Document




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM N-Q
 
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-07074

180 DEGREE CAPITAL CORP.
(Exact Name of Registrant as Specified in Its Charter)
  
7 N. Willow Street, Suite 4B, Montclair NJ
 
07042
(Address of Principal Executive Offices)
 
(Zip Code)

Daniel B. Wolfe
President and Chief Financial Officer
180 Degree Capital Corp.
7 N. Willow Street, Suite 4B
Montclair, NJ 07042
(Name and address of agent for service)

Registrant's telephone number, including area code: (973) 746-4500

Date of fiscal year end: December 31

Date of reporting period: September 30, 2018


Item 1. Consolidated Schedule of Investments and Schedule 12-14


1
180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2018 (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Unaffiliated Companies (2) -
 
 
 
 
 
 
 
 
 
40.1% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) (3) -
 
 
 
 
 
 
 
 
 
19.1% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AutoTech Ventures Management I, LLC (4)(5)(6)
 
 
 
 
 
 
 
 
 
Venture capital investing in automotive-related companies
 
 
Asset Management & Custody Banks
 
 
 
 
 
 
LLC Interests (acquired 12/1/17)
(M) (L3)
 
 
 
$
0

 
0

 
$
0

 
 
 
 
 
 
 
 
 
 
D-Wave Systems, Inc. (4)(5)(7)
 
 
Technology Hardware, Storage & Peripherals
 
 
 
 
 
 
Developing high-performance quantum computing systems
 
 
 
 
 
 
 
 
 
Series 1 Class B Convertible Preferred Stock (acquired 9/30/08)
(M) (L3)
 
 
 
1,002,074

 
1,144,869

 
2,070,906

Series 1 Class C Convertible Preferred Stock (acquired 9/30/08)
(M) (L3)
 
 
 
487,804

 
450,450

 
831,961

Series 1 Class D Convertible Preferred Stock (acquired 9/30/08)
(M) (L3)
 
 
 
748,473

 
855,131

 
1,579,389

Series 1 Class E Convertible Preferred Stock (acquired 11/24/10)
(M) (L3)
 
 
 
248,049

 
269,280

 
518,797

Series 1 Class F Convertible Preferred Stock (acquired 11/24/10)
(M) (L3)
 
 
 
238,323

 
258,721

 
498,454

Series 1 Class H Convertible Preferred Stock (acquired 6/27/14)
(M) (L3)
 
 
 
909,088

 
460,866

 
1,207,131

Series 2 Class D Convertible Preferred Stock (acquired 9/30/08)
(M) (L3)
 
 
 
736,019

 
678,264

 
1,252,723

Series 2 Class E Convertible Preferred Stock (acquired 6/1/12-3/22/13)
(M) (L3)
 
 
 
659,493

 
513,900

 
1,036,359

Series 2 Class F Convertible Preferred Stock (acquired 6/1/12-3/22/13)
(M) (L3)
 
 
 
633,631

 
493,747

 
995,718

Warrants for Common Stock expiring 5/12/19 (acquired 5/12/14)
(M) (L3)
 
 
 
26,357

 
20,415

 
10,498

 
 
 
 
 
5,689,311

 
 
 
10,001,936

 
 
 
 
 
 
 
 
 
 
Fleet Health Alliance, LLC (4)(5)
 
 
Health Care Technology
 
 
 
 
 
 
Developing software for information transfer amongst healthcare providers and consumers
 
 
 
 
 
 
 
 
 
Unsecured Convertible Bridge Note, 0%, (acquired 4/22/16, no maturity date)
(M) (L3)
 
 
 
225,000

 
$
225,000

 
225,000

 
 
 
 
 
 
 
 
 
 

The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
2
180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2018 (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Unaffiliated Companies (2) -
 
 
 
 
 
 
 
 
 
40.1% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) (3) -
 
 
 
 
 
 
 
 
 
19.1% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Genome Profiling, LLC (4)
 
 
Life Sciences Tools & Services
 
 
 
 
 
 
Developing a platform to analyze and understand the epigenome
 
 
 
 
 
 
 
 
 
Unsecured Convertible Bridge Note, 8%, (acquired 8/4/16, maturing 8/4/19)
(M) (L3)
 
 
 
$
230,000

 
$
230,000

 
$
345,000

 
 
 
 
 
 
 
 
 
 
Magnolia Neurosciences Corporation (4)(5)(8)
 
 
Pharmaceuticals
 
 
 
 
 
 
Developing and commercializing novel therapeutics for treatment of neurodegeneration
 
 
 
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 8/3/18)
(I) (L3)
 
 
 
862,872

 
862,872

 
864,623

 
 
 
 
 
 
 
 
 
 
Nanosys, Inc. (4)(5)
 
 
Specialty Chemicals
 
 
 
 
 
 
Developing inorganic nanowires and quantum dots for use in LED-backlit devices
 
 
 
 
 
 
 
 
 
Series C Convertible Preferred Stock (acquired 4/10/03)
(I) (L3)
 
 
 
1,500,000

 
803,428

 
912,661

Series D Convertible Preferred Stock (acquired 11/7/05)
(I) (L3)
 
 
 
3,000,003

 
1,016,950

 
1,806,998

Series E Convertible Preferred Stock (acquired 8/13/10)
(I) (L3)
 
 
 
496,573

 
433,688

 
791,313

 
 
 
 
 
4,996,576

 
 
 
3,510,972

 
 
 
 
 
 
 
 
 
 
NanoTerra, Inc. (4)(5)
 
 
Research & Consulting Services
 
 
 
 
 
 
Developing surface chemistry and nano-manufacturing solutions
 
 
 
 
 
 
 
 
 
Warrants for Common Stock expiring on 2/22/21 (acquired 2/22/11)
(I) (L3)
 
 
 
69,168

 
4,462

 
39

Warrants for Series A-3 Preferred Stock expiring on 11/15/22 (acquired 11/15/12)
(I) (L3)
 
 
 
35,403

 
47,508

 
50,669

 
 
 
 
 
104,571

 
 
 
50,708

 
 
 
 
 
 
 
 
 
 

The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
3
180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2018 (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Unaffiliated Companies (2) -
 
 
 
 
 
 
 
 
 
40.1% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) (3) -
 
 
 
 
 
 
 
 
 
19.1% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Petra Pharma Corporation (4)(5)(9)
 
 
Pharmaceuticals
 
 
 
 
 
 
Developing small molecule inhibitors for treatment of cancer and metabolic diseases
 
 
 
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 12/23/15-1/8/18)
(I) (L3)
 
 
 
$
1,894,798

 
1,894,798

 
$
882,263

Secured Convertible Bridge Note, 7% PIK, (acquired 8/30/18, maturing 1/31/19)
(M) (L3)
 
 
 
372,017

 
$
369,748

 
372,017

 
 
 
 
 
2,266,815

 
 
 
1,254,280

 
 
 
 
 
 
 
 
 
 
Phylagen, Inc. (4)
 
 
Research & Consulting Services
 
 
 
 
 
 
Developing technology to improve human health and business productivity
 
 
 
 
 
 
 
 
 
Secured Convertible Bridge Note, 5% PIK, (acquired 2/5/15, maturing 6/12/19)
(M) (L3)
 
 
 
236,548

 
$
200,000

 
373,497

Secured Convertible Bridge Note, 5% PIK, (acquired 6/5/15, maturing 6/12/19)
(M) (L3)
 
 
 
11,663

 
$
10,000

 
18,415

 
 
 
 
 
248,211

 
 
 
391,912

 
 
 
 
 
 
 
 
 
 
Total Unaffiliated Privately Held Companies (cost: $14,623,356)
 
 
 
 
 
 
 
 
$
16,644,431

 
 
 
 
 
 
 
 
 
 
Unaffiliated Publicly Traded Securities (10) -
 
 
 
 
 
 
 
 
 
21.0% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adesto Technologies Corporation (5)
 
 
Semiconductors
 
 
 
 
 
 
Developing low-power, high-performance memory devices
 
 
 
 
 
 
 
 
 
Common Stock (acquired 10/27/15-9/27/18)
(M) (L1)
 
 
 
$
5,960,164

 
979,400

 
$
5,827,430

 
 
 
 
 
 
 
 
 
 
Airgain, Inc. (5)(8)
 
 
Electronic Components
 
 
 
 
 
 
Providing advanced antenna technologies for high-performance wireless networking
 
 
 
 
 
 
 
 
 
Common Stock (acquired 6/4/18-6/29/18)
(M) (L1)
 
 
 
1,625,270

 
190,084

 
2,497,704

 
 
 
 
 
 
 
 
 
 
Emcore Corporation (5)
 
 
Communications Equipment
 
 
 
 
 
 
Providing mixed-signal optical products
 
 
 
 
 
 
 
 
 
Common Stock (acquired 5/3/18-9/19/18)
(M) (L1)
 
 
 
2,688,299

 
565,628

 
2,686,733

 
 
 
 
 
 
 
 
 
 

The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
4
180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2018 (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Unaffiliated Companies (2) -
 
 
 
 
 
 
 
 
 
40.1% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unaffiliated Publicly Traded Securities (10) -
 
 
 
 
 
 
 
 
 
21.0% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lantronix, Inc. (5)(8)
 
 
Communications Equipment
 
 
 
 
 
 
Providing secure data access and management solutions
 
 
 
 
 
 
 
 
 
Common Stock (acquired 9/18/18)
(M) (L1)
 
 
 
$
1,000,000

 
250,000

 
$
1,017,500

 
 
 
 
 
 
 
 
 
 
Mersana Therapeutics, Inc. (5)
 
 
Biotechnology
 
 
 
 
 
 
Developing antibody drug conjugates for cancer therapy
 
 
 
 
 
 
 
 
 
Common Stock (acquired 7/27/12-9/28/18)
(M) (L1)
 
 
 
4,317,173

 
275,155

 
2,751,550

 
 
 
 
 
 
 
 
 
 
OpGen, Inc. (5)
 
 
Biotechnology
 
 
 
 
 
 
Developing tools for genomic sequence assembly and analysis
 
 
 
 
 
 
 
 
 
Warrants for the Purchase of Common Stock expiring 5/8/20 (acquired 5/5/15)
(M) (L2)
 
 
 
425,579

 
12,033

 
3,114

Warrants for the Purchase of Common Stock expiring 2/17/25 (acquired 5/5/15)
(I) (L3)
 
