UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM N-CSR
 
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-07074

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

Daniel B. Wolfe
President and Chief Financial Officer
180 Degree Capital Corp.
7 N. Willow Street, Suite 4B
Montclair, NJ 07042
(Name and address of agent for service)
 
Copy to:
John J. Mahon, Esq.
Schulte Roth & Zabel, LLP
1152 Fifteenth Street, NW
Suite 850
Washington, DC 20005
(202) 729-7477 

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

Date of fiscal year end: December 31

Date of reporting period: December 31, 2018



Beginning on January 1, 2021, and as permitted by a rule adopted by the Securities and Exchange Commission, paper copies of the Company's shareholder reports like this one will no longer be sent to you by mail, unless you specifically request that the Company or your financial intermediary (i.e., the broker-dealer or bank through which you own your shares) send you paper copies of these reports. Instead, shareholder reports will be made available on a website, and you will be notified by mail each time a report is posted and will be provided with a website link to access the report.
If you already have elected to receive shareholder reports electronically, you will not be affected by this change and need not take any action. You may elect to receive electronic delivery of shareholder reports and other communications from the Company by contacting the Company at 833-293-1769 or, if you own your shares through a financial intermediary, by contacting your financial intermediary.
You may elect to receive all future shareholder reports of the Company in paper free of charge. You can inform the Company that you wish to continue receiving paper copies of your shareholder reports by contacting the Company at 833-293-1769. If you own shares through a financial intermediary, you may contact your financial intermediary or follow instructions included with this document to elect to continue to receive paper copies of your shareholder reports.


1





Item 1. Report to Shareholders.

Fellow Shareholders,

Creating long-term wealth centers around two key factors: 1. Making hay when the sun shines, and 2. Preserving capital during years where there is significant market duress. Over the course of the last two years, the United States stock market has given us two very different backdrops. As a matter of fact, the two years were an almost exact polar opposite of each other. In 2018, the Russell Microcap Index was down 13.0%. In 2017, the Russell Microcap Index was up 13.2%.

Our investment strategy is centered on providing value-added assistance through constructive activism to small public companies. To that end, over the course of the last two years, we have delivered a gross total return in our public holdings of 53.5% in 2017 and 19.5% in 2018.1 Our public market investing gross total return would place us in the top decile in the comparable Lipper category for microcap focused funds. As you know, we inherited the 61% of our current net assets that are in private companies, and our returns for that category have been more muted versus our public holdings. After taking into consideration our private portfolio and our reduced expense structure, 180 Degree Capital Corp. ("180" or the "Fund") delivered an 11.1% growth in our net asset value per share (“NAV”) in 2017 and 1.5% growth in 2018.

In 2017, we generated a nearly 4x gross total return in our public holdings versus the comparable indices. That was fun. 2018 was equally important. It was a lot less fun for sure, but almost more important. If you told me in the beginning of the year that the market would be down 13%, I would have signed on to our Fund’s nearly 20% gross total return in our public holdings and a 1.5% gain in our NAV. In some ways, I may be more satisfied with our 2018 performance than I was in 2017. Now don’t get me wrong, there were plenty of lessons to have been learned from 2018, and we gave back nearly 600 basis points of NAV in the fourth quarter. Interest rate fears, global trade tensions between the United States and China, and slowing global growth led to a market sell-off in the fourth quarter. The S&P 500 was down 13.5% in the quarter and the Russell Microcap Index declined by 22.2%. For the first time ever, the S&P 500 ended the year with a loss after being positive for the first three quarters. The December 9% decline in the S&P 500 was the second worst December ever and the worst since 1931, during the Great Depression. As always, selling begets selling begets selling. In the fourth quarter, according to HFR Global Hedge Fund Report, investors redeemed $22.5 billion from hedge funds, while Lipper reported $57 billion in redemptions from equity funds. These massive withdrawals exacerbated an already weakened market. In fact, despite legitimate macro concerns, the biggest surprise to market participants was the timing and suddenness in what is usually the strongest quarter of the year.

To be clear, we believe there are real concerns to be mindful of; the most worrisome for us being the dislocation of the technology supply chain resulting primarily from the continued trade war with China. But we believe the market overshot the concerns. We used the 20% correction and market dislocation to add to both current and new names, investing approximately 27% of our starting cash in the quarter. Additionally important for our success in 2019, is that in order to make money, you need to have money. We started 2019 with more cash and public holdings than we had starting in 2018.

