Garrett Edson - Investor Relations, ICR John Stuart - Chairman Gregg Felton - President and CEO Mike Sell - CFO, Treasurer and Secretary.

Alan Brochstein - 420 Investors Christopher Testa - National Securities Eric Duncan - Moloney Securities.

Good day and welcome to the Full Circle Capital Corporation Second Quarter Fiscal 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Garrett Edson of ICR. Please go ahead, sir..

Thank you, Anna, and good morning everyone. Thank you for joining us for Full Circle Capital Corp's second quarter fiscal 2015 earnings conference call for the quarter ended December 31, 2014.

On the call this morning are John Stuart, Full Circle's Chairman; Gregg Felton, President and Chief Executive Officer; and Michael Sell, Chief Financial Officer. If you would like to be added to the company's distribution list, please send an e-mail to info@fccapital.com.

Alternatively, you can signup under the Investor Relations tab on the company's website. The slide presentation accompanying this morning's conference call can also be found on Full Circle's website under the Investor Relations tab at www.fccapital.com.

Before I turn the call over to management, I'd like to call your attention to the customary Safe Harbor statement regarding forward-looking information.

Today's conference call includes forward-looking statements and projections, and we ask that you refer to Full Circle's most recent filings with the SEC for important factors that could cause actual results to differ materially from these projections. Full Circle does not undertake to update its forward-looking statement unless required by law.

To obtain copies of the latest SEC filings, please visit Full Circle's website under the Investor Relations tab. I'd now like to turn the call over to John Stuart, Chairman of Full Circle Capital.

John?.

Thank you, Garrett. Good morning, and welcome everyone to today's call. Let me start by discussing some of the recent developments at Full Circle Capital and their potential impact for our company. First we announced yesterday an important shift in our management structure.

Gregg Felton is now our sole Chief Executive Officer while I maintain my role as Chairman. Over the past year we've been transitioning the portfolio and investment strategy toward Gregg's areas of experience and expertise, which includes larger corporate borrowers, originated both directly and through selected partners.

With this shift and portfolio profile and more traditional management structure is a logical progression of that transition. We believe the streamlining of our structure will have obvious benefits as our Chief Investment Officer, Gregg has been responsible for repositioning and growing our investment portfolio over the past year.

As sole CEO he will now lead the day-to-day operations of our growing business, which has nearly doubled in size both in terms of portfolio assets and personnel. Alongside Gregg, I will be able to devote my efforts to the long term strategic direction of Full Circle Capital.

I look forward to continuing to work in constant with Gregg and focusing on our objective to create sustainable long term value for our stockholders. Second, our Board of Directors made the decision to postpone the declaration of our advanced monthly distributions which we have typically done in conjunction with earnings.

As we have previously discussed, we're nearly fully invested with our current capital base and we anticipate potential need to access additional capital to grow our portfolio and provide long term future capital. Depending on the size and price of any future capital raise, our personnel distribution may need could be adjusted.

At this time our Board determined is more appropriate to temporarily postpone the declaration to reserve flexibility and ensure that future payments are in line with our projected earnings. That said, there will be no confusion. We will continue to pay our monthly distribution to our stockholders.

There will be no stoppage in the payment of monthly distributions and stockholders we see, their April, May and June distributions which will be declared prior to the April record date.

Finally as communicated, the company will make its previously declared monthly distribution of $0.67 per share to stockholders of record on March 31, and payable on April 15, 2015.

Consistent with our communications over the past few quarters, we have been carefully working to reset our portfolio and better position the business to generate enhanced risk adjusted returns in an effort to create sustainable stockholder value going forward.

While this has taken substantial time and patience, we have made many difficult decisions regarding our challenged investments and continue to work towards either restructuring or exiting these positions. For example, TransAmerican Asset Servicing Group and Takoda Resources were put on nonaccrual this past quarter.

And we are working expeditiously to resolve these positions. We are also moving forward with the sale or liquation of ProGrade Ammo Group.

Through the work we put in on resolving these assets, we now have significantly more visibility with these investments and as a result, we have been able to further fine-tune our marks during the fiscal second quarter.