 
 
785

 
1,248

 
618

 
 
 
 
 
426,364

 
 
 
3,732

 
 
 
 
 
 
 
 
 
 
PDL BioPharma, Inc. (5)(8)
 
 
Biotechnology
 
 
 
 
 
 
Owner of royalty rights, debt securities and other assets in life science sectors
 
 
 
 
 
 
 
 
 
Common Stock (acquired 8/31/18-9/14/18)
(M) (L1)
 
 
 
1,183,826

 
500,000

 
1,315,000

 
 
 
 
 
 
 
 
 
 
Synacor, Inc. (5)
 
 
Application Software
 
 
 
 
 
 
Providing technology development, multiplatform services and revenue partner for video, internet and communications providers, device manufacturers, and enterprises
 
 
 
 
 
 
 
 
 
Common Stock (acquired 4/6/17-8/2/18)
(M) (L1)
 
 
 
4,044,745

 
1,402,165

 
2,243,464

 
 
 
 
 
 
 
 
 
 
Total Unaffiliated Publicly Traded Securities (cost: $21,245,841)
 
 
 
 
 
 
 
 
$
18,343,113

 
 
 
 
 
 
 
 
 
 
Total Investments in Unaffiliated Companies (cost: $35,869,197)
 
 
 
 
 
 
 
 
$
34,987,544

 
 
 
 
 
 
 
 
 
 

The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
5
180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2018 (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Non-Controlled Affiliated Companies (2) -
 
 
 
 
 
 
 
 
 
42.5% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) (11) -
 
 
 
 
 
 
 
 
 
30.6% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ABSMaterials, Inc. (4)
 
 
Specialty Chemicals
 
 
 
 
 
 
Developing nano-structured absorbent materials for water remediation and consumer applications
 
 
 
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 2/17/10-10/24/11)
(I) (L3)
 
 
 
$
435,000

 
390,000

 
$
5,924

Series B Convertible Preferred Stock (acquired 11/8/13-6/25/14)
(I) (L3)
 
 
 
1,217,644

 
1,037,751

 
416,876

Secured Convertible Bridge Note, 8% PIK, (acquired 1/20/16, maturing 12/31/18)
(M) (L3)
 
 
 
121,589

 
$
100,000

 
121,589

Secured Convertible Bridge Note, 8% PIK, (acquired 3/28/17, maturing 12/31/19)
(M) (L3)
 
 
 
28,025

 
$
25,000

 
28,025

 
 
 
 
 
1,802,258

 
 
 
572,414

 
 
 
 
 
 
 
 
 
 
AgBiome, LLC (4)(5)
 
 
Fertilizers & Agricultural Chemicals
 
 
 
 
 
 
Providing early-stage research and discovery for agriculture and utilizing the crop microbiome to identify products that reduce risk and improve yield
 
 
 
 
 
 
 
 
 
Series A-1 Convertible Preferred Stock (acquired 1/30/13)
(I) (L3)
 
 
 
2,000,000

 
2,000,000

 
10,483,248

Series A-2 Convertible Preferred Stock (acquired 4/9/13-10/15/13)
(I) (L3)
 
 
 
521,740

 
417,392

 
2,222,038

Series B Convertible Preferred Stock (acquired 8/7/15)
(I) (L3)
 
 
 
500,006

 
160,526

 
952,756

 
 
 
 
 
3,021,746

 
 
 
13,658,042

 
 
 
 
 
 
 
 
 
 
Coba Therapeutics Corporation (4)(8)
 
 
 
 
 
 
 
 
 
Developing therapeutics for obesity, diabetes and liver diseases
 
 
Pharmaceuticals
 
 
 
 
 
 
Unsecured Convertible Bridge Note, 6% PIK, (acquired 2/27/18, maturing 2/27/19)
(M) (L3)
 
 
 
150,697

 
$
145,530

 
150,697

 
 
 
 
 
 
 
 
 
 

The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
6
180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2018 (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Non-Controlled Affiliated Companies (2) -
 
 
 
 
 
 
 
 
 
42.5% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) (11) -
 
 
 
 
 
 
 
 
 
30.6% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EchoPixel, Inc. (4)(5)
 
 
Health Care Equipment
 
 
 
 
 
 
Developing virtual reality 3-D visualization software for life sciences and health care applications
 
 
 
 
 
 
 
 
 
Series Seed Convertible Preferred Stock (acquired 6/21/13-6/30/14)
(I) (L3)
 
 
 
$
1,250,000

 
4,194,630

 
$
1,025,822

Series Seed-2 Convertible Preferred Stock (acquired 1/22/16)
(I) (L3)
 
 
 
500,000

 
1,476,668

 
367,867

Series A-2 Convertible Preferred Stock (acquired 3/23/17)
(I) (L3)
 
 
 
350,000

 
1,471,577

 
438,671

 
 
 
 
 
2,100,000

 
 
 
1,832,360

 
 
 
 
 
 
 
 
 
 
Ensemble Therapeutics Corporation (4)(5)(12)
 
 
Pharmaceuticals
 
 
 
 
 
 
Developed DNA-Programmed ChemistryTM for the discovery of new classes of therapeutics
 
 
 
 
 
 
 
 
 
Series B Convertible Preferred Stock (acquired 6/6/07)
(I) (L3)
 
 
 
2,000,000

 
1,449,275

 
0

Series B-1 Convertible Preferred Stock (acquired 4/21/14)
(I) (L3)
 
 
 
551,553

 
492,575

 
86,104

 
 
 
 
 
2,551,553

 
 
 
86,104

 
 
 
 
 
 
 
 
 
 
Essential Health Solutions, Inc. (4)(5)
 
 
Health Care Technology
 
 
 
 
 
 
Developing software for information transfer amongst healthcare providers and consumers
 
 
 
 
 
 
 
 
 
Common Stock (acquired 11/18/16)
(I) (L3)
 
 
 
20

 
200,000

 
125,821

Series A Convertible Preferred Stock (acquired 11/18/16)
(I) (L3)
 
 
 
2,750,000

 
2,750,000

 
2,755,878

 
 
 
 
 
2,750,020

 
 
 
2,881,699

 
 
 
 
 
 
 
 
 
 
Lodo Therapeutics Corporation (4)(5)
 
 
Pharmaceuticals
 
 
 
 
 
 
Developing and commercializing novel therapeutics derived from a metagenome-based Natural Product Discovery Platform
 
 
 
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 12/21/15-4/22/16)
(I) (L3)
 
 
 
658,190

 
658,190

 
781,379

 
 
 
 
 
 
 
 
 
 

The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
7
180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2018 (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Non-Controlled Affiliated Companies (2) -
 
 
 
 
 
 
 
 
 
42.5% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) (11) -
 
 
 
 
 
 
 
 
 
30.6% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NGX Bio, Inc. (4)(5)
 
 
Research & Consulting Services
 
 
 
 
 
 
Developing translational genomics solutions
 
 
 
 
 
 
 
 
 
Series Seed Convertible Preferred Stock (acquired 6/6/14-1/10/16)
(M) (L3)
 
 
 
$
500,002

 
666,667

 
$
135,975

Series Seed 2 Convertible Preferred Stock (acquired 8/20/15-9/30/15)
(M) (L3)
 
 
 
499,999

 
329,989

 
101,981

Series Seed 3 Convertible Preferred Stock (acquired 6/26/17)
(M) (L3)
 
 
 
686,329

 
666,001

 
152,139

 
 
 
 
 
1,686,330

 
 
 
390,095

 
 
 
 
 
 
 
 
 
 
ORIG3N, Inc. (4)(5)
 
 
Health Care Technology
 
 
 
 
 
 
Developing precision medicine applications for induced pluripotent stems cells
 
 
 
 
 
 
 
 
 
Series 1 Convertible Preferred Stock (acquired 2/5/15-8/5/15)
(H) (L3)
 
 
 
500,000

 
1,195,315

 
1,261,746

Series A Convertible Preferred Stock (acquired 11/25/15-9/7/16)
(H) (L3)
 
 
 
1,500,000

 
1,364,666

 
1,463,379

Series A-2 Convertible Preferred Stock (acquired 5/11/17-2/8/18)
(H) (L3)
 
 
 
200,002

 
176,386

 
193,162

 
 
 
 
 
2,200,002

 
 
 
2,918,287

 
 
 
 
 
 
 
 
 
 
Produced Water Absorbents, Inc. (4)(13)
 
 
Oil & Gas Equipment & Services
 
 
 
 
 
 
Providing integrated process separation solutions to the global oil and gas industries, enabling onsite treatment of produced and flowback water
 
 
 
 
 
 
 
 
 
Common Stock (acquired 4/30/16)
(M) (L3)
 
 
 
7,670,281

 
50,243,350

 
0

Warrants for Common Stock expiring upon liquidation event (acquired 4/30/16)
(M) (L3)
 
 
 
65,250

 
450,000

 
0

Senior Secured Debt, 15% commencing on 4/1/16, maturing on 12/31/19 (acquired 4/1/16)
(M) (L3)
 
 
 
2,276,104

 
$
2,533,766

 
0

 
 
 
 
 
10,011,635

 
 
 
0

 
 
 
 
 
 
 
 
 
 

The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
8
180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2018 (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Non-Controlled Affiliated Companies (2) -
 
 
 
 
 
 
 
 
 
42.5% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) (11) -
 
 
 
 
 
 
 
 
 
30.6% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TARA Biosystems, Inc. (4)(5)
 
 
Life Sciences Tools & Services
 
 
 
 
 
 
Developing human tissue models for toxicology and drug discovery applications
 
 
 
 
 
 
 
 
 
Common Stock (acquired 8/20/14)
(I) (L3)
 
 
 
$
20

 
2,000,000

 
$
658,457

Series A Convertible Preferred Stock (acquired 3/31/17)
(I) (L3)
 
 
 
2,545,493

 
6,878,572

 
2,831,460

 
 
 
 
 
2,545,513

 
 
 
3,489,917

 
 
 
 
 
 
 
 
 
 
Total Non-Controlled Affiliated Privately Held Companies (cost: $29,477,944)
 
 
 
 
 
 
 
 
$
26,760,994

 
 
 
 
 
 
 
 
 
 
Non-Controlled Affiliated Publicly Traded Securities (14) -
 
 
 
 
 
 
 
 
 
11.9% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TheStreet, Inc. (4)(5)(15)
 