NET ASSET VALUE PER SHARE

Our NAV decreased this quarter from $2.81 to $2.64, a 6.0% decrease. With this decrease in NAV, our year-to-date increase in NAV stands at 1.5% or $0.04 per share. Our Fund has three principal components to the variance in our NAV: our public portfolio, our private portfolio, and our expenses. For the quarter, our public portfolio companies reduced our NAV by $0.16 while our private portfolio companies subtracted $0.01. Operating expenses, exclusive of bonus accruals and net of income, negatively impacted NAV by $0.02. We had a $0.02 gain from a reversal of an accrual we established earlier in the year for a potential bonus pool in 2018. Remember what we have said in the past about compensation; if our shareholders benefit from achieving meaningful NAV growth, our management team will share in that reward, and if not, there will be no bonus for our management team. In the prior two quarters, we began to accrue for a potential bonus pool based on multiple metrics assessed by the Compensation Committee of our Board, including the strength in our NAV growth for the first three quarters. With most of the 2018 gains in NAV reversed in Q4, we recommended, and the Compensation Committee agreed, that there will be no bonus pool for 2018. As such, we reversed the accrual.

______________________
1 Past performance is not an indication or guarantee of future performance. Amounts gross unrealized and realized total returns compounded on a quarterly basis. 180 Degree Capital Corp. is an internally managed registered closed end fund and does not have an external manager that is paid fees based on assets and/or returns. 180 also has more than 50 percent of its investment portfolio in legacy privately held investments. Please see its filings with the SEC, including its 2018 Annual Report filed on Form N-CSR for information on its expenses and expense ratios.


2





Public Portfolio

Nearly two year ago, we embarked on a new strategy to invest in small public companies. Over the course of the last two years, we have added $0.45 of NAV from our investments in public companies. Over that same period of time, we generated $0.08 of NAV growth from our private portfolio. 180’s shareholders have clearly benefited from our strategy change. That said, Q4 saw a pullback in the value of our public market holdings. Let’s dig into the sources of this pullback:

Adesto Technologies Corporation (NASDAQ: IOTS) had been on an uptrend through Q2 2018. As the stock reached a price that we believed made it fully valued, we sold 62% of our position during Q2 at an average price of $8.81. As we mentioned in last quarter’s letter, the company announced two separate acquisitions. In May of 2018, IOTS acquired S3 Semiconductors, a mixed-signal ASIC company. This acquisition materially increases the total addressable market for IOTS and provides additional geographies for IOTS's products in industrial Internet of Things (“IoT”) applications. IOTS followed up that acquisition with the purchase of Echelon, a company focused on developing open-standard control networking platforms. These two deals have completely transformed IOTS from a specialty memory company into a leading provider of innovative, application-specific semiconductors and embedded systems that comprise the essential building blocks of IoT edge devices. Unfortunately, IOTS coupled these announcements with a disappointing Q2 2018 financial report followed by a $40 million equity raise at $6.00 per share. The fourth quarter saw significant deterioration in the entire semiconductor space due to excess inventory and concerns of a continued trade war with China. We have nearly doubled our position since exiting Q2 2018 at an average cost of $5.21. We believe the inventory overhang will dissipate as 2019 unfolds and expect IOTS to achieve notable revenue and cost synergies from its recent two acquisitions. For the quarter, IOTS reduced our NAV by $0.05.
 
Mersana Therapeutics, Inc. (NASDAQ: MRSN) is biotech company that produces novel drug conjugates. It specializes in oncology agents for the treatment of tumors and cancer. As everyone knows, there is tremendous volatility for a biotech company that is currently in the middle of clinical trials. In Q3 2018, one patient in one of MRSN's trials died, possibly from side effects of the drug, and the stock collapsed to $10 per share when the trial was put on partial clinical hold. Although MRSN announced that the U.S. Food and Drug Administration lifted the partial clinical hold, the stock continued its decline in Q4 2018. We note that the NASDAQ Biotechnology Index declined 21% in Q4 2018. Most early stage biotech companies either burn cash or are in need of raising cash to fund expensive clinical trials. During a bear market, like the one we saw in Q4 2018, investors flee from the speculative biotech sector. In the case of MRSN, there was no significant news during the quarter. For the quarter, MRSN reduced our NAV by $0.05.

TheStreet, Inc. (NASDAQ: TST) has been a successful investment for our shareholders. A year ago, we helped TST retire its preferred stock at a significant discount, and we joined the board of directors. In the first half of 2018, TST sold its deposit and loan data collection subsidiary, RateWatch, to S&P Global for $33.5 million. In this last quarter, TST sold the rest of its institutional businesses, BoardEx and The Deal, to Euromoney Institutional Investor for $87.3 million.TST stated it plans to return a significant portion of the proceeds from these sales and its available cash in the form of a special distribution. Additionally, TST continues to look at strategic alternatives for its remaining consumer businesses. Since the announcement of our significant investment in the fall of 2017, the stock is up 100%. In the fourth quarter, the stock trended down with the overall market, only to rally significantly following the sale announcement. TST's year-end close of $2.03 was less than the projected cash per share of $2.14 to $2.23. TST is our signature investment for how we define constructive activism. For the quarter, TST reduced our NAV by $0.03.