Overall, for the second quarter due to our larger investment portfolio, we are able to achieve net investment income per share of $0.19 nearly covering our current distribution rate of $0.20 per quarter as declared through March.

However, as a result of several factors including both the widening risk premium in credit markets, as well as some of the legacy portfolio issues referenced earlier, we took several write-downs in the quarter reducing our net asset value to $5.48 per share as of December 31.

Approximately 58% of this quarter's write-downs were attributable to legacy assets. 27% to equity write-downs and the balanced to lower credit valuation partially driven by credit spread widening during the quarter. I will now turn the call over to Gregg for a discussion of origination activity and portfolio composition..

Thanks, John. Let me start by saying that while we're certainly disappointed in our historical performance and the decline in net asset value, we're committed and determined to growing shareholder value. Thus, it's been necessary to work out these legacy challenges in order to reposition our portfolio.

We believe our aggressive efforts will allow us to mitigate further impact of many of our most troublesome positions allowing us to put these challenges fully behind us. Aided by these de-risking process, we are now positioning our business for sustained long term growth.

We've made the appropriate investments in personnel, which has contributed to more investment opportunities over the past year. We believe the increased flow of opportunities and the enhancements we've made will allow us to successfully grow our portfolio with optimizer portfolio returns.

We also believe that the arrangement with our investment advisor that essentially limits our operating expenses is appropriately aligned with stockholders best interest.

As we noted last quarter, Full Circle Advisors has agreed to provide reimbursement to Full Circle Capital for annual operating expenses that exceed 1.5% in net asset value in fiscal 2015 and 1.75% of net asset in fiscal 2016 and subsequent years.

This expense cap is designed to provide stockholders with accelerated benefits that would be realized with a larger capital base and ensures an alignment of interest among management and our stockholders. During the fiscal second quarter, we remained active, funding what we believe are three strong companies and further expanding our deal pipeline.

As presented on Slide 5, we funded $13.3 million to three new portfolio companies. Realizations in the quarter are detailed on Slide 6, and totaled $8.4 million. Esselte Holdings and CPX paid off in full, while GW Power was partially prepaid and the PEAK Trust position amortized significantly.

Our activity subsequent to the December quarter end is summarized on Slide 7. In mid-January, we exercised approximately 1.2 million shares with Advanced Cannabis Solutions on as cashless basis meaning we paid no additional consideration for the shares providing us with approximately 660,000 shares of common stock.

While this position was marked at zero as of December 31, and there has been light trading activity in the stock, as of last night's close, this position had a market value of approximately $3.3 million representing approximately $0.28 per share.

As equity is more volatile in fixed income, we may eventually receive more or less than the current value of the shares. We also continue to hold a warrant allowing us to purchase an additional 185,000 shares of common stock at $4 per share.

In addition, at the end of January we purchased $2 million of a $50 million second lien term loan with GK Holdings, which is an IT and business skill training company. We remained focused on growing our portfolio across a variety of industries. Slide 8 details the metrics of our investment portfolio as of December 31.

We maintain 27 diverse portfolio investments as compared with 18 just a year ago. Although we have identified attractive second lien investments in the current market environment, the issuers represent larger corporate enterprises and the first lien investment still do represent 92% of our portfolio of assets as of December 31.

As of December 31 our portfolio totaled $129 million, compared with $132 million in our first fiscal quarter of 2015 which is up 69% year-over-year from $76 million. The average size of our debt investments is 4.6 million and a weighted average interest rate in the second fiscal quarter was 10.23%.

This average interest rate does not reflect the average borrower coupon in our portfolio, as it includes the effect of nonaccruals at a rate of 0%. The weighted average interest rate of our performing debt investments was 11.7%.

I would now like to pass the call over to Mike for a more detailed discussion of our financial performance in the second quarter.

Mike?.

Thanks, Gregg. Please turn to Slide 9, which provides an overview of the second quarter financial highlights. For the second quarter of fiscal 2015, interest income was $4.9 million, an increase of 23% compared to $4 million in the second quarter of fiscal 2014.

