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EX-31.2 - EXHIBIT 31.2 - Full Circle Capital Corp	v431494_exhx31x2.htm
EX-31.1 - EXHIBIT 31.1 - Full Circle Capital Corp	v431494_exhx31x1.htm
EX-32.1 - EXHIBIT 32.1 - Full Circle Capital Corp	v431494_exhx32x1.htm
EX-32.2 - EXHIBIT 32.2 - Full Circle Capital Corp	v431494_exhx32x2.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-Q


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

For the quarterly period ended December 31, 2015

OR


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

COMMISSION FILE NUMBER: 814-00809

Full Circle Capital Corporation

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


MARYLAND		27-2411476
(State or jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


102 Greenwich Avenue, 2^nd Floor Greenwich, CT		06830
(Address of principal executive office)		(Zip Code)

REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE:
(203) 900-2100

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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


Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ (Do not check if a smaller reporting company)		Smaller reporting company o

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

The number of shares of the issuer’s Common Stock, $0.01 par value, outstanding as of February 16, 2016 was 22,472,243.

TABLE OF CONTENTS


	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements		1
Consolidated Statements of Assets and Liabilities as of December 31, 2015 (unaudited) and June 30, 2015		1
Consolidated Statements of Operations (unaudited) for the three and six months ended December 31, 2015 and December 31, 2014		2
Consolidated Statements of Changes in Net Assets (unaudited) for the six months ended December 31, 2015 and December 31, 2014		3
Consolidated Statements of Cash Flows (unaudited) for the six months ended December 31, 2015 and December 31, 2014		4
Consolidated Schedule of Investments (unaudited) as of December 31, 2015		5
Consolidated Schedule of Investments as of June 30, 2015		11
Notes to Consolidated Financial Statements (unaudited) as of December 31, 2015		17
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		45
Forward-Looking Statements		45
Overview		46
Exemptive Relief		47
Critical Accounting Policies		48
Current Market Conditions and Market Opportunity		52
Review of Strategic Alternatives		52
Operating Expense Reimbursement		53
Management Fee and Incentive Fee Waiver		53
Portfolio Composition and Investment Activity		53
Results of Operations		59
Liquidity and Capital Resources		64
Recent Developments		68
Item 3. Quantitative and Qualitative Disclosures About Market Risk		68
Item 4 Controls and Procedures		69
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		70
Item 1A. Risk Factors		70
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		72
Item 3. Defaults Upon Senior Securities		72
Item 4. Mine Safety Disclosures		72
Item 5. Other Information		73
Item 6. Exhibits		73
SIGNATURES		75

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES


		December 31, 2015			June 30, 2015
		(Unaudited)
Assets
Control Investments at Fair Value (Cost of $4,744,935 and $11,409,596, respectively)		$	5,026,820		$	5,812,064
Affiliate Investments at Fair Value (Cost of $24,200,577 and $24,434,726, respectively)			9,254,356			16,019,272
Non-Control/Non-Affiliate Investments at Fair Value (Cost of $118,425,234 and $136,351,581, respectively)			110,181,564			130,282,423
Total Investments at Fair Value (Cost of $147,370,746 and $172,195,903, respectively)	(NOTE 9)		124,462,740			152,113,759
Cash			3,733,719			3,736,563
Receivable from Swap Counterparty	(NOTE 10)		1,320,000			—
Interest Receivable			2,201,494			1,903,606
Principal Receivable			135,499			23,287
Distributions Receivable			—			15,141
Due from Affiliates			224,253			605,749
Due from Portfolio Investments			155,691			180,300
Receivable on Open Swap Contract			35,719			1,081
Prepaid Expenses			184,767			66,105
Other Assets			26,447			1,483,578
Deferred Offering Expenses			367,807			328,168
Deferred Credit Facility Fees	(NOTE 8)		122,434			267,645
Total Assets			132,970,570			160,724,982
Liabilities
Open Swap Contract, at Fair Value	(NOTE 10)		1,650,000			—
Due to Affiliates	(NOTE 5)		1,104,327			1,052,489
Accrued Liabilities			142,944			179,378
Deposit from Swap Counterparty			11,700,000			10,380,000
Payable for Investments Acquired			—			15,020,000
Distributions Payable			786,529			813,240
Interest Payable			—			57,605
Other Liabilities			157,084			305,957
Accrued Offering Expenses			1,200			7,258
Notes Payable 8.25% due June 30, 2020 (plus unamortized premium of $146,938 and $158,504 and less deferred debt issuance costs of $753,860 and $833,541, respectively)	(NOTE 8)		33,038,603			32,970,488
Total Liabilities			48,580,687			60,786,415
Commitments and contingencies	(NOTE 12)		—			—
Net Assets		$	84,389,883		$	99,938,567
Components of Net Assets
Common Stock, par value $0.01 per share (100,000,000 authorized; 22,472,243 and 23,235,430 issued and outstanding, respectively)		$	224,722		$	232,354
Paid-in Capital in Excess of Par			130,072,314			132,487,067
Distributions in Excess of Net Investment Income			(119,318	)		(119,318	)
Accumulated Net Realized Losses			(21,229,829	)		(12,579,392	)
Accumulated Net Unrealized Losses			(24,558,006	)		(20,082,144	)
Net Assets		$	84,389,883		$	99,938,567
Net Asset Value Per Share		$	3.76		$	4.30

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)


		Three Months Ended December 31,						Six Months Ended December 31,
		2015			2014			2015			2014
Investment Income
Interest Income from Non-Control/Non-Affiliate Investments		$	3,228,102		$	3,367,613		$	6,639,356		$	6,175,544
Interest Income from Affiliate Investments			335,984			665,621			950,442			1,206,181
Interest Income from Control Investments			160,844			433,638			329,625			962,746
Dividend Income from Control Investments			—			—			20,647			—
Other Income from Non-Control/Non-Affiliate Investments			1,080,304			408,586			1,576,823			584,591
Other Income from Affiliate Investments			1,600			5,822			3,381			15,292
Other Income from Control Investments			12,500			12,500			25,000			25,000
Other Income from Non-Investment Sources	(NOTE 5)		9,999			18,440			24,681			29,490
Total Investment Income			4,829,333			4,912,220			9,569,955			8,998,844
Operating Expenses
Management Fee			548,857			581,329			1,160,786			1,153,887
Incentive Fee			534,585			526,242			1,016,362			916,092
Total Advisory Fees	(NOTE 5)		1,083,442			1,107,571			2,177,148			2,069,979
Allocation of Overhead Expenses			60,884			36,962			108,022			73,517
Sub-Administration Fees			66,891			66,595			138,729			129,804
Officers’ Compensation			76,307			75,913			152,613			151,826
Total Costs Incurred Under Administration Agreement	(NOTE 5)		204,082			179,470			399,364			355,147
Directors’ Fees			38,750			40,750			84,500			88,696
Interest Expenses	(NOTE 8)		974,500			1,177,094			1,978,329			2,179,477
Professional Services Expense			213,973			139,926			553,525			359,594
Bank Fees			7,060			10,918			15,801			21,189
Other			169,186			151,523			295,841			260,394
Total Gross Operating Expenses			2,690,993			2,807,252			5,504,508			5,334,476
Management Fee Waiver and Expense Reimbursement	(NOTE 5)		(223,384	)		(248,373	)		(720,493	)		(531,047	)
Total Net Operating Expenses			2,467,609			2,558,879			4,784,015			4,803,429
Net Investment Income			2,361,724			2,353,341			4,785,940			4,195,415
Net Change in Unrealized Gain (Loss) on:
Investments			4,859,971			(7,624,759	)		(2,825,862	)		(9,639,794	)
Open Swap Contract			(1,875,000	)		—			(1,650,000	)		—
Net Change in Unrealized Gain (Loss)			2,984,971			(7,624,759	)		(4,475,862	)		(9,639,794	)
Net Realized Gain (Loss) on:
Non-Control/Non-Affiliate Investments			(4,542,001	)		(1,131,014	)		(4,459,640	)		(728,107	)
Affiliate Investments			1,712,323			—			1,712,323			—
Control Investments			(6,052,901	)		(170,438	)		(6,106,007	)		(170,438	)
Open Swap Contract			103,332			—			202,988			—
Foreign Currency Transactions			(101	)		—			(101	)		(1,248	)
Net Realized Gain (Loss)			(8,779,348	)		(1,301,452	)		(8,650,437	)		(899,793	)
Net Increase (Decrease) in Net Assets Resulting from Operations		$	(3,432,653	)	$	(6,572,870	)	$	(8,340,359	)	$	(6,344,172	)
Earnings (Loss) per Common Share Basic and Diluted	(NOTE 4)	$	(0.15	)	$	(0.55	)	$	(0.36	)	$	(0.53	)
Net Investment Income per Common Share Basic and Diluted		$	0.11		$	0.19		$	0.21		$	0.35
Weighted Average Shares of Common Stock Outstanding Basic and Diluted			22,527,816			11,949,034			22,851,579			11,913,284

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)


	Six Months Ended December 31, 2015			Six Months Ended December 31, 2014
Increase (Decrease) in Net Assets Resulting from Operations:
Net Investment Income	$	4,785,940		$	4,195,415
Net Change in Unrealized Gain (Loss) on Investments and Open Swap Contract		(4,475,862	)		(9,639,794	)
Net Realized Gain (Loss) on:
Investments and Open Swap Contract		(8,650,336	)		(898,545	)
Foreign Currency Transactions		(101	)		(1,248	)
Net Realized Gain (Loss)		(8,650,437	)		(899,793	)
Net Increase (Decrease) in Net Assets Resulting from Operations		(8,340,359	)		(6,344,172	)
Dividends from Net Investment Income		(4,785,940	)		(4,195,415	)
Distributions from Other Sources		—			(608,097	)
Net Decrease in Net Assets Resulting from Distributions		(4,785,940	)		(4,803,512	)
Capital Share Transactions:
Repurchase of Common Stock Under Share Repurchase Program		(2,422,385	)		—
Issuance of Common Stock		—			3,744,400
Less Offering Costs and Underwriting Fees		—			(37,775	)
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions		(2,422,385	)		3,706,625
Total Increase (Decrease) in Net Assets		(15,548,684	)		(7,441,059	)
Net Assets at Beginning of Period		99,938,567			72,980,277
Net Assets at End of Period	$	84,389,883		$	65,539,218
Capital Share Activity:
Shares Repurchased Under Share Repurchase Program		(763,187	)		—
Shares Issued		—			506,000
Shares Outstanding at Beginning of Period		23,235,430			11,443,034
Shares Outstanding at End of Period		22,472,243			11,949,034

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Six Months Ended December 31, 2015			Six Months Ended December 31, 2014
Cash Flows from Operating Activities:
Net Increase (Decrease) in Net Assets Resulting from Operations	$	(8,340,359	)	$	(6,344,172	)
Adjustments to Reconcile Net Increase (Decrease) in Net Assets Resulting from Operations to Net Cash Provided by (Used in) Operating Activities
Purchases of Investments		(49,822,834	)		(64,942,614	)
Increase in Investments Due to PIK		(56,492	)		(202,235	)
Proceeds from Sale or Refinancing of Investments and Open Swap Contract		66,972,203			76,884,209
Net Realized (Gain) Loss on:
Investments and Open Swap Contract		8,650,336			898,545
Foreign Currency Transactions		101			1,248
Net Change in Unrealized (Gain) Loss on Investments and Open Swap Contract		4,475,862			9,639,794
Amortization and Accretion of Fixed Income Premiums and Discounts		(918,157	)		(547,966	)
Amortization and Accretion of Deferred Debt Issuance Premiums and Costs		68,115			18,396
Amortization of Deferred Credit Facility Fees		145,211			131,705
Change in Operating Assets and Liabilities
Receivable from Swap Counterparty		(1,320,000	)		—
Deposit with Broker		—			2,525,000
Interest Receivable		(297,888	)		(1,125,223	)
Principal Receivable		(112,212	)		173,180
Distributions Receivable		15,141			—
Due from Affiliates		381,496			(335,649	)
Due from Portfolio Investments		24,609			(46,114	)
Receivable on Open Swap Contract		(34,638	)		—
Prepaid Expenses		(118,662	)		(103,481	)
Other Assets		1,457,131			(39,935	)
Due to Affiliates		51,838			219,122
Accrued Liabilities		(36,434	)		(42,589	)
Deposit from Swap Counterparty		1,320,000			—
Due to Broker		—			(25,000,221	)
Payable for Investments Acquired		(15,020,000	)		(24,900,172	)
Interest Payable		(57,605	)		73,810
Other Liabilities		(148,873	)		(273,379	)
Net Cash Provided by (Used in) Operating Activities		7,277,889			(33,338,741	)
Cash Flows from Financing Activities:
Bank Overdraft		—			(821,316	)
Borrowings Under Credit Facility		101,392,335			146,085,449
Payments Under Credit Facility		(101,392,335	)		(120,703,080	)
Distributions Paid to Shareholders		(4,812,651	)		(4,769,610	)
Deferred Credit Facility Fees		—			(93,122	)
Payment of Offering Expenses and Underwriting Fees		(45,697	)		(196,064	)
Proceeds from Notes Payable		—			12,687,500
Proceeds from Issuance of Common Stock		—			3,744,400
Payment for Repurchase of Common Stock Under Share Repurchase Program		(2,422,385	)		—
Net Cash Provided by (Used in) Financing Activities		(7,280,733	)		35,934,157
Total Increase (Decrease) in Cash		(2,844	)		2,595,416
Cash Balance at Beginning of Period		3,736,563			—
Cash Balance at End of Period	$	3,733,719		$	2,595,416
Supplemental Disclosures of Non-Cash Financing Activities:
Distributions Declared, Not Yet Paid	$	786,529		$	800,585
Accrued Offering Expenses	$	1,200		$	20,689
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Period for Interest	$	1,822,608		$	1,955,566

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2015


Description and Industry⁽¹⁾	Type of Investment⁽²⁾			Par Amount/ Quantity		Cost		Fair Value		% of Net Asset Value
Control Investments⁽³⁾
Texas Westchester Financial, LLC Consumer Financing		Limited Liability Company Interests^ˆ			9,278	$	408,606	$	130,000		0.16	%
The Finance Company, LLC Consumer Financing		Senior Secured Term Loan, 15.00% (one month LIBOR plus 14.25%, 15.00% floor), 9/30/2016		$	4,195,915		4,195,915		4,094,793		4.85	%
		Limited Liability Company Interests			50		140,414		802,027		0.95	%
							4,336,329		4,896,820		5.80	%
Total Control Investments							4,744,935		5,026,820		5.96	%
Affiliate Investments⁽⁴⁾
Modular Process Control, LLC Energy Efficiency Services		Senior Secured Revolving Loan, 14.50% (one month LIBOR plus 13.50%, 14.50% floor), 3/28/2017⁽⁶⁾		$	1,068,959		1,065,740		800,000		0.95	%
		Senior Secured Term Loan, 15.50% (one month LIBOR plus 14.50%, 15.50% floor), 3/28/2017	⁽⁶⁾	$	4,900,000		4,759,936		—		—	%
		Senior Secured Term Loan – Tranche 2, 18.00% (one month LIBOR plus 17.00%, 18.00% floor), 3/28/2017⁽⁶⁾^,**		$	1,009,636		1,009,636		—		—	%
		Warrant for 14.50% of the outstanding Class B LLC Interests (at a $0.01 strike price), expires 3/28/2023^ˆ			1		288,000		—		—	%
							7,123,312		800,000		0.95	%
ProGrade Ammo Group, LLC Munitions		Senior Secured Revolving Loan, 9.25% (one month LIBOR plus 9.00%, 9.20% floor), 3/30/2016⁽⁶⁾^,ˆ		$	1,868,568		1,868,568		1,131,980		1.34	%
		Senior Secured Term Loan, 16.25% (one month LIBOR plus 16.00%, 16.20% floor), 3/30/2016⁽⁶⁾^,ˆ		$	4,843,750		4,843,750		—		—	%
		Warrants for 19.9% of the outstanding LLC interests (at a $10.00 strike price), expire 8/2/2018^ˆ			181,240		176,770		—		—	%
							6,889,088		1,131,980		1.34	%
SOLEX Fine Foods, LLC; Catsmo, LLC Food Distributors and Wholesalers		Senior Secured Term Loan, 12.39% (one month LIBOR plus 12.14%), 12/28/2016		$	3,861,696		3,828,923		3,817,287		4.52	%
		Limited Liability Company Interests^ˆ,⁽⁵⁾			1		290,284		—		—	%
		Warrant for 1.6% of the outstanding LLC interests (strike price $0.01), expires 12/31/2022^ˆ,⁽⁵⁾			1		58,055		—		—	%
							4,177,262		3,817,287		4.52	%
US Oilfield Company, LLC Oil and Gas Field Services		Senior Secured Revolving Loan, 12.75% (one month LIBOR plus 12.50%), 8/13/2017		$	522,174		522,174		522,174		0.62	%
		Senior Secured Term Loan A, 12.75% (one month LIBOR plus 12.50%), 8/13/2017		$	854,167		848,324		460,481		0.55	%
		Senior Secured Term Loan B, 12.75% (one month LIBOR plus 12.50%), 8/13/2017		$	4,678,972		4,640,417		2,522,434		2.99	%

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2015


Description and Industry⁽¹⁾	Type of Investment⁽²⁾		Par Amount/ Quantity		Cost			Fair Value			% of Net Asset Value
Affiliate Investments (continued)
		Warrant for 7.625% of the outstanding Class A voting LLC interests (strike price $0.01), expires 8/13/2024^ˆ		1	$	—		$	—			—	%
		Warrants for 4.788% of the outstanding Class B non-voting LLC interests (strike price $0.01), expire 8/13/2024^ˆ		4		—			—			—	%
						6,010,915			3,505,089			4.16	%
Total Affiliate Investments						24,200,577			9,254,356			10.97	%
Other Investments
310E53RD, LLC Real Estate Holding Company		Senior Secured Term Loan, 10.25% (one month LIBOR plus 10.00%, 10.15% floor, 16.00% cap) 7/1/2017	$	6,000,000		5,905,014			5,905,014			7.00	%
Ads Direct Media, Inc. Internet Advertising		Senior Secured Term Loan, 13.50% (one month LIBOR plus 13.00%, 13.50% floor) 10/9/2017,⁽⁶⁾	$	1,963,927		1,950,195			443,667			0.53	%
		Warrant for 3.25% of outstanding LLC interests (strike price $0.01) expires 10/9/2024^ˆ		1		—			—			—	%
						1,950,195			443,667			0.53	%
AP Gaming I, LLC Gambling Machine Manufacturer		Senior Secured Term Loan, 9.25% (one month LIBOR plus 8.25%, 9.25% floor) 12/20/2020	$	3,969,620		3,932,873			3,840,608			4.55	%
Aptean, Inc Enterprise Software Company		Unfunded Revolving Loan, 11.00%, 2/26/2019⁽⁷⁾	$	7,500,000		(811,393	)		(811,393	)		(0.96	)%
Attention Transit Advertising Systems, LLC Outdoor Advertising Services		Senior Secured Term Loan, 11.50%, 9/30/2016	$	1,799,260		1,799,260			1,906,676			2.26	%
Background Images, Inc. Equipment Rental Services		Senior Secured Term Loan – Term A, 14.75% (one month LIBOR plus 14.50%), 9/1/2016⁽⁶⁾	$	121,127		121,127			136,303			0.16	%
		Senior Secured Term Loan – Term B, 16.50% (one month LIBOR plus 16.25%), 9/1/2016⁽⁶⁾	$	446,465		446,465			455,037			0.54	%
						567,592			591,340			0.70	%
Bioventus, LLC Specialty Pharmaceuticals		Subordinated Secured Term Loan, 11.00% (one month LIBOR plus 10.00%, 11.00% floor), 4/10/2020	$	6,000,000		5,949,196			5,880,000			6.97	%
Davidzon Radio, Inc. Radio Broadcasting		Senior Secured Term Loan, 11.00% (one month LIBOR plus 10.00%, 11.00% floor), 3/31/2020	$	10,529,852		8,822,740			9,339,277			11.07	%
Fuse, LLC Television Programming		Senior Secured Note, 10.375%, 7/1/2019	$	7,000,000		7,036,716			5,285,000			6.26	%
GC Pivotal, LLC Data Connectivity Services Company		Unsecured Notes, 11.00%, 12/31/2020	$	3,164,000		3,171,430			3,110,423			3.69%

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2015


Description and Industry⁽¹⁾	Type of Investment⁽²⁾		Par Amount/ Quantity		Cost		Fair Value		% of Net Asset Value
Other Investments (continued)
General Cannabis Corp. Non-Residential Property Owner		Common Stock^ˆ		492,853	$	411,940	$	256,333		0.30	%
Granite Ridge Energy, LLC Power Generation		Common Stock^ˆ		60,000		12,975,000		14,625,000		17.33	%
GW Power, LLC and Greenwood Fuels WI, LLC Electric Services		Senior Secured Term Loan, 12.25% (one month LIBOR plus 12.00%, 12.16% floor), 3/31/2016	$	2,820,388		2,815,871		2,810,799		3.33	%
Infinite Aegis Group, LLC Healthcare Billing and Collections		Warrant for 2.0% of the outstanding LLC interests (at a $0.01 strike price), expires 8/1/2023^ˆ		1		107,349		—		—	%
JN Medical Corporation Biological Products		Senior Secured Term Loan, 11.25%, (one month LIBOR plus 11.00%, 11.25% floor, 12.00% cap), 6/30/2016	$	3,500,000		3,489,290		3,485,417		4.12	%
Lee Enterprises, Incorporated Daily and Weekly Newspaper Publisher		Senior Secured Notes, 9.50%, 3/15/2022	$	5,000,000		4,949,640		4,600,000		5.45	%
Liquidnet Holdings, Inc. Equities Trading Platform		Senior Secured Term Loan, 7.75% (one month LIBOR plus 6.75%, 7.75% floor), 5/22/2019	$	2,932,145		2,834,416		2,829,520		3.35	%
Luling Lodging, LLC Hotel Operator		Senior Secured Term Loan, 12.25% (one month LIBOR plus 12.00%, 12.25% floor), 12/17/2017	$	4,500,000		4,468,296		4,048,950		4.80	%
OPS Acquisitions Limited and Ocean Protection Services Limited^* Maritime Security Services		Senior Secured Term Loan, 12.50%, (one month LIBOR plus 12.00%, 12.50% floor), 3/4/2017	$	4,890,043		4,865,849		4,828,479		5.72	%
PEAKS Trust 2009-1^* Consumer Financing		Senior Secured Term Loan, 7.50%, (one month LIBOR plus 5.50%, 7.50% floor), 1/27/2020	$	2,741,340		2,375,767		2,256,123		2.67	%
PR Wireless, Inc. Wireless Communications		Senior Secured Term Loan, 10.00%, (one month LIBOR plus 9.00%, 10.00% floor), 6/27/2020	$	8,372,500		7,730,890		7,535,250		8.93	%
		Warrant for 101 shares (at a $0.01 strike price), expires 6/27/2024^ˆ		1		634,145		209,844		0.25	%
						8,365,035		7,745,094		9.18	%
Pristine Environments, Inc. Building Cleaning and Maintenance Services		Senior Secured Revolving Loan, 11.75% (one month LIBOR plus 11.50%, 11.70% floor), 3/31/2017	$	5,750,792		5,750,792		5,849,514		6.93	%
		Senior Secured Term Loan A, 12.75% (one month LIBOR plus 12.50%, 12.70% floor), 3/31/2017	$	1,536,719		1,532,453		1,571,244		1.86	%
		Senior Secured Term Loan B, 12.75% (one month LIBOR plus 12.50%, 12.70% floor), 3/31/2017	$	2,904,688		2,869,774		2,969,559		3.52	%
						10,153,019		10,390,317		12.31	%

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2015


Description and Industry⁽¹⁾	Type of Investment⁽²⁾			Par Amount/ Quantity		Cost		Fair Value		% of Net Asset Value
Other Investments (continued)
RiceBran Technologies Corporation Grain Mill Products		Senior Secured Revolving Loan, 11.50% (one month LIBOR plus 10.75%, 11.50% floor, 12.00% cap), 6/1/2018		$	1,383,261	$	1,331,627	$	1,330,236		1.58	%
		Senior Secured Term Loan, 11.50% (one month LIBOR plus 10.75%, 11.50% floor, 12.00% cap), 6/1/2018		$	2,500,000		2,369,939		2,412,500		2.85	%
		Warrants for 300,000 shares (at a $5.25 strike price), expire 5/12/2020^ˆ			300,000		39,368		55,500		0.07	%
							3,740,934		3,798,236		4.50	%
Sundberg America, LLC et al. Appliance Parts Distributor		Senior Secured Notes, 9.50%, 4/30/2020		$	8,000,000	$	7,960,459	$	8,000,000		9.48	%
The Selling Source, LLC Information and Data Services		Senior Secured Term Loan, 12.54%, 12/31/2017		$	3,957,921		3,946,674		3,312,384		3.93	%
US Shale Solutions, Inc. Oil and Gas Field Services		Senior Secured Note, 12.50%, 9/1/2017	⁽⁶⁾	$	9,000,000		6,641,958		1,704,300		2.02	%
		Warrants for 2.78 shares (at a $0.01 strike price), expire 9/1/2024^ˆ			9,000		114		—		—	%
							6,642,072		1,704,300		2.02	%
Total Other Investments							118,425,234		110,181,564		130.56	%
Total Investments						$	147,370,746	$	124,462,740		147.49	%


Counterparty	Instrument		# of Contracts		Notional		Cost		Fair Value		% of Net Asset Value
Open Swap Contract Liability
Reef Road Master Fund, Ltd.		Total Return Swap, Pay Total Return on 60,000 shares of Granite Ridge Energy, LLC, Receive 3.00% Fixed Rate, expires June 29, 2016		1	$	14,625,000	$	—	$	1,650,000		1.96	%

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2015

The following tables show the fair value of our portfolio of investments by geography and industry as of December 31, 2015. The below tables do not include our open swap contract.