 
Financial Exchanges & Data
 
 
 
 
 
 
Providing financial news and proprietary data to consumers and businesses
 
 
 
 
 
 
 
 
 
Common Stock (acquired 4/19/17-5/18/18)
(M) (L1)
 
 
 
$
4,949,734

 
4,668,552

 
$
10,270,814

Stock Options for Common Stock Expiring 1/1/25 (acquired 1/1/18)
(I) (L3)
 
 
 
0

 
3,333

 
2,544

Stock Options for Common Stock Expiring 5/18/25 (acquired 5/18/18)
(I) (L3)
 
 
 
0

 
10,000

 
4,588

Restricted Stock Units (acquired 5/18/18)
(M) (L3)
 
 
 
0

 
33,333

 
69,094

 
 
 
 
 
4,949,734

 
 
 
10,347,040

 
 
 
 
 
 
 
 
 
 
Total Non-Controlled Affiliated Publicly Traded Securities (cost: $4,949,734)
 
 
 
 
 
 
 
 
$
10,347,040

 
 
 
 
 
 
 
 
 
 
Total Investments in Non-Controlled Affiliated Companies (cost: $34,427,678)
 
 
 
 
 
 
 
 
$
37,108,034

 
 
 
 
 
 
 
 
 
 

The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
9
180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2018 (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Controlled Affiliated Companies (2) -
 
 
 
 
 
 
 
 
 
4.6% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) (16) -
 
 
 
 
 
 
 
 
 
4.6% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Black Silicon Holdings, Inc. (4)(12)(17)
 
 
Semiconductors
 
 
 
 
 
 
Holding company for interest in a company that develops silicon-based optoelectronic products
 
 
 
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 8/4/15)
(M) (L3)
 
 
 
$
750,000

 
233,499

 
$
0

Series A-1 Convertible Preferred Stock (acquired 8/4/15)
(M) (L3)
 
 
 
890,000

 
2,966,667

 
0

Series A-2 Convertible Preferred Stock (acquired 8/4/15)
(M) (L3)
 
 
 
2,445,000

 
4,207,537

 
0

Series B-1 Convertible Preferred Stock (acquired 8/4/15)
(M) (L3)
 
 
 
1,169,561

 
1,892,836

 
0

Series C Convertible Preferred Stock (acquired 8/4/15)
(M) (L3)
 
 
 
1,171,316

 
1,674,030

 
0

Secured Convertible Bridge Note, 8% PIK, (acquired 8/25/16, maturing 8/4/21)
(M) (L3)
 
 
 
1,444,368

 
$
1,278,453

 
105,070

 
 
 
 
 
7,870,245

 
 
 
105,070

 
 
 
 
 
 
 
 
 
 
HALE.life Corporation (4)(5)(9)
 
 
Health Care Technology
 
 
 
 
 
 
Developing a platform to facilitate precision health and medicine
 
 
 
 
 
 
 
 
 
Common Stock (acquired 3/1/16)
(M) (L3)
 
 
 
10

 
1,000,000

 
10

Series Seed Convertible Preferred Stock (acquired 3/28/17)
(M) (L3)
 
 
 
1,896,920

 
23,081,580

 
1,896,920

Unsecured Convertible Bridge Note, 0%, (acquired 3/28/17, no maturity date)
(M) (L3)
 
 
 
2,000,000

 
$
2,000,000

 
2,000,000

 
 
 
 
 
3,896,930

 
 
 
3,896,930

 
 
 
 
 
 
 
 
 
 
Total Controlled Affiliated Privately Held Companies (cost: $11,767,175)
 
 
 
 
 
 
 
 
$
4,002,000

 
 
 
 
 
 
 
 
 
 
Total Investments in Controlled Affiliated Privately Held Companies (cost: $11,767,175)
 
 
 
 
 
 
 
 
$
4,002,000

 
 
 
 
 
 
 
 
 
 
Total Investments in Privately Held Companies and Publicly Traded Securities (cost: $82,064,050)
 
 
 
 
 
 
 
 
$
76,097,578

 
 
 
 
 
 
 
 
 
 

The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
10
180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF SEPTEMBER 30, 2018 (UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investment in Equity Method Privately Held Company (18) -
 
 
 
 
 
 
 
 
 
0.2% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Company (Illiquid) (18) -
 
 
 
 
 
 
 
 
 
0.2% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accelerator IV-New York Corporation (4)(5)(9)
 
 
Research & Consulting Services
 
 
 
 
 
 
Identifying and managing emerging biotechnology companies
 
 
 
 
 
 
 
 
 
Series A Common Stock (acquired 7/21/14-12/5/17)
(E)
 
 
 
$
148,146

 
719,427

 
$
148,146

 
 
 
 
 
 
 
 
 
 
Total Investment in Equity Method Privately Held Company (cost: $148,146)
 
 
 
 
 
 
 
 
$
148,146

 
 
 
 
 
 
 
 
 
 
Total Investments (cost: $82,212,196)
 
 
 
 
 
 
 
 
$
76,245,724

 
 
 
 
 
 
 
 
 
 
Derivative Investments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unaffiliated Rights to Payments (Illiquid) (19) -
 
 
 
 
 
 
 
 
 
2.5% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amgen, Inc. (4)(5)(20)
 
 
Biotechnology
 
 
 
 
 
 
Rights to Milestone Payments from Acquisition of BioVex Group, Inc. (acquired 3/4/11)
(I) (L3)
 
 
 
$
548,998

 
$
548,998

 
$
2,195,701

 
 
 
 
 
 
 
 
 
 
Xenio Holdings, Inc. (4)(5)(21)
 
 
Technology Hardware, Storage & Peripherals
 
 
 
 
 
 
Rights to Payments from the Merger with Xenio Systems, Inc. (acquired 10/20/17)
(I) (L3)
 
 
 
0

 
$
0

 
0

 
 
 
 
 
 
 
 
 
 
Total Unaffiliated Rights to Payments (cost: $548,998)
 
 
 
 
 
 
 
 
$
2,195,701

 
 
 
 
 
 
 
 
 
 
Total Derivative Investments (cost: $548,998)
 
 
 
 
 
 
 
 
$
2,195,701

 
 
 
 
 
 
 
 
 
 
Total Investments and Derivatives (cost: $82,761,194)
 
 
 
 
 
 
 
 
$
78,441,425

 
 
 
 
 
 
 
 
 
 
OTHER ASSETS (INCLUDING CASH) MINUS LIABILITIES
 
 
 
 
 
 
 
 
$
8,918,303

 
 
 
 
 
 
 
 
 
 
NET ASSETS (equivalent to $2.81 per share based on 31,121,562 shares of common stock outstanding)
 
 
 
 
 
 
 
 
$
87,359,728



The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
11
180 DEGREE CAPITAL CORP.
NOTES TO CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF SEPTEMBER 30, 2018 (UNAUDITED)

Notes to Consolidated Schedule of Investments

(1)
See "Note 1. Investment Valuation Procedures."
(2)
Investments in unaffiliated companies consist of investments in which we own less than five percent of the voting shares of the portfolio company. Investments in non-controlled affiliated companies consist of investments in which we own five percent or more, but less than 25 percent, of the voting shares of the portfolio company, or where we control one or more seats on the portfolio company’s board of directors but do not control the company. Investments in controlled affiliated companies consist of investments in which we own 25 percent or more of the outstanding voting rights of the portfolio company or otherwise control the company, including control of a majority of the seats on the board of directors, or more than 25 percent of the seats on the board of directors, with no other entity or person in control of more director seats than us.
(3)
The aggregate cost for federal income tax purposes of investments in unaffiliated privately held companies is $14,623,356. The gross unrealized appreciation based on the tax cost for these securities is $4,573,077. The gross unrealized depreciation based on the tax cost for these securities is $2,552,002.
(4)
We are subject to legal restrictions on the sale of some or all of our securities in this company. The total amount of restricted securities held is $49,824,954, or 57.0 percent of net assets.
(5)
Represents a non-income producing investment. Investments that have not paid dividends or interest within the last 12 months are considered to be non-income producing.
(6)
We received LLC Interests of 1.25 percent in AutoTech Ventures Management I, LLC ("AutoTech") pursuant to an Administrative Services Agreement between us and AutoTech and due to us following the termination of a former employee of the Company. These LLC Interests were separate from the compensation received for providing the administrative services under the agreement that were paid in cash. We are not investors in AutoTech. The LLC interests have a capital percentage of 0 percent.
(7)
D-Wave Systems, Inc., is located and is doing business primarily in Canada. We invested in D-Wave through Parallel Universes, Inc., a Delaware company. Our investment is denominated in Canadian dollars and is subject to foreign currency translation.
(8)
Initial investment was made in 2018.
(9)
See "Note 4. Commitments and Contingencies."
(10)
The aggregate cost for federal income tax purposes of investments in unaffiliated publicly traded securities is $21,245,841. The gross unrealized appreciation based on the tax cost for these securities is $1,021,108. The gross unrealized depreciation based on the tax cost for these securities is $3,923,836.
(11)
The aggregate cost for federal income tax purposes of investments in non-controlled affiliated privately held companies is $29,477,944. The gross unrealized appreciation based on the tax cost for these securities is $12,553,853. The gross unrealized depreciation based on the tax cost for these securities is $15,270,803.
(12)
Represents a non-operating entity that exists to collect future payments from licenses or other engagements and/or monetize assets for future distributions to investors and debt holders.
(13)
Produced Water Absorbents, Inc., also does business as ProSep, Inc. We placed our senior secured debt of this company on non-accrual status during the third quarter of 2018.
(14)
The aggregate cost for federal income tax purposes of investments in non-controlled affiliated publicly traded securities is $4,949,734. The gross unrealized appreciation based on the tax cost for these securities is $5,397,306. The gross unrealized depreciation based on the tax cost for these securities is $0.