Net investment income was $2.4 million compared to $1.9 million for the quarter ended December 31, 2013, a 24% increase. On a per share basis, net investment income was $0.19 per share versus $0.25 per share in the prior year period, reflecting the year-over-year increase in our share account.

Net realized and unrealized losses were $8.9 million or $0.75 per share. Net unrealized depreciation was $7.6 million, and was comprised of $5.3 million of net unrealized depreciation on debt investments and $2.3 million of net unrealized deprecation on equity investments. Realized losses on investments were $1.3 million or $0.11 per share.

We reported a decrease in net assets resulting from operations of $6.6 million or $0.55 per share. Per share amounts for the quarter are based on approximately 11.9 million weighted average shares outstanding compared to 7.6 million weighted average shares outstanding for the second quarter of fiscal 2014.

This reflects the capital raised in the second half of fiscal 2014. Net asset value was $5.48 per share at December 31, compared to $6.24 per share at September 30, primarily resulting from the net unrealized losses during the period. Slide 10 illustrates the composition of the portfolio. In the second quarter, 78% of our loans carried a floating rate.

The benefit of our portfolio consisting on majority of floating rate loans in the rising interest rate environment, we would expect our portfolio and net investment income to increase. Please turn to Slide 11, which highlights the important balance sheet items. On December 31, our total assets were approximately $136.2 million.

At the end of the quarter, the investment portfolio at fair value totaled approximately $128.5 million, reflecting the net impact of sales, pay-offs, new investments and net unrealized and realized losses that occurred during the fiscal second quarter. Total liabilities were approximately $71 million.

This includes approximately $33.8 million outstanding on a revolving line of credit and $33.6 million outstanding on our 8.25% notes. I will now turn the call back over to Gregg..

Thanks Mike. We believe we've made the hard decisions on legacy positions that were necessary to position Full Circle Capital for long term growth. We've nearly doubled our investment team. Our investment pipeline has been greatly enhanced and we continue to build toward a well diversified investment portfolio.

We are committed to deliver and value to our stockholders in the form of increased returns and sustainable stockholder distributions over the long term. We'd now like to open up the call for questions.

Operator?.

[Operator Instructions] And we'll take our first question from Alan Brochstein with 420 Investors..

Thank you for taking my call. I just wanted some clarification on not only the transaction with the Advanced Cannabis Solution warrants but also your strategy with respect to that company and Cannabis industry overall..

Thanks for the question. Let me give you a bit of detail first on the position and then we’ll talk about the company and our strategy. Respective to the position we held warrants that entitled us to pursue a cashless exercise based on essentially trailing stock price averages.

We were able to exercise 1.215 million to be précised of the 1.4 million warrants. And those were - exercise been exchanged for approximately 660,000 shares. So that was a financial decision that we made, that we thought was in the best interest of shareholders to position us with stock which should be again saleable.

As it relates to the company, we continue to work closely with the company to try to identify investment opportunities that would make sense for the company and would make sense for us. As I'm sure you’re aware, they continue to be a great market issuer.

It did recently looks like at registration statement effective, which is very positive development for the company. But they are yet to get re-listed into a national exchange or certainly over the calendar a traditional exchange. So that’s limiting their access.

But from our perspective, we continue to be in dialogue with and looking for ways to work with the company to help them create value..

And what about other companies in the industry - you obviously have this idea and unfortunately your partner was hit with the suspension which has had repercussions but have you looked into other relationships in the industry?.

I would say this, I would that we are in general, the piece is as it relates to Advanced Cannabis and our thesis in the spaces. We are not and no shareholder should know that we are not interested in financing Cannabis per se. Specific to the Advanced Cannabis investment and the opportunity we saw which was we thought as sensible way to get involved.

These names or these issuers in states where there is legal activity which includes the states where we are Connecticut [ph], there is legal medical marijuana, there is a lack of excess to capital in the form of real estate lending and that's specifically the avenue that we had been focused on. We are a diversified lender.

We are not specifically focused on Cannabis. We saw an opportunity to finance real estate in the sector where there was a lack of capital. And we obviously pursued that in the case of this company. And we continue to opportunistically look for businesses across the diverse range of industries.