Airgain, Inc. (NASDAQ: AIRG) is a provider of advanced antenna technologies used to enable high performance wireless networking across a broad range of devices and markets, including connected home, enterprise, automotive, and IoT. We bought the stock following a CEO change and a new commitment to move quickly on not only product refresh cycles, but also on operating expense reductions and a focus on profitable growth. Unfortunately, this past quarter, AIRG came under pressure against the backdrop of very weak technology sector performance. Despite this pressure, the underlying secular uptrend of increased rollouts of technologies that enable high-speed wireless communications is gaining momentum and plays to the strengths of AIRG; that is, increasing speeds require high-quality, complex antennas. For the quarter, AIRG reduced our NAV by $0.02.


3





Emcore Corporation (NASDAQ: EMKR) is a provider of advanced mixed-signal optics products that provide the foundation for today’s high-speed communication network infrastructures and leading-edge defense systems. EMKR had a myriad of recent revenue challenges in its CATV (community access television, or cable) business, including inventory corrections at one of its largest customers. Essentially, this customer over-ordered in 2017, and as a result, had a dramatic decline in its ordering pattern in 2018. It has been our view this inventory correction would dissipate by fiscal year 2018 fourth quarter (September 30) and EMKR's visibility to future revenues and growth would resume. That view proved accurate. At the same time, EMKR's state-of-the-art Fiber Optic Gyroscope (“FOG”) products are designed for fast, accurate navigation and gyrocompassing, and low noise, line of sight stabilization. These FOG products are critical components of high-performance drones and other systems where highly accurate navigation is critical. Like AIRG and IOTS, EMKR suffered with the rest of the market and technology meltdown. With an enterprise value of less than 1x revenues and with approximately half the market capitalization of EMKR in cash, we believe the stock has a favorable risk-reward profile. For the quarter, EMKR reduced our NAV by $0.01.

Lantronix, Inc. (NASDAQ: LTRX) is a global provider of secure data access and management solutions for IoT assets. The IoT gateway market (75% of LTRX sales) is experiencing strong growth as businesses are becoming increasingly connected. Following years of declining revenues and net losses, a new management team took over in 2015 and embarked on a dramatic turnaround of the business. In its most recent earnings report, LTRX pointed to the expectation of nearly double-digit revenue growth in the upcoming quarters. We participated in a secondary offering in Q3 2018 that strengthened LTRX’s balance sheet and gave it firepower to make strategic and accretive acquisitions. Unfortunately, like almost every other technology stock, and despite no negative company specific news, the stock sold off in Q4 2018. For the quarter, LTRX reduced our NAV by $0.01.

Synacor, Inc. (NASDAQ: SYNC) is a holding we have discussed extensively in our communications with shareholders. The issue at SYNC isn’t fundamental problems with its overall business; it is rather a management credibility issue resulting from the company historically and consistently over-promising and under-delivering. Approximately 40% of SYNC's revenues are recurring and fee-based from its email and Cloud ID businesses. Investors typically pay a minimum of 1x recurring revenues, and in many cases, significantly higher multiples if such revenues are coupled with high margins and growth rates. SYNC's management team has made considerable strides in improving its business. For instance, EBITDA is expected to increase from $2.3 million in 2017 to $7.7 million in 2018. Unfortunately, last August, AT&T (SYNC's largest individual customer), delivered notice to SYNC that it would not automatically renew an expiring contract and sought to initiate renewal negotiations on a potential new definitive agreement. While it is not certain how this will turn out, investors viewed this announcement as negative, with many assuming SYNC would lose the AT&T business in its entirety. As such, the stock has traded off 38% following the announcement. Going forward, if SYNC can resolve the AT&T contract renewal uncertainty and execute on its business, we think the stock has meaningful upside. For the quarter, SYNC reduced our NAV by $0.01.