	December 31, 2015
Geography	Investment at Fair Value (in millions)		Percentage of Net Assets
United States	$	119.7		141.77	%
United Kingdom		4.8		5.72
Total	$	124.5		147.49	%


	December 31, 2015
Industry	Investment at Fair Value (in millions)			Percentage of Net Assets
Power Generation	$	14.6			17.33	%
Building Cleaning and Maintenance Services		10.4			12.31
Radio Broadcasting		9.4			11.07
Appliance Parts Distributor		8.0			9.48
Wireless Communications		7.8			9.18
Consumer Financing		7.3			8.63
Real Estate Holdings Company		5.9			7.00
Specialty Pharmaceuticals		5.9			6.97
Television Programming		5.3			6.26
Oil and Gas Field Services		5.2			6.17
Maritime Security Services		4.8			5.72
Daily and Weekly Newspaper Publisher		4.6			5.45
Hotel Operator		4.1			4.80
Gambling Machine Manufacturer		3.8			4.55
Food Distributors and Wholesalers		3.8			4.52
Grain Mill Products		3.8			4.50
Biological Products		3.5			4.13
Information and Data Services		3.3			3.93
Data Connectivity Service Company		3.1			3.69
Equities Trading Platform		2.8			3.35
Electric Services		2.8			3.33
Outdoor Advertising Services		1.9			2.26
Munitions		1.1			1.34
Energy Efficiency Services		0.8			0.95
Equipment Rental Services		0.6			0.70
Internet Advertising		0.4			0.53
Non-Residential Property Owner		0.3			0.30
Healthcare Billing and Collections Servicer		—			—
Enterprise Software Company		(0.8	)		(0.96	)
Total	$	124.5			147.49	%

(1)

The Company’s investments are acquired in private transactions exempt from registration under the Securities Act of 1933 and, therefore, are generally subject to certain limitations on resale, and may be deemed to be “restricted securities” under the Securities Act of 1933.

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2015

(2)

A majority of the Company’s variable rate debt investments bear interest at a rate that is determined by reference to LIBOR (“London Interbank Offered Rate”) or the U.S. prime rate, and which is reset daily, monthly, quarterly or semiannually. For each debt investment, the Company has provided the interest rate in effect as of December 31, 2015. If no reference to LIBOR or the U.S. prime rate is made, the rate is fixed. A floor is the minimum rate that will be applied in calculating an interest rate. A cap is the maximum rate that will be applied in calculating an interest rate.

(3)

“Control Investments” are investments in those companies that are “Control Investments” of the Company, as defined in the Investment Company Act of 1940. A company is deemed to be a “Control Investment” of Full Circle Capital Corporation if Full Circle Capital Corporation owns more than 25% of the voting securities of such company.

(4)

“Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the Investment Company Act of 1940, which are not “Control Investments.” A company is deemed to be an “Affiliate” of Full Circle Capital Corporation if Full Circle Capital Corporation owns 5% or more, but less than 25%, of the voting securities of such company.

(5)

Full Circle Capital Corporation’s equity investments in SOLEX Fine Foods, LLC; Catsmo, LLC are held through its wholly owned subsidiary FC New Specialty Foods, Inc.

(6)

Investments were on non-accrual status as of December 31, 2015.

(7)

The negative fair value is the result of the unfunded commitment being valued below par. These amounts may or may not be funded to the borrowing party now or in the future. The cost basis of the loan reflects the unamortized portion of the “netback” received on the settlement date when the Company acquired the commitment.

Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the 1940 Act. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets.

Security pays all or a portion of its interest in kind.

Security is a nonincome-producing security.

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS
June 30, 2015


Description and Industry⁽¹⁾	Type of Investment⁽²⁾		Par Amount/ Quantity		Cost		Fair Value		% of Net Asset Value
Control Investments⁽³⁾
Takoda Resources Inc.* Geophysical Surveying and Mapping Services		Senior Secured Term Loan, 16.00%, 4/1/2016⁽⁹⁾	$	3,054,532	$	3,054,532	$	161,585		0.16	%
		Common Stock^ˆ,(5)		749		—		—		—	%
						3,054,532		161,585		0.16	%
Texas Westchester Financial, LLC Consumer Financing		Limited Liability Company Interests^ˆ		9,278		491,713		177,500		0.18	%
The Finance Company, LLC Consumer Financing		Senior Secured Term Loan, 15.00% (one month LIBOR plus 14.25%, 15.00% floor), 9/30/2015	$	4,195,915		4,187,977		4,204,167		4.21	%
		Limited Liability Company Interests		50		140,414		802,027		0.80	%
						4,328,391		5,006,194		5.01	%
TransAmerican Asset Servicing Group, LLC Asset Recovery Services		Senior Secured Revolving Loan, 12.00%, 7/25/2016⁽⁹⁾	$	3,563,246		3,534,960		466,785		0.47	%
		Limited Liability Company Interests^ˆ,(6)		75		—		—		—	%
						3,534,960		466,785		0.47	%
Total Control Investments						11,409,596		5,812,064		5.82	%
Affiliate Investments⁽⁴⁾
Modular Process Control, LLC Energy Efficiency Services		Senior Secured Revolving Loan, 14.50% (one month LIBOR plus 13.50%, 14.50% floor), 3/28/2017	$	1,297,884		1,294,200		1,175,320		1.18	%
		Senior Secured Term Loan, 15.50% (one month LIBOR plus 14.50%, 15.50% floor), 3/28/2017	$	4,900,000		4,743,125		2,296,957		2.30	%
		Senior Secured Term Loan – Tranche 2, 18.00% (one month LIBOR plus 17.00%, 18.00% floor), 3/28/2017**	$	953,143		953,143		191,550		0.19	%
		Warrant for 14.50% of the outstanding Class B LLC Interests (at a $0.01 strike price), expires 3/28/2023^ˆ		1		288,000		—		—	%
						7,278,468		3,663,827		3.67	%
ProGrade Ammo Group, LLC Munitions		Senior Secured Revolving Loan, 9.19% (one month LIBOR plus 9.00%, 9.19% floor), 3/30/2016⁽⁹⁾	$	1,821,447		1,821,447		1,821,447		1.82	%
		Senior Secured Term Loan, 16.19% (one month LIBOR plus 16.00%, 16.19% floor), 3/30/2016⁽⁹⁾	$	4,843,750		4,843,750		768,862		0.77	%
		Warrants for 19.9% of the outstanding LLC interests (at a $10.00 strike price), expire 8/2/2018^ˆ		181,240		176,770		—		—	%
						6,841,967		2,590,309		2.59	%
SOLEX Fine Foods, LLC; Catsmo, LLC Food Distributors and Wholesalers		Senior Secured Term Loan, 12.33% (one month LIBOR plus 12.14%), 12/28/2016	$	3,861,696		3,814,813		3,832,347		3.83	%
		Limited Liability Company Interests^ˆ,(7)		1		290,284		—		—	%
		Warrants for 1.6% of the outstanding LLC interests (strike price $0.01), expire 12/31/2022^ˆ,(7)		1		58,055		—		—	%
						4,163,152		3,832,347		3.83	%

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
June 30, 2015


Description and Industry⁽¹⁾	Type of Investment⁽²⁾		Par Amount/ Quantity		Cost			Fair Value			% of Net Asset Value
Affiliate Investments (continued)
US Oilfield Company, LLC Oil and Gas Field Services		Senior Secured Revolving Loan, 12.69% (one month LIBOR plus 12.50%), 8/13/2017	$	545,118	$	545,118		$	545,118			0.55	%
		Senior Secured Term Loan A, 12.69% (one month LIBOR plus 12.50%), 8/13/2017	$	854,167		847,155			840,415			0.84	%
		Senior Secured Term Loan B, 12.69% (one month LIBOR plus 12.50%), 8/13/2017	$	4,368,132		4,328,366			4,297,805			4.30	%
		Warrant for 7.625% of the outstanding Class A voting LLC interests (strike price $0.01), expires 8/13/2024^ˆ		1		—			—			—	%
		Warrants for 1.824% of the outstanding Class B non-voting LLC interests (strike price $0.01), expires 8/13/2024^ˆ		2		—			—			—
						5,720,639			5,683,338			5.69	%
West World Media, LLC Information and Data Services		Limited Liability Company Interests^ˆ,(8)		148,326		430,500			249,451			0.25	%
Total Affiliate Investments						24,434,726			16,019,272			16.03	%
Other Investments
Ads Direct Media, Inc. Internet Advertising		Senior Secured Term Loan, 13.50% (one month LIBOR plus 13.00%, 13.50% floor) 10/9/2017	$	2,406,250		2,387,763			2,392,294			2.39	%
		Warrant for 3.25% of outstanding LLC interests (strike price $0.01) expires 10/9/2024^ˆ		1		—			—			—	%
						2,387,763			2,392,294			2.39	%
AP Gaming I, LLC Gambling Machine Manufacturer		Unfunded Revolving Loan, 8.25%, 12/20/2018⁽¹⁰⁾	$	—		(146,988	)		(146,988	)		(0.15	)%
		Senior Secured Term Loan, 9.25% (one month LIBOR plus 8.25%, 9.25% floor) 12/20/2020	$	3,989,873		3,950,167			3,950,167			3.95	%
						3,803,179			3,803,179			3.80	%
Attention Transit Advertising Systems, LLC Outdoor Advertising Services		Senior Secured Term Loan, 11.50%, 9/30/2016	$	1,915,341		1,915,341			1,979,058			1.98	%
Background Images, Inc. Equipment Rental Services		Senior Secured Term Loan – Term A, 14.69% (one month LIBOR plus 14.50%), 7/31/2015	$	132,866		132,866			146,525			0.15	%
		Senior Secured Term Loan – Term B, 16.44% (one month LIBOR plus 16.25%), 7/31/2015	$	485,725		485,725			493,449			0.49	%
						618,591			639,974			0.64	%
Bioventus, LLC Specialty Pharmaceuticals		Subordinated Secured Term Loan, 11.00% (one month LIBOR plus 10.00%, 11.00% floor), 4/10/2020	$	6,000,000		5,944,426			5,970,000			5.97%

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
June 30, 2015


Description and Industry⁽¹⁾	Type of Investment⁽²⁾		Par Amount/ Quantity		Cost		Fair Value		% of Net Asset Value
Other Investments (continued)
Butler Burgher Group, LLC Real Estate Management Services		Senior Secured Revolving Loan, 13.50% (one month LIBOR plus 13.25%, 13.50% floor), 6/30/2017	$	750,000	$	745,237	$	800,000		0.80	%
		Senior Secured Term Loan, 13.50% (one month LIBOR plus 13.25%, 13.50% floor), 6/30/2017	$	7,349,264		7,302,515		7,716,728		7.72	%
						8,047,752		8,516,728		8.52	%
Davidzon Radio, Inc. Radio Broadcasting		Senior Secured Term Loan, 11.00% (one month LIBOR plus 10.00%, 11.00% floor), 3/31/2020	$	10,897,013	$	8,991,089	$	9,262,098		9.27	%
Fuse, LLC Television Programming		Senior Secured Note, 10.375%, 7/1/2019	$	7,000,000		7,041,962		5,775,000		5.78	%
GC Pivotal, LLC Data Connectivity Services Company		Unsecured Notes, 11.00%, 12/31/2020	$	3,164,000		3,171,910		3,171,910		3.17	%
General Cannabis Corp. Non-Residential Property Owner		Common Stock^ˆ		654,409		515,094		1,308,818		1.31	%
GK Holdings Inc. IT and Business Skill Training		Subordinated Secured Term Loan, 10.50% (one month LIBOR plus 9.50%, 10.50% floor), 1/20/2022	$	2,000,000		1,962,074		1,980,000		1.98	%
Good Technology Corporation Mobile Device Management		Senior Secured Note, 5.00%, 10/1/2017	$	10,000,000		8,201,173		8,845,667		8.85	%
		Warrants for 203.252 shares (at a $4.92 strike price), expire 9/30/2018^ˆ		10,000		2,289,400		2,289,400		2.29	%
						10,490,573		11,135,067		11.14	%
Granite Ridge Energy, LLC Power Generation		Common Stock^ˆ		60,000		12,975,000		12,975,000		12.98	%
GW Power, LLC and Greenwood Fuels WI, LLC Electric Services		Senior Secured Term Loan, 12.19% (one month LIBOR plus 12.00%, 12.16% floor), 3/31/2016	$	5,320,388		5,299,835		5,255,480		5.26	%
Infinite Aegis Group, LLC Healthcare Billing and Collections		Warrant for 2.0% of the outstanding LLC interests (at a $0.01 strike price), expires 8/1/2023^ˆ		1		107,349		—		—	%
JN Medical Corporation Biological Products		Senior Secured Term Loan, 11.25%, (one month LIBOR plus 11.00%, 11.25% floor, 12.00% cap), 6/30/2016	$	3,500,000		3,481,766		3,449,367		3.45	%
Lee Enterprises, Incorporated Daily and Weekly Newspaper Publisher		Senior Secured Notes, 9.50%, 3/15/2022	$	2,000,000		2,045,000		2,045,000		2.05	%
Luling Lodging, LLC Hotel Operator		Senior Secured Term Loan, 12.25% (one month LIBOR plus 12.00%, 12.25% floor), 12/17/2017	$	4,500,000		4,463,119		4,303,650		4.31	%
Medinet Investments, LLC Medical Liability Claims Factoring		Senior Secured Revolving Loan, 13.50%, (one month LIBOR plus 13.00%, 13.50% floor), 7/23/2017	$	188,313		183,211		103,083		0.10	%

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
June 30, 2015


Description and Industry⁽¹⁾	Type of Investment⁽²⁾		Par Amount/ Quantity		Cost		Fair Value		% of Net Asset Value
Other Investments (continued)
New Media West, LLC Cable TV/Broadband Services		Senior Secured Term Loan, 9.00%, 12/31/2017⁽⁹⁾	$	3,811,681	$	3,811,681	$	—		—	%
OPS Acquisitions Limited and Ocean Protection Services Limited* Maritime Security Services		Senior Secured Term Loan, 12.50%, (one month LIBOR plus 12.00%, 12.50% floor), 3/4/2017	$	5,950,000		5,913,412		5,968,246		5.97	%
PEAKS Trust 2009-1^* Consumer Financing		Senior Secured Term Loan, 7.50%, (one month LIBOR plus 5.50%, 7.50% floor), 1/27/2020	$	3,450,828		2,947,443		2,705,449		2.71	%
PR Wireless, Inc. Wireless Communications		Senior Secured Term Loan, 10.00%, (one month LIBOR plus 9.00%, 10.00% floor), 6/27/2020	$	8,415,000	$	7,618,897	$	7,573,500		7.58	%
		Warrant for 101 shares (at a $0.01 strike price), expires 6/27/2024^ˆ		1		634,145		378,675		0.38	%
						8,253,042		7,952,175		7.96	%
Pristine Environments, Inc. Building Cleaning and Maintenance Services		Senior Secured Revolving Loan, 11.70% (one month LIBOR plus 11.50%, 11.70% floor), 3/31/2017	$	5,614,310		5,614,310		5,863,211		5.87	%
		Senior Secured Term Loan A, 12.70% (one month LIBOR plus 12.50%, 12.70% floor), 3/31/2017	$	1,607,656		1,602,678		1,685,037		1.69	%
		Senior Secured Term Loan B, 12.70% (one month LIBOR plus 12.50%, 12.70% floor), 3/31/2017	$	3,026,563		2,979,285		3,172,039		3.17	%
						10,196,273		10,720,287		10.73	%
RiceBran Technologies Corporation Grain Mill Products		Senior Secured Revolving Loan, 11.50% (one month LIBOR plus 10.75%, 11.50% floor), 6/1/2018	$	1,000,000		939,362		939,362		0.94	%
		Senior Secured Term Loan, 11.50% (one month LIBOR plus 10.75%, 11.50% floor), 6/1/2018	$	2,500,000		2,348,330		2,348,330		2.35	%
		Warrants for 300,000 (at a $5.25 strike price), expires 5/12/2020^ˆ		300,000		39,368		27,000		0.03	%
						3,327,060		3,314,692		3.32	%
Sundberg America, LLC et al. Appliance Parts Distributor		Senior Secured Notes, 9.50%, 4/30/2020	$	8,000,000		7,960,112		7,960,112		7.97	%
The Selling Source, LLC Information and Data Services		Senior Secured Term Loan, 15.00%, 12/31/2017**	$	3,869,881		3,855,453		3,140,666		3.14	%
US Shale Solutions, Inc. Oil and Gas Field Services		Senior Secured Note, 12.50%, 9/1/2017⁽⁹⁾	$	9,000,000		6,641,957		4,455,000		4.46	%
		Warrants for 2.78 shares (at a $0.01 strike price), expire 9/1/2024^ˆ		9,000		114		90		0.00	%
						6,642,071		4,455,090		4.46	%
Total Other Investments						136,351,581		130,282,423		130.36	%
Total Investments					$	172,195,903	$	152,113,759		152.21	%

See notes to consolidated financial statements.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
June 30, 2015


Counterparty	Instrument		# of Contracts		Notional		Cost		Fair Value		% of Net Asset Value
Open Swap Contract
Reef Road Master Fund, Ltd.		Total Return Swap, Pay Total Return on 60,000 shares of Granite Ridge Energy, LLC, Receive 3.00% Fixed Rate, expires June 29, 2016		1	$	12,975,000	$	—	$	—		—	%

The following tables show the fair value of our portfolio of investments by geography and industry as of June 30, 2015.


	June 30, 2015
Geography	Investment at Fair Value (in millions)		Percentage of Net Assets
United States	$	145.9		146.08	%
United Kingdom		6.0		5.97
Canada		0.2		0.16
Total	$	152.1		152.21	%


	June 30, 2015
Industry	Investment at Fair Value (in millions)		Percentage of Net Assets
Power Generation	$	13.0		12.98	%
Mobile Device Management		11.1		11.14
Building Cleaning and Maintenance Services		10.7		10.73
Oil and Gas Field Services		10.1		10.14
Radio Broadcasting		9.3		9.27
Real Estate Management Services		8.5		8.52
Appliance Parts Distributor		8.0		7.97
Wireless Communications		8.0		7.96
Consumer Financing		7.9		7.90
Specialty Pharmaceuticals		6.0		5.97
Maritime Security Services		6.0		5.97
Television Programming		5.8		5.78
Electric Services		5.2		5.26
Hotel Operator		4.3		4.31
Food Distributors and Wholesalers		3.8		3.83
Gambling Machine Manufacturer		3.8		3.81
Energy Efficiency Services		3.6		3.67
Biological Products		3.4		3.45
Information and Data Services		3.4		3.39
Grain Mill Products		3.3		3.32
Data Connectivity Service Company		3.2		3.17
Munitions		2.6		2.59
Internet Advertising		2.4		2.39
Daily and Weekly Newspaper Publisher		2.0		2.05
IT and Business Skill Training		2.0		1.98

See notes to consolidated financial statements.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
June 30, 2015


	June 30, 2015
Industry	Investment at Fair Value (in millions)		Percentage of Net Assets
Outdoor Advertising Services		2.0		1.98
Non-Residential Property Owner		1.3		1.31
Equipment Rental Services		0.6		0.64
Asset Recovery Services		0.5		0.47
Geophysical Surveying and Mapping Services		0.2		0.16
Medical Liability Claims Factoring		0.1		0.10
Cable TV/Broadband Services		—		—
Total	$	152.1		152.21	%

(1)

(2)

A majority of the Company’s variable rate debt investments bear interest at a rate that is determined by reference to LIBOR (“London Interbank Offered Rate”) or the U.S. prime rate, and which is reset daily, monthly, quarterly or semiannually. For each debt investment, the Company has provided the interest rate in effect as of June 30, 2015. If no reference to LIBOR or the U.S. prime rate is made, the rate is fixed. A floor is the minimum rate that will be applied in calculating an interest rate. A cap is the maximum rate that will be applied in calculating an interest rate.

(3)

(4)

(5)

Full Circle Capital Corporation’s equity investment in Takoda Resources Inc. is held through its wholly owned subsidiary FC Takoda Holdings, LLC.

(6)

Full Circle Capital Corporation’s equity investment in TransAmerican Asset Servicing Group, LLC is held through its wholly owned subsidiary TransAmerican Asset Servicing Group, Inc.

(7)

Full Circle Capital Corporation’s equity investments in SOLEX Fine Foods, LLC; Catsmo, LLC are held through its wholly owned subsidiary FC New Specialty Foods, Inc.

(8)

A portion of Full Circle Capital Corporation’s investment in West World Media, LLC is held through its wholly owned subsidiary Full Circle West, Inc. The remainder of the LLC interests are held directly by Full Circle Capital Corporation.

(9)

Investments were on non-accrual status as of June 30, 2015.

(10)

The negative fair value is the result of the unfunded commitment being valued below par. These amounts may or may not be funded to the borrowing party now or in the future.

Security pays all or a portion of its interest in kind.

Security is a nonincome-producing security.

See notes to consolidated financial statements.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 1. Organization

References herein to “we”, “us” or “our” refer to Full Circle Capital Corporation and Subsidiaries (“Full Circle Capital” or the “Company”) unless the context specifically requires otherwise.

We were formed as Full Circle Capital Corporation, a Maryland corporation, on April 16, 2010 and were funded in an initial public offering, or IPO, completed on August 31, 2010. We are a non-diversified, closed-end investment company that has filed an election to be treated as a business development company, or BDC, under the Investment Company Act of 1940 (the “1940 Act”). As a BDC, we expect to qualify annually as a regulated investment company, or RIC, under Subchapter M of the Internal Revenue Code of 1989, as amended, which we refer to as the Code. We invest primarily in senior secured term debt issued by lower middle-market and middle-market companies. Our investment objective is to generate both current income and capital appreciation through debt and equity investments.

Note 2. Significant Accounting Policies

Use of Estimates and Basis of Presentation

The preparation of the accompanying Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reporting period. Changes in the economic environment, financial markets, creditworthiness of our portfolio companies and any other parameters used in determining these estimates could cause actual results to differ materially.

Interim financial statements are prepared in accordance with GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments, consisting solely of normal recurring accruals considered necessary for the fair presentation of financial statements for the interim period, have been included. The current period’s results of operations will not necessarily be indicative of results that ultimately may be achieved for the fiscal year ending June 30, 2016.

The June 30, 2015 and December 31, 2014 Consolidated Financial Statements were reclassified in order to be consistent with the new format used for the December 31, 2015 Consolidated Financial Statements.

Investment Classification

We are a non-diversified company within the meaning of the 1940 Act. We classify our investments by level of control. As defined in the 1940 Act, control investments are those where there is the ability or power to exercise a controlling influence over the management or policies of a company. Control is generally deemed to exist when a company or individual possesses or has the right to acquire within 60 days or less, a beneficial ownership of 25% or more of the voting securities of an investee company. Affiliated investments and affiliated companies are defined by a lesser degree of influence and are deemed to exist through the possession outright, or via the right to acquire within 60 days or less, beneficial ownership of 5% or more of the outstanding voting securities owned by another company or person.