So this particular investment given the volatility had a lot of focus but it's a part of a broad strategy, and I would not say that we're focused on this industry in any particular way..

I appreciate that. And just to be clear, I guess you did not yet sell any stocks – any of the shares.

But I'm curious is that even possible while they are on gray market?.

I would say as a consequence of our holding period, we have stock that is saleable. So we have liquid stock that has the right to be sold. It doesn't know restriction. And as it relates to the liquidity, yes the stock does trade, a month ago it traded over 100,000 shares, more recently its trading 1,000 shares.

So it does trade but the answer is it's liquid or less than our liquid stock..

Can you comment if you were able to sell any yet?.

We have not sold stock..

Okay. That's what I want to verify. Thank you so much for taking my questions and good luck as you continue to transition your company here..

And we'll go to our next question from Christopher Testa with National Securities..

Thanks for taking my question.

With regards to the shift in the business model focusing on the larger corporate burrowers and the syndicated loans, do you think that you’re going to experience any more additional pricing pressure as you step up the ladder in terms of borrowers stock?.

We should be clear on the point because I take your question to focus on it. It should, the fact that at the very large end of the market, there is not nearly the pricing there, the smaller end of the market.

And the thing that we have tried to make clear as it relates to our strategy is not that we are going to the very large end of the market but rather we are avoiding the very, very small end of the market and doing transactions that are somewhat larger borrowers than we historically did.

And so we think there's a lot of excess return, and a lot of excess spread to be earned but we don't need to be dealing with or focusing our portfolio on very, very small issuers which I think, would have much less financial flexibility on the downside.

So we are focused on making sure we have a diversified portfolio that has a broad range of issuers from a number of issuer perspective, a broad diversity of industries and then of course, we have corporate borrowers who have some hopefully level of financial flexibility that they can manage through volatile environments.

So that would be the headlines. As it relates to the very large end of the market, we do not expect to be participating in large syndicated deals but rather smaller syndicated deals where there is a pricing premium by virtue of the size of the syndication. For point of reference, the high yield market is a $250 million and above market.

So there are deals of $100 million in size and as you know we did a deal for company called Good Technology which was 80 million in size. That's a big company but it's still very, very much attractively price from our perspective notwithstanding the size..

Got it. And with the syndicated part assuming that these are done with some sponsors.

Do you think that will lead possibly less trouble with the investments and sponsor who is able to back these companies as well and put additional capital as needed?.

I would say to that, for sure, the strength of sponsor or the strength of investment is a consideration. One of the recent investments that we announced had a 45% capital infusion of the total capitalization of the company in the form of equity. So nearly 55% debt, and 45% equity is an attractive starting point for our capital structure.

And we are able to earn a 10.5% type of yield on that instrument which we announced. That's attractive. So, we do think about size of investor and the financial means of the investor is important. We also think about the size of the borrower. We are not looking to obviously, particularly as it relates to second liens.

We are not looking to finance small companies in a second lien fashion. But as you move up either in terms of size of company and potentially size of equity, that might create those circumstances.

But we think, in general, you should expect to see us be predominantly a first lien lender, collateralized with some form of collateral or traditional collateral or potentially cash loan.

And focused on companies that for whatever reason don't have the access to capital which typically would mean that there is some lesser liquidity again there - might just mean that they are below $200 million which is a big number.

But we think one of the recent fields we referenced was at $50 million deal and that provided attractive financing and attractive pricing for us. Hope that answers your question..

Absolutely.

And just given where the leverage is, where it was last quarter, what's your comfort level with that equity? Where do you ideally like to see it, given the portfolio that's going forward?.

This is Mike. I think we are obviously pushing up against the 200% asset coverage Test. We've historically stated that we like to be around, I'd say 70% debt equity and it's still probably a realistic target but obviously there's been a bit of backup in the BDC space in terms of the ability to have capital creation.

So without turning off the speaker on the front end, that has led to inherently a higher leverage ratio on the portfolio, and is something we're looking to multiple ad news is, it means to address..