New position

Intermolecular, Inc. (NASDAQ: IMI) provides customers with a platform and multi-disciplinary development team for the research and development of advanced materials in the semiconductor, display, and glass and coatings industries. Coincident with the downturn of the semiconductor sector, we purchased approximately 1.4 million shares at an average cost of $0.94. At that valuation, the stock was trading at approximately 2x the cash on its balance sheet and an enterprise value of 0.67x revenues. IMI announced a slowdown in revenue for Q4 2018 due to the timing of certain program completions as well as a temporary delay in the scheduled commencement of a new program. IMI also announced a new program with a leading semiconductor manufacturer. We believe this new relationship, as well as improved operational efficiencies, will lead to a better 2019. We also note that the sell-off in Q4 2018 was not 100% fundamentally driven. As we noted earlier in this letter, Q4 2018 forced liquidations exacerbated the decline in the overall stock market. In the particular case of IMI, we became aware that its fourth largest shareholder was liquidating its entire IMI holdings. We took advantage of this liquidation. For the quarter, IMI did not materially impact our NAV.

Deletion

PDL BioPharma, Inc. (NASDAQ: PDLI) was a new holding last quarter. We sold our position in PDLI in Q4 2018 for a realized gain of 26.2% in a total holding period of less than 100 days. Our investment thesis centered on our expectation that PDLI's Board and management would use a meaningful portion of the its cash on hand to buy back stock. Subsequent to our investment, the company authorized a $100 million stock repurchase program. As the stock moved directly to our short-term price target, we exited the position.


4





Private Portfolio

For the quarter, our private portfolio subtracted $0.01 from our NAV. Positive contributors to NAV were HALE.life, which increased our NAV by $0.01 due to a recent financing, and Black Silicon Holdings and EchoPixel, which increased by a $0.01 each, against the backdrop of improved fundamentals respective to each company. Conversely, D-Wave Systems decreased by $0.02 due to a weakening of the Canadian dollar and NGX Bio decreased by $0.01 as business fundamentals worsened.

We continue to believe in the potential for our most mature companies to build value including, AgBiome, D-Wave Systems, ORIG3N, and Nanosys. There are other companies in the portfolio that also hold promise, however these companies are in early stages of development and the timelines and potential exit values for these companies are highly uncertain. We have often talked about our desire to actively shepherd our existing private portfolio to exits or opportunities to sell our positions in those companies at what we believe are reasonable valuations. As a reminder, on July 5, 2018, we sold our entire position in HZO to undisclosed buyers for $7 million, an 8% premium to its value as of March 31, 2018, but lower than our cost basis of $9.1 million. This significant event both helped us de-risk our private portfolio while also giving us more cash to invest in our core strategy of investing in small public companies. We also note that in January 2019, we sold our convertible bridge note in Genome Profiling for $230,000 realizing a 20% gain on the investment through payment of interest over our holding period.

Expenses

As we have noted, we have dramatically reduced our cost structure under our new strategy. In 2016, before our Fund’s change in investment focus and management, our operating expenses, excluding stock-based compensation and interest on outstanding debt, averaged $1.3 million per quarter. For Q4 2018, our operating expenses excluding 2017 deferred bonus accruals equaled approximately $587,000. Our total operating expenses excluding 2017-related bonus accruals declined approximately $200,000 from $3.1 million in 2017 to $2.9 million in 2018. Including sub-lease income, our operating expenses net of such income declined $300,000 year-over-year. We remain committed to treating every dollar of shareholder money with the utmost care and consideration.

In Q2 2018, given an assessment of individual and company-related metrics, the Compensation Committee determined that it was appropriate for us to accrue for the probable payment of a bonus to management at year-end. This expense accrual of $0.017 per share, or approximately $540,000, was derived using the same framework and considerations used to determine the bonus compensation in 2017. It also included the concept of the deferral of a meaningful portion of the bonus to future years to encourage and reward persistent performance. Given the decline in our NAV this quarter, management recommended, and our Compensation Committee agreed, that it was appropriate to reverse this accrual. As such, there will be no bonus pool for management in 2018. This reversal increased NAV by $0.017 in the quarter.

TURN/NAV: SUM OF THE PARTS:

At the end of Q4 2018, TURN traded at 66% of its NAV. Our liquid assets, cash, and other assets net of liabilities were $1.03 per share. Our stock price was $1.75. If we received 100% credit for the value of these assets net of liabilities, the market is ascribing a value of $0.72 per share, or $22.4 million, to our private portfolio. Given our private assets are valued at $50.1 million, the market is discounting the value of our private portfolio assets by 55% as of the end of 2018 versus 40% as of the end of Q3 2018 and 36% as of the end of 2017.

As we grow our cash and liquid securities, the discount our stock trades to NAV should narrow. In September 2016, we had 19% of our cash and investments in cash and liquid securities less outstanding debt. At the beginning of our strategy in 2017, we had 27% of our cash and investments in cash and public companies. Today that number is 40%. We want that trend to continue and accelerate. We have made substantial progress in reinventing ourselves. Our balance sheet reflects just how far we have come.

