 million under the new facility. Any inability to expand the credit facility could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.
Our business plan is dependent upon external financing, which is constrained by the limitations of the 1940 Act.
A change in interest rates may adversely affect our profitability.
In addition to regulatory limitations on our ability to raise capital, our credit facility contains various covenants which, if not complied with, could accelerate our repayment obligations under the facility, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions.
Risks Related to Our Investments
We operate in a highly competitive market for investment opportunities.
Our investments in small and medium-sized portfolio companies are extremely risky and could cause you to lose all or a part of your investment.
Small and medium-sized businesses are likely to have greater exposure to economic downturns than larger businesses.
Small and medium-sized businesses may have limited financial resources and may not be able to repay the loans we make to them.
Small and medium-sized businesses typically have narrower product lines and smaller market shares than large businesses.
There is generally little or no publicly available information about these businesses.
Small and medium-sized businesses generally have less predictable operating results.
Small and medium-sized businesses are more likely to be dependent on one or two persons.
Small and medium-sized businesses may have limited operating histories.
Because a large percentage of the loans we make and equity securities we receive when we make loans are not publicly traded, there is uncertainty regarding the value of our privately held securities that could adversely affect our determination of our net asset value.
The lack of liquidity of our privately held investments may adversely affect our business.
Our financial results could be negatively affected if a significant portfolio investment fails to perform as expected.
When we are a debt or minority equity investor in a portfolio company, which we expect will generally be the case, we may not be in a position to control the entity, and its management may make decisions that could decrease the value of our investment.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
Prepayments of our investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.
Higher taxation of our portfolio companies may impact our quarterly and annual operating results.
Our portfolio is concentrated in a limited number of companies and industries, which subjects us to an increased risk of significant loss if any one of these companies does not repay us or if the industries experience downturns.
Our investments are typically long term and will require several years to realize liquidation events.
We may not realize gains from our equity investments and other yield enhancements.
Any unrealized depreciation we experience on our investment portfolio may be an indication of future realized losses, which could reduce our income available for distribution.
Risks Related to Our Regulation and Structure
We will be subject to corporate-level tax if we are unable to satisfy Code requirements for RIC qualification.
Changes in laws or regulations governing our operations, or changes in the interpretation thereof, and any failure by us to comply with laws or regulations governing our operations may adversely affect our business.
We are subject to restrictions that may discourage a change of control. Certain provisions contained in our articles of incorporation and Maryland law may prohibit or restrict a change of control and adversely impact the price of our shares.
Risks Related to an Investment in Our Common Stock
We may experience fluctuations in our quarterly and annual operating results.
There is a risk that you may not receive distributions.
Distributions by us have and may in the future continue to include a return of capital.
The market price of our shares may fluctuate significantly.
The issuance of subscription rights to our existing stockholders may dilute the ownership and voting powers by existing stockholders in our common stock, dilute the net asset value of their shares and have a material adverse effect on the trading price of our common stock.
Shares of closed-end investment companies frequently trade at a discount from net asset value.
Stockholders may incur dilution if we sell shares of our common stock in one or more offerings at prices below the then current net asset value per share of our common stock.
We could face losses and potential liability if intrusion, viruses or similar disruptions to our technology jeopardize our confidential information, whether through breach of our network security or otherwise.
Terrorist attacks, acts of war, or national disasters may affect any market for our common stock, impact the businesses in which we invest, and harm our business, operating results, and financial conditions.
Full 10-K form ▸
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