Investments are recognized when we assume an obligation to acquire a financial instrument and assume the risks for gains or losses related to that instrument. Investments are derecognized when we assume an obligation to sell a financial instrument and forego the risks for gains or losses related to that instrument. Specifically, we record all security transactions on a trade date basis. Investments in other, non-security financial instruments, such as limited partnerships or private companies, are recorded on the basis of subscription date or redemption date, as applicable. Amounts for investments recognized or derecognized but not yet settled are reported as receivables for investments sold and payables for investments acquired, respectively, in the Consolidated Statements of Assets and Liabilities.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 2. Significant Accounting Policies – (continued)

Basis of Consolidation

Under the 1940 Act rules, the regulations pursuant to Article 6 of Regulation S-X and the American Institute of Certified Public Accountants’ Audit and Accounting Guide for Investment Companies, we are generally precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services and benefits to us. Our Consolidated Financial Statements include our accounts and the accounts of Full Circle West, Inc., FC New Media, Inc., TransAmerican Asset Servicing Group, Inc., FC New Specialty Foods, Inc., and FC Takoda Holdings, LLC, our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Valuation of Investments

In accordance with GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.

Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from an independent pricing service or broker-dealers or market makers. Debt and equity securities for which market quotations are not readily available or are not considered to be the best estimate of fair value are valued at fair value as determined in good faith by the Board of Directors (the “Board”). Because the Company expects that there will not be a readily available market value for many of the investments in the Company’s portfolio, it is expected that many of the Company’s portfolio investments’ values will be determined in good faith by the Board in accordance with a documented valuation policy that has been reviewed and approved by the Board and in accordance with GAAP. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

In determining fair value, Full Circle Capital’s Board uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Board. Unobservable inputs reflect the Board’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

Securities for which reliable market quotations are not readily available or for which the pricing source does not provide a valuation or methodology or provides a valuation or methodology that, in the judgment of the Board or the Audit Committee of the Board (the “Audit Committee”), does not represent fair value, are valued as follows:

The quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals responsible for the portfolio investment;

Preliminary valuation conclusions are then documented and discussed with the Company’s senior management. Independent third-party valuation firms are engaged by, or on behalf of, the Audit Committee to conduct independent appraisals or review management’s preliminary valuations or make their own independent assessment, for certain assets;

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 2. Significant Accounting Policies – (continued)

The Audit Committee discusses valuations and recommends the fair value of each investment in the portfolio in good faith based on the input of the Company and, where appropriate, the independent valuation firms; and

The Board then discusses the recommended valuations and determines in good faith the fair value of each investment in the portfolio based upon input from the Company’s senior management, estimates from the independent valuation firms and the recommendations of the Audit Committee.

GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree of judgment.

Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of valuation techniques and observable inputs can vary from investment to investment and is affected by a wide variety of factors, including the type of investment, whether the investment is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Board in determining fair value is greatest for investments categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause an investment to be reclassified to a lower level within the fair value hierarchy.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 2. Significant Accounting Policies – (continued)

Valuation Techniques

Senior and Subordinated Loans

The Company’s portfolio consists primarily of private debt instruments such as senior and subordinated loans. Investments for which market quotations are readily available (“Level 2 Debt”) are generally valued using market quotations, which are generally obtained from an independent pricing service or broker-dealers. For other debt investments (“Level 3 Debt”), market quotations are not available and other techniques are used to determine fair value. The Company considers its Level 3 Debt to be performing if the borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance or is otherwise not deemed to be impaired. In determining the fair value of the performing Level 3 Debt, the Board considers fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings, financial condition of the borrower, economic conditions, success and prepayment fees, and other relevant factors, both qualitative and quantitative. In the event that a Level 3 Debt instrument is not performing, as defined above, the Board may evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the Level 3 Debt instrument.

This evaluation will be updated no less than quarterly for Level 3 Debt instruments that are not performing, and more frequently for time periods where there are significant changes in the investor base or significant changes in the perceived value of the underlying collateral. The collateral value will be analyzed on an ongoing basis using internal metrics, appraisals, third-party valuation agents and other data as may be acquired and analyzed by management and the Board.

Investments in Private Companies

The Board determines the fair value of its investments in private companies where no market quotations are readily available (“Level 3 Private Companies”) by incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information, including comparable transactions, and performance multiples, among other factors, including work performed by third-party valuation agents. The Level 3 Private Companies investments can include Limited Liability Company interests, common stock and other equity investments. These nonpublic investments are included in Level 3 of the fair value hierarchy.

Warrants

The Board ascribes value to warrants based on fair value analyses that can include discounted cash flow analyses, option pricing models, comparable analyses and other techniques as deemed appropriate.

Publicly Traded Common Stock

Publicly traded common stock in an active market (“Level 1 Common Stock”) is valued based on unadjusted quoted prices in active markets for identical Level 1 Common Stock that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 Common Stock.

Swap Contracts

Derivative financial instruments such as swap contracts are valued based on discounted cash flow models and options pricing models, as appropriate. Models use observable data to the extent practicable. However, areas such as credit risk (both our own and that of the counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of derivative financial instruments at the valuation date.

The Company’s accounting policy is to not offset fair value amounts recognized for derivative financial instruments. The related assets and liabilities are presented gross in the Consolidated Statements of Assets and Liabilities. Any cash collateral payables or receivables associated with these instruments are not added to or netted against the fair value amounts of the derivative financial instruments.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 2. Significant Accounting Policies – (continued)

All derivative financial instruments are carried in assets when amounts are receivable by the Company and in liabilities when amounts are payable by the Company. During the period a contract is open, changes in the value of the contracts are recognized as unrealized appreciation or depreciation to reflect the fair value of the contract at the reporting date. When the contracts settle, mature, terminate, or are otherwise closed, the Company records realized gains or losses equal to the difference between the proceeds from (or cost of) the close-out of the contracts and the original contract price. Additionally, the Company records realized gains (losses) on open swap contracts when periodic payments are received or made at the end of each measurement period.

Fair Value of Financial Instruments

The carrying amounts of the Company’s financial instruments, including cash and accrued liabilities, approximate fair value due to their short-term nature. The carrying amounts and fair values of the Company’s long-term obligations are disclosed in Note 8.

Cash

The Company places its cash with Santander Bank, N.A. (“Santander Bank”) and, at times, cash held in such accounts may exceed the Federal Deposit Insurance Corporation insured limit. The Company may invest a portion of its cash in money market funds, within the limitations of the 1940 Act.

Revenue Recognition

Realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs. Realized gains or losses on the sale of investments are calculated using the specific identification method.

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with senior and subordinated secured loans are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a senior or subordinated secured loan, any unamortized loan origination, closing and/or commitment fees are recorded as interest income. Generally, when a payment default occurs on a loan in the portfolio, or if the Company otherwise believes that the issuer of the loan will not be able to make contractual interest payments, the Company may place the loan on non-accrual status and cease recognizing interest income on the loan until all principal and interest is current through payment, or until a restructuring occurs, and the interest income is deemed to be collectible. The Company may make exceptions to this policy if a loan has sufficient collateral value and is in the process of collection or is viewed to be able to pay all amounts due if the loan were to be collected on through an investment in or sale of the business, the sale of the assets of the business, or some portion or combination thereof.

Dividend income is recorded on the ex-dividend date.

Structuring fees, excess deal deposits, prepayment fees and similar fees are recognized as Other Income from Investments as earned, usually when received, and are non-recurring in nature. Other fee income, including administrative and unused line fees, is included in Other Income from Investments. Income from such sources was $1,094,404 and $426,908 for the three months ended December 31, 2015 and 2014, respectively, and $1,605,204 and $624,883 for the six months ended December 31, 2015 and 2014, respectively. Management fee income is included in Other Income from Non-Investment Sources. Income from such sources was $9,999 and $18,440 for the three months ended December 31, 2015 and 2014, respectively and $24,681 and $29,490 for the six months ended December 31, 2015 and 2014, respectively.

Change in unrealized gain (loss) on investments

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 2. Significant Accounting Policies – (continued)

From time to time, the Company may enter into a new transaction with a portfolio company as a result of the sale, merger, foreclosure, bankruptcy or other corporate event involving the portfolio company. In such cases, the Company may receive newly issued notes, securities and/or other consideration in exchange for, or resulting from, the cancellation of the instruments previously held by the Company with regard to that portfolio company. In such cases, the Company may experience a realized loss on the instrument being sold or cancelled, and, concurrently, an elimination of any previously recognized unrealized losses on the portfolio investment. Such elimination of unrealized loss is included on the Consolidated Statements of Operations as an increase in the Net Change in Unrealized Gain (Loss) on Investments.

Federal and State Income Taxes

The Company has elected to be treated as a RIC under subchapter M of the Code and operates in a manner so as to qualify for the tax treatment applicable to RICs. In order to qualify as a RIC, among other things, the Company is required to meet certain source of income and asset diversification requirements and timely distribute to its stockholders at least 90% of the sum of investment company taxable income (“ICTI”) including payment-in-kind (“PIK”), as defined by the Code, and net tax exempt interest income (which is the excess of our gross tax exempt interest income over certain disallowed deductions) for each taxable year in order to be eligible for tax treatment under subchapter M of the Code. Depending on the level of ICTI earned in a tax year, the Company may choose to carry forward ICTI in excess of current year dividend distributions into the next tax year. Any such carryover ICTI must be distributed prior to the 15^th day of the ninth month after the tax year-end.

If we do not distribute (or are not deemed to have distributed) each calendar year sum of (1) 98% of our net ordinary income for each calendar year, (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years (the “Minimum Distribution Amount”), we will generally be required to pay an excise tax equal to 4% of the amount by the which Minimum Distribution Amount exceeds the distributions for the year. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such taxable income, we accrue excise taxes, if any, on estimated excess taxable income as taxable income is earned using an annual effective excise tax rate. The annual effective excise tax rate is determined by dividing the estimated annual excise tax by the estimated annual taxable income.

Distributions

Distributions to common stockholders are recorded on the ex-dividend date. The amounts, if any, of our monthly distributions are approved by our Board each quarter and are generally based upon our management’s estimate of our earnings for the quarter. Net realized capital gains, if any, are distributed at least annually.

Guarantees and Indemnification Agreements

We follow ASC Topic 460 — Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“ASC 460”). The application of ASC 460 elaborates on the disclosure requirements of a guarantor in its interim and annual Consolidated Financial Statements about its obligations under certain guarantees that it has issued. It also requires a guarantor to recognize, at the inception of a guarantee, for those guarantees that are covered by ASC 460, the fair value of the obligation undertaken in issuing certain guarantees. ASC 460 did not have a material effect on the Consolidated Financial Statements. Refer to Note 5 for further discussion of guarantees and indemnification agreements.

Per Share Information

Basic and diluted earnings (loss) per common share is calculated using the weighted average number of common shares outstanding for the period presented. For the three and six months ended December 31, 2015 and 2014, basic and diluted earnings (loss) per share, were the same because there are no potentially dilutive securities outstanding.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 2. Significant Accounting Policies – (continued)

Organizational Expenses and Offering Costs

The Company did not incur organizational expenses for the three or six months ended December 31, 2015 or 2014. The Company complies with the requirements of ASC 340-10-S99-1, “Expenses of Offering”. Deferred offering costs consist principally of legal and audit costs incurred through the balance sheet date that are related to an offering of equity securities. Such costs are charged against the gross proceeds of the offering or will be charged to the Company’s operations if the offering is not completed. Offering expenses related to the Company’s July 14, 2014, March 30, 2015, and April 13, 2015 offerings were $1,442,780. Refer to Note 6.

Capital Accounts

Certain capital accounts including undistributed net investment income, accumulated net realized gain or loss, accumulated net unrealized appreciation or depreciation, and paid-in capital in excess of par, are adjusted, at least annually, for permanent differences between book and tax. In addition, the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from GAAP.

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-03, Interest — Imputation of Interest (Topic 835): Simplifying the Presentation of Debt Issuance Costs (“ASU 2015-03”). ASU 2015-03 requires companies to present debt issuance costs related to a recognized debt liability in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Public companies are required to apply ASU 2015-03 retrospectively for interim and annual reporting periods beginning after December 15, 2015 and early adoption is permitted. The Company has decided to early adopt this standard. As a result, deferred debt issuance costs of $753,860 and $833,541 at December 31, 2015 and June 30, 2015, respectively, are presented as a reduction to Notes Payable in the Consolidated Statements of Assets and Liabilities. In prior periods, the deferred debt issuance costs had been presented as assets on the Consolidated Statements of Assets and Liabilities.

In May 2015, the FASB issued ASU 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (“ASU 2015-07”). ASU 2015-07 removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. ASU 2015-07 is effective for fiscal years beginning after December 15, 2015. The Company does not believe this standard will have an impact on its Consolidated Financial Statements.

Note 3. Concentration of Credit Risk and Liquidity Risk

In the normal course of business, the Company maintains its cash balances in financial institutions, which at times may exceed federally insured limits. The Company is subject to credit risk to the extent any financial institution with which it conducts business is unable to fulfill contractual obligations on its behalf. Management monitors the financial condition of such financial institutions and does not anticipate any losses from these counterparties.

The Company utilizes two financial institutions to provide financing, which are essential to its business. There are a number of other financial institutions available that could potentially provide the Company with financing. Management believes that such other financial institutions would likely be able to provide similar financing with generally comparable terms. However, a change in financial institutions at the present time could cause a delay in service provisioning or result in potential lost opportunities, which could adversely affect operating results.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 4. Earnings (Loss) per Common Share — Basic and Diluted

The following information sets forth the computation of basic and diluted earnings (loss) per common share for the three and six months ended December 31, 2015 and December 31, 2014:


	Three months ended December 31,						Six months ended December 31,
	2015			2014			2015			2014
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Per Share Data⁽¹⁾:
Net Increase (Decrease) in Net Assets Resulting from Operations	$	(3,432,653	)	$	(6,572,870	)	$	(8,340,359	)	$	(6,344,172	)
Weighted average shares outstanding for period basic and diluted		22,527,816			11,949,034			22,851,579			11,913,284
Basic and diluted earnings (loss) per common share	$	(0.15	)	$	(0.55	)	$	(0.36	)	$	(0.53	)

(1)

Per share data based on weighted average shares outstanding.

Note 5. Related Party Agreements and Transactions

Investment Advisory Agreement

On June 22, 2015, the Board re-approved the investment advisory agreement (the “Investment Advisory Agreement”) with Full Circle Advisors, LLC (the “Adviser”) under which the Adviser, subject to the overall supervision of our Board, manages the day-to-day operations of, and provides investment advisory services to, us. Under the terms of the Investment Advisory Agreement, our Adviser: (i) determines the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes, (ii) identifies, evaluates and negotiates the structure of the investments we make (including performing due diligence on our prospective portfolio companies); and (iii) closes and monitors investments we make.

The Adviser’s services under the Investment Advisory Agreement are not exclusive, and it is free to furnish similar services to other entities so long as its services to us are not impaired. For providing these services, the Adviser receives a fee from us consisting of two components, a base management fee and an incentive fee.

The base management fee is calculated at an annual rate of 1.75% of our gross assets, as adjusted. For services rendered under the Investment Advisory Agreement, the base management fee is payable quarterly in arrears. The base management fee is calculated based on the average value of our gross assets, as adjusted, at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. Base management fees for any partial month or quarter will be appropriately prorated.

The total base management fees earned by the Adviser for the three and six months ended December 31, 2015 were $548,857 and $1,160,786, respectively. The total base management fee payable to the Adviser as of December 31, 2015 was $548,857, after reflecting payment of $1,192,536 for the six months ended December 31, 2015 and is included in the Consolidated Statements of Assets and Liabilities in Due to Affiliates. The total base management fees earned by the Adviser for the three and six months ended December 31, 2014 were $581,329 and $1,153,887, respectively.

The incentive fee has two parts. The first part of the incentive fee (the “Income incentive fee”) is calculated and payable quarterly in arrears based on our pre-incentive fee net investment income for the immediately preceding calendar quarter. For this purpose, pre-incentive fee net investment income means interest income, dividend income and any other income (including any other fees (other than fees for providing managerial assistance), such as prepayment fees, management fee income and similar fees that we

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 5. Related Party Agreements and Transactions – (continued)

receive from portfolio companies, including administrative and unused line fees accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, expenses payable under the Administration Agreement to Full Circle Service Company (the “Administrator”), and any interest expenses and dividends paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with pay in kind interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-incentive fee net investment income does not include organizational costs or any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income, expressed as a rate of return on the value of our net assets at the end of the immediately preceding calendar quarter, is compared to a hurdle of 1.75% per quarter (7.00% annualized). Our net investment income used to calculate this part of the incentive fee is also included in the amount of our gross assets used to calculate the 1.75% base management fee. We pay the Adviser an incentive fee with respect to our pre-incentive fee net investment income in each calendar quarter as follows:

•

no incentive fee in any calendar quarter in which our pre-incentive fee net investment income does not exceed the hurdle of 1.75%;

•

100% of our pre-incentive fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle but is less than 2.1875% in any calendar quarter (8.75% annualized). We refer to this portion of our pre-incentive fee net investment income (which exceeds the hurdle but is less than 2.1875%) as the “catch-up.” The “catch-up” is meant to provide our investment adviser with 20% of our pre-incentive fee net investment income as if a hurdle did not apply if this net investment income exceeds 2.1875% in any calendar quarter; and

•

20% of the amount of our pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized) is payable to the Adviser (once the hurdle is reached and the catch-up is achieved, 20% of all pre-incentive fee investment income thereafter is allocated to the Adviser).

These calculations are appropriately prorated for any period of less than three months and adjusted for any share issuances or repurchases during the current quarter.

The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, as of the termination date) and will equal 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees with respect to each of the investments in our portfolio, provided that, the incentive fee determined as of December 31, 2010 was calculated for a period of shorter than twelve calendar months to take into account any realized capital gains computed net of all realized capital losses and unrealized capital depreciation from the inception of Full Circle Capital. There were no incentive fees earned on realized capital gains for the three and six months ended December 31, 2015 and 2014.

Income incentive fees of $534,585 and $1,016,362 were earned by the Adviser for the three and six months ended December 31, 2015, respectively, and the total income incentive fee payable to the Adviser as of December 31, 2015 was $534,585, after reflecting payment of $944,127 during the six months ended December 31, 2015, and is included in the Consolidated Statements of Assets and Liabilities in Due to Affiliates. Income incentive fees of $526,242 and $916,092 were earned by the Adviser for the three and six months ended December 31, 2014, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 5. Related Party Agreements and Transactions – (continued)

The Adviser agreed to reimburse the Company for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses, in excess of 1.50% of our net assets, beginning with our fiscal quarter ended September 30, 2014 through the end of our fiscal year 2015. For our fiscal year 2016 and beyond, the Adviser had agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses, in excess of 1.75% of our net assets; however, on February 11, 2016, our Board of Directors authorized the termination of the Adviser’s operating expense reimbursement obligations, effective as of January 1, 2016. The expense reimbursements from the Adviser for the three and six months ended December 31, 2015 were $231,208 and $506,364, respectively. The total expense reimbursement receivable from the Adviser as of December 31, 2015 was $231,208, after reflecting payment of $434,451 for the six months ended December 31, 2015 and is included in Due from Affiliates on the Consolidated Statements of Assets and Liabilities. The expense reimbursements from the Adviser for the three and six months ended December 31, 2014 were $248,373 and $531,047, respectively.

The Adviser had agreed to reimburse the Company for any operating expenses, excluding interest expenses, investment advisory and management fees, and organizational and offering expenses, in excess of 2% of our net assets for the first twelve months following the completion of the initial public offering, which occurred on August 31, 2010.

For the periods commencing on April 1, 2015 and ending on June 30, 2015, and commencing on July 1, 2015 and ending on June 30, 2016, Full Circle Advisors had agreed to waive the portion of the base management fees and incentive fees that Full Circle Advisors would otherwise be entitled to receive pursuant to our Investment Advisory Agreement to the extent required in order for Full Circle Capital to earn net investment income sufficient to support the distribution payment on the shares of our common stock outstanding on the relevant record date for each monthly distribution as then declared by our board of directors; however, on February 11, 2016, our Board of Directors authorized the termination of the Adviser’s management fee and incentive fee waiver, effective as of January 1, 2016. For the year to date period ending December 31, 2015, $214,129 of the base management fee waiver was accrued for and is included in the management fee waiver and expense reimbursement line in the Consolidated Statements of Operations.

Administration Agreement

On June 22, 2015, the Board re-approved the Administration Agreement with the Administrator under which the Administrator, among other things, furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities. Under the Administration Agreement, the Administrator also performs, or oversees the performance of, our required administrative services, which include, among other things, being responsible for the financial records which we are required to maintain and preparing reports to our stockholders. In addition, the Administrator assists us in determining and publishing our net asset value, oversees the preparation and filing of our tax returns and the printing and dissemination of reports to our stockholders, and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. Payments under the Administration Agreement are equal to an amount based upon our allocable portion of Full Circle Service Company’s overhead in performing its obligations under the Administration Agreement, including rent, the fees and expenses associated with performing compliance functions and our allocable portion of the compensation of our chief financial officer and our allocable portion of the compensation of any administrative support staff employed by the Administrator, directly or indirectly. Under the Administration Agreement, the Administrator will also provide on our behalf managerial assistance to those portfolio companies that request such assistance. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other party.

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NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 5. Related Party Agreements and Transactions – (continued)

The Administrator and Conifer Asset Solutions LLC (“Conifer” or the “Sub-Administrator”) may also provide administrative services to the Adviser. As a result, the Adviser also reimburses the Administrator and/or the Sub-Administrator for its allocable portion of the Administrator’s and/or Sub-Administrator’s overhead, including rent, the fees and expenses associated with performing compliance functions for Full Circle Advisors, and its allocable portion of the compensation of any administrative support staff. To the extent the Adviser or any of its affiliates manage other investment vehicles in the future, no portion of any administrative services provided by the Administrator to such other investment vehicles will be charged to us.

The Administration Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of its duties or by reason of the reckless disregard of its duties and obligations, the Administrator and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from Full Circle Capital for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of the Administrator’s services under the Administration Agreement or otherwise as administrator for Full Circle Capital.

Sub-Administration Agreement

The Administrator has engaged Conifer to provide certain administrative services to us. In exchange for providing such services, the Administrator pays Conifer an asset-based fee with a $200,000 annual minimum as adjusted for any reimbursement of expenses. This asset-based fee will vary depending upon our gross assets, as adjusted, as follows:


Gross Assets		Fee
first $150 million of gross assets		20 basis points (0.20%)
next $150 million of gross assets		15 basis points (0.15%)
next $200 million of gross assets		10 basis points (0.10%)
in excess of $500 million of gross assets		5 basis points (0.05%)

For the three and six months ended December 31, 2015, the Company incurred $204,082 and $399,364, respectively, of expenses under the Administration Agreement, $66,891 and $138,729, respectively, of which were earned by the Sub-Administrator and $76,307 and $152,613, respectively, were paid for officers’ compensation. The remaining $60,884 and $108,022, respectively, were recorded as an Allocation of Overhead Expenses in the Consolidated Statements of Operations.

For the three and six months ended December 31, 2014, the Company incurred $179,470 and $355,147, respectively, of expenses under the Administration Agreement, $66,595 and $129,804, respectively, of which were earned by the Sub-Administrator and $75,913 and $151,826, respectively, were paid for officers’ compensation. The remaining $36,962 and $73,517, respectively, were recorded as an Allocation of Overhead Expenses in the Consolidated Statements of Operations.

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NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 5. Related Party Agreements and Transactions – (continued)

FC Capital Investment Partners, LLC

On June 4, 2014, we formed FC Capital Investment Partners, LLC (“FCCIP”), a multiple series private fund, for which we serve as the managing member and investment adviser. FCCIP was formed as a Delaware limited liability company and operates under a Limited Liability Company agreement dated June 13, 2014. FCCIP closed its first series on June 17, 2014, raising approximately $5.6 million in capital from investors. FCCIP closed its second series on September 25, 2014, raising approximately $10.0 million in capital from investors. On November 30, 2015, the second series ceased investing and was liquidated after full realization of proceeds from its investment strategy. We may co-invest in certain portfolio investments from time to time with one or more series issued by FCCIP where we determine that the aggregate available investment opportunity exceeds what we believe would be appropriate for us to acquire directly, subject to certain conditions. During the three and six months ended December 31, 2015, the Company recognized $9,999 and $24,681, respectively, in net management fee income related to the services performed for FCCIP. Such amounts are included in Other Income from Non-Investment Sources on the Consolidated Statements of Operations.