The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
12
180 DEGREE CAPITAL CORP.
NOTES TO CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF SEPTEMBER 30, 2018 (UNAUDITED)

(15)
The stock options and restricted stock units were issued to Kevin Rendino for service on the Board of Directors of TST. Mr. Rendino entered into an assignment and assumption agreement with us that transfers all beneficial and voting interest to us. The stock options issued in May 2018 and the restricted stock issued in May 2018 are subject to vesting and therefore considered restricted securities as of September 30, 2018.
(16)
The aggregate cost for federal income tax purposes of investments in controlled affiliated privately held companies is $11,767,175. The gross unrealized appreciation based on the tax cost for these securities is $0. The gross unrealized depreciation based on the tax cost for these securities is $7,765,175.
(17)
On August 4, 2015, SiOnyx, Inc., reorganized its corporate structure to become a subsidiary of a new company, Black Silicon Holdings, Inc.  Our security holdings of SiOnyx were converted into securities of Black Silicon Holdings.  SiOnyx was then acquired by an undisclosed buyer.  Black Silicon Holdings owns a profit interest in the undisclosed buyer. We placed our secured convertible bridge note on non-accrual status during the second quarter of 2018.
(18)
The aggregate cost for federal income tax purposes of investments in our equity method privately held company is $148,146. Under the equity method, investments are carried at cost, plus or minus the Company's equity in the increases and decreases in the investee's net assets after the date of acquisition and certain other adjustments. The Company owns approximately 9 percent of Accelerator IV-New York Corporation.
(19)
The aggregate cost for federal income tax purposes of investments in unaffiliated rights to payments is $548,998. The gross unrealized appreciation based on the tax cost for these securities is $1,646,703. The gross unrealized depreciation based on the tax cost for these securities is $0.
(20)
If all the remaining milestones are met, we would receive $5,384,482. There can be no assurance as to how much of these amounts we will ultimately realize or when they will be realized, if at all.
(21)
In October 2017, Xenio Systems, Inc., merged with Xenio Holdings, Inc. In conjunction with this merger, all common stock of Xenio Systems, Inc., was canceled and shareholders were granted a right to a future payment in the event of a sale of Xenio Holdings, Inc. The maximum amount we could receive from such payments is approximately $11,000. There can be no assurance as to how much of these amounts we will ultimately realize or when they will be realized, if at all.


The accompanying unaudited notes are an integral part of this consolidated schedule of investments.
13
180 DEGREE CAPITAL CORP.
NOTES TO CONSOLIDATED SCHEDULE OF INVESTMENTS
AS OF SEPTEMBER 30, 2018 (UNAUDITED)


NOTE 1. INVESTMENT VALUATION PROCEDURES
 
Investments are stated at "value" as defined in the 1940 Act and in the applicable regulations of the Securities and Exchange Commission ("SEC") and in accordance with GAAP. Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which a market quotation is readily available and (ii) the fair value as determined in good faith by, or under the direction of, the Board of Directors for all other assets. The Valuation Committee, comprised of all of the independent Board members, is responsible for determining the valuation of the Company’s assets within the guidelines established by the Board of Directors. The Valuation Committee receives information and recommendations from management. An independent valuation firm also reviews select portfolio company valuations. The independent valuation firm does not provide proposed valuations. The fair values assigned to these investments are based on available information and do not necessarily represent amounts that might ultimately be realized when that investment is sold, as such amounts depend on future circumstances and cannot reasonably be determined until the individual investments are actually liquidated or become readily marketable. The Valuation Committee values the Company's investment assets as of the end of each calendar quarter and as of any other time requested by the Board of Directors.

Accounting Standards Codification Topic 820, "Fair Value Measurements and Disclosures," ("ASC 820") defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). It applies fair value terminology to all valuations whereas the 1940 Act applies market value terminology to readily marketable assets and fair value terminology to other assets.
 
The main approaches to measuring fair value utilized are the market approach, the income approach and the hybrid approach.
 
•
Market Approach (M): The market approach may use quantitative inputs such as prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities and the values of market multiples derived from a set of comparable companies. The market approach may also use qualitative inputs such as progress toward milestones, the long-term potential of the business, current and future financing requirements and the rights and preferences of certain securities versus those of other securities. The selection of the relevant inputs used to derive value under the market approach requires judgment considering factors specific to the significance and relevance of each input to deriving value.
•
Income Approach (I): The income approach uses valuation techniques to convert future amounts (for example, revenue, cash flows or earnings) to a single present value amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. Those valuation techniques include present value techniques; option-pricing models, such as the Black-Scholes-Merton formula (a closed-form model) and a binomial model (a lattice model), which incorporate present value techniques; and the multi-period excess earnings method, which is used to measure the fair value of certain assets.
•
Hybrid Approach (H): The hybrid approach uses elements of both the market approach and the income approach. The hybrid approach calculates values using the market and income approach, individually. The resulting values are then distributed among the share classes based on probability of exit outcomes.

ASC Topic 820 classifies the inputs used to measure fair value by these approaches into the following hierarchy:

•
Level 1 (L1): Unadjusted quoted prices in active markets for identical assets or liabilities;

•
Level 2 (L2): Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices in active markets for similar assets or liabilities, or quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 2 inputs are in those markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers; and

•
Level 3 (L3): Inputs to the valuation methodology are unobservable and significant to the fair value measurement. Unobservable inputs are those inputs that reflect our own assumptions that market participants would use to price the asset or liability based upon the best available information.


14

Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement and are not necessarily an indication of risks associated with the investment.    

Our investment in Accelerator IV-New York Corporation is accounted for under the equity method of accounting as it represents non-controlling interest in operating entities that provide investment advisory services to the Company. Under the equity method, investments are carried at cost, plus or minus the Company’s equity in the increases and decreases in the investee’s net assets after the date of acquisition and certain other adjustments. Upon sale of investments, the values that are ultimately realized may be different from the fair value presented in the Company's consolidated schedule of investments. The difference could be material.


15

NOTE 2. FAIR VALUE OF INVESTMENTS
 
At September 30, 2018, our financial assets valued at fair value were categorized as follows in the fair value hierarchy:

 
 
Fair Value Measurement at Reporting Date Using:
 
 
Description
 
Unadjusted Quoted
Prices in Active
Markets for Identical
Assets (Level 1)

 
 
Significant Other
Observable Inputs
(Level 2)

 
 
Significant
Unobservable Inputs
(Level 3)

 
September 30, 2018

 
 
 
 
 
 
 
 
 
Privately Held Portfolio Companies:
 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
Preferred Stock
 
$
0

 
$
0

 
$
42,822,621

 
$
42,822,621

Bridge Notes
 
0

 
0

 
3,739,310

 
3,739,310

Common Stock
 
0

 
0

 
784,288

 
784,288

Warrants
 
0

 
0

 
61,206

 
61,206

Senior Secured Debt
 
0

 
0

 
0

 
0

LLC Interests
 
0

 
0

 
0

 
0

 
 
 
 
 
 
 
 
 
Publicly Traded Portfolio Companies:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
$
28,610,195

 
$
0

 
$
0

 
$
28,610,195

Warrants
 
0

 
3,114

 
618

 
3,732

Restricted Stock Units and Stock Options
 
0

 
0

 
76,226

 
76,226

 
 
 
 
 
 
 
 
 
Total Investments:
 
$
28,610,195

 
$
3,114

 
$
47,484,269

 
$
76,097,578

 
 
 
 
 
 
 
 
 
Derivative Investments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rights to Milestone Payments
 
$
0

 
$
0

 
$
2,195,701

 
$
2,195,701

 
 
 
 
 
 
 
 
 
Total Financial Assets:
 
$
28,610,195

 
$
3,114

 
$
49,679,970

 
$
78,293,279

















16

Significant Unobservable Inputs
 
The table below presents the valuation technique and quantitative information about the significant unobservable inputs utilized by the Company in the fair value measurements of Level 3 assets. Unobservable inputs are those inputs for which little or no market data exists and, therefore, require an entity to develop its own assumptions.

 
September 30, 2018
 
Valuation 
Approach(es)
 
Unobservable Input(s)
 
Range(s) (Weighted
Average(a))
 
 
 
 
 
 
 
 
 
 
 
 
 
Price Per Share
 
$1.30 ($1.30)
 
 
 
 
 
Volatility
 
79.4% (79.4%)
Preferred Stock
$
2,918,287

 
Hybrid Approach
 
Time to Exit / Cash Flows (Years)
 
4.7 (4.7)
 
 
 
 
 
Probability of Achieving Independent Milestones
 
12.5% (12.5%)
 
 
 
 
 
Probability of Achieving Dependent Milestones
 
30.7% - 85.3% (59.6%)
 
 
 
 
 
Price Per Share
 
$0.30 - $6.33 ($3.62)
 
 
 
 
 
Public Comparable Adjustment (Including Non-Performance Risk)
 
-80.4% - 19.0% (-2.2%)
 
 
 
 
 
Volatility
 
45.1% - 91.6% (72.3%)
Preferred Stock
27,625,881

 
Income Approach
 
Time to Exit / Cash Flows (Years)
 
1.8 - 8.3 (5.2)
 
 
 
 
 
Volatility
 
64.9% (64.9%)
 
 
 
 
 
Revenue Multiples
 
2.0 (2.0)
 
 
 
 
 
Time to Exit (Years)
 
0.3 (0.3)
 
 
 
 
 
Discount for Lack of Marketability
 
7.9% (7.9%)
Preferred Stock
12,278,453

 
Market Approach
 
Price Per Share
 
$0.00 - $1.95 ($1.65)
 
 
 
 
 
Estimated Value to Cost Ratio at Payout
 
0.07 (0.07)
Bridge Notes
3,739,310

 
Market Approach
 
Estimated Value to Cost Ratio at Conversion
 
1.00 - 1.58 (1.11)
 
 
 
 
 
Discount for Lack of Marketability
 
11.8% (11.8%)
 
 
 
 
 
Public Comparable Adjustment (Including Non-Performance Risk)
 
0.0% (0.0%)
 
 
 
 
 
Volatility
 
45.1% - 79.4% (73.9%)
 
 
 
 
 
Time to Exit (Years)
 
5.0 - 6.3 (5.2)
Common Stock
784,278

 
Income Approach
 
Price Per Share
 
$0.40 - $1.00 ($0.50)
 
 
 
 
 
Volatility
 
59.2% (59.2%)
 
 
 
 
 
Revenue Multiples
 
1.6 (1.6)
 
 
 
 
 
Time to Exit (Years)
 
0.7 (0.7)
 
 
 
 
 
Discount for Lack of Marketability
 
12.1% (12.1%)
Common Stock
10

 
Market Approach
 
Price Per Share
 
$0.00001 ($0.00001)
 
 
 
 
 
Price Per Share
 
$1.55 - $2.21 ($2.15)
 
 
 
 
 