I would just add to that, as of now what we are doing and we are purposefully running on a fully invested basis to try to optimize our returns for investors. We clearly were running fully invested in the current quarter which helped with a net investment income of $0.19.

So we would like to have more capacity because we see a very strong pipeline of deals. So we are not uncomfortable with our current leverage profile by any means but it does limit our flexibility and allows us only to recycle our current investments into new investments. So we have had some payoffs and that's allowed us to make new loans..

Got it.

And my last question, with the nonaccruals, you guys have said TransAmerica and what was the other one you placed on nonaccrual?.

Takoda Resources, Chris..

Okay, great. Thank you guys for taking my questions. I appreciate the color..

[Operator Instructions] And our next question comes from [Leonard Samuels] [ph], Private Investor..

Thanks for taking my call. I noticed that the loans value ratio is boosted at about 60%, which would suggest that the loans are secured by a fair amount of value.

How should I interpret this in light of these write-offs and nonaccruals status loans? What is the safety of these loans in terms of getting assets that can sold if the company is default?.

It’s John speaking. The 60% LPV figures an aggregate number, it's the aggregate of all positions. Some positions clearly those that are nonaccrual are going to have higher LTVs and some will have lower LTVs. And in fact, it can be across the spectrum but that's basically on an aggregated basis. Generally they start out in a 40 to 60 range to begin with.

That's sort of our comfort zone, in terms of from origination and under-writing. Obviously, they will move around and that's also embedded within our risk ratings that we also report in the 10-Q. In terms of - obviously when we underwrite, we underwrite to get money back plus interest and principle.

But in terms of last couple of quarters or last three, four quarters we have had some issues that we have worked on, as we said on this call that we are addressing..

This is Gregg, I'll take your question and, we understand that the losses have been unfortunate. What I would say is that we are very much focused on ensuring that the quality of the portfolio and the losses prospectively are minimized.

And so a big part of the theme that we hope that comes across to the 10-Q in the press release in this call, is that there have been some losses that have been incurred largely. We can tell you are attributable to positions that had been longer term - some of the more challenging ones meaning some of the ones with higher loans to value.

And they were not turning around. We made some tough decisions with respect to, for example, liquidating, our position we talked about ProGrade and clearly we are 100% of value now because that's in liquidation and we're hoping to get as much money back as we can.

But I think, we feel very comfortable I do in telling you that the profile, the portfolio is changing for the better. And I personally feel very good about the transition that we are making here as it relates to the quality of the portfolio that we're creating.

And also the mark-downs that we have taken, which we think put us in a positive position in terms of building value going forward..

Thank you..

And we’ll take our next question from [Carl Hester] [ph] with SPLC..

Good morning.

Given the discount in net asset value, right now, has there have been any thought about buying back shares in the open market?.

It’s a great question and I think on paper really interesting to talk about. With the limitation as it relates to buyback is that we are at our leverage limit. So from a regulatory capital perspective, we are very close to the limits of our leverage, which means that we don't have the financial where result the buyback stock.

As you know, management and the Board have brought stock at higher levels than our current pricing. I think that we certainly think there is value here. The company is not in a position to be buying back stock based on its leverage profile..

During the next quarter if there are repayments of loans or anything, would those be recycled into new loans or could that be considered for share buybacks..

We have a very significant pipeline of deals and one of the things that we have heard from shareholders and we believe, is this company will benefit through growth.

And so, from our perspective one of the challenges as it relates to shrinking versus growing is that we have a company today that is on the smaller end of where we and the investor base generally from the feedback we receive would like it to be.

And so now withstanding the fact that we’re at a discount, I do think that there is a very significant focus on how do we grow. And if already use our proceeds to buyback stock, I think by definition we would be shrinking. So, we don’t disagree with your premise that the stock is at a substantial discount and might afford the opportunity.

Unfortunately given our current size, we're not really in a position to consider that. But of course the Board, it makes these decisions and that is something that is discussed at the Board level with regularity..

Okay. And a related question from the [N2A] [ph] that was filed a few days ago. It gives authorization to issue shares below net asset value.