Managerial Assistance

As a business development company, we offer, and must provide upon request, managerial assistance to certain of our portfolio companies. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. With regard to the Control Investments in Texas Westchester Financial, LLC and The Finance Company, LLC, the Company has provided managerial assistance during the period for which no fees were charged. Our Chairman, John Stuart, currently serves as a director of The Finance Company, LLC.

Note 6. Equity Offerings, Related Expenses, and Other Stock Issuances

Equity offerings are included in the Company’s capital accounts on the date that the Company assumes the obligation to issue the shares. For purposes of the calculation of Net Asset Value Per Share, Earnings Per Share and Per Share Data, the related shares are treated as outstanding on the same date that the equity offering is included in the Company’s capital accounts.

Offering expenses are generally charged against paid-in capital in excess of par. The proceeds raised, the related underwriting fees, the offering expenses, and the price at which common stock was issued, since inception, are detailed in the following table:


Issuances of Common Stock	Number of Shares Issued			Gross Proceeds Raised, Net Assets Acquired and Dividends Reinvested		Underwriting Fees			Offering Expenses		Gross Offering Price
April 16, 2010		100		$	1,500	$	—		$	—	$	15.00 per/share
August 31, 2010		4,191,415	⁽¹⁾	$	42,425,564	$	—		$	—	$	10.13 per/share	⁽²⁾
August 31, 2010		2,000,000		$	18,000,000	$	1,350,000		$	1,052,067	$	9.00 per/share
November 27, 2012		1,350,000		$	10,665,000	$	533,250		$	153,330	$	7.90 per/share
January 14, 2014		1,892,300	⁽³⁾	$	13,492,099	$	539,684		$	261,994	$	7.13 per/share
February 27, 2014		630,000		$	4,920,300	$	—	⁽⁴⁾	$	47,236	$	7.81 per/share
June 19, 2014		1,351,352		$	10,000,005	$	—	⁽⁴⁾	$	44,826	$	7.40 per/share
July 14, 2014		506,000		$	3,744,400	$	—	⁽⁴⁾	$	37,775	$	7.40 per/share
March 30, 2015		11,205,921		$	39,220,723	$	952,214	⁽⁵⁾	$	449,446	$	3.50 per/share
April 13, 2015		80,475		$	281,663	$	—		$	3,345	$	3.50 per/share

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NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 6. Equity Offerings, Related Expenses, and Other Stock Issuances – (continued)

(1)

Includes 403,662 shares that were issued on September 30, 2010 upon the expiration of the overallotment option granted to the underwriters in connection with our initial public offering. Such shares were deemed to be outstanding at August 31, 2010.

(2)

Based on weighted average price assigned to shares.

(3)

Includes 242,300 overallotment shares that were granted to the underwriters in connection with our January 14, 2014 follow-on offering. The underwriters exercised their option to purchase additional shares on January 27, 2014. Such shares were deemed to be outstanding at January 14, 2014.

(4)

This was a registered offering placed directly with investors.

(5)

Shares were issued pursuant to a rights offering. The dealer manager received $952,214 for services provided in connection with the rights offering.

On August 26, 2015, the Board of Directors authorized the purchase of an additional 1 million shares to provide for the purchase of up to 2 million shares of the outstanding common stock as part of the share repurchase program. Under the repurchase program, we may, but are not obligated to, repurchase our outstanding common stock in the open market from time to time. The timing and number of shares to be repurchased in the open market will depend on a number of factors, including market conditions and alternative investment opportunities. In addition, any repurchases will be conducted in accordance with the 1940 Act. The number of shares repurchased, the repurchase price, cost and weighted average discount per share is summarized in the following table:


Repurchase of Common Stock	Number of Shares Repurchased		Average Repurchase Price		Total Cost		Weighted Average Discount Per Share
Three months ended September 30, 2015		472,407	$	3.19 per/share	$	1,504,819		25.9	%⁽¹⁾
Three months ended December 31, 2015		290,780	$	3.16 per/share	$	917,566		21.1	%⁽²⁾

(1)

The average discount rate per share, based upon the Net Asset Value per share at June 30, 2015, is weighted based upon the total shares repurchased during the period.

(2)

The average discount rate per share, based upon the Net Asset Value per share at September 30, 2015, is weighted based upon the total shares repurchased during the period.

As of February 16, 2016, the Company has repurchased an aggregate of 763,187 shares under the share repurchase program at the weighted average price of $3.17 per share, resulting in $2.4 million of cash paid, under the program.

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NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 7. Financial Highlights


	Three months ended December 31, 2015			Three months ended December 31, 2014
	(Unaudited)			(Unaudited)
Per Share Data⁽¹⁾:
Net asset value at beginning of period	$	4.00		$	6.24
Accretion from share repurchases⁽⁴⁾		0.01			—
Offering costs		—			—
Net investment income (loss)		0.11			0.19
Net change in unrealized gain (loss)		0.14			(0.64	)
Net realized gain (loss)		(0.39	)		(0.11	)
Dividends from net investment income		(0.11	)		(0.19	)
Return of capital		—			(0.01	)
Net asset value at end of period	$	3.76		$	5.48
Per share market value at end of period	$	2.47		$	4.52
Total return based on market value		(16.22)% ⁽⁶⁾			(26.37)% ⁽⁶⁾
Total return based on net asset value		(2.12)% ⁽⁶⁾			(8.59)% ⁽⁶⁾
Shares outstanding at end of period		22,472,243			11,949,034
Weighted average shares outstanding for period		22,527,816			11,949,034
Ratio/Supplemental Data:
Net assets at end of period	$	84,389,883		$	65,539,218
Average net assets	$	91,674,106		$	70,038,296
Annualized ratio of gross operating expenses to average net assets⁽⁷⁾		11.65	%		15.90	%
Annualized ratio of net operating expenses to average net assets⁽⁷⁾		10.68	%		14.50	%
Annualized ratio of net investment income (loss) to average net assets⁽⁷⁾		10.22	%		13.33	%
Annualized ratio of net operating expenses excluding management fees (net of waiver), incentive fees, and interest expense to average net assets⁽⁷⁾		1.74	%		1.55	%
Portfolio Turnover⁽⁸⁾		15	%		18	%

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NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 7. Financial Highlights – (continued)


	Six months ended December 31, 2015			Six months ended December 31, 2014
	(Unaudited)			(Unaudited)
Per Share Data⁽¹⁾:
Net asset value at beginning of period	$	4.30		$	6.38
Accretion (dilution) from offering(s)⁽³⁾		—			0.04
Accretion from share repurchases⁽⁴⁾		0.03			—
Offering costs		—			0.00
Net investment income (loss)		0.21			0.35
Net change in unrealized gain (loss)		(0.19	)		(0.81	)
Net realized gain (loss)		(0.38	)		(0.08	)
Dividends from net investment income		(0.21	)		(0.35	)
Return of capital		—			(0.05	)
Net asset value at end of period	$	3.76		$	5.48
Per share market value at end of period	$	2.47		$	4.52
Total return based on market value		(25.56)% ⁽⁶⁾			(37.87)% ⁽⁶⁾
Total return based on net asset value		(5.92)% ⁽⁶⁾			(7.79)% ⁽⁶⁾
Shares outstanding at end of period		22,472,243			11,949,034
Weighted average shares outstanding for period		22,851,579			11,913,284
Ratio/Supplemental Data:
Net assets at end of period	$	84,389,883		$	65,539,218
Average net assets	$	95,600,248		$	72,762,729
Annualized ratio of gross operating expenses to average net assets⁽⁷⁾		11.42	%		14.54	%
Annualized ratio of net operating expenses to average net assets⁽⁷⁾		9.93	%		13.10	%
Annualized ratio of net investment income (loss) to average net assets⁽⁷⁾		9.93	%		11.44	%
Annualized ratio of net operating expenses excluding management fees (net of waiver), incentive fees, and interest expense to average net assets⁽⁷⁾		1.75	%		1.51	%
Portfolio Turnover⁽⁸⁾		36	%		40	%

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NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 7. Financial Highlights – (continued)


	Year Ended June 30, 2015			Year Ended June 30, 2014			Year Ended June 30, 2013			Year Ended June 30, 2012			For the period from August 31, 2010 (commencement of operations) to June 30, 2011
Per Share Data⁽¹⁾⁽²⁾:
Net asset value at beginning of period	$	6.38		$	8.01		$	8.59		$	9.08		$	9.40
Accretion (dilution) from offering(s)⁽³⁾		(0.92	)		0.03			(0.18	)		—			—
Offering costs		(0.06	)		(0.04	)		(0.02	)		—			(0.04	)
Net investment income (loss)⁽⁹⁾		0.63			0.71			0.77			0.78			0.70
Net change in unrealized gain (loss)		(0.51	)		(1.36	)		0.37			(0.32	)		(0.29	)
Net realized gain (loss)		(0.51	)		(0.11	)		(0.60	)		(0.03	)		0.06
Dividends from net investment income		(0.63	)		(0.69	)		(0.78	)		(0.80	)		(0.75	)
Return of capital		(0.08	)		(0.17	)		(0.14	)		(0.12	)		—
Net asset value at end of period	$	4.30		$	6.38		$	8.01		$	8.59		$	9.08
Per share market value at end of period	$	3.57		$	7.81		$	7.83		$	7.65		$	7.90
Total return based on market value		(46.78)% ⁽⁶⁾			11.51% ⁽⁶⁾			15.12% ⁽⁶⁾			8.71% ⁽⁶⁾			(4.03)% ⁽⁵⁾
Total return based on net asset value		(21.53)% ⁽⁶⁾			(11.00	)%⁽⁶⁾		4.94	%⁽⁶⁾		6.20% ⁽⁶⁾			5.62% ⁽⁵⁾
Shares outstanding at end of period		23,235,430			11,443,034			7,569,382			6,219,382			6,219,382
Weighted average shares outstanding for period		14,803,637			8,698,814			7,018,286			6,219,382			6,206,824
Ratio/Supplemental Data:
Net assets at end of period	$	99,938,567		$	72,980,277		$	60,644,039		$	53,442,785		$	56,474,006
Average net assets	$	78,137,174		$	64,360,541		$	57,842,601		$	55,531,518		$	57,455,987
Annualized ratio of gross operating expenses to average net assets⁽⁷⁾		13.51	%		12.11	%		11.52	%		9.56	%		8.49	%
Annualized ratio of net operating expenses to average net assets⁽⁷⁾		11.69	%		12.11	%		11.52	%		8.99	%		7.34	%
Annualized ratio of net investment income (loss) to average net assets⁽⁷⁾		11.02	%		9.37	%		9.30	%		8.70	%		9.29	%
Annualized ratio of net operating expenses excluding management fees (net of waiver), incentive fees, and interest expense to average net assets⁽⁷⁾		1.51	%		3.04	%		3.53	%		3.15	%		2.00	%
Portfolio Turnover⁽⁸⁾		74	%		88% ⁽¹⁰⁾			73% ⁽¹⁰⁾			58% ⁽¹⁰⁾			54	%⁽¹⁰⁾

(1)

Financial highlights are based on weighted average shares outstanding.

(2)

Financial highlights for the period from April 16, 2010 (inception) through June 30, 2010 are not presented as the Company’s operations were limited to organization and offering activities only.

(3)

Accretion and dilution from offering(s) is based on the net change in net asset value from each follow-on offering.

(4)

Accretion from share repurchases during the period is based on the net change in net asset value from the share repurchases.

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NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 7. Financial Highlights – (continued)

(5)

Total return based on market value is based on the change in market price per share assuming an investment at the initial public offering price of $9.00 per share and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in the period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. The total returns are not annualized.

(6)

Total return based on market value is based on the change in market price per share and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in the period and assumes that dividends are reinvested in accordance with our dividend reinvestment plan. The total returns are not annualized.

(7)

Financial highlights for periods of less than one year are annualized and the ratios of gross and net operating expenses to average net assets and net investment income (loss) to average net assets are adjusted accordingly. Non-recurring expenses were not annualized. For the period from August 31, 2010 (commencement of operations) to June 30, 2011 the Company incurred $102,609 of organizational expenses, which were deemed to be non-recurring.

(8)

Portfolio Turnover is not annualized.

(9)

Net investment income (loss) per share is calculating based on the beginning of year and end of year shares outstanding.

(10)

Unaudited

Note 8. Long Term Liabilities

Line of Credit

On June 3, 2013, the Company entered into a credit facility (the “Credit Facility”) with Santander Bank. The facility size was originally $32.5 million and replaced the Company’s First Capital Credit Facility. The Credit Facility was subsequently increased to $45.0 million on November 6, 2013. On September 12, 2014, the Company entered into an amendment to our Credit Facility with Santander Bank, N.A. to give the Company the option to increase the size of the facility from $45.0 million to $60.0 million and to provide additional criteria for eligibility of loans under the borrowing base under the credit facility. The Company has not exercised its option to expand the facility as of December 31, 2015.

The Credit Facility matures on June 3, 2016 and bears interest based on a tiered rate structure, depending upon utilization, ranging from LIBOR (one month, two month or three month, depending on the Company’s option) plus 3.25% to 4.00% per annum, or from Santander Bank’s prime rate plus 1.25% to 2.00% per annum, based on the Company’s election. As of December 31, 2015, one month LIBOR, two month LIBOR, and three month LIBOR, respectively, were: 0.43%, 0.51%, and 0.61%. As of December 31, 2015, the Prime Rate was 3.50%. In addition, a fee of 0.50% to 1.00% per annum, depending on utilization, is charged on unused amounts under the Credit Facility. The Credit Facility is secured by all of the Company’s assets. Under the Credit Facility, the Company has made certain customary representations and warranties, and is required to comply with various covenants, reporting requirements and other customary requirements, including a minimum balance sheet leverage ratio, for similar credit facilities. The Credit Facility includes usual and customary events of default for credit facilities of this nature.

The fees and expenses associated with opening and expanding the Credit Facility are being amortized over the term of the Credit Facility in accordance with ASC 470, Debt. As of December 31, 2015, of the total $763,984 of fees and expenses incurred, $122,434 remains to be amortized and is reflected as Deferred Credit Facility Fees on the Consolidated Statements of Assets and Liabilities.

At December 31, 2015 and June 30, 2015, the Company did not have any outstanding borrowings under the Credit Facility.

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NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 8. Long Term Liabilities – (continued)

Notes Payable

On June 28, 2013, the Company issued $21,145,525 in aggregate principal amount of 8.25% Notes due June 30, 2020 (the “Notes”) (including a partial exercise of the underwriters’ overallotment option in July 2013) for net proceeds of $20,038,250 after deducting underwriting commissions of approximately $860,822 and offering expenses of $246,453.

On July 14, 2014, we closed an offering of our 8.25% fixed-rate notes due 2020. The Notes offering consisted of $12,500,000 in aggregate principal amount of the Notes. The Notes were sold at price of $25.375 plus accrued interest from June 30, 2014, a premium to par value of $25.00 per Note. The sale of the notes resulted in total gross proceeds of $12,687,500. The Notes are a further issuance of, rank equally in right of payment with, and form a single series with the $21,145,525 of currently outstanding Notes.

The offering expenses and underwriting commissions are being amortized over the term of the notes in accordance with ASC 470, Debt. Additionally, in accordance with ASU 2015-03, debt issuance costs related to the Notes are reported on the Consolidated Statements of Assets and Liabilities as a direct deduction from the face amount of the Notes. As such, as of December 31, 2015, of the total $1,150,940 issuance costs incurred, $753,860 remains to be amortized and is included in, and offsets, the Notes Payable balance in the Consolidated Statements of Assets and Liabilities. Additionally, $146,938 of the $187,500 premium related to the July 14, 2014 issuance remains unamortized and is included in the Notes Payable balance in the Consolidated Statements of Assets and Liabilities.

As of June 30, 2015, of the total $1,150,940 issuance costs incurred, $833,541 remained to be amortized and is included in, and offsets, the Notes Payable balance in the Consolidated Statements of Assets and Liabilities. Additionally, $158,504 of the $187,500 premium related to the July 14, 2014 issuance remained unamortized and is included in the Notes Payable balance in the Consolidated Statements of Assets and Liabilities.

The Notes were issued pursuant to an indenture, dated June 3, 2013, as supplemented by the first supplemental indenture, dated June 28, 2013 (collectively, the “Indenture”), between the Company and U.S. Bank National Association (the “Trustee”). The Notes are unsecured obligations of the Company and rank senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to the Company’s existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of the Company’s secured indebtedness (including existing unsecured indebtedness that is later secured) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by the Company’s subsidiaries or financing vehicles. Interest on the Notes is paid quarterly in arrears on March 30, June 30, September 30 and December 30, at a fixed rate of 8.25% per annum, beginning September 30, 2013. The Notes mature on June 30, 2020 and may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after June 30, 2016. The Notes are listed on the Nasdaq Global Market under the trading symbol “FULLL” with a par value of $25.00 per share.

The Indenture contains certain covenants, including covenants requiring compliance with (regardless of whether the Company is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring the Company to provide financial information to the holders of the Notes and the Trustee if the Company ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the Indenture. The Company may repurchase the Notes in accordance with the 1940 Act and the rules promulgated thereunder. Any Notes repurchased by the Company may, at the Company’s option, be surrendered to the Trustee for cancellation, but may not be reissued or resold by the

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 8. Long Term Liabilities – (continued)

Company. Any Notes surrendered for cancellation will be promptly cancelled and no longer outstanding under the Indenture. As of December 31, 2015, the Company had not repurchased any of the Notes in the open market.

At December 31, 2015 and June 30, 2015, the Company had a balance of $33,645,525 on the Notes, which is included in Notes Payable in the Consolidated Statements of Assets and Liabilities.

The following shows a summary of the Long Term Liabilities as of December 31, 2015 and June 30, 2015:

As of December 31, 2015 (Unaudited)


Facility	Commitments		Borrowings Outstanding		Fair Value
Credit Facility⁽¹⁾	$	45,000,000	$	—	$	—
Notes		33,645,525		33,645,525		33,901,231
Total	$	78,645,525	$	33,645,525	$	33,901,231

As of June 30, 2015


Facility	Commitments		Borrowings Outstanding		Fair Value
Credit Facility⁽¹⁾	$	45,000,000	$	—	$	—
Notes		33,645,525		33,645,525		34,049,271
Total	$	78,645,525	$	33,645,525	$	34,049,271

(1)

On September 12, 2014, the Company entered into an amendment to our Credit Facility with Santander Bank, N.A. to give the Company the option to increase the size of the facility from $45.0 million to $60.0 million and to provide additional criteria for eligibility of loans under the borrowing base under the credit facility. The Company has not exercised its option to expand the facility as of December 31, 2015.

As of December 31, 2015 and June 30, 2015, the carrying amount of the Company’s outstanding Credit Facility approximated fair value. The fair values of the Company’s Credit Facility and Notes are determined in accordance with ASC 820, which defines fair value in terms of the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The fair value of the Company’s Notes is determined by utilizing market quotations at the measurement date.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 9. Fair Value Measurements

The Company’s assets recorded at fair value have been categorized based upon a fair value hierarchy in accordance with ASC Topic 820 — Fair Value Measurements and Disclosures (“ASC 820”). See Note 2 for a discussion of the Company’s policies.

The following tables present information about the Company’s assets and liabilities measured at fair value as of December 31, 2015 and June 30, 2015:

As of December 31, 2015 (Unaudited)


	Level 1		Level 2		Level 3		Total
Assets
Senior and Subordinated Loans, at fair value	$	—	$	9,885,000	$	98,499,036	$	108,384,036
Limited Liability Company Interests, at fair value		—		—		932,027		932,027
Investments in Warrants, at fair value		—		—		265,344		265,344
Common Stock, at fair value		256,333		—		14,625,000		14,881,333
Total Assets	$	256,333	$	9,885,000	$	114,321,407	$	124,462,740
Liabilities
Open Swap Contract, at fair value		—		—		1,650,000		1,650,000
Total Liabilities	$	—	$	—	$	1,650,000	$	1,650,000

As of June 30, 2015


	Level 1		Level 2		Level 3		Total
Assets
Senior and Subordinated Loans, at fair value	$	—	$	12,275,000	$	121,630,798	$	133,905,798
Limited Liability Company Interests, at fair value		—		—		1,228,978		1,228,978
Investments in Warrants, at fair value		—		90		2,695,075		2,695,165
Common Stock, at fair value		1,308,818		—		12,975,000		14,283,818
Open Swap Contract, at fair value		—		—		—		—
	$	1,308,818	$	12,275,090	$	138,529,851	$	152,113,759

During the six months ended December 31, 2015, the senior secured term loan and warrants in US Shale Solutions, Inc. were transferred from Level 2 to Level 3. During the year ended June 30, 2015, a portion of the Level 3 General Cannabis Corp. warrant was converted into Level 1 Common Stock.

The following table presents additional information about Level 3 assets measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the net unrealized gains and losses for assets within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 9. Fair Value Measurements – (continued)

The tables below reflect the changes in Level 3 assets and liabilities measured at fair value for the six months ended December 31, 2015, the six months ended December 31, 2014 and for the year ended June 30, 2015.


	Six Months Ended December 31, 2015 (Unaudited)
	Beginning Balance July 1, 2015		Amortization & Accretion of Fixed Income Premiums & Discounts		Realized & Unrealized Gains (Losses)			Transfers Into Level 3		Purchases⁽¹⁾		Sales & Settlements			Ending Balance December 31, 2015			Change in Unrealized Gains (Losses) for Investments still held at December 31, 2015
Assets
Senior and Subordinated Loans, at fair value	$	121,630,798	$	926,264	$	(11,068,569	)	$	4,455,000	$	46,971,826	$	(64,416,283	)	$	98,499,036		$	(11,489,908	)
Limited Liability Company Interests, at fair value		1,228,978		—		1,875,872			—		—		(2,172,823	)		932,027			35,606
Warrants, at fair value		2,695,075		—		(2,429,821	)		90		—		—			265,344			(140,421	)
Common Stock, at fair value		12,975,000		—		1,650,000			—		—		—			14,625,000			1,650,000
Total Assets		138,529,851		926,264		(9,972,518	)		4,455,090		46,971,826		(66,589,106	)		114,321,407			(9,944,723	)
Liabilities
Open Swap Contract, at fair value		—		—		(1,447,012	)		—		—		(202,988	)		(1,650,000	)		(1,650,000	)
Net	$	138,529,851	$	926,264	$	(11,419,530	)		4,455,090	$	46,971,826	$	(66,792,094	)	$	112,671,407		$	(11,594,723	)

(1)

Includes PIK interest.


	Six months ended December 31, 2014 (Unaudited)
	Beginning Balance July 1, 2014		Amortization & Accretion of Fixed Income Premiums & Discounts		Realized & Unrealized Gains (Losses)			Purchases⁽¹⁾		Sales & Settlements			Ending Balance December 31, 2014		Change in Unrealized Gains (Losses) for Investments still held at December 31, 2014
Assets
Senior and Subordinated Loans, at fair value	$	111,079,608	$	543,796	$	(4,339,564	)	$	58,923,107	$	(51,762,491	)	$	114,444,456	$	(4,794,879	)
Limited Liability Company Interests, at fair value		3,875,583		—		(2,078,009	)		—		(121,718	)		1,675,856		(1,907,572	)
Warrants, at fair value		3,060,421		—		(2,662,855	)		2,289,400		—			2,686,966		(2,662,855	)
	$	118,015,612	$	543,796	$	(9,080,428	)	$	61,212,507	$	(51,884,209	)	$	118,807,278	$	(9,365,306	)

(1)

Includes PIK interest.