Volatility
 
56.5% - 101.5% (57.3%)
Warrants
51,326

 
Income Approach
 
Time to Exit (Years)
 
2.4 - 6.4 (4.01)
Warrants
10,498

 
Market Approach
 
Price Per Share
 
$0.00 - $0.51 ($0.51)
 
 
 
 
 
Revenue Multiple
 
1.6x (1.6x)
 
 
 
 
 
Exit Date
 
0.7 (0.7)
 
 
 
 
 
Volatility Rate
 
59.2% (59.2%)
Senior Secured Debt
0

 
Market Approach
 
Discount for Lack of Marketability
 
12.1% (12.1%)
LLC Interests
0

 
Income Approach
 
Estimated Distributable Profits
 
$0 ($0)
 
 
 
 
 
 
 
 

17

 
September 30, 2018
 
Valuation 
Approach(es)
 
Unobservable Input(s)
 
Range(s) (Weighted
Average(a))
 
 
 
 
 
Volatility
 
47.5% (47.5%)
Restricted Stock Units and Stock Options
$
7,132

 
Income Approach
 
Time to Exit (Years)
 
0.3 (0.3)
 
 
 
 
 
Discount for Lack of Marketability
 
5.8% (5.8%)
 
 
 
 
 
Volatility
 
47.5% (47.5%)
Restricted Stock Units and Stock Options
69,094

 
Market Approach
 
Time to Exit
 
0.3 (0.3)
 
 
 
 
 
Probability of Achieving Independent Milestones
 
0.0% - 75.0% (75.0%)
 
 
 
 
 
Probability of Achieving Dependent Milestones
 
18.8% - 75.0% (51.0%)
Rights to Payments
2,195,701

 
Income Approach
 
Time to Cash Flows (Years)
 
1.3 - 6.3 (3.4)
 
 
 
 
 
 
 
 
Total
$
49,679,970

 
 
 
 
 
 
 
(a) Weighted average based on fair value at September 30, 2018.

Valuation Methodologies and Inputs for Level 3 Assets
 
The following sections describe the valuation techniques and significant unobservable inputs used to measure Level 3 assets.

Preferred Stock, Preferred Units, LLC Interests, Bridge Notes and Common Stock
 
Preferred stock, preferred units, LLC interests, bridge notes and common stock are valued by either a market, income or hybrid approach using internal models with inputs, most of which are not market observable. Common inputs for valuing Level 3 preferred stock, bridge note and private common stock investments include prices from recently executed private transactions in a company’s securities or unconditional firm offers, revenue multiples of comparable publicly traded companies, merger and acquisition ("M&A") transactions consummated by comparable companies, discounts for lack of marketability, rights and preferences of the class of securities we own as compared with other classes of securities the portfolio company has issued, particularly related to potential liquidity scenarios of an initial public offering ("IPO") or an acquisition transaction, estimated time to exit, volatilities of comparable publicly traded companies and management’s best estimate of risk attributable to non-performance risk. Certain securities are valued using the present value of future cash flows.

We may also consider changes in market values for sets of comparable companies when recent private transaction information is not available and/or in consideration of non-performance risk. We define non-performance risk as the risk that the price per share (or implied valuation of a portfolio company) or the effective yield of a debt security of a portfolio company, as applicable, does not appropriately represent the risk that a portfolio company with negative cash flow will be: (a) unable to raise capital, will need to be shut down and will not return our invested capital; or (b) able to raise capital, but at a valuation significantly lower than the implied post-money valuation of the last round of financing.  We assess non-performance risk for each private portfolio company quarterly. Our assessment of non-performance risk typically includes an evaluation of the financial condition and operating results of the company, the company's progress towards milestones, and the long-term potential of the business and technology of the company and how this potential may or may not affect the value of the shares owned by us. An increase to the non-performance risk or a decrease in the private offering price of a future round of financing from that of the most recent round would result in a lower fair value measurement and/or a change in the distribution of value among the classes of securities we own.
 
Option pricing models place a high weighting on liquidation preferences, which means that small differences in how the preferences are structured can have a material effect on the fair value of our securities at the time of valuation and also on future valuations should additional rounds of financing occur with senior preferences. As such, valuations calculated by option pricing models may not increase if 1) rounds of financing occur at higher prices per share, 2) liquidation preferences include multiples on investment, 3) the amount of invested capital is small and/or 4) liquidation preferences are senior to prior rounds of financing. Additionally, an increase in the volatility assumption generally increases the enterprise value calculated in an option pricing model. An increase in the time to exit assumption also generally increases the enterprise value calculated in an option pricing model. Variations in the expected time to exit or expected volatility assumptions have a significant impact on fair value.
 

18

Bridge notes commonly contain terms that provide for the conversion of the full amount of principal, and sometimes interest, into shares of preferred stock at a defined price per share and/or the price per share of the next round of financing. The use of a discount for non-performance risk in the valuation of bridge notes would indicate the potential for conversion of only a portion of the principal, plus interest when applicable, into shares of preferred stock or the potential that a conversion event will not occur and that the likely outcome of a liquidation of assets would result in payment of less than the remaining principal outstanding of the note. An increase in non-performance risk would result in a lower fair value measurement.
 
Warrants and Options
 
We use the Black-Scholes-Merton option-pricing model to determine the fair value of warrants and options held in our portfolio unless there is a publicly traded active market for such warrants and options or another indication of value such as a sale of the portfolio company. Option pricing models, including the Black-Scholes-Merton model, require the use of subjective input assumptions, including expected volatility, expected life, expected dividend rate, and expected risk-free rate of return. In the Black-Scholes-Merton model, variations in the expected volatility or expected term assumptions have a significant impact on fair value. Because certain securities underlying the warrants in our portfolio are not publicly traded, many of the required input assumptions are more difficult to estimate than they would be if a public market for the underlying securities existed.
 
An input to the Black-Scholes-Merton option-pricing model is the value per share of the type of stock for which the warrant is exercisable as of the date of valuation. This input is derived according to the methodologies discussed in "Preferred Stock, Preferred Units, LLC Interests, Bridge Notes and Common Stock." 

Rights to Payments
 
Rights to payments are valued using a probability-weighted discounted cash flow model. As part of Amgen Inc.’s acquisition of our former portfolio company, BioVex Group, Inc., we are entitled to potential future milestone payments based upon the achievement of certain regulatory and sales milestones. We are also entitled to future payments from Xenio Holdings, Inc., which merged with one of our former portfolio companies, Xenio Systems, Inc., in the event of a sale of Xenio Holdings, Inc. We assign probabilities to the achievements of the various milestones. Milestones identified as independent milestones can be achieved irrespective of the achievement of other contractual milestones. Dependent milestones are those that can only be achieved after another, or series of other, milestones are achieved. The interest rates used in these models are observable inputs from sources such as the published interest rates for corporate bonds of the acquiring or comparable companies.
 
Senior Secured Debt
 
We currently hold investments in senior secured debt securities. We value these securities either by an income or market approach. The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value amount (discounted). The measurement is based on the value indicated by current market expectations about those future amounts. Common inputs for valuing Level 3 debt investments include: the effective yield of the debt investment or, in the case where we have received warrant coverage, the warrant-adjusted effective yield of the security, adjustments for changes in the yields of comparable publicly traded high-yield debt funds and risk-free interest rates and an assessment of non-performance risk. For debt investments, an increase in yields would result in a lower fair value measurement. Furthermore, yields would decrease, and value would increase, if the company is exceeding targets and risk has been substantially reduced from the level of risk that existed at the time of investment. Yields would increase, and values would decrease, if the company is failing to meet its targets and risk has been increased from the level of risk that existed at the time of investment. The market approach distributes an estimated value of the entity through the liquidation waterfall to derive value. Common inputs for valuing by the market approach include: multiples of publicly traded comparable companies, time to expected return/exit, discounts for lack of marketability and probability weighted expected return models.

Changes in Valuation Approaches

During the period ended September 30, 2018, the following changes in valuation methodology occurred since December 31, 2017:

•
We changed the valuation methodology of our securities of NGX Bio., from the income approach to the market approach owing to changes in the inputs used to derive value, particularly related to potential paths to exit.
•
We changed the valuation methodology of our securities of ORIG3N, Inc., from the income approach to the hybrid approach owing to changes in the inputs used to derive value, particularly related to potential paths to exit.
•
We changed the valuation methodology of our securities of Black Silicon Holdings, Inc., from the income approach to the market approach owing to changes in the inputs used to derive value, particularly related to potential paths to exit.

19


Changes in Investment Categories

During the period ended September 30, 2018, the following changes in investment categories occurred since December 31, 2017:

•
Adesto Technologies Corporation's classification as a non-controlled affiliated publicly traded securities changed to an unaffiliated publicly traded securities due to us owning less than 5 percent of the company's outstanding securities as of the end of this period.


    


20

NOTE 3. INDUSTRY DIVERSIFICATION

The following table shows the percentage of our net assets invested by industry as of September 30, 2018.
Industry
Value as of September 30, 2018
 
% of Net Assets
 
Value as of September 30, 2018
 
% of Net Assets
Application Software
 
 
 
 
$
2,243,464

 
2.6%
Unaffiliated Portfolio Companies
$
2,243,464

 
2.6%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Asset Management & Custody Banks
 
 
 
 
0

 
0.0%
Unaffiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Biotechnology
 
 
 
 
6,265,983

 
7.2%
Unaffiliated Portfolio Companies
6,265,983

 
7.2%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Communications Equipment
 
 
 
 
3,704,233

 
4.2%
Unaffiliated Portfolio Companies
3,704,233

 
4.2%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Electronic Components
 
 
 
 
2,497,704

 
2.9%
Unaffiliated Portfolio Companies
2,497,704

 
2.9%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Fertilizers & Agricultural Chemicals
 
 
 
 
13,658,042

 
15.6%
Unaffiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
13,658,042

 
15.6%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Financial Exchanges & Data
 
 
 
 
10,347,040

 
11.8%
Unaffiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
10,347,040

 
11.8%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Health Care Equipment
 
 
 
 
1,832,360

 
2.1%
Unaffiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
1,832,360

 
2.1%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Health Care Technology
 
 
 
 
9,921,916

 
11.4%
Unaffiliated Portfolio Companies
225,000

 
0.3%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
5,799,986

 
6.6%
 
 
 
 
Controlled Affiliated Portfolio Companies
3,896,930

 
4.5%
 
 
 