Can you give any idea of when that might be exercised under what circumstances?.

Sure. We are given a leverage that we discussed in the preference to figure out a sensible way to grow. We are considering a number of potential capital raising options. We are given the pending registration state that you referenced, we're unfortunately in a position that we can't comment on the specifics of any possible offering.

So, we are currently in a position where we are evaluating a variety of alternatives. And again what we can tell you, with a high degree of confidence is that the market is presenting very significant opportunities. We are very focused on avoiding or I should say minimizing deletion.

We have said that before and so we are considering options that are designed to minimize shareholder deletion..

All right. Thank you..

Our next question comes from Eric Duncan with Moloney Securities..

I was hoping to touch base on a couple of investments in particular. You had already mentioned pro rate and the fact that, that is in liquidation. Yet I see on the filing that you're still calling the current value of $2.8 in change million.

And that’s our current fair value, is that has been written-off entirely as a respect to the net asset value or is there effectively another $2.8 million to be written-off here?.

Mike will talk about how we go about our marks and valuation in a minute, but with respect to pro rate, I just want to make it clear, we are in the process of disposing of the business and/or assets.

We are in active dialogue with a handful of potential purchasers, some who would like to acquire the business on an ongoing basis and restart it, others who would be understood in purchasing the machinery equipment and the facility as they are attractive assets in that industry. So that's going on right now.

Obviously, our goal is to maximize proceeds off that situation whether it be through straight liquidation or a sale of the business intact to it to somebody who would purchase it and manufacture product. So that's what going on. In case any of the potential purchasers are listening to the call, make sure that they understand that's the approach.

Mike, why don't you talk about the mark?.

From a mark to market prospect, I think you’ll remember that according to the core tenant of our strategy is to be firstly in senior secured and this is a situation where we have multiple instruments, but we have priority security interest.

So to the degree there are cash flows received from either a sales of business as it going concern, liquidation of the assets or some hybrid approach to the two. We would have first claim on the cash flow generator from that process.

And while obviously looking at this through a lens of – let's make it sure we get it as right as we can, our expectations are that when you look at all the possible outcomes or if somebody be willing to pay for this note, you are blending them altogether our output of that analysis was what we would expect with a wide range if you will.

Potentially receive approximately $2.8 million of proceeds from either the sales of the business, or the liquidation of the collateral. Obviously, it's a small business. There is a variety of outcomes here. The goal in any evaluation process really is to try to figure out what a ready willing buyer and seller would be willing to transact that.

And that's the exercise that we went through to drive our valuation..

You said you had a spectrum of values, is that higher the low end of your spectrum?.

Neither, that is somewhere in the middle..

Okay.

And so what was the mark on this last quarter?.

I think taking into account there we have received some capital back - we were higher, specifics I think it will be probably a decrease in value about $600 to $700..

Within the quarter obviously we saw a significant drop in net asset value.

I assume that some of these marks came in, which was the one that came in the most?.

Actually I think the biggest change was the value in our Advanced Cannabis warrants. We had previously marked those at $1.8 million reflecting where the stock was trading at that point in time. December 31, the stock was trading at $1 even and our stock price was at $4.

So, we had actually written warrants down to zero reflecting the fact that there was limited - the optionality value and there is definitely a zero on the intrinsic value. And we talked about $1.9 million hit on those warrants. There being 20-20 obviously that's a bit of an interesting one..

Suppose that they maintain a current price now, going forward we expect to see you mark at higher again and see an increase in net asset value from that at least from that elements in the next quarter?.

I think that there is a lot of factors that would come into play now at least of which is the liquidity and the stock itself and the fact that we held some direct stock now. We hold some warrants now.

If you take the market close yesterday as an indicative value and say that is the absolute, then we would probably take a significant ride upon that position. I think Gregg mentioned somewhere in the $2 million to $3.5 million representing the amount of shares, the notional shares that we have now multiplied by the close yesterday..

We will wait and see what happens at the end of the quarter..