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NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 9. Fair Value Measurements – (continued)


	Year Ended June 30, 2015
	Beginning Balance July 1, 2014		Amortization & Accretion of Fixed Income Premiums & Discounts		Realized & Unrealized Gains (Losses)			Transfers out of Level 3⁽²⁾			Purchases⁽¹⁾		Sales & Settlements			Ending Balance June 30, 2015		Change in Unrealized Gains (Losses) for Investments still held at June 30, 2015
Assets
Senior and Subordinated Loans, at fair value	$	111,079,608	$	1,371,720	$	(6,728,531	)	$	—		$	113,149,706	$	(97,241,705	)	$	121,630,798	$	(7,918,295	)
Limited Liability Company Interests, at fair value		3,875,583		—		(2,474,886	)		—			—		(171,719	)		1,228,978		(1,171,144	)
Warrants, at fair value		3,060,421		—		(2,194,114	)		(486,786	)		2,328,768		(13,214	)		2,695,075		(337,902	)
Common Stock, at fair value		—		—		—						12,975,000		—			12,975,000		—
Open Swap Contract, at fair value		—		—		1,081			—			—		(1,081	)		—		—
	$	118,015,612	$	1,371,720	$	(11,396,450	)	$	(486,786	)	$	128,453,474	$	(97,427,719	)	$	138,529,851	$	(9,427,341	)

(1)

Includes PIK interest.

(2)

Represents the transfer of a portion of the General Cannabis Corp. warrant out of Level 3 into Level 1 Common Stock upon conversion.

Realized and unrealized gains and losses are included in net realized gain (loss) and net change in unrealized gain (loss) in the Consolidated Statements of Operations. The change in unrealized losses for Level 3 investments still held at December 31, 2015 of $(11,594,723) is included in net change in unrealized gain (loss) in the Consolidated Statements of Operations for the six months ended December 31, 2015.

The following table provides quantitative information regarding Level 3 fair value measurements as of December 31, 2015:

Description

Fair Value

Valuation Technique

Unobservable
Inputs

Range (Average)⁽¹⁾

Senior and Subordinated Loans

91,029,768

Discounted cash flows
(income approach)

Discount Rate

5.37% – 50.38% (14.84

5,093,621

Precedent Transactions

Transaction Value

N/A

2,375,647

Liquidation Value

Asset Value

N/A

Total

98,499,036

Limited Liability Interests, Warrants, and Common Stock (Private Companies)

1,011,871

Market comparable
companies
(market approach)

EBITDA multiple

3.50x – 7.00x (4.62x)

14,625,000

Precedent Transactions

Transaction Value

N/A

130,000

Liquidation Value

Asset Value

N/A

Total

15,766,871

Warrant (Public Companies)

55,500

Option Pricing Model

Volatility

50.00% – 86.50% (61.53

Open Swap Contract

(1,650,000

)

Option Pricing Model

Broker Quotes

242.50/share – $245.00/share ($243.75/share)

Total Level 3 Investments

112,671,407

(1)

The average values were determined using the weighted average of the fair value of the investments in each investment category.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 9. Fair Value Measurements – (continued)

The following table provides quantitative information regarding Level 3 fair value measurements as of June 30, 2015:

Description

Fair Value

Valuation Technique

Unobservable Inputs

Range (Average)⁽¹⁾

Senior and Subordinated Loans

91,569,415

Discounted cash flows
(income approach)

Discount Rate

8.51% – 55.00% (16.27

26,739,621

Precedent Transactions

Transaction Value

N/A

3,321,762

Liquidation Value

Asset Value

N/A

Total

121,630,798

Limited Liability Interests, Warrants, and Common Stock (Private Companies)

3,719,553

Market comparable
companies
(market approach)

EBITDA multiple

4.00x – 7.25x (5.15x)

12,975,000

Precedent Transactions

Transaction Value

N/A

177,500

Liquidation Value

Asset Value

N/A

Total

16,872,053

Warrant (Public Companies)

27,000

Option Pricing Model

Volatility

32.588

Open Swap Contract

—

Option Pricing Model

Broker Quotes

212.50/share – $220.00/share ($216.50/share)

Total Level 3 Investments

138,529,851

(1)

The average values were determined using the weighted average of the fair value of the investments in each investment category.

The primary significant unobservable input used in the fair value measurement of the Company’s debt securities (first lien debt, second lien debt and subordinated debt), including income-producing investments in funds, is the discount rate. Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. In determining the discount rate, for the income, or yield, approach, the Company considers current market yields and multiples, portfolio company performance, leverage levels and credit quality, among other factors in its analysis. Changes in one or more of these factors can have a similar directional change on other factors in determining the appropriate discount rate to use in the income approach.

The primary significant unobservable input used in the fair value measurement of the Company’s private equity and warrant investments is the EBITDA multiple, which is used to determine the Enterprise Value. Significant increases (decreases) in the Enterprise Value in isolation would result in a significantly higher (lower) fair value measurement. To determine the Enterprise Value for the market approach, the Company considers current market trading and/or transaction multiples, portfolio company performance (financial ratios) relative to public and private peer companies and leverage levels, among other factors. Changes in one or more of these factors can have a similar directional change on other factors in determining the appropriate multiple to use in the market approach.

The primary unobservable inputs used in the fair value measurement of the Company’s warrant investments, when using an option pricing model, are the discount rate and volatility. Significant increases (decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in the volatility in isolation would result in a significantly higher (lower) fair value measurement. Changes in one or more factors can have a similar directional change on other factors in determining the appropriate discount rate or volatility to use in the valuation of a warrant using an option pricing model.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 10. Derivative Financial Instruments

In the normal course of business, the Company may utilize derivative contracts in connection with its investment activities. Investments in derivative contracts are subject to additional risks that can result in a loss of all or part of an investment. The derivative activities and exposure to derivative contracts primarily involve equity price risks. In addition to the primary underlying risk, additional counterparty risk exists due to the potential inability of counterparties to meet the terms of their contracts.

Warrants

The warrants provide exposure and potential gains upon equity appreciation of the portfolio company’s equity value.

The value of a warrant has two components: time value and intrinsic value. A warrant has a limited life and expires on a certain date. As a warrant’s expiration date approaches, the time value of the warrant will decline. In addition, if the stock underlying the warrant declines in price, the intrinsic value of an “in the money” warrant will decline. Further, if the price of the stock underlying the warrant does not exceed the strike price of the warrant on the expiration date, the warrant will expire worthless. As a result, there is the potential for the entire value of an investment in a warrant to be lost.

Counterparty risk exists from the potential failure of an issuer of warrants to settle its exercised warrants. The maximum risk of loss from counterparty risk is the fair value of the contracts and the purchase price of the warrants. The Company’s Board of Directors considers the effects of counterparty risk when determining the fair value of its investments in warrants.

Swap contracts — general

The Company may enter into swap contracts, including interest rate swaps, total return swaps, and credit default swaps, as part of its investment strategy, to hedge against unfavorable changes in the value of investments and to protect against adverse movements in interest rates or credit performance with counterparties. Generally, a swap contract is an agreement that obligates two parties to exchange a series of cash flows at specified intervals based upon or calculated by reference to changes in specified prices or rates for a specified notional amount of the underlying assets. The payment flows are usually netted against each other, with the difference being paid by one party to the other. Payments are disclosed as realized gain (loss) on open swap contracts on the Consolidated Statements of Operations. If the payment is a receivable as of the end of the period, it is disclosed as receivable on open swap contract on the Consolidated Statements of Assets and Liabilities.

The fair value of open swaps reported in the Consolidated Statements of Assets and Liabilities may differ from that which would be realized in the event the Company terminated its position in the contract. Risks may arise as a result of the failure of the counterparty to the swap contract to comply with the terms of the swap contract. The loss incurred by the failure of counterparty is generally limited to the aggregate fair value of swap contracts in an unrealized gain position, as adjusted for any collateral posted to us by the counterparty or by us with the counterparty. Therefore, the Company considers the creditworthiness of each counterparty to a swap contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in the fair value of the underlying investments.

Total return swaps

The Company is subject to market risk in the normal course of pursuing its investment objectives. The Company may enter into total return swaps either to manage its exposure to the market or certain sectors of the market, or to create exposure to certain investments to which it is otherwise not exposed.

Total return swap contracts involve the exchange by the Company and a counterparty of their respective commitments to pay or receive a net amount based on the change in the fair value of a particular security or index and a specified notional amount.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 10. Derivative Financial Instruments – (continued)

During the year ended June 30, 2015, we funded one synthetic secured loan in the form of a total return swap. More specifically, we purchased 60,000 shares of Granite Ridge Holdings, LLC, a power generation company. We contemporaneously entered into a collateralized swap agreement with another private fund, which posted approximately $10.4 million of cash collateral, whereby we swapped the returns on the shares for a fixed rate of 15.0% on the net loan amount. Under the terms of the swap, the Company expects to receive periodic payments from the counterparty. These periodic payments will be recorded as realized capital gains for accounting purposes in accordance with GAAP. For the three and six months ended December 31, 2015, $103,332 and $202,988, respectively, of realized gain related to the open swap contract was included on the Consolidated Statement of Operations.

Note 11. Subsequent Events

Recent Portfolio Activity

Effective January 14, 2016, the Company participated in a restructuring process with US Shale Solutions, Inc. in which the Company exchanged its $9.0 million senior secured bonds and its warrants in return for approximately $2.2 million of a second lien term loan and equity in US Shale Solutions, Inc. As part of the restructuring, the Company funded approximately $1.1 million of a new senior secured term loan.

On February 5, 2016, Calpine Corporation announced that it has entered into a definitive agreement to acquire Granite Ridge Energy, LLC for approximately $500 million. Upon closing of the transaction, the Company is expected to receive approximately $14.5 million in exchange for the 60,000 shares of the common stock held by the Company. Upon settlement, the Company expects to contemporaneously unwind the total return swap contract hedging position.

On February 10, 2016, the senior secured term loan with Solex Fine Foods, LLC; Catsmo, LLC was repaid with approximately $4.1 million of principal and interest received by the Company.

Note 12. Commitments and Contingencies

In the normal course of business, the Company may enter into investment agreements under which it commits to make an investment in a portfolio company at some future date or over a specified period of time. As of December 31, 2015, we had approximately $8.7 million in unfunded loan commitments, subject to our approval in certain instances, to provide debt financing to certain of our portfolio companies.

The Company is currently not subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition or results of operations.

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 12. Commitments and Contingencies – (continued)

Schedule 12 – 14

The table below represents the fair value of control and affiliate investments at June 30, 2015 and any amortization, purchases, sales, and realized and net unrealized gain (loss) made to such investments, as well as the ending fair value as of December 31, 2015.

Schedule of Investments in and Advances to Affiliates



Portfolio Company/Type of Investment	Par Amount/ Quantity at June 30, 2015		Amount of Interest and Dividends Credited in Income		Fair Value at June 30, 2015		Accretion/ Amortization		Purchases		Sales			Realized and Unrealized Gains/Losses			Fair Value at December 31, 2015
Control Investments
Takoda Resources Inc.
Senior Debt/Common Stock^(1),(2)	$	—	$	—	$	161,585	$	—	$	—	$	(162,796	)	$	1,211		$	—
Texas Westchester Financial, LLC
Limited Liability Company Interests⁽¹⁾		9,278		—		177,500		—		—		(30,000	)		(17,500	)		130,000
The Finance Company, LLC
Senior Debt/Limited Liability Company Interests	$	4,195,915/50		350,272		5,006,194		7,938		—		—			(117,312	)		4,896,820
TransAmerican Asset Servicing Group, LLC
Senior Debt/Limited Liability Company Interests^(1),(2)	$	—		—		466,785		—		323,359		(697,153	)		(92,991	)		—
Total Control Investments			$	350,272	$	5,812,064	$	7,938	$	323,359	$	(889,949	)	$	(226,592	)	$	5,026,820
Affiliate Investments
Modular Process Control, LLC
Senior Debt/Warrant⁽¹⁾	$	6,978,594/1		287,797		3,663,827		17,276		1,306,663		(1,479,096	)		(2,708,670	)		800,000
ProGrade Ammo Group, LLC
Senior Debt⁽¹⁾/Warrants⁽¹⁾	$	6,712,318/181,240		—		2,590,309		—		47,121		—			(1,505,450	)		1,131,980
SOLEX Fine Foods, LLC; Catsmo, LLC
Senior Debt/Limited Liability Company Interests⁽¹⁾/Warrant⁽¹⁾	$	3,861,696/1/1		257,804		3,832,347		14,110		—		—			(29,170	)		3,817,287
US Oilfield Company, LLC
Senior Debt/Warrants⁽¹⁾	$	6,055,313/5		404,841		5,683,338		9,220		5,220,292		(4,939,235	)		(2,468,526	)		3,505,089
West World Media, LLC
Limited Liability Company Interests^(1),(2)		—		—		249,451		—		—		(2,142,823	)		1,893,372			—
Total Affiliate Investments			$	950,442	$	16,019,272	$	40,606	$	6,574,076	$	(8,561,154	)	$	(4,818,444	)	$	9,254,356

(1)

Nonincome-producing security.

(2)

Investment is no longer held as of December 31, 2015.

TABLE OF CONTENTS

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 12. Commitments and Contingencies – (continued)

Schedule 12 – 14

The table below represents the fair value of control and affiliate investments at June 30, 2014 and any amortization, purchases, sales, and realized and net unrealized gain (loss) made to such investments, as well as the ending fair value as of June 30, 2015.



Portfolio Company/Type of Investment	Par Amount/ Quantity		Amount of Interest and Dividends Credited in Income		Fair Value at June 30, 2014		Accretion/ Amortization		Purchases		Sales			Realized and Unrealized Gains/Losses			Transfer from Control to Non-Control/ Non-Affiliate Investment			Fair Value at June 30, 2015
Control Investments
New Media West, LLC⁽²⁾
Senior Debt/Limited Liability Company Interests⁽⁴⁾	$	3,811,681	$	318,461	$	5,666,679	$	—	$	—	$	(1,015,030	)	$	(4,651,649	)	$	—		$	—
Takoda Resources Inc.
Senior Debt/Common Stock⁽¹⁾	$	3,054,532/749		118,703		2,557,379		—		453,272		(91,568	)		(2,757,498	)		—			161,585
Texas Westchester Financial, LLC
Limited Liability Company Interests⁽¹⁾		9,278		—		540,037		—		—		(171,717	)		(190,820	)		—			177,500
The Finance Company, LLC
Senior Debt/Limited Liability Company Interests⁽¹⁾	$	4,195,915/50		881,110		7,214,905		38,386		—		(967,632	)		(1,279,465	)		—			5,006,194
TransAmerican Asset Servicing Group, LLC
Senior Debt/Limited Liability Company Interests⁽¹⁾	$	3,563,246/75		183,042		1,560,057		9,714		1,532,467		(977,374	)		(1,658,079	)		—			466,785
Total Control Investments			$	1,501,316	$	17,539,057	$	48,100	$	1,985,739	$	(3,223,321	)	$	(10,537,511	)	$	—		$	5,812,064
Affiliate Investments
General Cannabis Corp.⁽³⁾
Common Stock/Warrant^(1),(4)		654,409		—		2,356,212		—		113,214		(377,639	)		(600,986	)		(1,490,801	)		—
Modular Process Control, LLC
Senior Debt/Warrant⁽¹⁾	$	7,151,027/1		1,205,914		3,971,110		99,410		2,282,926		(1,911,704	)		(777,915	)		—			3,663,827
ProGrade Ammo Group, LLC
Senior Debt/Warrants⁽¹⁾	$	6,665,197/181,240		4,594		4,133,284		4,594		877,441		(2,305,294	)		(119,716	)		—			2,590,309
SOLEX Fine Foods, LLC; Catsmo, LLC
Senior Debt/Limited Liability Company Interests⁽¹⁾/Warrant⁽¹⁾	$	3,861,696/1/1		512,253		3,888,914		27,904		110,000		(148,304	)		(46,167	)		—			3,832,347

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FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

Note 12. Commitments and Contingencies – (continued)



Portfolio Company/Type of Investment	Par Amount/ Quantity		Amount of Interest and Dividends Credited in Income		Fair Value at June 30, 2014		Accretion/ Amortization		Purchases		Sales			Realized and Unrealized Gains/Losses			Transfer from Control to Non-Control/ Non-Affiliate Investment			Fair Value at June 30, 2015
US Oilfield Company, LLC
Senior Debt/Warrants⁽¹⁾	$	5,767,417/3		722,952		—		38,812		18,396,291		(12,714,465	)		(37,300	)		—			5,683,338
West World Media, LLC
Limited Liability Company Interests⁽¹⁾		148,326		—		238,897		—		—		—			10,554			—			249,451
Total Affiliate Investments			$	2,445,713	$	14,588,417	$	170,720	$	21,779,872	$	(17,457,406	)	$	(1,571,530	)	$	(1,490,801	)	$	16,019,272

(1)

Nonincome-producing security.

(2)

On June 30, 2015, New Media West, LLC transferred from a Control Investment to a Non-Control/Non-Affiliate Investment.

(3)

As of May 13, 2015, General Cannabis Corp. transferred from an Affiliate Investment to a Non-Control/Non-Affiliate Investment. All purchases and sales after May 13, 2015 have been excluded from the purchase and sales columns in the above table. Realized and unrealized gains/losses have been prorated and only the realized and unrealized gains/losses which are attributable to the investment as an Affiliate Investment have been included.

(4)

Investment no longer held as of June 30, 2015.

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The information contained in this section should be read in conjunction with our consolidated financial statements and related notes and schedules thereto appearing elsewhere in this quarterly report on Form 10-Q, as well as the sections entitled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes and schedules thereto included in our Annual Report on Form 10-K for the period ended June 30, 2015.

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

•

our future operating results;

•

our business prospects and the prospects of our portfolio companies;

•

the impact of investments that we expect to make;

•

our contractual arrangements and relationships with third parties;

•

the dependence of our future success on the general economy and its impact on the industries in which we invest;

•

the ability of our portfolio companies to achieve their objectives;

•

our expected financings and investments;

•

the adequacy of our cash resources and working capital; and

•

the timing of cash flows, if any, from the operations of our portfolio companies.

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

•

an economic downturn could impair our portfolio companies’ ability to continue to operate, which could lead to the loss of some or all of our investments in such portfolio companies;

•

an expiration or contraction of available credit and/or an inability to access the equity markets could impair our lending and investment activities;

•

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

•

the risks, uncertainties and other factors we identify in “Risk Factors” in our Annual Report on Form 10-K for the period ended June 30, 2015 and elsewhere in this quarterly report on Form 10-Q and in our filings with the SEC.

Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this quarterly report on Form 10-Q should not be regarded as a representation by us that our plans and objectives will be achieved. These risks and uncertainties include those described or identified in

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“Risk Factors” and elsewhere in this quarterly report on Form 10-Q. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report on Form 10-Q.

Except as otherwise specified, references to “Full Circle Capital,” the “Company,” “we,” “us” and “our” refer to Full Circle Capital Corporation.

Overview

We are an externally managed non-diversified closed-end management investment company formed in April 2010, and have elected to be regulated as a business development company under the 1940 Act. Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We are managed by Full Circle Advisors. Full Circle Service Company provides the administrative services necessary for us to operate.

We invest primarily in senior secured loans and, to a lesser extent, second liens loans, mezzanine loans and equity securities issued by lower middle-market and middle-market companies that operate in a diverse range of industries. In our lending activities, we focus primarily on portfolio companies with both (i) tangible and intangible assets available as collateral and security against our loan to help mitigate our risk of loss, and (ii) cash flow to cover debt service. We believe this provides us with a more attractive risk adjusted return profile, with greater principal protection and likelihood of repayment.

Our investments generally range in size from $3 million to $10 million; however, we may make larger or smaller investments from time to time on an opportunistic basis. We focus primarily on senior secured loans and “stretch” senior secured loans, also referred to as “unitranche” loans, which combine characteristics of traditional first-lien senior secured loans and second-lien or subordinated loans. We believe that having a first lien, senior secured position provides us with greater control and security in the primary collateral of a borrower and helps to mitigate risk against loss of principal should a borrower default. Our stretch senior secured loans typically possess a greater advance rate against the borrower’s assets and cash flow, and accordingly carry a higher interest rate and/or greater equity participation, than traditional senior secured loans. Stretch senior secured loan instruments can provide borrowers with a more efficient and desirable solution than a senior bank line combined with a separate second lien or mezzanine loan obtained from another source. We also may invest in mezzanine, subordinated or unsecured loans. In addition, we may acquire equity or equity related interests from a borrower along with our debt investment. We attempt to protect against risk of loss on our debt investments by investing in borrowers with cash flows to cover debt service, while frequently securing our loans against tangible or intangible assets of our borrowers, which may include accounts receivable and contracts for services, and obtaining a favorable loan-to-value ratio, and in many cases, securing other financial protections or credit enhancements, such as personal guarantees from the principals of our borrowers, make well agreements and other forms of collateral, rather than lending predominantly against anticipated cash flows of our borrowers. We believe this allows us more options and greater likelihood of repayment from refinancing, asset sales of our borrowers and/or amortization.

We generally seek to invest in lower middle-market and middle-market companies in areas that we believe have been historically under-serviced, especially during and after the 2008/2009 credit crisis. These areas include industries that are outside the focus of mainstream institutions or investors due to required industry-specific knowledge or are too small to attract interest from larger investment funds or other financial institutions. Because we believe there are fewer banks and specialty finance companies focused on lending to these lower middle-market and middle market companies, we believe we can negotiate more favorable terms on our debt investments in these companies than those that would be available for debt investments in comparable larger, more mainstream borrowers. Such favorable terms may include higher debt yields, lower leverage levels, more significant covenant protection and/or greater equity grants than typical of other transactions. We generally seek to avoid competing directly with other capital providers with respect to specific transactions in order to avoid the less favorable terms we believe are typically associated with such competitive bidding processes.

On June 4, 2014, we formed FC Capital Investment Partners (“FCCIP”), a multiple series private fund, for which we serve as the managing member and investment adviser. FCCIP was formed as a Delaware limited liability company and operates under a limited liability company agreement dated June 13, 2014. FCCIP closed its first series on June 17, 2014, raising approximately $5.6 million in capital from investors.

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FCCIP closed its second series on September 25, 2014, raising approximately $10.0 million in capital from investors. On November 30, 2015, the second series ceased investing and was liquidated after full realization of proceeds from its investment strategy. We may co-invest in certain portfolio investments from time to time with one or more series issued by FCCIP where we determine that the aggregate available investment opportunity exceeds what we believe would be appropriate for us to acquire directly, subject to certain conditions. In addition, we expect to receive certain fees or other distributions for FCCIP in connection with the services we provide to each series it may issue. Such fees may include management fees, incentive fees and administration fees and could be offset by expense caps or waivers in the future. During the three and six months ended December 31, 2015, we recognized $9,999 and $24,681, respectively, in net management fee income related to the services performed for FCCIP.

On July 14, 2014, we sold 506,000 shares of our common stock at $7.40 per share in a direct registered offering to certain investors for total gross proceeds of approximately $3.7 million.

On July 14, 2014, we closed an offering of $12,500,000 in aggregate principal amount of our 8.25% fixed-rate notes due 2020 (the “Notes”). The Notes were sold at price of $25.375 per note plus accrued interest from June 30, 2014, a premium to par value of $25.00 per Note, for total gross proceeds of approximately $12.7 million. The Notes are a further issuance of, rank equally in right of payment with, and form a single series with the $21.1 million of currently outstanding Notes that will mature on June 30, 2020, and may be redeemed in whole or in part at any time or from time to time at our option on or after June 30, 2016. The Notes are listed on the NASDAQ Global Market and trade under the trading symbol “FULLL.”

On March 30, 2015, we completed non-transferable rights offering to our stockholders of record as of 5:00 p.m., New York City time, on March 6, 2015. The rights entitled holders of rights to subscribe for an aggregate of up to 11,949,034 shares of our common stock. Our stockholders as of the record date received one right for each share of common stock owned on the record date. The rights entitled the holder to purchase one new share of common stock for every one right held and record date stockholders who fully exercised their rights were entitled to subscribe, subject to certain limitations and pro-rata allocation, for additional shares that remain unsubscribed as a result of any unexercised rights. The subscription price per share was $3.50. The net proceeds from this rights offering, after deducting the fee payable to the dealer managers and offering expenses, were approximately $37.8 million, which we received on April 6, 2015. In connection with this rights offering, the dealer manager received a fee for its financial advisory, marketing and soliciting services equal to a maximum of 4.0% of the subscription price per share for each share issued pursuant to the exercise of rights, including pursuant to the over-subscription privilege. We incurred offering expenses, including the dealer manager fee of $1,401,660, in connection with this rights offering.

As part of the rights offering, an institutional investor committed to purchase approximately 214,000 shares in open market transactions over a seven-day period following the expiration date of the rights offering. The institutional investor agreed to acquire the remainder of the 214,000 shares in a private placement directly from us to the extent such shares were not purchased in open market transactions during such seven-day period. Subsequent to the seven-day period, on April 13, 2015, such investor acquired 80,475 shares, the remainder of its initial commitment of approximately 214,000 shares, in a private placement at $3.50 per share directly from us. We incurred offering expenses of $3,345 in connection with this offering.