 
Life Sciences Tools & Services
 
 
 
 
3,834,917

 
4.4%
Unaffiliated Portfolio Companies
345,000

 
0.4%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
3,489,917

 
4.0%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
 
 
 
 
 
 
 
 

21

Industry
Value as of September 30, 2018
 
% of Net Assets
 
Value as of September 30, 2018
 
% of Net Assets
Oil & Gas Equipment & Services
 
 
 
 
$
0

 
0.0%
Unaffiliated Portfolio Companies
$
0

 
0.0%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Pharmaceuticals
 
 
 
 
3,137,083

 
3.6%
Unaffiliated Portfolio Companies
2,118,903

 
2.4%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
1,018,180

 
1.2%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Research & Consulting Services
 
 
 
 
980,861

 
1.1%
Unaffiliated Portfolio Companies
442,620

 
0.5%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
538,241

 
0.6%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Semiconductors
 
 
 
 
5,932,500

 
6.8%
Unaffiliated Portfolio Companies
5,827,430

 
6.7%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Controlled Affiliated Portfolio Companies
105,070

 
0.1%
 
 
 
 
Specialty Chemicals
 
 
 
 
4,083,386

 
4.7%
Unaffiliated Portfolio Companies
3,510,972

 
4.0%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
572,414

 
0.7%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Technology Hardware, Storage & Peripherals
 
 
 
 
10,001,936

 
11.4%
Unaffiliated Portfolio Companies
10,001,936

 
11.4%
 
 
 
 
Non-Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
Controlled Affiliated Portfolio Companies
0

 
0.0%
 
 
 
 
 
 
 
 
 
 
 
 
Total
$
78,441,425

 
 
 
$
78,441,425

 
 

NOTE 4. COMMITMENTS AND CONTINGENCIES
 
On July 21, 2014, the Company invested in Accelerator IV-New York Corporation ("Accelerator"), a company that will identify emerging biotechnology companies for the Company to invest in directly. The investment consists of an operating capital commitment and an investment commitment to be invested in the identified portfolio companies over a five-year period. During the third quarter of 2016, the board of directors of Accelerator voted to modify the operating commitment and investment commitment distributions, which resulted in the Company's operating commitment to be set at $833,333 and investment commitment to be set at $3,166,667. During the quarter ended September 30, 2018, Accelerator called $0 in operating capital and $862,872 in investment capital to fund a new tenant company, Magnolia Neurosciences Corporation. As of September 30, 2018, the Company had remaining unfunded commitments of $113,906 and $475,025, or approximately 13.7 percent and 15.0 percent, of the total operating and investment commitments, respectively. The withdrawal of contributed capital is not permitted. The transfer or assignment of capital is subject to approval by Accelerator.

If the Company defaults on these commitments, the other investors may purchase the Company's shares of Accelerator and any tenant companies of the Accelerator, currently Coba Therapeutics Corporation, Lodo Therapeutics Corporation, Magnolia Neurosciences Corporation, and Petra Pharma Corporation, for $0.001 per share. The combined value of Accelerator, Coba Therapeutics Corporation, Lodo Therapeutics Corporation, Magnolia Neurosciences Corporation, and Petra Pharma Corporation is $3,199,125, or $0.10 per share as of September 30, 2018. In the event of default, the Company would still be required to contribute the remaining operating commitment.
 

22

The Company's most recent investments in HALE.life Corporation ("HALE"), and Petra Pharma Corporation, were in rounds of financing that include investment of additional capital upon achievement of certain quantitative and qualitative milestones. The original additional investment of $1 million in HALE was reduced to $500,000 upon mutual agreement between us and HALE. This additional $500,000 was invested in HALE in October 2018. We have no further contingent obligations to invest additional capital in HALE.life Corporation. The remaining portion of the additional investment in Petra was reduced to $260,504 following our investment of $369,748 in August 2018. The milestones that would trigger the remaining potential investment in Petra Pharma Corporation has yet to occur. Should these milestones be successfully achieved and the Company decides to not invest such capital, the securities held by the Company in Petra may be subject to punitive action including, but not limited to, conversion from preferred stock to common stock and/or repurchase by the respective companies at a substantial discount to current carrying value. Additionally, portfolio companies may seek additional capital in the future and any decision by the Company to not participate in the round of financing could result in similar outcomes that could negatively impact the value of the Company's securities of those portfolio companies.

On September 24, 2009, we signed a ten-year lease for approximately 6,900 square feet of office space located at 1450 Broadway, New York, New York. On March 23, 2017, we signed a month-to-month lease for approximately 1,250 square feet of office space located at 7 N. Willow Street, Suite 4B, Montclair, New Jersey. Upon an event of default, the leases each provide that the landlord may terminate the lease and require us to pay all rent that would have been payable during the remainder of the lease or until the date the landlord re-enters the premises. 

NOTE 5. SUBSEQUENT EVENTS
 
The Company has evaluated subsequent events as of September 30, 2018, through the date these consolidated schedule of investments were issued, and include the following:
    
On October 18, 2018, we made a $500,000 follow-on investment in HALE.life Corporation.



23




NOTE 6. INVESTMENTS IN AND ADVANCES TO AFFILIATES - SCHEDULE 12-14 (UNAUDITED)
Name of Issuer
 
Title of Issue or Nature of Indebtedness (A)
 
Amount of Dividends or Interest Credited to Income (B)
 
Realized Gain (Loss)
 
Value as of 12/31/17
 
Gross Additions (C)
 
Gross Reductions (D)
 
Net Change in Unrealized Appreciation (Depreciation)
 
Value as of 9/30/18
MAJORITY OWNED CONTROLLED INVESTMENTS (E):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Black Silicon Holdings, Inc.
 
Series A Convertible Preferred Stock
 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
 
Series A-1 Convertible Preferred Stock
 
0

 
0

 
0

 
0

 
0

 
0

 
0

 
 
Series A-2 Convertible Preferred Stock
 
0

 
0

 
0

 
0

 
0

 
0

 
0

 
 
Series B-1 Convertible Preferred Stock
 
0

 
0

 
0

 
0

 
0

 
0

 
0

 
 
Series C Convertible Preferred Stock
 
0

 
0

 
0

 
0

 
0

 
0

 
0

 
 
Secured Convertible Bridge Notes (G)
 
25,569

 
0

 
288,759

 
0

 
(183,689
)
 
(209,258
)
 
105,070

HALE.life Corporation
 
Common Stock
 
$
0

 
$
0

 
$
10

 
$
0

 
$
0

 
$
0

 
$
10

 
 
Series Seed Convertible Preferred Stock
 
0

 
0

 
1,896,920

 
0

 
0

 
0

 
1,896,920

 
 
Convertible Bridge Notes
 
0

 
0

 
2,000,000

 
0

 
0

 
0

 
2,000,000

SynGlyCo, Inc.
 
Common Stock
 
$
0

 
$
(2,729,817
)
 
$
0

 
$
0

 
$
0

 
$
2,729,817

 
$
0

 
 
Series A' Convertible Preferred Stock
 
0

 
(4,855,627
)
 
0

 
0

 
0

 
4,855,627

 
0

 
 
Senior Convertible Bridge Notes
 
0

 
(27,857
)
 
30,000

 
0

 
(30,000
)
 
47,857

 
0

Total Majority Owned Controlled Investments
 

 
$
25,569

 
$
(7,613,301
)
 
$
4,215,689

 
$
0

 
$
(213,689
)
 
$
7,424,043

 
$
4,002,000

Total Controlled Affiliated Companies
 
 
 
$
25,569

 
$
(7,613,301
)
 
$
4,215,689

 
$
0

 
$
(213,689
)
 
$
7,424,043

 
$
4,002,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NON-CONTROLLED AFFILIATED PRIVATELY HELD COMPANIES (F):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ABSMaterials, Inc.
 
Series A Convertible Preferred Stock
 
$
0

 
$
0

 
$
64,160

 
$
0

 
$
(58,236
)
 
$
(58,236
)
 
$
5,924

 
 
Series B Convertible Preferred Stock
 
0

 
0

 
527,055

 
0

 
(110,179
)
 
(110,179
)
 
416,876

 
 
Secured Convertible Bridge Note
 
7,480

 
0

 
142,134

 
7,480

 
0

 
0

 
149,614

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

24




Name of Issuer
 
Title of Issue or Nature of Indebtedness (A)
 
Amount of Dividends or Interest Credited to Income (B)
 
Realized Gain (Loss)
 
Value as of 12/31/17
 
Gross Additions (C)
 
Gross Reductions (D)
 
Net Change in Unrealized Appreciation (Depreciation)
 
Value as of 9/30/18
NON-CONTROLLED AFFILIATED PRIVATELY HELD COMPANIES (F):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AgBiome, LLC
 
Series A-1 Convertible Preferred Stock
 
$
0

 
$
0

 
$
8,583,935

 
$
1,899,313

 
$
0

 
$
1,899,313

 
$
10,483,248

 
 
Series A-2 Convertible Preferred Stock
 
0

 
0

 
1,838,865

 
383,173

 
0

 
383,173

 
2,222,038

 
 
Series B Convertible Preferred Stock
 
0

 
0

 
884,777

 
67,979

 
0

 
67,979

 
952,756

Coba Therapeutics Corporation
 
Convertible Bridge Note
 
$
5,167

 
$
0

 
$
0

 
$
150,697

 
$
0

 
$
0

 
$
150,697

EchoPixel, Inc.
 
Series Seed Convertible Preferred Stock
 
$
0

 
$
0

 
$
945,726

 
$
80,096

 
$
0

 
$
80,096

 
$
1,025,822

 
 
Series Seed-2 Convertible Preferred Stock
 
0

 
0

 
337,930

 
29,937

 
0

 
29,937

 
367,867

 
 
Series A-2 Convertible Preferred Stock
 
0

 
0

 
412,209

 
26,462

 
0

 
26,462

 
438,671

Ensemble Therapeutics Corporation
 
Series B Convertible Preferred Stock
 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
 
Series B-1 Convertible Preferred Stock
 
0

 
90,105

 
173,143

 
0

 
(87,039
)
 
(64,513
)
 
86,104

Essential Health Solutions, Inc.
 