To frame this, we are predominantly a lender so the volatility in our net asset value isn’t may be what you would expect to see. But to the degree we have some liquid equity securities in the portfolio like this one for the last year, it will create volatility in our NAV per share.

It has done so and to this degree we continue to own it, I think we will continue to do so up and down..

I know that New Media West has been a legacy issue for you as well.

Where do you stand with that one?.

As any position we are looking at our alternatives with that asset. And that is something we are working on. The business has somewhat stabilized from the last quarter, which is important and obviously we review our position certainly in New Media West everyday and every quarter..

So it seems like you guys are fairly confident that you take in a lot of hits not only in this quarter but two quarter ago as well in regard to NAV.

Is it fair to assume that this downward trend in net asset value is halting our bottom door? Can you give us any sort of color on where you see that going by let's say at the end of the year or any future period?.

At every quarter we value the book and did it to a degree that is first - reflects where we believe value is as of that date. Clearly, we are disappointed in the trend that went on this year. We are always looking to make sure that trend certainly trend that we have this past year abets and stops.

And I think what we've been trying to get across in this call is that we've been working through that over the last quarter and into this quarter to - and the numbers should reflect where we believe value to be today..

This is Mike again. I would say one thing over the past couple of quarters we started to work to realize position which has given us a lot of visibility and to the underlying profile of each of these businesses above and beyond what we typically get. We typically have pretty decent visibility but this is added to it.

So I think what you’re seeing is a change in the business profile some of the underlying credits, as well as maybe a greater understanding regarding where some of the forward projections are, and how all of that has evolved over the course of the quarter is reflected in the numbers.

I'd reiterate what John said that, every quarter is a purpose of our valuation process is to get to the point where the portfolio value reflects what we believe to be accurate valuation on the whole portfolio at that point in time. And I would reiterate that that's the case to 12/31.

I would also say that we have worked through several of these issues to the point that maybe there is a greater clarity in the outcome and maybe this reflect some more – this marks are more reflective of that and have a little more stability just because you are closer to an outcome..

With the goal of pushing the mat of the portfolio and collecting proceeds from their disposition..

All right. Fair enough. Best of luck now and ever..

Our next question is from [indiscernible]..

Good morning.

Could you give us a little more color on what your feelings are on the Cannabis investment whether you expect to hold that as a long term equity position or is your purpose to get out and be what we expect a secured lender?.

So, very quickly just to recap. We invested only $500,000 in these warrants. That being said, we appreciate the fact there has been a lot of volatility to the position. So, $500,000 invested, zero market end of the year, $3.3 million sort of marks for the stock as of today appreciate volatility in between.

We are certainly very focused on trying to deliver some value to shareholders for that position. And we will endeavor to do that. We are not eager anymore I'm sure than you are to have the volatility in the portfolio that we've had.

So, as it relates to this stock, we certainly would intend to try to monetize and get whatever value we can, we're optimized the value of that position for our shareholders.

As it relates to the lending opportunity which is certainly why we initially engaged in this investment to begin with, the warrants were sort of a footnote to our lending conversation. Outside of our control the company a lot of things transpired which caused us to not move forward with the loan and continue to work with the company.

Obviously as I mentioned earlier in the call to see if there is a traditional lending opportunity there, as that would make sense for our shareholders. But sympathetic to the fact that volatility aspect of this investment is something that we’re trying to minimize going forward..

Could you also give us little color on the timing or potential timing or the rights offering that you filed for?.

Unfortunately there is little we can say there. As I mentioned from a legal point of view, what we can do is to direct you the filings that folks have referred to and you can take a look at that. But there is nothing we can say as it relates to commenting specifically on any potential transaction..

Okay. Thank you..

Thanks for your questions.

Operator, anything else?.

That concludes today's question-and-answer session. Mr. Felton, I would like to turn the conference back over to you for any additional or closing remarks..

Thank you, operator. In closing we thank you for attending the call this morning. And we look forward to speaking with you on our third quarter earnings call on mid-May. Until then, please don’t hesitate to reach out to me John, Mike or myself, at any time should you have any additional questions. Thank you..

That concludes today's conference. Thank you for your participation..