Exemptive Relief

On December 4, 2014, we filed an exemptive application with the SEC to permit us to co-invest with funds or entities managed by our investment adviser in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act. On September 23, 2015, we received exemptive relief from the SEC to co-invest with investment funds managed by our investment adviser where doing so is consistent with our investment strategy as well as applicable law (including the terms and conditions of the exemptive order issued by the SEC). Under the terms of the relief permitting us to co-invest with other funds managed by our investment adviser, a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent directors must make certain conclusions in connection with a co-investment transaction, including (1) the terms of the proposed transaction, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching of us or our stockholders on the part of any

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person concerned and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objectives and strategies. We may co-invest, subject to the conditions included in the exemptive order we received from the SEC, with one or more funds managed by our investment adviser that have an investment strategy that is similar to or overlaps our investment strategy. We believe that such co-investments may afford us additional investment opportunities and an ability to achieve greater diversification.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following items as critical accounting policies.

Basis of Consolidation

Under the 1940 Act rules, the regulations pursuant to Article 6 of Regulation S-X and the American Institute of Certified Public Accountants’ Audit and Accounting Guide for Investment Companies, we are precluded from consolidating any entity other than another investment company or an operating company which provides substantially all of its services and benefits to us. Our Consolidated Financial Statements include our accounts and the accounts of Full Circle West, Inc., FC New Media Inc., TransAmerican Asset Servicing Group, Inc., FC New Specialty Foods, Inc., and FC Takoda Holdings, LLC, our only wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Valuation of Investments in Securities at Fair Value — Definition and Hierarchy

In determining fair value, the Board of Directors uses various valuation approaches. In accordance with GAAP, a fair value hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.

Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Board of Directors. Unobservable inputs reflect the Board of Directors’ assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

Investments for which market quotations are readily available are valued using market quotations, which are generally obtained from an independent pricing service or broker-dealers or market makers. Debt and equity securities for which market quotations are not readily available or are not considered to be the best estimate of fair value are valued at fair value as determined in good faith by the Board of Directors. Because the Company expects that there will not be a readily available market value for many of the investments in the Company’s portfolio, it is expected that many of the Company’s portfolio investments’ values will be determined in good faith by the Board of Directors in accordance with a documented valuation policy that has been reviewed and approved by the Board of Directors and in accordance with GAAP. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

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Level 2 — Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by the Board of Directors in determining fair value is greatest for securities categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety falls, is determined based on the lowest level input that is significant to the fair value measurement.

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, the Company’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.

Net realized gain (loss) and net change in unrealized gain (loss) on investments

Net change in unrealized appreciation or depreciation recorded on investments is the net change in the fair value of our investment portfolio during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. Realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs.

From time to time, the Company may enter into a new transaction with a portfolio company as a result of the sale, merger, foreclosure, bankruptcy or other corporate event involving the portfolio company. In such cases, the Company may receive newly issued notes, securities and/or other consideration in exchange for, or resulting from, the cancellation of the instruments previously held by the Company with regard to that portfolio company. In such cases, the Company may experience a realized loss on the instrument being sold or cancelled, and, concurrently, an elimination of any previously recognized unrealized losses on the portfolio investment. Such elimination of unrealized gain (loss) is included on the Consolidated Statements of Operations as a (decrease) increase in the Change in Unrealized Gain (Loss) on Investments.

Valuation Techniques

Senior and Subordinated Loans

The Company’s portfolio consists primarily of private debt instruments such as senior and subordinated loans. Investments for which market quotations are readily available (“Level 2 Debt”) are valued using market quotations, which are generally obtained from an independent pricing service or broker-dealers. For other debt investments (“Level 3 Debt”) market quotations are not available and other techniques are used to determine fair value. The Company considers its Level 3 Debt to be performing if the borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance or is otherwise not deemed to be impaired. In determining the fair value of the performing Level 3 Debt, the Board of Directors considers fluctuations in current interest rates, the trends in yields of debt instruments with similar credit ratings, the financial condition of the borrower, economic conditions, success and prepayment

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fees and other relevant factors, both qualitative and quantitative. In the event that a Level 3 Debt instrument is not performing, as defined above, the Company’s Board of Directors will evaluate the value of the collateral utilizing the same framework described above for a performing loan to determine the value of the Level 3 Debt instrument.

This evaluation will be updated no less than quarterly for Level 3 Debt instruments, and more frequently for time periods where there are significant changes in the investor base or significant changes in the perceived value of the underlying collateral. The collateral value will be analyzed on an ongoing basis using internal metrics, appraisals, work performed by third-party valuation agents, if applicable, and other data as may be acquired and analyzed by Management and Board of Directors.

Investments in Private Companies

The Company’s Board of Directors determines the fair value of its investments in private companies where no market quotations are readily available (“Level 3 Private Companies”) by incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information, including comparable transactions, and performance multiples, among other factors, including work performed by third-party valuation agents. The Level 3 Private Companies investments can include Limited Liability Company interests, common stock and other equity investments. These nonpublic investments are included in Level 3 of the fair value hierarchy.

Warrants

The Board of Directors ascribes value to warrants based on fair value analyses that may include discounted cash flow analyses, option pricing models, comparable analyses and other techniques as deemed appropriate.

Publicly Traded Common Stock

Publicly traded common stock in an active market (“Level 1 Common Stock”) is valued based on unadjusted closing prices in active markets for identical Level 1 Common Stock that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 Common Stock.

Swap Contracts

Derivative financial instruments such as swap contracts are valued based on discounted cash flow models and option pricing models, as appropriate. Models use observable data to the extent practicable. However, areas such as credit risk (both our own and that of the counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of derivative financial instruments at the valuation date.

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Fair Value

The Company’s assets and liabilities measured at fair value on a recurring basis subject to the requirements of ASC Topic 820 at December 31, 2015 and June 30, 2015 were as follows:

As of December 31, 2015 (Unaudited)


	Level 1		Level 2		Level 3		Total
Assets
Senior and Subordinated Loans, at fair value	$	—	$	9,885,000	$	98,499,036	$	108,384,036
Limited Liability Company Interests, at fair value		—		—		932,027		932,027
Investments in Warrants, at fair value		—		—		265,344		265,344
Common Stock, at fair value		256,333		—		14,625,000		14,881,333
Total Assets	$	256,333	$	9,885,000	$	114,321,407	$	124,462,740
Liabilities
Open Swap Contract, at fair value		—		—		1,650,000		1,650,000
Total Liabilities	$	—	$	—	$	1,650,000	$	1,650,000

As of June 30, 2015


	Level 1		Level 2		Level 3		Total
Assets
Senior and Subordinated Loans, at fair value	$	—	$	12,275,000	$	121,630,798	$	133,905,798
Limited Liability Company Interests, at fair value		—		—		1,228,978		1,228,978
Investments in Warrants, at fair value		—		90		2,695,075		2,695,165
Common Stock, at fair value		1,308,818		—		12,975,000		14,283,818
Open Swap Contract, at fair value		—		—		—		—
	$	1,308,818	$	12,275,090	$	138,529,851	$	152,113,759

Revenue Recognition

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or commitment fees associated with senior and subordinated secured loans are accreted into interest income over the respective terms of the applicable loans. Upon the prepayment of a senior or subordinated secured loan, any unamortized loan origination, closing and/or commitment fees are recorded as interest income. Generally, when a payment default occurs on a loan in the portfolio, or if the Company otherwise believes that the issuer of the loan will not be able to make contractual interest payments, the Company may place the loan on non-accrual status and cease recognizing interest income on the loan until all principal and interest is current through payment, or until a restructuring occurs, and the interest income is deemed to be collectible. The Company may make exceptions to this policy if a loan has sufficient collateral value and is in the process of collection or is viewed to be able to pay all amounts due if the loan were to be collected on through an investment in, or sale of the business, the sale of the assets of the business, or some portion or combination thereof.

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Dividend income is recorded on the ex-dividend date.

Use of Estimates

The preparation of our Consolidated Financial Statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts disclosed in the Consolidated Financial Statements of Full Circle Capital. Actual results could differ from those estimates.

Current Market Conditions and Market Opportunity

We believe that the current credit environment provides favorable opportunities to achieve attractive risk-adjusted returns on the types of senior secured loans and other investments we may target. In particular, we believe that, despite an overall fall off in loan demand due to the depressed economic conditions, demand for financing from lower middle-market and middle-market companies is largely outpacing the availability of lenders that have traditionally served this market. We believe that bank consolidations, the failure of a number of alternative lending vehicles due to poor underwriting practices and an overall tightening of underwriting standards has significantly reduced the number and activity level of potential lenders.

We believe there has long been a combination of demand for capital and an underserved market for capital addressing lower middle-market and middle-market borrowers. We believe there is robust demand for continued growth capital as well as demand from very significant refinancing requirements of many borrowers as debt facilities come due, given the lack of willing and qualified capital providers. We believe these market conditions have been further exacerbated in the current environment due to:

larger lenders exiting this market to focus on larger investment opportunities that are more appropriate for their operating cost structures;

the elimination of many specialized lenders from the market due to lack of capital as a result of, for instance, the closing off of the securitization market or their own poor performance, and

the need for certain capital providers to reduce lending activities due to their reduced access to capital and the overall deleveraging of the financial market.

With the decreased availability of debt capital for lower middle-market and middle-market borrowers, combined with the significant demand for refinancing, we believe there are increased lending opportunities for us. As always, we remain cautious in selecting new investment opportunities, and will only deploy capital in deals which are consistent with our disciplined philosophy of pursuing superior risk-adjusted returns.

Review of Strategic Alternatives

Public equity market conditions for business development companies (“BDCs”) have been challenging for an extended period of time. Similar to many other BDCs, our common stock has been trading at a significant discount to its net asset value and, as a result, has limited our ability to grow and reap the benefits of increased scale, including the ability to commit to larger hold sizes, enhanced liquidity for our shareholders and substantially increased operating leverage. We do not believe that these market conditions are likely to abate in the near term.

In light of the current situation, our Board of Directors formed a Special Committee, composed solely of independent directors Mark C. Biderman, Edward H. Cohen and Thomas A. Ortwein, Jr., in November 2015 to consider various strategic alternatives potentially available to us. The Special Committee is authorized to consider, negotiate, and potentially implement all strategic alternatives reasonably available to us, including, but not limited to, the acquisition or disposition of assets and the sale or merger of the Company. The Special Committee has engaged Houlihan Lokey Capital, Inc. as its financial advisor.

In order to maximize the types of potential strategic alternatives available to us and enhance the benefits to be derived therefrom for our stockholders, we have opted to retain the cash proceeds received by us in

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connection with loan repayments and sales and have otherwise limited our origination activities. However, because our investment income has declined and is expected to continue to decline in the current and subsequent quarters as a result of this change in investment strategy, our Board of Directors has decided to suspend the declaration of any future distributions to our stockholders beyond the previously declared distribution of $0.035 per share to stockholders of record on March 31, 2016 and payable on April 15, 2016.

In addition, given that our Board of Directors has chosen to pursue a strategic process which, among other things, calls for reducing the size of our investment portfolio and the resulting impact that such reduction has had and will have on the fees payable to our investment adviser, our Board of Directors has terminated, effective January 1, 2016, our investment adviser’s management and incentive fee waiver and operating expense reimbursement obligations to ensure its continuing financial and operational viability pending the completion of the strategic process.

Operating Expense Reimbursement

Our investment adviser agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses that exceed 1.50% of our net assets, beginning with our fiscal quarter ended September 30, 2014 through June 30, 2015. For our fiscal year 2016 and beyond, our investment adviser had agreed to reimburse us for any operating expenses, excluding interest expenses, investment advisory and management fees, and offering expenses, that exceed 1.75% of our net assets; however, on February 11, 2016, our Board of Directors authorized the termination of our investment adviser’s operating expense reimbursement obligations, effective as of January 1, 2016, as part of the strategic process. For the three and six months ended December 31, 2015, our investment adviser reimbursed us $231,208 and $506,364, respectively.

Management Fee and Incentive Fee Waiver

For the periods commencing on April 1, 2015 and ending on June 30, 2015 and commencing on July 1, 2015 and ending on June 30, 2016, our investment adviser had agreed to waive the portion of the base management fees and incentive fees that our investment adviser would otherwise be entitled to receive pursuant to our Investment Advisory Agreement to the extent required in order for us to earn net investment income sufficient to support the distribution payment on the shares of our common stock outstanding on the relevant record date for each monthly distribution as then declared by our board of directors; however, on February 11, 2016, our Board of Directors authorized the termination of our investment adviser’s management fee and incentive fee waiver, effective as of January 1, 2016, as part of the strategic process. For the three and six months ended December 31, 2015, we incurred $548,857 and $1,160,786, respectively, of base management fees, of which $214,129 has been accrued for as a management fee waiver year to date.

Portfolio Composition and Investment Activity

Our portfolio of investments consists primarily of senior secured loans and, to a lesser extent, second lien loans, mezzanine loans and equity securities issued by lower middle-market and middle-market companies. We focus primarily on senior secured loans and “stretch” senior secured loans, also referred to as “unitranche” loans, which combine characteristics of traditional first lien senior secured loans and second-lien or subordinated loans. Our investment objective is to generate both current income and capital appreciation through debt and equity investments.

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The following is a summary of our investment activity since the completion of our initial public offering. Such amounts are not inclusive of our holdings of United States Treasury Bills.


Time Period	Acquisitions⁽¹⁾ (dollars in millions)		Dispositions⁽²⁾ (dollars in millions)		Weighted Average Interest Rate of Portfolio at End of Period⁽³⁾
For the year ended June 30, 2011	$	90.0	$	32.6		12.68	%
For the year ended June 30, 2012		55.3		38.1		12.93	%
For the year ended June 30, 2013		75.1		58.1		12.90	%
For the year ended June 30, 2014		132.5		82.3		11.27	%
July 1, 2014 through September 30, 2014		36.5		28.7		10.53	%
October 1, 2014 through December 31, 2014		28.7		23.2		10.23	%
January 1, 2015 through March 31, 2015		24.4		32.1		10.53	%
April 1, 2015 through June 30, 2015		47.5		13.9		9.99	%
For the year ended June 30, 2015		137.1		97.9		9.99	%
July 1, 2015 through September 30, 2015		29.8		32.7		8.93	%
October 1, 2015 through December 31, 2015		20.1		34.3		9.27	%
For the year ended June 30, 2016 to date		49.9		67.0		9.27	%
Since inception	$	539.9	$	376.0		N/A

(1)

Includes new deals, additional fundings, refinancings (inclusive of those on revolving credit facilities) and payment in kind “PIK” interest

(2)

Includes scheduled principal payments, prepayments, sales and repayments (inclusive of those on revolving credit facilities)

(3)

For transactions in the secondary market, the interest rate used for the weighted average interest rate reflects the effective yield on the loan at the purchase price. Weighted average interest rate is based upon the stated coupon rate and face value of outstanding debt securities at the measurement date. Debt securities on non-accrual status are included in the calculation and are treated as having 0.00% as their applicable interest rate for purposes of this calculation, unless such debt securities are valued at zero.

At December 31, 2015, the weighted average interest rate of our performing debt investments was 11.33%.

Portfolio Activity for the Six Months Ended December 31, 2015

The primary investment activities for the six months ended December 31, 2015 were fundings and repayments under the revolving credit facilities and the funding of the following loan facilities:

•

On July 1, 2015, the Company issued a $6.0 million mortgage note to 310E53RD, LLC, a real estate holding company.

•

On July 1, 2015, the senior secured credit facility and revolving commitment with Butler Burger Group, LLC, was fully repaid at par plus accrued interest and prepayment fees for total proceeds of $8.6 million.

•

On July 15, 2015, the senior secured credit facility with Medinet Investments, LLC was repaid in full at par plus accrued interest for total proceeds of $0.1 million.

•

On July 17, 2015, the Company purchased $3.0 million of a $175.0 million senior secured term loan to Liquidnet Holdings, Inc., an equities trading platform, at 96.375% of par.

•

On July 31, 2015, the Company purchased an additional $1.0 million of senior secured notes to Lee Enterprises, Incorporated, a daily and weekly newspaper publisher.

•

On September 3, 2015, the senior secured credit facility with GW Power, LLC and Greenwood Fuels WI, LLC was partially repaid for total proceeds of $2.2 million.

•

On September 10, 2015, the Company sold the full $2.0 million of the second lien term loan with GK Holdings, Inc. for total proceeds of $2.0 million plus accrued interest.

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•

During the quarter ended September 30, 2015, the Company funded an additional $0.4 million of the senior secured term loan B to U.S. Oilfield Company, LLC, which increased the Company’s total investment to $7.1 million. The Company funded $0.3 million of the increase and the remainder was funded by a third party. The Company also received additional warrants for 2.964% of the class B non-voting shares of U.S. Oilfield Company, LLC.

•

On October 30, 2015, the Company sold its equity interest in West World Media, LLC for total proceeds of $2.2 million.

•

On October 30, 2015, the senior secured revolving loan with TransAmerican Asset Servicing Group, LLC was repaid with total proceeds of approximately $0.5 million and the limited liability company interest was written off.

•

On November 30, 2015, the senior secured note with Good Technology Corporation was repaid in full at par plus accrued interest and fees with total proceeds of approximately $11.1 million and the warrant was written off.

•

On December 10, 2015, the Company entered into an unfunded revolver commitment to Aptean, Inc., an enterprise software company.

•

On December 30, 2015, the senior secured term loan to New Media West, LLC was written off in its entirety.

•

On December 31, 2015, the senior secured term loan and common stock in Takoda Resources, Inc. was written off in its entirety.

Portfolio Reconciliation

The following is a reconciliation of the investment portfolio, including our open swap contract, for the six months ended December 31, 2015 and for the year ended June 30, 2015:


	Six Months Ended December 31, 2015 (Unaudited)			Year Ended June 30, 2015
Beginning Investment Portfolio	$	152,113,759		$	150,190,759
Portfolio Investments Acquired⁽¹⁾		49,879,326			137,121,602
Amortization and Accretion of Fixed Income Premiums and Discounts		918,157			1,496,851
Portfolio Investments Repaid		(66,972,203	)		(97,880,572	)
Sales and Maturities of Treasury Securities⁽²⁾		—			(25,000,000	)
Net Change in Unrealized Gain (Loss) on Investments and Open Swap Contract		(4,475,862	)		(6,237,328	)
Net Realized Gains (Losses) on Investments and Open Swap Contract		(8,650,437	)		(7,577,553	)
Ending Investment Portfolio	$	122,812,740		$	152,113,759

(1)

Includes PIK interest.

(2)

U.S. Treasury Securities were purchased and temporarily held in connection with complying with RIC diversification requirements under Subchapter M of the Code.

During the six months ended December 31, 2015, we recorded net unrealized appreciation (depreciation) of $(4,475,862). This consisted of $(3,602,764) of net unrealized depreciation on debt investments, $776,902 of net unrealized appreciation on equity investments, and $(1,650,000) of net unrealized depreciation on an open swap contract.

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Portfolio Classifications

The following table shows the fair value of our portfolio of investments, including our open swap contract, by asset class as of December 31, 2015 and June 30, 2015.


	December 31, 2015 (Unaudited)						June 30, 2015
	Investments at Fair Value (dollars in millions)			Percentage of Total Portfolio			Investments at Fair Value (dollars in millions)		Percentage of Total Portfolio
Investments:
Senior Secured Loans	$	99.4			81.0	%	$	122.8		80.7	%
Subordinated Secured Loans		5.9			4.8			7.9		5.2
Unsecured Notes		3.1			2.5			3.2		2.1
Warrants		0.3			0.2			2.7		1.8
Limited Liability Company Interests		0.9			0.8			1.2		0.8
Common Stock		14.9			12.1			14.3		9.4
Total Investments at Fair Value		124.5			101.4			152.1		100.0
Open Swap Contract Liability:
Total Return Swap		(1.7	)		(1.4	)		—		—
Total Investments and Open Swap Contract Liability at Fair Value	$	122.8			100.0	%	$	—		—	%

At December 31, 2015, the 28 borrowers whose debt investments are included in the table above averaged a loan to value ratio of approximately 62% (i.e., each $62 of loan value outstanding is secured by $100 of collateral value). At June 30, 2015, the 32 borrowers whose debt investments are included in the table above averaged a loan to value ratio of approximately 59% (i.e., each $59 of loan value outstanding is secured by $100 of collateral value).

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The following table shows the fair value of our portfolio of investments by industry, as of December 31, 2015 and June 30, 2015. This table does not include our open swap contract.


	December 31, 2015 (Unaudited)						June 30, 2015
	Investments at Fair Value (dollars in millions)			Percentage of Total Investment Portfolio*			Investments at Fair Value (dollars in millions)		Percentage of Total Investment Portfolio
Power Generation	$	14.6			11.8	%	$	13.0		8.5	%
Building Cleaning and Maintenance Services		10.4			8.3			10.7		7.0
Radio Broadcasting		9.4			7.4			9.3		6.1
Appliance Parts Distributor		8.0			6.4			8.0		5.2
Wireless Communications		7.8			6.2			8.0		5.2
Consumer Financing		7.3			5.9			7.9		5.2
Real Estate Holding Company		5.9			4.7			—		—
Specialty Pharmaceuticals		5.9			4.7			6.0		3.9
Television Programming		5.3			4.2			5.8		3.8
Oil and Gas Field Services		5.2			4.2			10.1		6.8
Maritime Security Services		4.8			3.9			6.0		3.9
Daily and Weekly Newspaper Publisher		4.6			3.7			2.0		1.3
Hotel Operator		4.1			3.3			4.3		2.8
Gambling Machine Manufacturer		3.8			3.1			3.8		2.5
Food Distributors and Wholesalers		3.8			3.1			3.8		2.5
Grain Mill Products		3.8			3.1			3.3		2.2
Biological Products		3.5			2.8			3.4		2.3
Information and Data Services		3.3			2.7			3.4		2.2
Data Connectivity Service Company		3.1			2.5			3.2		2.1
Equities Trading Platform		2.8			2.3			—		—
Electric Services		2.8			2.3			5.2		3.5
Outdoor Advertising Services		1.9			1.5			2.0		1.3
Munitions		1.1			0.9			2.6		1.7
Energy Efficiency Services		0.8			0.6			3.6		2.4
Equipment Rental Services		0.6			0.5			0.6		0.4
Internet Advertising		0.4			0.4			2.4		1.6
Non-Residential Property Owner		0.3			0.2			1.3		0.9
Mobile Device Management		—			—			11.1		7.3
Real Estate Management Services		—			—			8.5		5.6
IT and Business Skill Training		—			—			2.0		1.3
Asset Recovery Services		—			—			0.5		0.3
Geophysical Surveying and Mapping Services		—			—			0.2		0.1
Medical Liability Claims Factoring		—			—			0.1		0.1
Healthcare Billing and Collections		—			—			—		—
Enterprise Software Company		(0.8	)		(0.7	)		—		—
Total	$	124.5			100.0	%	$	152.1		100.0	%

Total investment portfolio does not include our open swap contract.

Portfolio Grading

We have adopted a credit grading system to monitor the quality of our debt investment portfolio. As of December 31, 2015, our portfolio had a weighted average grade of 3.06, based upon the fair value of the debt investments in the portfolio. Equity securities and investments in United States Treasury Bills are not graded. This was an increase of 0.10 from the weighted average grade of 2.96 at June 30, 2015.

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At December 31, 2015, our debt investment portfolio was graded as follows:


	December 31, 2015 (Unaudited)
Grade	Summary Description		Fair Value		Percentage of Total Portfolio*
1		Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk profile are favorable (including a potential exit).	$	—		—	%
2		The portfolio company is performing above expectations and the risk profile is generally favorable.		10,390,317		8.46
3		Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk profile is generally neutral; all new investments are initially assessed a grade of 3.		83,569,523		68.04
4		The portfolio company is performing below expectations, requires procedures for closer monitoring, may be out of compliance with debt covenants, and the risk profile is generally unfavorable.		12,276,229		10.00
5		The investment is performing well below expectations and is not anticipated to be repaid in full.		2,147,967		1.75
			$	108,384,036		88.25	%

Total portfolio includes our total investments at fair value and open swap contract at fair value.