Common Stock
 
$
0

 
$
0

 
$
145,218

 
$
0

 
$
(19,397
)
 
$
(19,397
)
 
$
125,821

 
 
Series A Convertible Preferred Stock
 
0

 
0

 
3,169,662

 
0

 
(413,784
)
 
(413,784
)
 
2,755,878

HZO, Inc.
 
Common Stock
 
$
0

 
$
(155,666
)
 
$
473,896

 
$
0

 
$
(473,896
)
 
$
192,771

 
$
0

 
 
Series I Convertible Preferred Stock
 
0

 
(1,333,236
)
 
4,074,569

 
0

 
(4,074,569
)
 
1,635,266

 
0

 
 
Series II Convertible Preferred Stock
 
0

 
(583,747
)
 
1,571,541

 
0

 
(1,571,541
)
 
928,465

 
0

 
 
Series II-A Convertible Preferred Stock
 
0

 
(52,787
)
 
188,810

 
0

 
(188,810
)
 
37,260

 
0

 
 
Warrants for Series II-A Convertible Preferred Stock
 
0

 
(6,963
)
 
17,925

 
0

 
(17,925
)
 
11,895

 
0

Lodo Therapeutics Corporation
 
Series A Convertible Preferred Stock
 
$
0

 
$
0

 
$
777,896

 
$
3,483

 
$
0

 
$
3,483

 
$
781,379

NGX Bio, Inc.
 
Series Seed Convertible Preferred Stock
 
$
0

 
$
0

 
$
721,539

 
$
0

 
$
(585,564
)
 
$
(585,564
)
 
$
135,975

 
 
Series Seed 2 Convertible Preferred Stock
 
0

 
0

 
477,157

 
0

 
(375,176
)
 
(375,176
)
 
101,981


 
Series Seed 3 Convertible Preferred Stock
 
0

 
0

 
769,258

 
0

 
(617,119
)
 
(617,119
)
 
152,139

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

25




Name of Issuer
 
Title of Issue or Nature of Indebtedness (A)
 
Amount of Dividends or Interest Credited to Income (B)
 
Realized Gain (Loss)
 
Value as of 12/31/17
 
Gross Additions (C)
 
Gross Reductions (D)
 
Net Change in Unrealized Appreciation (Depreciation)
 
Value as of 9/30/18
NON-CONTROLLED AFFILIATED PRIVATELY HELD COMPANIES (F):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ORIG3N, Inc.
 
Series 1 Convertible Preferred Stock
 
$
0

 
$
0

 
$
907,129

 
$
354,617

 
$
0

 
$
354,617

 
$
1,261,746

 
 
Series A Convertible Preferred Stock
 
0

 
0

 
1,305,499

 
157,880

 
0

 
157,880

 
1,463,379

 
 
Series A-2 Convertible Preferred Stock
 
0

 
0

 
169,890

 
23,272

 
0

 
(26,532
)
 
193,162

Produced Water Absorbents, Inc.
 
Common Stock
 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
$
0

 
 
Warrants for Common Stock
 
0

 
0

 
0

 
0

 
0

 
0

 
0

 
 
Senior Secured Debt (H)
 
85,445

 
0

 
357,407

 
0

 
(357,407
)
 
(492,514
)
 
0

Senova Systems, Inc.
 
Series B-1 Convertible Preferred Stock
 
$
0

 
$
(1,083,963
)
 
$
0

 
$
0

 
$
0

 
$
1,083,963

 
$
0

 
 
Series C Convertible Preferred Stock
 
0

 
(1,208,287
)
 
0

 
0

 
0

 
1,208,287

 
0

 
 
Warrants for Series B Preferred Stock
 
0

 
(20,000
)
 
0

 
0

 
0

 
20,000

 
0

TARA Biosystems, Inc.
 
Common Stock
 
$
0

 
$
0

 
$
651,642

 
$
6,815

 
$
0

 
$
6,815

 
$
658,457

 
 
Series A Convertible Preferred Stock
 
0

 
0

 
2,802,573

 
28,887

 
0

 
28,887

 
2,831,460

Total Non-Controlled Affiliated Privately Held Companies
 
 
 
$
98,092

 
$
(4,354,544
)
 
$
32,491,545

 
$
3,220,091

 
$
(8,950,642
)
 
$
5,393,535

 
$
26,760,994

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NON-CONTROLLED AFFILIATED PUBLICLY TRADED SECURITIES(F):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TheStreet, Inc.
 
Common Stock
 
$
0

 
$
0

 
$
6,387,423

 
$
3,883,391

 
$
0

 
$
3,825,451

 
$
10,270,814

 
 
Stock Options
 
0

 
0

 
0

 
7,132

 
0

 
7,132

 
7,132

 
 
Restricted Stock Units
 
0

 
0

 
43,476

 
25,618

 
0

 
25,618

 
69,094

Total Non-Controlled Affiliated Publicly Traded Securities
 
 
 
$
0

 
$
0

 
$
6,430,899

 
$
3,916,141

 
$
0

 
$
3,858,201

 
$
10,347,040

Total Non-Controlled Affiliated Privately Held Companies and Publicly Traded Securities
 
 
 
$
98,092

 
$
(4,354,544
)
 
$
38,922,444

 
$
7,136,232

 
$
(8,950,642
)
 
$
9,251,736

 
$
37,108,034

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

26




Name of Issuer
 
Title of Issue or Nature of Indebtedness (A)
 
Amount of Dividends or Interest Credited to Income (B)
 
Realized Gain (Loss)
 
Value as of 12/31/17
 
Gross Additions (C)
 
Gross Reductions (D)
 
Net Change in Unrealized Appreciation (Depreciation)
 
Value as of 9/30/18
EQUITY METHOD INVESTMENT:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Accelerator IV-New York Corporation
 
Series A Common Stock
 
$
0

 
$
0

 
$
256,622

 
$
0

 
$
(108,476
)
 
$
0

 
$
148,146

Total Equity Method Investment
 
 
 
$
0

 
$
0

 
$
256,622

 
$
0

 
$
(108,476
)
 
$
0

 
$
148,146

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(A)
Common stock, warrants, membership units and, in some cases, preferred stock are generally non-income producing and restricted. The principal amount of debt and the number of shares of common and preferred stock and number of membership units are shown in the accompanying Consolidated Schedule of Investments as of September 30, 2018.
 
(B)
Represents the total amount of interest or dividends and yield-enhancing fees on debt securities credited/(debited) to income for the portion of the year an investment was a control or affiliate investment, as appropriate. Amounts credited to preferred or common stock represent accrued bridge note interest related to conversions that occurred during the period ended September 30, 2018.

(C)
Gross additions include increases in investments resulting from new portfolio investments, paid-in-kind interest or dividends, the amortization of discounts and fees. Gross additions also include net increases in unrealized appreciation or decreases in unrealized depreciation.
 
(D)
Gross reductions include decreases in investments resulting from principal collections related to investment repayments or sales, the amortization of premiums and acquisition costs. Gross reductions also include net increases in unrealized depreciation or decreases in unrealized appreciation.

(E)
"Controlled Affiliated" is defined as control of 50.1 percent or more of the voting securities outstanding and/or 50.1 percent or more control of the appointment of members of the board of directors.

(F)
"Non-Controlled Affiliated" is defined as ownership of five percent or more, but less than 25 percent, of the voting shares of the portfolio company, or where we hold the right to appoint one or more members to the portfolio company’s board of directors, but less than 25 percent of the members of the board of directors.

(G)
Debt security is on non-accrual status as of April 1, 2018 and, therefore, is considered non-income producing during the period ended September 30, 2018.

(H)
Debt security is on non-accrual status as of July 1, 2018 and, therefore, is considered non-income producing during the period ended September 30, 2018.


 **Information related to the amount of equity in the net profit and loss for the year for the investments listed has not been included in this schedule. This information is not considered to be meaningful owing to the complex capital structures of the portfolio companies, with different classes of equity securities outstanding with different preferences in liquidation. These investments are not consolidated, nor are they accounted for under the equity method of accounting, with the exception of Accelerator IV-New York Corporation, which are accounted for under the equity method.


27




Line for Schedule of Investments
Method / Level
 
Primary Industry
 
# of Shares Purchased/Principal
 
Cost of TURN's Investment
 
Valuation
CONTROLLED AFFILIATED COMPANIES
 
 
 
 
 
 
 
 
 
PRIVATELY HELD COMPANIES
 
 
 
 
 
 
 
 
 
Black Silicon Holdings, Inc.
 
 
Semiconductors
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 8/4/15)
(M) (L3)
 
 
 
233,499

 
$
750,000

 
$
0

Series A-1 Convertible Preferred Stock (acquired 8/4/15)
(M) (L3)
 
 
 
2,966,667

 
890,000

 
0

Series A-2 Convertible Preferred Stock (acquired 8/4/15)
(M) (L3)
 
 
 
4,207,537

 
2,445,000

 
0

Series B-1 Convertible Preferred Stock (acquired 8/4/15)
(M) (L3)
 
 
 
1,892,836

 
1,169,561

 
0

Series C Convertible Preferred Stock (acquired 8/4/15)
(M) (L3)
 
 
 
1,674,030

 
1,171,316

 
0

Secured Convertible Bridge Note, 8% PIK, (acquired 8/25/16, maturing 8/4/21)
(M) (L3)
 
 
 
$
1,278,453

 
1,444,368

 
105,070

 
 
 
 
 
 
 
$
7,870,245

 
$
105,070

HALE.life Corporation
 
 
Health Care Technology
 
 
 
 
 
 
Common Stock (acquired 3/1/16)
(M) (L3)
 
 
 
1,000,000

 
$
10

 
$
10

Series Seed Convertible Preferred Stock (acquired 3/28/17)
(M) (L3)
 
 
 
23,081,580

 
1,896,920

 
1,896,920

Unsecured Convertible Bridge Note, 0%, (acquired 3/28/17, no maturity date)
(M) (L3)
 
 
 
$
2,000,000

 
2,000,000

 
2,000,000

 
 
 
 
 
 
 
$
3,896,930

 
$
3,896,930

Total Controlled Affiliated Companies (4.6%)
 
 
 
 
 
 
$
11,767,175

 
$
4,002,000

 
 
 
 
 
 
 
 
 
 
NON-CONTROLLED AFFILIATED COMPANIES
 
 
 
 
 
 
 
 
 
PRIVATELY HELD COMPANIES
 
 
 
 
 
 
 
 
 
ABSMaterials, Inc.
 
 
Specialty Chemicals
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 2/17/10-10/24/11)
(I) (L3)
 
 
 
390,000

 
$
435,000

 
$
5,924

Series B Convertible Preferred Stock (acquired 11/8/13-6/25/14)
(I) (L3)
 
 
 
1,037,751

 
1,217,644

 
416,876

Secured Convertible Bridge Note, 8% PIK, (acquired 1/20/16, maturing 12/31/18)
(M) (L3)
 
 
 
$
100,000

 
121,589

 
121,589

Secured Convertible Bridge Note, 8% PIK, (acquired 3/28/17, maturing 12/31/19)
(M) (L3)
 
 
 
$
25,000

 
28,025

 
28,025

 
 
 
 
 
 
 
$
1,802,258

 
$
572,414

AgBiome, LLC
 
 
Fertilizers & Agricultural Chemicals
 
 
 
 
 
 
Series A-1 Convertible Preferred Stock (acquired 1/30/13)
(I) (L3)
 
 
 
2,000,000

 
$
2,000,000

 
$
10,483,248

Series A-2 Convertible Preferred Stock (acquired 4/9/13-10/15/13)
(I) (L3)
 
 
 
417,392

 
521,740

 
2,222,038

Series B Convertible Preferred Stock (acquired 8/7/15)
(I) (L3)
 
 
 
160,526

 
500,006

 
952,756

 
 
 
 
 
 
 
$
3,021,746

 
$
13,658,042

Coba Therapeutics Corporation
 
 
Pharmaceuticals
 
 
 
 
 
 
Unsecured Convertible Bridge Note, 6% PIK, (acquired 2/27/18, maturing 2/27/19)
(M) (L3)
 
 
 
$
145,530

 
$
150,697

 
$
150,697

 
 
 
 
 
 
 
 
 
 

28




Line for Schedule of Investments
Method / Level
 
Primary Industry
 
# of Shares Purchased/Principal
 
Cost of TURN's Investment
 
Valuation
NON-CONTROLLED AFFILIATED COMPANIES
 
 
 
 
 
 
 
 
 
PRIVATELY HELD COMPANIES
 
 
 
 
 
 
 
 
 
EchoPixel, Inc.
 
 
Health Care Equipment
 
 
 
 
 
 
Series Seed Convertible Preferred Stock (acquired 6/21/13-6/30/14)
(I) (L3)
 
 
 
4,194,630

 
$
1,250,000

 
$
1,025,822

Series Seed-2 Convertible Preferred Stock (acquired 1/22/16)
(I) (L3)
 
 
 
1,476,668

 
500,000

 
367,867

Series A-2 Convertible Preferred Stock (acquired 3/23/17)
(I) (L3)
 
 
 
1,471,577

 
350,000

 
438,671

 
 
 
 
 
 
 
$
2,100,000

 
$
1,832,360

Ensemble Therapeutics Corporation
 
 
Pharmaceuticals
 
 
 
 
 
 
Series B Convertible Preferred Stock (acquired 6/6/07)
(I) (L3)
 
 
 
1,449,275

 
$
2,000,000

 
$
0

Series B-1 Convertible Preferred Stock (acquired 4/21/14)
(I) (L3)
 
 
 
492,575

 
551,553

 
86,104

 
 
 
 
 
 
 
$
2,551,553

 
$
86,104

Essential Health Solutions, Inc.
 
 
Health Care Technology
 
 
 
 
 
 
Common Stock (acquired 11/18/16)
(I) (L3)
 
 
 
200,000

 
$
20

 
$
125,821

Series A Convertible Preferred Stock (acquired 11/18/16)
(I) (L3)
 
 
 
2,750,000

 
2,750,000

 
2,755,878

 
 
 
 
 
 
 
$
2,750,020

 
$
2,881,699

Lodo Therapeutics Corporation
 
 
Pharmaceuticals
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 12/21/15-4/22/16)
(I) (L3)
 
 
 
658,190

 
$
658,190

 
$
781,379

NGX Bio, Inc.
 
 
Research & Consulting Services
 
 
 
 
 
 
Series Seed Convertible Preferred Stock (acquired 6/6/14-1/10/16)
(M) (L3)
 
 
 
666,667

 
$
500,002

 
$
135,975

Series Seed 2 Convertible Preferred Stock (acquired 8/20/15-9/30/15)
(M) (L3)
 
 
 
329,989

 
499,999

 
101,981

Series Seed 3 Convertible Preferred Stock (acquired 6/26/17)
(M) (L3)
 
 
 
666,001

 
686,329

 
152,139

 
 
 
 
 
 
 
$
1,686,330

 
$
390,095

ORIG3N, Inc.
 
 
Health Care Technology
 
 
 
 
 
 
Series 1 Convertible Preferred Stock (acquired 2/5/15-8/5/15)
(H) (L3)
 
 
 
1,195,315

 
$
500,000

 
$
1,261,746

Series A Convertible Preferred Stock (acquired 11/25/15-9/7/16)
(H) (L3)
 
 
 
1,364,666

 
1,500,000

 
1,463,379

Series A-2 Convertible Preferred Stock (acquired 5/11/17-2/8/18)
(H) (L3)
 
 
 
176,386

 
200,002

 
193,162

 
 
 
 
 
 
 
$
2,200,002

 
$
2,918,287

Produced Water Absorbents, Inc.
 
 
Oil & Gas Equipment & Services
 
 
 
 
 
 
Common Stock (acquired 4/30/16)
(M) (L3)
 
 
 
50,243,350

 
$
7,670,281

 
$
0

Warrants for Common Stock expiring upon liquidation event (acquired 4/30/16)
(M) (L3)
 
 
 
450,000

 
65,250

 
0

Senior Secured Debt, 15% commencing on 4/1/16, maturing on 12/31/19 (acquired 4/1/16)
(M) (L3)
 
 
 
$
2,533,766

 
2,276,104

 
0

 
 
 
 
 
 
 
$
10,011,635

 
$
0

 
 
 
 
 
 
 
 
 
 

29




Line for Schedule of Investments
Method / Level
 
Primary Industry
 
# of Shares Purchased/Principal
 
Cost of TURN's Investment
 
Valuation
NON-CONTROLLED AFFILIATED COMPANIES
 
 
 
 
 
 
 
 
 
PRIVATELY HELD COMPANIES
 
 
 
 
 
 
 
 
 
TARA Biosystems, Inc.
 
 
Life Sciences Tools & Services
 
 
 
 
 
 
Common Stock (acquired 8/20/14)
(I) (L3)
 
 
 
2,000,000

 
$
20

 
$
658,457

Series A Convertible Preferred Stock (acquired 3/31/17)
(I) (L3)
 
 
 
6,878,572

 
2,545,493

 
2,831,460

 
 
 
 
 
 
 
$
2,545,513

 
$
3,489,917

Total Non-Controlled Affiliated Privately Held Companies (30.6%)
 
 
 
 
 
 
$
29,477,944

 
$
26,760,994

 
 
 
 
 
 
 
 
 
 
PUBLICLY TRADED SECURITIES
 
 
 
 
 
 
 
 
 
TheStreet, Inc.
 
 
Financial Exchanges & Data
 
 
 
 
 
 
Common Stock (acquired 4/19/17-5/18/18)
(M) (L1)
 
 
 
4,668,552

 
$
4,949,734

 
$
10,270,814

Stock Options for Common Stock Expiring 1/1/25 (acquired 1/1/18)
(I) (L3)
 
 
 
3,333

 
0

 
2,544

Stock Options for Common Stock Expiring 5/18/25 (acquired 5/18/18)
(I) (L3)
 
 
 
10,000

 
0

 
4,588

Restricted Stock Units (acquired 5/18/18)
(M) (L3)
 
 
 
33,333

 
0

 
69,094

Total Non-Controlled Affiliated Publicly Traded Securities (11.9%)
 
 
 
 
 
 
$
4,949,734

 
$
10,347,040

 
 
 
 
 
 
 
 
 
 
EQUITY METHOD PRIVATELY HELD COMPANY
 
 
 
 
 
 
 
 
 
Accelerator IV-New York Corporation
 
 
Research & Consulting Services
 
 
 
 
 
 
Series A Common Stock (acquired 7/21/14-12/5/17)
(E)
 
 
 
719,427

 
$
148,146

 
$
148,146

Total Equity Method Privately Held Company (0.2%)
 
 
 
 
 
 
$
148,146

 
$
148,146

Total Investments in Non-Controlled Affiliated Companies, Publicly Traded Securities and Equity Method Company (42.7%)
 
 
 
 
 
 
$
34,575,824

 
$
37,256,180

Total Investments in Controlled, Non-Controlled Affiliated Companies, Publicly Traded Securities and Equity Method Company (47.3%)
 
 
 
 
 
 
$
46,342,999

 
$
41,258,180



30




Item 2. Controls and Procedures.

(a)        Based on an evaluation of the Registrant's Disclosure Controls and Procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, the “Disclosure Controls”) as of a date within 90 days prior to the filing date (the “Filing Date”) of this Form N-CSR (the “Report”), the Chief Executive Officer (its principal executive officer) and Chief Financial Officer (its principal financial officer) have concluded that the Disclosure Controls are reasonably designed to ensure that information required to be disclosed by the Registrant in the Report is recorded, processed, summarized and reported by the Filing Date, including ensuring that information required to be disclosed in the Report is accumulated and communicated to the Registrant's management, including the Registrant's principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
 
(b)        There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s last fiscal quarter that have materially affected or are reasonably likely to materially affect the Registrant’s internal control over financial reporting.

Item 3. Exhibits.
 
Certifications of the principal executive officer and the principal financial officer pursuant to Rule 30a-2(a) under the Investment Company Act of 1940.


31




SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
180 DEGREE CAPITAL CORP.
 
By:
/s/ Daniel B. Wolfe
 
Name: Daniel B. Wolfe
 
Title: President and Chief Financial Officer
 
 
 
Date: October 29, 2018
 
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
  
By:
/s/ Kevin M. Rendino
 
By:
/s/ Daniel B. Wolfe
 
Name: Kevin M. Rendino
 
 
Name: Daniel B. Wolfe
 
Title: Chief Executive Officer
 
 
Title: President and Chief Financial Officer
 
         (Principal Executive Officer)
 
 
          (Principal Financial Officer)
 
 
 
 
 
 
Date: October 29, 2018
 
 
Date: October 29, 2018


32