At June 30, 2015, our debt investment portfolio was graded as follows:


	June 30, 2015
Grade	Summary Description		Fair Value		Percentage of Total Portfolio
1		Involves the least amount of risk in our portfolio, the portfolio company is performing above expectations, and the trends and risk profile are favorable (including a potential exit).	$	8,516,728		5.60	%
2		The portfolio company is performing above expectations and the risk profile is generally favorable.		10,720,287		7.05
3		Risk that is similar to the risk at the time of origination, the portfolio company is performing as expected, and the risk profile is generally neutral; all new investments are initially assessed a grade of 3.		98,780,645		64.93
4		The portfolio company is performing below expectations, requires procedures for closer monitoring, may be out of compliance with debt covenants, and the risk profile is generally unfavorable.		9,932,823		6.53
5		The investment is performing well below expectations and is not anticipated to be repaid in full.		5,955,315		3.92
			$	133,905,798		88.03	%

We expect that a portion of our investments will be in grades 4 or 5 from time to time, and, as such, we will be required to work with portfolio companies to improve their business and protect our investment. The number and amount of investments included in grades 4 or 5 may fluctuate from period to period.

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Results of Operations

Comparison of the three months ended December 31, 2015 and 2014


	Three Months Ended December 31, 2015						Three Months Ended December 31, 2014
	Total			Per Share⁽¹⁾			Total			Per Share⁽¹⁾
Total Investment Income	$	4,829,333		$	0.21		$	4,912,220		$	0.41
Interest Income⁽²⁾		3,724,930			0.16			4,466,872			0.37
Other Income		1,104,403			0.05			445,348			0.04
Net Operating Expenses		2,467,609			0.11			2,558,879			0.22
Management Fee		548,857			0.02			581,329			0.05
Incentive Fee		534,585			0.03			526,242			0.04
Total Advisory Fees		1,083,442			0.05			1,107,571			0.09
Administrative Fees		204,082			0.01			179,470			0.02
Director’s Fees		38,750			0.00			40,750			0.00
Interest Expenses		974,500			0.04			1,177,094			0.10
Professional Services Expense		213,973			0.01			139,926			0.02
Bank Fees		7,060			0.00			10,918			0.00
Other		169,186			0.01			151,523			0.01
Management Fee Waiver and Expense Reimbursement		(223,384	)		(0.01	)		(248,373	)		(0.02	)
Net Investment Income		2,361,724			0.11			2,353,341			0.19
Net Change in Unrealized Gain (Loss)		2,984,971			0.14			(7,624,759	)		(0.64	)
Net Realized Loss		(8,779,348	)		(0.39	)		(1,301,452	)		(0.11	)

(1)

The basic per share figures noted above are based on a weighted average of 22,527,816 and 11,949,034 shares outstanding for the three months ended December 31, 2015 and December 31, 2014, respectively, except where such amounts need to be adjusted to be consistent with what is disclosed in the financial highlights of our audited Consolidated Financial Statements.

(2)

Interest income includes PIK interest of $11,972 and $100,621 for the three months ended December 31, 2015 and December 31, 2014, respectively.

Total Investment Income

Total investment income includes interest and dividend income on our investments and other income, which is typically comprised of fee income. Fee income typically consists of administrative fees, prepayment fees, structuring fees and unused line fees.

Total investment income decreased from $4,912,220 for the three months ended December 31, 2014 to $4,829,333 for the three months ended December 31, 2015. The decrease in investment income was predominantly due to decreased interest income related to a smaller debt portfolio versus the prior year period and decreasing average coupon rates, and was partially offset by an increase in other income. The increase in other income is predominantly due to prepayment fees received as a result of the payoff of Good Technology Corporation.

Total investment income decreased on a per share basis, as interest income decreased from $0.37 per share for the three months ended December 31, 2014 to $0.16 per share for the three months ended December 31, 2015. Other income per share increased from $0.04 per share for the three months ended December 31, 2014 to $0.05 per share for the three months ended December 31, 2015. Per share figures noted above reflect an increase in the weighted average shares outstanding from 11,949,034 to 22,527,816 for the three months ended December 31, 2014 and 2015, respectively; this increase in share count from our rights offering increased the per share impact of decreased total investment income.

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Expenses

Net operating expenses decreased from $2,558,879 for the three months ended December 31, 2014 to $2,467,609 for the three months ended December 31, 2015. The decrease in net operating expenses is primarily due to decreased interest expense related to reduced borrowings.

Net operating expenses per share decreased from $0.22 per share for the three months ended December 31, 2014 to $0.11 per share for the three months ended December 31, 2015. Per share figures noted above reflect an increase in the weighted average shares outstanding from 11,949,034 to 22,527,816 for the three months ended December 31, 2014 and December 31, 2015, respectively; this increase in share count from our rights offering increased the per share impact of decreased net operating expenses.

Net Investment Income

Net investment income increased from $2,353,341 for the three months ended December 31, 2014 to $2,361,724 for the three months ended December 31, 2015. The increase in net investment income for the three months ended December 31, 2015, as compared to the three months ended December 31, 2014 was primarily due to increased fee income related to the prepayment fees received as a result of the payoff of Good Technology Corporation and was partially offset by a decrease in interest income and interest expense.

Net investment income per share decreased from $0.19 per share for the three months ended December 31, 2014 to $0.11 per share for the three months ended December 31, 2015. Per share figures noted above reflect an increase in the weighted average shares outstanding from 11,949,034 to 22,527,816 for the three months ended December 31, 2014 as compared to the three months ended December 31, 2015. This increase in share count from our rights offering decreased the per share impact of increased net investment income.

Realized Gain (Loss) on Investments

Realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs.

During the three months ended December 31, 2015, we recorded net realized losses of $8,779,348, primarily in connection with the write off of the term loans to New Media West, LLC and Takoda Resources Inc. of $3,811,681 and $2,891,736, respectively, the write off of the warrant in Good Technology Corporation of $2,289,400 and the loss on the payoff of the revolving term loan to TransAmerican Asset Servicing Group, LLC of $3,161,166. These losses were partially offset by a gain from the payoff of the term loan to Good Technology Corporation of $1,508,603 and a gain from the sale of the equity interest in West World Media, LLC of $1,712,323.

During the three months ended December 31, 2014, we recorded realized losses of $1,301,452, primarily in connection with the final disposition of the investment in MDU Communications (USA) Inc., which resulted in a realized loss of $1,583,980. This loss was partially offset by a gain on the partial prepayments of PEAKS Trust 2009-1 of $509,112.

Change in Unrealized Gain (Loss) on Investments

Net unrealized appreciation or depreciation recorded on investments is the net change in the fair value of our investment portfolio during the reporting period, including the reversal of previously recorded unrealized appreciation or depreciation when gains or losses are realized. See “Critical Accounting Policies — Change in Unrealized Gain (Loss) on Investments.”

From time to time, the Company may enter into a new transaction with a portfolio company as a result of the sale, merger, foreclosure, bankruptcy or other corporate event involving the portfolio company. In such cases, the Company may receive newly issued notes, securities and/or other consideration in exchange for, or resulting from, the cancellation of the instruments previously held by the Company with regard to that portfolio company. In such cases, the Company may experience a realized loss on the instrument being sold or cancelled, and, concurrently, an elimination of any previously recognized unrealized losses on the portfolio investment. Such elimination of unrealized gain (loss) is included on the Consolidated Statements of Operations as a (decrease) increase in the Net Change in Unrealized Gain (Loss) on Investments.

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Net change in unrealized appreciation (depreciation) on investments and open swap contract was $2,984,971 for the three months ended December 31, 2015 compared to $(7,624,759) for the three months ended December 31, 2014. The following table summarizes the significant changes in unrealized appreciation (depreciation) of the Company’s investment portfolio, including our open swap contract, for the three months ended December 31, 2015 by portfolio company.



Portfolio Company	Change in Unrealized Appreciation (Depreciation)			December 31, 2015 (Unaudited)							September 30, 2015 (Unaudited)
Portfolio Company	Change in Unrealized Appreciation (Depreciation)			Cost		Fair Value		Unrealized Appreciation (Depreciation)			Cost		Fair Value		Unrealized Appreciation (Depreciation)
New Media West, LLC	$	3,811,681		$	—	$	—	$	—		$	3,811,681	$	—	$	(3,811,681	)
TransAmerican Asset Servicing Group, LLC		3,085,131			—		—		—			3,630,531		545,400		(3,085,131	)
Takoda Resources, Inc.		2,907,250			—		—		—			2,986,718		79,468		(2,907,250	)
West World Media, LLC		(1,769,500	)		—		—		—			430,500		2,200,000		1,769,500
Ads Direct Media, Inc.		(1,500,663	)		1,950,195		443,667		(1,506,528	)		2,184,159		2,178,294		(5,865	)
Other⁽¹⁾		(3,548,928	)		145,420,551		122,369,073		(23,051,478	)		156,780,802		137,278,252		(19,502,550	)
Totals	$	2,984,971		$	147,370,746	$	122,812,740	$	(24,558,006	)	$	169,824,391	$	142,281,414	$	(27,542,977	)

(1)

Other represents all remaining investments.

Comparison of the six months ended December 31, 2015 and 2014


	Six Months Ended December 31, 2015						Six Months Ended December 31, 2014
	Total			Per Share⁽¹⁾			Total			Per Share⁽¹⁾
Total Investment Income	$	9,569,955		$	0.42		$	8,998,844		$	0.76
Interest Income⁽²⁾		7,919,423			0.35			8,344,471			0.70
Dividend Income		20,647			0.00			—			—
Other Income		1,629,885			0.07			654,373			0.06
Net Operating Expenses		4,784,015			0.21			4,803,429			0.40
Management Fee		1,160,786			0.05			1,153,887			0.10
Incentive Fee		1,016,362			0.05			916,092			0.07
Total Advisory Fees		2,177,148			0.10			2,069,979			0.17
Administrative Fees		399,364			0.02			355,147			0.03
Director’s Fees		84,500			0.00			88,696			0.01
Interest Expenses		1,978,329			0.09			2,179,477			0.18
Professional Services Expense		553,525			0.02			359,594			0.03
Bank Fees		15,801			0.00			21,189			0.00
Other		295,841			0.01			260,394			0.02
Management Fee Waiver and Expense Reimbursement		(720,493	)		(0.03	)		(531,047	)		(0.04	)
Net Investment Income		4,785,940			0.21			4,195,415			0.35
Net Change in Unrealized Gain (Loss)		(4,475,862	)		(0.19	)		(9,639,794	)		(0.81	)
Net Realized Loss		(8,650,437	)		(0.38	)		(899,793	)		(0.08	)

(1)

The basic per share figures noted above are based on a weighted average of 22,851,579 and 11,913,284 shares outstanding for the six months ended December 31, 2015 and December 31, 2014, respectively, except where such amounts need to be adjusted to be consistent with what is disclosed in the financial highlights of our audited Consolidated Financial Statements.

(2)

Interest income includes PIK interest of $56,492 and $202,235 for the six months ended December 31, 2015 and December 31, 2014, respectively.

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Total Investment Income

Total investment income increased from $8,998,844 for the six months ended December 31, 2014 to $9,569,955 for the six months ended December 31, 2015. The increase in investment income was predominantly due to increased other income. The increase in other income is predominantly due to prepayment fees received as a result of the payoff of Good Technology Corporation and Butler Burger Group, LLC.

Total investment income decreased on a per share basis, as interest income decreased from $0.70 per share for the six months ended December 31, 2014 to $0.35 per share for the six months ended December 31, 2015. Other income per share increased from $0.06 per share for the six months ended December 31, 2014 to $0.07 per share for the six months ended December 31, 2015. Per share figures noted above reflect an increase in the weighted average shares outstanding from 11,913,284 to 22,851,579 for the six months ended December 31, 2014 and 2015, respectively; this increase in share count from our rights offering decreased the per share impact of increased total investment income.

Expenses

Net operating expenses decreased from $4,803,429 for the six months ended December 31, 2014 to $4,784,015 for the six months ended December 31, 2015. The decrease in net operating expenses is primarily due to decreased interest expense related to reduced borrowings. The decrease in interest expense was partially offset by an increase in professional fees, which were higher primarily due to fees for the initial annual audit of the Company’s internal controls over financial reporting.

Net operating expenses per share decreased from $0.40 per share for the six months ended December 31, 2014 to $0.21 per share for the six months ended December 31, 2015. Per share figures noted above reflect an increase in the weighted average shares outstanding from 11,913,284 to 22,851,579 for the six months ended December 31, 2014 and December 31, 2015, respectively; this increase in share count from our rights offering increased the per share impact of decreased net operating expenses.

Net Investment Income

Net investment income increased from $4,195,415 for the six months ended December 31, 2014 to $4,785,940 for the six months ended December 31, 2015. The increase in net investment income for the six months ended December 31, 2015, as compared to the six months ended December 31, 2014, was primarily due to increased fee income related to the prepayment fees received as a result of the payoff of Good Technology Corporation and Butler Burger Group, LLC. The increase in other income was partially offset by lower interest income during the period.

Net investment income per share decreased from $0.35 per share for the six months ended December 31, 2014 to $0.21 per share for the six months ended December 31, 2015. Per share figures noted above reflect an increase in the weighted average shares outstanding from 11,913,284 to 22,851,579 for the six months ended December 31, 2014 as compared to the six months ended December 31, 2015. This increase in share count from our rights offering decreased the per share impact of increased net investment income.

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Realized Gain (Loss) on Investments

Realized gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and their stated costs.

During the six months ended December 31, 2015, we recorded net realized losses of $8,650,437, primarily in connection with the write off of the term loans to New Media West, LLC and Takoda Resources Inc. of $3,811,681 and $2,891,736, respectively, the write off of the warrant in Good Technology Corporation of $2,289,400 and the loss on the full payoff of the revolving term loan to TransAmerican Asset Servicing Group, LLC of $3,161,166. These losses were partially offset by a gain from the payoff of the term loan to Good Technology Corporation of $1,508,603 and a gain from the sale of the equity interest in West World Media, LLC of $1,712,323.

During the six months ended December 31, 2014, we recorded realized losses of $899,793, primarily in connection with a loss from the final disposition of the investment in MDU Communications (USA) Inc., which resulted in a realized loss of $1,583,980. This loss was partially offset by a gain on the partial prepayments of PEAKS Trust 2009-1 of $918,426.

Change in Unrealized Gain (Loss) on Investments

From time to time, we may enter into a new transaction with a portfolio company as a result of the sale, merger, foreclosure, bankruptcy or other corporate event involving the portfolio company. In such cases, we may receive newly issued notes, securities and/or other consideration in exchange for, or resulting from, the cancellation of the instruments previously held by the Company with regard to that portfolio company. In such cases, we may experience a realized loss on the instrument being sold or cancelled, and, concurrently, an elimination of any previously recognized unrealized losses on the portfolio investment. Such elimination of unrealized gain (loss) is included on the Consolidated Statements of Operations as a (decrease) increase in the Net Change in Unrealized Gain (Loss) on Investments.

Net change in unrealized appreciation (depreciation) on investments and open swap contract was $(4,475,862) for the six months ended December 31, 2015 compared to $(9,639,794) for the six months ended December 31, 2014. The following table summarizes the significant changes in unrealized appreciation (depreciation) of the Company’s investment portfolio, including our open swap contract, for the six months ended December 31, 2015 by portfolio company.



Portfolio Company	Change in Unrealized Appreciation (Depreciation)			December 31, 2015 (Unaudited)							June 30, 2015
Portfolio Company	Change in Unrealized Appreciation (Depreciation)			Cost		Fair Value		Unrealized Appreciation (Depreciation)			Cost		Fair Value		Unrealized Appreciation (Depreciation)
New Media West, LLC	$	3,811,681		$	—	$	—	$	—		$	3,811,681	$	—	$	(3,811,681	)
TransAmerican Asset Servicing Group, LLC		3,068,175			—		—		—			3,534,960		466,785		(3,068,175	)
Takoda Resources, Inc.		2,892,947			—		—		—			3,054,532		161,585		(2,892,947	)
US Shale Solutions, Inc.		(2,750,791	)		6,642,072		1,704,300		(4,937,772	)		6,642,071		4,455,090		(2,186,981	)
Modular Process Control, LLC		(2,708,671	)		7,123,312		800,000		(6,323,312	)		7,278,468		3,663,827		(3,614,641	)
Other⁽¹⁾		(8,789,203	)		133,605,362		120,308,440		(13,296,922	)		147,874,191		143,366,472		(4,507,719	)
Totals	$	(4,475,862	)	$	147,370,746	$	122,812,740	$	(24,558,006	)	$	172,195,903	$	152,113,759	$	(20,082,144	)

(1)

Other represents all remaining investments.

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Liquidity and Capital Resources

At December 31, 2015, we had investments in debt securities of 28 companies, totaling approximately $108.4 million at fair value, equity investments in 13 companies, totaling approximately $16.1 million at fair value, and an open swap contract with 1 company, held at approximately $(1.7) million at fair value. The debt investment amount includes $56,492 in accrued PIK interest earned for the six months ended December 31, 2015, and $458,877, cumulatively, which is added to the carrying value of our investments.

For the six months ended December 31, 2015, cash provided by operating activities, consisting primarily of net repayments of investments and the items described in “Results of Operations,” was approximately $7.3 million, reflecting the purchases and repayments of investments, net investment income resulting from operations, offset by non-cash income related to OID income, changes in working capital and accrued interest receivable. Net cash provided by purchases and sales of investments was approximately $16.9 million, reflecting principal repayments of $66.8 million, offset by additional investments of $49.9 million.

As of December 31, 2015, we did not have any outstanding borrowings under our senior secured credit facility (the “Credit Facility”) with Santander Bank, N.A. (“Santander Bank”), as administrative agent. On November 6, 2013, the Company increased the size of the Credit Facility from $32.5 million to $45.0 million. On September 12, 2014, the Company entered into an amendment to our Credit Facility with Santander Bank to give the Company the option to increase the size of the facility from $45.0 million to $60.0 million and to provide additional criteria for eligibility of loans under the borrowing base under the credit facility. The Company has not exercised its option to expand the Credit Facility as of December 31, 2015. In addition, as of December 31, 2015, the Company had $33.6 million in Notes Payable outstanding.

As a business development company, we generally have an ongoing need to raise additional capital for investment purposes. As a result, we expect, from time to time, to access the debt and equity markets when we believe it is necessary and appropriate to do so. In this regard, we continue to explore various options for obtaining additional debt or equity capital for investments. This may include expanding or extending our Credit Facility, or the issuance of additional shares of our common stock, possibly at prices below our then current net asset value per share pursuant to a proposal, approved by our stockholders at our most recent Special Meeting of Stockholders, authorizing us to sell shares of our common stock below its then current net asset value per share in one or more offerings for a period of one year or, if earlier, the date of our next Annual Meeting of Shareholders. We would need similar future approval from our stockholders to issue shares below the then current net asset value per share any time after the expiration of the current approval. We are currently not seeking such approval. If we are unable to obtain leverage or raise equity capital on terms that are acceptable to us, our ability to grow our portfolio will be substantially impacted.

Capital Raises

On July 14, 2014, we sold 506,000 shares of our common stock at $7.40 per share in a direct registered offering to certain investors for total gross proceeds of approximately $3.7 million.

Our non-transferable rights offering to our stockholders of record as of 5:00 p.m., New York City time, on March 6, 2015 expired at 5:00 p.m., New York City time, on March 30, 2015. The rights entitled holders of rights to subscribe for an aggregate of up to 11,949,034 shares of our common stock. Record date stockholders received one right for each share of common stock owned on the record date. The rights entitled the holder to purchase one new share of common stock for every one right held and record date stockholders who fully exercised their rights were entitled to subscribe, subject to certain limitations and pro-rata allocation, for additional shares that remain unsubscribed as a result of any unexercised rights. The subscription price per share was $3.50. The net proceeds from this rights offering, after deducting the fee payable to the dealer managers and offering expenses, were approximately $37.8 million, which we received on April 6, 2015. In connection with this rights offering, the dealer manager received a fee for its financial advisory, marketing and soliciting services equal to a maximum of 4.0% of the subscription price per share for each share issued pursuant to the exercise of rights, including pursuant to the over-subscription privilege. We incurred offering expenses, including the dealer manager fee, of $1,401,660 in connection with this rights offering.

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As part of the rights offering, an institutional investor committed to purchase approximately 214,000 shares in open market transactions over a seven-day period following the expiration date of the rights offering. The institutional investor agreed to acquire the remainder of the 214,000 shares in a private placement directly from the Company to the extent such shares were not purchased in open market transactions during such seven-day period. Subsequent to the seven-day period, on April 13, 2015, such investor acquired 80,475 shares, the remainder of its initial commitment of approximately 214,000 shares, in a private placement at $3.50 per share directly from the Company. We incurred offering expenses of $3,345 in connection with this offering.

Share Repurchase Program

On April 7, 2014, the Board of Directors authorized a share repurchase program which provides for the purchase of up to 1 million shares of outstanding common stock to be implemented at the discretion of our management team. On August 26, 2015, the Board of Directors authorized the purchase of an additional 1 million shares to provide for the purchase of up to 2 million shares of the outstanding common stock as part of the share repurchase program. Under the repurchase program, we may, but are not obligated to, repurchase our outstanding common stock in the open market from time to time. The timing and number of shares to be repurchased in the open market will depend on a number of factors, including market conditions and alternative investment opportunities. In addition, any repurchases will be conducted in accordance with the 1940 Act. For the three months ended December 31, 2015, the Company repurchased 290,780 shares under the share repurchase program at the weighted average price of $3.16 per share. As of February 16, 2016, the Company has repurchased an aggregate of 763,187 shares under the share repurchase program at the weighted average price of $3.17 per share, resulting in $2.4 million of cash paid, under the program since September 17, 2015.

Contractual Obligations


	Payments Due By Period (dollars in millions)
	Total		Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
Credit Facility⁽¹⁾	$	—	$	—	$	—	$	—	$	—
Notes		33.6		—		—		33.6		—
Total	$	33.6	$	—	$	—	$	33.6	$	—

(1)

On September 12, 2014, we entered into an amendment to our Credit Facility with Santander Bank, N.A. to give the Company the option to increase the size of the facility from $45.0 million to $60.0 million and to provide additional criteria for eligibility of loans under the borrowing base under the credit facility. We have not exercised our option to expand the facility as of December 31, 2015. At December 31, 2015, $45.0 million remained unused under the Credit Facility.

In addition to the contractual obligations set forth above, we have certain obligations with respect to the investment advisory and administration services we receive. See “Overview.” We incurred fees of $2,177,148 for investment advisory services and $399,364 for administrative services for the six months ended December 31, 2015.

As of December 31, 2015, we had approximately $8.7 million in unfunded loan commitments, subject to our approval in certain instances, to provide debt financing to certain of our portfolio companies.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, including any risk management of commodity pricing or other hedging practices.

Borrowings

Secured Revolving Credit Facility. On June 3, 2013, we entered into a credit agreement with Santander Bank, as administrative agent, which provided us with our $32.5 million Credit Facility. The Credit Facility replaced our prior senior secured revolving credit facility with FCC, LLC d/b/a First Capital.

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The Credit Facility matures on June 3, 2016 and bears interest based on a tiered rate structure, depending upon utilization, ranging from LIBOR (one month, two month or three month, depending on our option) plus 3.25% to 4.00% per annum, or from Santander Bank’s prime rate plus 1.25% to 2.00% per annum, based on our election. In addition, a fee of 0.50% per annum is charged on unused amounts under the Credit Facility. The Credit Facility is secured by all of our assets. Under the Credit Facility, we have made certain customary representations and warranties, and are required to comply with various covenants, reporting requirements and other customary requirements, including a minimum balance sheet leverage ratio, for similar credit facilities. The Credit Facility includes usual and customary events of default for credit facilities of this nature. On November 6, 2013, the Company increased the size of its Credit Facility with Santander Bank from $32.5 million to $45.0 million. On September 12, 2014, the Company entered into an amendment to our Credit Facility with Santander Bank to give the Company the option to increase the size of the facility from $45.0 million to $60.0 million and to provide additional criteria for eligibility of loans under the borrowing base under the credit facility. The Company has not exercised its option to expand the Credit Facility as of December 31, 2015.

Notes Payable. On June 28, 2013, we issued approximately $21.1 million in aggregate principal amount of our 8.25% Notes due June 30, 2020 for net proceeds of approximately $20.2 million after deducting underwriting commissions of approximately $0.9 million. Offering expenses of approximately $0.2 million were incurred.

The Notes were issued pursuant to an indenture, dated June 3, 2013, as supplemented by the first supplemental indenture, dated June 28, 2013 (collectively, the “Indenture”), between us and U.S. Bank National Association (the “Trustee”). The Notes are our unsecured obligations and rank senior in right of payment to our existing and future indebtedness that is expressly subordinated in right of payment to the Notes; equal in right of payment to our existing and future unsecured indebtedness that is not so subordinated; effectively junior in right of payment to any of our secured indebtedness (including existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries or financing vehicles. Interest on the Notes is paid quarterly in arrears on March 30, June 30, September 30 and December 30, at a rate of 8.25% per annum, beginning September 30, 2013. The Notes mature on June 30, 2020 and may be redeemed in whole or in part at any time or from time to time at our option on or after June 30, 2016. The Notes are listed on the NASDAQ Global Market under the trading symbol “FULLL” with a par value of $25.00 per share.

The Indenture contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the Notes and the Trustee if we cease to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the Indenture. We may repurchase the Notes in accordance with the 1940 Act and the rules promulgated thereunder. Any Notes repurchased by us may, at our option, be surrendered to the Trustee for cancellation, but may not be reissued or resold by us. Any Notes surrendered for cancellation will be promptly cancelled and no longer outstanding under the Indenture. As of December 31, 2015, we had not repurchased any of the Notes in the open market.

On July 14, 2014, we closed an offering of Notes consisting of $12,500,000 in aggregate principal amount of the Notes. The Notes were sold at price of $25.375 plus accrued interest from June 30, 2014, a premium to par value of $25.00 per Note, for total gross proceeds of approximately $12.7 million. The Notes are a further issuance of, rank equally in right of payment with, and form a single series with the $21,145,525 of outstanding Notes that will mature on June 30, 2020, and may be redeemed in whole or in part at any time or from time to time at our option on or after June 30, 2016.

Distributions

In order to qualify as a regulated investment company and to avoid corporate level tax on the income we distribute to our stockholders, we are required, under Subchapter M of the Code, to distribute at least 90% of our ordinary income and short-term capital gains to our stockholders on an annual basis.

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The following table lists the cash distributions, including dividends and returns of capital, if any, per share that we have declared since our formation on April 16, 2010. The table is divided by fiscal year according to record date.

Date Declared

Record Date

Payment Date

Amount

Total Fiscal 2011

0.751

Total Fiscal 2012

0.918

Total Fiscal 2013

0.924

Total Fiscal 2014

0.864

Fiscal 2015:

May 2, 2014

July 31, 2014

August 15, 2014

0.067

May 2, 2014

August 29, 2014

September 15, 2014

0.067

May 2, 2014

September 30, 2014

October 15, 2014

0.067

September 8, 2014

October 31, 2014

November 14, 2014

0.067

September 8, 2014

November 28, 2014

December 15, 2014

0.067

September 8, 2014

December 31, 2014

January 15, 2015

0.067

November 3, 2014

January 30, 2015

February 13, 2015

0.067

November 3, 2014

February 27, 2015

March 13, 2015

0.067

November 3, 2014

March 31, 2015

April 15, 2015

0.067

February 20, 2015

April 30, 2015

May 15, 2015

0.035

February 20, 2015

May 29, 2015

June 15, 2015

0.035

February 20, 2015

June 30, 2015

July 15, 2015

0.035

Total (2015)

0.708

Fiscal 2016:

May 5, 2015

July 31, 2015

August 14, 2015

0.035

May 5, 2015

August 31, 2015

September 15, 2015

0.035

May 5, 2015

September 30, 2015

October 15, 2015

0.035

August 4, 2015

October 30, 2015

November 13, 2015

0.035

August 4, 2015

November 30, 2015

December 15, 2015

0.035

August 4, 2015

December 31, 2015

January 15, 2016

0.035

November 3, 2015

January 29, 2016

February 15, 2016

0.035

November 3, 2015

February 29, 2016

March 15, 2016

0.035

November 3, 2015

March 31, 2016

April 15, 2016

0.035

Total 2016 to date

0.315

Related Parties

We have entered into a number of business relationships with affiliated or related parties, including the following:

•

We have entered into the Investment Advisory Agreement with Full Circle Advisors. John E. Stuart, our Chairman, and Gregg J. Felton, our Chief Executive Officer and President, are both managing members of, and have financial and controlling interests in, Full Circle Advisors.

•

We have entered into the Administration Agreement with Full Circle Service Company. Pursuant to the terms of the Administration Agreement, Full Circle Service Company provides us with the office facilities and administrative services necessary to conduct our day-to-day operations. Mr. Stuart, our Chairman, and Mr. Felton, our Chief Executive Officer and President, are managing members of, and have financial and controlling interests in, Full Circle Service Company. Our Chief Financial Officer, Michael J. Sell, is the Vice President of Full Circle Service Company.

•

We have entered into a license agreement with Full Circle Advisors, pursuant to which Full Circle Advisors has agreed to grant us a non-exclusive, royalty-free license to use the name “Full Circle.”

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FCCIP is a multiple series private fund, for which we serve as the managing member and investment adviser. FCCIP was formed as a Delaware limited liability company and operates under a limited liability company agreement dated June 13, 2014. We may co-invest in certain portfolio investments from time to time with one or more series issued by FCCIP where we determine that the aggregate available investment opportunity exceeds what we believe would be appropriate for us to acquire directly, subject to certain conditions. In addition, we expect to receive certain fees or other distributions for FCCIP in connection with the services we provide to each series it may issue. Such fees may include management fees, incentive fees and administration fees and could be offset by expense caps or waivers in the future.

Certain members of Full Circle Advisors’ investment committee presently manage Full Circle Funding, LP, a specialty lender serving lower middle-market companies. Although the existing investment funds managed by Full Circle Funding, LP are no longer making investments in new opportunities, any affiliated investment vehicle formed in the future and managed by our investment adviser or its affiliates may, notwithstanding different stated investment objectives, have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. Full Circle Advisors and its affiliates may determine that an investment is appropriate for us and for one or more of those other funds. In such event, depending on the availability of such investment and other appropriate factors, Full Circle Advisors or its affiliates may determine that we should invest side-by-side with one or more other funds. Any such investments will be made only to the extent permitted by applicable law and interpretive positions of the SEC and its staff, and consistent with Full Circle Advisors’ allocation procedures.

We have also adopted a Code of Ethics which applies to, among others, our senior officers, including our Chairman, Chief Executive Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Ethics requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individual’s personal interests and our interests. Pursuant to our Code of Ethics, each employee and director must disclose any conflicts of interest, or actions or relationships that might give rise to a conflict, to our Chief Compliance Officer. Our Audit Committee is charged with approving any waivers under our Code of Ethics. As required by the NASDAQ corporate governance listing standards, the Audit Committee of our Board of Directors is also required to review and approve any transactions with related parties (as such term is defined in Item 404 of Regulation S-K).

Recent Developments

Recent Portfolio Activity

Effective January 14, 2016, the Company participated in a restructuring process with US Shale Solutions, Inc. in which the Company exchanged its $9.0 million senior secured bond and its warrants in return for approximately $2.2 million of a second lien term loan and equity in US Shale Solutions, Inc. As part of the restructuring, the Company funded approximately $1.1 million of a new senior secured term loan.

On February 10, 2016, the senior secured term loan with Solex Fine Foods, LLC; Catsmo, LLC was repaid with approximately $4.1 million of principal and interest received by the Company.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

We are subject to financial market risks, including changes in interest rates. As of December 31, 2015, 7 debt investments in our portfolio bore interest at a fixed rate, and the remaining 30 debt investments were at variable rates, representing approximately $25.2 million and $83.2 million in principal debt, respectively. The variable rates are based upon LIBOR.

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To illustrate the potential impact of a change in the underlying interest rate on our net investment income, we have assumed a 1%, 2%, and 3% increase and 1%, 2%, and 3% decrease in the underlying Prime Rate or LIBOR, and no other change in our portfolio as of December 31, 2015. We have also assumed there are no outstanding floating rate borrowings by the Company. See the below table for the effect the rate changes would have on net investment income.


LIBOR or Prime Rate Increase (Decrease)	Increase (decrease) of Net Investment Income (in millions)
3.00%	$	2.1
2.00%	$	1.3
1.00%	$	0.5
(1.00)%	$	(0.1	)
(2.00)%	$	(0.2	)
(3.00)%	$	(0.3	)

Although management believes that this analysis is indicative of our existing interest rate sensitivity at December 31, 2015, it does not adjust for changes in the credit quality, size and composition of our portfolio, and other business developments, including borrowing under a credit facility, that could affect the net increase in net assets resulting from operations. Accordingly, no assurances can be given that actual results would not differ materially from the results under this hypothetical analysis.

We may in the future hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates.

Item 4.

Controls and Procedures

As of December 31, 2015, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in timely alerting management, including the Chief Executive Officer and Chief Financial Officer, of material information about us required to be included in periodic SEC filings.

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

None of us, our investment adviser or administrator, is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our investment adviser or administrator. From time to time, we, our investment adviser or administrator, may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A.

Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended June 30, 2015, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results. Except as indicated below, there have been no material changes during the six months ended December 31, 2015 to the risk factors discussed in Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended June 30, 2015.

Investments in our portfolio companies in the power and energy industries involve various operational, construction and regulatory risks that could adversely affect our results of operations, liquidity and financial condition.

The development, operation and maintenance of power and energy generation facilities involves many risks, including, as applicable, labor issues, start-up risks, breakdown or failure of facilities, lack of sufficient capital to maintain the facilities, the dependence on a specific fuel source or the impact of unusual or adverse weather conditions or other natural events, as well as the risk of performance below expected levels of output, efficiency or reliability, the occurrence of any of which could result in lost revenues and/or increased expenses. In turn, such developments could impair a portfolio company’s ability to repay its debt or conduct its operations. We may also choose or be required to decommission a power generation facility or other asset. The decommissioning process could be protracted and result in the incurrence of significant financial and/or regulatory obligations or other uncertainties.

Our power and energy sector portfolio companies may also face construction risks typical for power generation and related infrastructure businesses. Such developments could result in substantial unanticipated delays or expenses and, under certain circumstances, and could prevent completion of construction activities once undertaken. Delays in the completion of any power project may result in lost revenues or increased expenses, including higher operation and maintenance costs related to such portfolio company.

The power and energy sectors are the subject of substantial and complex laws, rules and regulation by various federal and state regulatory agencies. Failure to comply with applicable laws, rules and regulations could result in the prevention of operation of certain facilities or the prevention of the sale of such a facility to a third party, as well as the loss of certain rate authority, refund liability, penalties and other remedies, all of which could result in additional costs to a portfolio company and adversely affect the investment results.

The power generation industry is subject to many risks.

As of December 31, 2015, our investments in the power generation industry represented approximately 11.8% of the fair value of our investment portfolio, excluding our open swap contract. The revenues, income (or losses) and valuations of power generation companies can fluctuate suddenly and dramatically due to any one or more of the following factors:

Commodity Pricing Risk. In general, commodity prices directly affect energy companies, such as the market prices of crude oil, natural gas, coal and wholesale electricity, especially for those who own the underlying energy commodity. In addition, the volatility of commodity prices can affect other energy

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companies due to the impact of prices on the volume of commodities produced, transported, processed, stored or distributed and on the cost of fuel for power generation companies. The volatility of commodity prices can also affect energy companies’ ability to access the capital markets in light of market perception that their performance may be directly tied to commodity prices. Historically, energy commodity prices have been cyclical and exhibited significant volatility, such as the recent significant decline in oil and natural gas prices. Some of our portfolio companies may not engage in hedging transactions to minimize their exposure to commodity price risk. Those companies that engage in such hedging transactions remain subject to market risks, including market liquidity and counterparty creditworthiness.

Regulatory Risk. Changes in the regulatory environment could adversely affect the profitability of energy companies. Federal, state and local governments heavily regulate the businesses of energy companies in diverse matters, such as the way in which energy assets are constructed, maintained and operated, environmental regulations and requirements, and the prices energy companies may charge for their products and services. Such regulation can change over time in scope and intensity. Additionally, certain states in which our portfolio companies operate have adopted, or are considering adopting, new or more stringent disclosure and additional well-location and well-construction requirements related to production operations. Moreover, many state and federal environmental laws provide for civil penalties as well as regulatory remediation, thus adding to the potential liability an energy company may face.

Production Risk. The volume of crude oil, natural gas or other energy commodities available for producing, transporting, processing, storing, distributing or generating power may materially impact the profitability of energy companies. A significant decrease in the production of natural gas, crude oil, coal or other energy commodities, due to the decline of production from existing facilities, import supply disruption, depressed commodity prices, political events, OPEC actions or otherwise, could reduce revenue and operating income or increase operating costs of energy companies and, therefore, their ability to service debt or pay dividends. Similarly, the excess production of crude oil, natural gas or other energy commodities may result in the decline in the prices of these commodities, which could negatively impact the results of operations and financial condition of operating companies, including their ability to service debt obligations or pay dividends.

Demand Risk. A sustained decline in demand for crude oil, natural gas, refined petroleum products, coal and electricity could materially affect revenues and cash flows of energy companies. Factors that could lead to a decrease in market demand include a recession or other adverse economic conditions, increases in the market price of the underlying commodity, higher taxes or other regulatory actions that increase costs, or shifts in consumer demand for such products. The long-term effect of a decline in demand is uncertain, and may adversely impact a portfolio company’s ability to satisfy financial or operating covenants imposed by us or other lenders.

Depletion and Exploration Risk. A portion of an energy company’s assets may consist of natural gas, crude oil and/or coal reserves and other commodities that naturally deplete over time. Depletion could have a material adverse impact on such company’s ability to maintain its revenue. Further, estimates of energy reserves may not be accurate and, even if accurate, reserves may not be produced profitably. In addition, exploration of energy resources, especially of oil and natural gas, is inherently risky and requires large amounts of capital.

Weather Risk. Unseasonable extreme weather patterns could result in significant volatility in demand for energy and power or may directly affect the operations of individual companies. In addition, hurricanes (particularly those along the Gulf Coast or in the Gulf of Mexico) could damage offshore production platforms or coastal oil or natural gas gathering or transmission facilities, causing delays or disruption in the flows of oil and natural gas to the marketplace. These weather-related risks may create fluctuations in earnings of energy companies.

Operational Risk. Energy companies are subject to various operational risks, such as failed drilling or well development, unscheduled outages, underestimated cost projections, unanticipated operation and maintenance expenses, failure to obtain the necessary permits to operate and failure of third-party contractors (such as energy producers and shippers) to perform their contractual obligations. In addition, energy companies employ a variety of means of increasing cash flow, including increasing utilization of existing facilities, expanding operations through new construction, expanding operations through acquisitions, or

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securing additional long-term contracts. Thus, some energy companies may be subject to construction risk, acquisition risk or other risks arising from their specific business strategies.

Competition Risk. Our energy-focused portfolio companies face substantial competition in acquiring properties, enhancing and developing their assets, marketing their commodities, securing trained personnel and operating their properties. Many of their competitors, including major oil companies, natural gas utilities, independent power producers and other private independent energy companies, may have financial and other resources that substantially exceed their resources. Our energy-focused portfolio companies may face greater competition in the production, marketing and selling of power and energy products brought about in part from the deregulation of the energy markets.

Valuation Risk. The valuations of our energy-focused portfolio companies are based, in part, on the value of their assets. The valuations of the assets of our energy-focused portfolio companies are subject to uncertainties inherent in estimating quantities of reserves of oil and natural gas and in projecting future rates of production and the timing of development expenditures, which are dependent upon many factors beyond our control. The estimates rely on various assumptions, including, for example, commodity prices, operating expenses, capital expenditures and the availability of funds, and are therefore inherently imprecise indications of future net cash flows. Actual future production, cash flows, taxes, operating expenses, development expenditures and quantities of recoverable reserves may vary substantially from those assumed in the estimates. Any significant variance in these assumptions could materially affect the value of our investments.

Financing Risk. Some of our energy-focused portfolio companies may rely on the capital markets to raise money to pay their existing obligations. Any of the risk factors associated with energy companies described above, general economic and market conditions or other factors may affect their ability to access the capital markets on attractive terms. This may in turn affect their ability to satisfy their obligations to us.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

We did not engage in unregistered sales of equity securities during the six months ended December 31, 2015.

Issuer Purchases of Equity Securities

For the quarter ended December 31, 2015, as a part of our dividend reinvestment plan for our common stockholders, we purchased 16,693 shares of our common stock for an average price of approximately $2.90 per share in the open market in order to satisfy the reinvestment portion of our dividends. The following chart outlines repurchases of our common stock during the quarter ended December 31, 2015.


Month	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
October 2015		5,181	$	3.16		—		—
November 2015		5,196	$	3.06		—		—
December 2015		6,316	$	2.56		—		—
Total		16,693	$	2.90		—		—

For the three months ended December 31, 2015, the Company repurchased 290,780 shares under the share repurchase program at the weighted average price of $3.16 per share. As of February 16, 2016, the Company has repurchased an aggregate of 763,187 shares under the share repurchase program at the weighted average price of $3.17 per share, resulting in $2.4 million of cash paid, under the program since September 17, 2015.

Item 3.

Defaults Upon Senior Securities

Not applicable.

Item 4.

Mine Safety Disclosures

Not applicable.

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Item 5.

Other Information

Not applicable.

Item 6.

Exhibits

The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:


Exhibit Number		Description
3.1		Articles of Amendment and Restatement⁽²⁾
3.2		Amended and Restated Bylaws⁽⁹⁾
4.1		Form of Common Stock Certificate⁽¹⁾
4.2		Form of Note Agreement for Distribution Notes⁽¹⁾
4.3		Indenture, dated as of June 3, 2013⁽⁶⁾
4.4		Form of First Supplemental Indenture⁽⁷⁾
4.5		Form of Global Note (included as Exhibit A to the Form of First Supplemental Indenture)⁽⁷⁾
10.1		Amended and Restated Dividend Reinvestment Plan⁽¹³⁾
10.2		Investment Advisory Agreement by and between Registrant and Full Circle Advisors, LLC⁽¹⁾
10.3		Administration Agreement by and between Registrant and Full Circle Service Company, LLC⁽¹⁾
10.4		Credit Agreement by and among Registrant, Sovereign Bank, N.A., as agent, and the lenders party thereto, dated as of June 3, 2013⁽⁵⁾
10.5		First Amendment to Credit Agreement by and between Registrant and Sovereign Bank, N.A., as agent, dated as of September 25, 2013.⁽¹⁰⁾
10.6		Second Amendment to Credit Agreement by and between Registrant, Santander Bank, N.A. (formerly known as Sovereign Bank, N.A.), as agent, and the lenders party thereto, dated as of November 6, 2013⁽¹¹⁾
10.7		Third Amendment to Credit Agreement by and between Registrant, Santander Bank, N.A. (formerly known as Sovereign Bank, N.A.), as agent, and the lenders party thereto, dated as of September 12, 2014.⁽¹²⁾
10.8		Pledge Agreement by Registrant in favor of Sovereign Bank, N.A., as agent, dated as of June 3, 2013⁽⁵⁾
10.9		Security Agreement by Registrant in favor of Sovereign Bank, N.A., as agent, dated as of June 3, 2013⁽⁵⁾
10.10		Form of Indemnification Agreement by and between Registrant and each of its directors⁽¹⁾
10.11		Trademark License Agreement by and between Registrant and Full Circle Advisors, LLC⁽¹⁾
10.12		Form of Purchase and Sale Agreement by and between Registrant, Full Circle Partners, LP, Full Circle Fund, Ltd., Full Circle Offshore, LLC, and FCC, LLC d/b/a First Capital⁽²⁾
11		Computation of Per Share Earnings (included in the Consolidated Financial Statements contained in this report)
14.1		Code of Ethics⁽⁸⁾
14.2		Code of Business Conduct⁽⁸⁾
31.1		Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended*
31.2		Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended*
32.1		Certification of Chief Executive Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002*
32.2		Certification of Chief Financial Officer pursuant to Section 906 of The Sarbanes-Oxley Act of 2002*

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(1)

Incorporated by reference to Registrant’s registration statement on Form N-2 Pre-Effective Amendment No. 2 (File No. 333-166302) filed on August 5, 2010.

(2)

Incorporated by reference to Registrant’s registration statement on Form N-2 Pre-Effective Amendment No. 3 (File No. 333-166302) filed on August 26, 2010.

(3)

Incorporated by reference to Registrant’s registration statement on Form N-2 Pre-Effective Amendment No. 2 (File No. 333-180321) filed on July 13, 2012.

(4)

Incorporated by reference to the Registrant’s registration statement on Form N-2 (File No. 333-187207) filed on March 12, 2013.

(5)

Incorporated by reference to Registrant’s current report on Form 8-K (File No. 814-00809) filed on June 4, 2013.

(6)

Incorporated by reference to Registrant’s registration statement on Form N-2 Pre-Effective Amendment No. 1 (File No. 333-188280) filed on June 11, 2013.

(7)

Incorporated by reference to Registrant’s registration statement on Form N-2 Pre-Effective Amendment No. 2 (File No. 333-188280) filed on June 19, 2013.

(8)

Incorporated by reference to Registrant’s annual report on form 10-K (File No. 814-00809) filed on September 13, 2013.

(9)

Incorporated by reference to Registrant’s current report on Form 8-K (Item 5.03) (File No. 814-00809) filed on November 7, 2013.

(10)

Incorporated by reference to Registrant’s quarterly report on Form 10-Q (File No. 814-00809) filed on November 7, 2013.

(11)

Incorporated by reference to Registrant’s current report on Form 8-K (Items 1.01, 2.03 and 9.01) (File No. 814-00809) filed on November 7, 2013.

(12)

Incorporated by reference to Registrant’s current report on Form 8-K (Items 1.01, 2.03 and 9.01) (File No. 814-00809) filed on September 15, 2014.

(13)

Incorporated by reference to Registrant’s registration statement on Form N-2 (File No. 333-198737) filed on September 15, 2014.

Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


		FULL CIRCLE CAPITAL CORPORATION
Date: February 16, 2016		/s/ Gregg J. Felton Gregg J. Felton, Chief Executive Officer and President (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacity and on the dates indicated.


Date: February 16, 2016		/s/ Michael J. Sell Michael J. Sell, Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)

Full Circle Capital Corp - FORM 10-Q - February 16, 2016

Attached files

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

Form 10-Q

For the quarterly period ended December 31, 2015

OR

COMMISSION FILE NUMBER: 814-00809

Full Circle Capital Corporation

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PART I — FINANCIAL INFORMATION

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued) December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued) December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued) December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued) December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued) December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued) June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 1. Organization

Note 2. Significant Accounting Policies

Use of Estimates and Basis of Presentation

Investment Classification

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 2. Significant Accounting Policies – (continued)

Basis of Consolidation

Valuation of Investments

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 2. Significant Accounting Policies – (continued)

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 2. Significant Accounting Policies – (continued)

Valuation Techniques

Senior and Subordinated Loans

Investments in Private Companies

Warrants

Publicly Traded Common Stock

Swap Contracts

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 2. Significant Accounting Policies – (continued)

Fair Value of Financial Instruments

Cash

Revenue Recognition

Change in unrealized gain (loss) on investments

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 2. Significant Accounting Policies – (continued)

Federal and State Income Taxes

Distributions

Guarantees and Indemnification Agreements

Per Share Information

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 2. Significant Accounting Policies – (continued)

Organizational Expenses and Offering Costs

Capital Accounts

Recent Accounting Pronouncements

Note 3. Concentration of Credit Risk and Liquidity Risk

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 4. Earnings (Loss) per Common Share — Basic and Diluted

Note 5. Related Party Agreements and Transactions

Investment Advisory Agreement

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 5. Related Party Agreements and Transactions – (continued)

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 5. Related Party Agreements and Transactions – (continued)

Administration Agreement

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 5. Related Party Agreements and Transactions – (continued)

Sub-Administration Agreement

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited) December 31, 2015

Note 5. Related Party Agreements and Transactions – (continued)

FC Capital Investment Partners, LLC

Managerial Assistance

Note 6. Equity Offerings, Related Expenses, and Other Stock Issuances

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Unaudited)

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Unaudited) (Continued)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS
June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED SCHEDULE OF INVESTMENTS (Continued)
June 30, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015

FULL CIRCLE CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATMENTS (Unaudited)
December 31, 2015