2018 was an event filled year. Our vision is to be known as a leader in small cap activist investing, with a relentless focus on achieving excellence in our investment performance. Our investment in Turtle Beach Corporation (NASDAQ: HEAR) in the second quarter of 2018 is the second time we have assisted a company in removing an overhang to its stock price. The result was the same: a significant shareholder value creation exercise for HEAR and its shareholders, and most importantly, for our Fund and our shareholders. Of course, our first major “active” investment was TST. We have achieved a 100% unrealized return over the last 13 months on our investment in TST; which is evidence of our ability to help a company increase shareholder value.


5





A picture tells a thousand words. Take a look at the next two tables.

chart1123118.jpg

chart2aa123118.jpg

Our stock picking has been very good, and it has been very good in two entirely different markets (2017 and 2018). We have drastically reduced our expense base, raised money for two special purpose vehicles, and successfully exited two of our private portfolio companies, MRSN and HZO, through an IPO and a cash sale, respectively.

We were bitterly disappointed in how 2018 ended, but we take solace in the notion that we grew our net asset value over the entirety of 2018. We think from that perspective, we were an outlier, as not many funds were up last year. Being amongst the ones that were on the positive side of the ledger is a very positive outcome. The dislocation in Q4 2018 created buying opportunities of both old and new positions. While we don’t know how long the current unwind of technology-related companies due to fears of a trade war with China will last, many stocks have now discounted the bad news. As we look at our portfolio, we have made a conscious decision to be long those companies that we believe will benefit from IoT growth. Many of those names have been hurt in recent months. We think the fundamental underpinnings and secular trends of the IoT market are sound. We also recognize the stock market and economic growth have been rising for 10 years. Simply put, there is less value today than there was, when the bull market started. But given the outright wipeout in Q4 2018, we are very optimistic about what we own as we start 2019.

sig2a07.jpg
Kevin Rendino
Chairman and Chief Executive Officer

6


180 DEGREE CAPITAL CORP.
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
 
December 31, 2018

ASSETS
 

Investments in portfolio securities, at value:
 

Unaffiliated privately held companies (cost: $14,631,117)
$
16,139,296

Unaffiliated publicly traded securities (cost: $18,556,002)
13,032,576

Non-controlled affiliated privately held companies (cost: $27,027,538)
26,429,303

Non-controlled affiliated publicly traded securities (cost: $9,288,130)
11,907,377

Controlled affiliated privately held companies (cost: $12,267,175)
5,271,414

Equity method privately held company (adjusted cost basis: $246,229)
246,229

Unaffiliated rights to payments (adjusted cost basis: $548,998)
2,019,283

Cash
7,801,712

Restricted cash
46,151

Interest receivable
661,677

Prepaid expenses
259,359

Receivable from portfolio companies and managed funds
106,662

Other assets
132,015

Total assets
$
84,053,054

LIABILITIES & NET ASSETS
 

Post-retirement plan liabilities
$
1,140,406

Accounts payable and accrued liabilities
732,324

Payable for securities purchased
92,371

Deferred rent
53,185

Total liabilities
$
2,018,286

Commitments and contingencies (Note 10)
 

Net assets
$
82,034,768

Net assets are comprised of:
 

Preferred stock, $0.10 par value, 2,000,000 shares authorized; none issued
$
0

Common stock, $0.01 par value, 45,000,000 shares authorized; 34,623,341 issued
334,594

Additional paid in capital
127,652,787

Total distributable loss
(41,347,088
)
Treasury stock, at cost 3,501,779 shares
(4,605,525
)
Net assets
$
82,034,768

Shares outstanding
31,121,562

Net asset value per outstanding share
$
2.64

 


The accompanying notes are an integral part of these consolidated financial statements.
7


180 DEGREE CAPITAL CORP.
CONSOLIDATED STATEMENT OF OPERATIONS
 
Year Ended
December 31, 2018

Income:
 

Interest from:
 

Unaffiliated companies-cash
$
19,206

Unaffiliated companies-PIK
17,883

Non-controlled affiliated companies-cash
(49,562
)
Non-controlled affiliated companies-PIK
16,219

Controlled affiliated companies-PIK
25,569

Cash and U.S. government securities
19,018

Yield enhancing fee income on debt securities-non-cash
182,683

Sub-lease income
248,666

Fee income for providing managerial assistance to portfolio companies-cash
75,000

Fee income for providing managerial assistance to portfolio companies-non-cash
57,940

Management fee income
73,214

Total income
685,836

Operating fees and expenses:
 

Salaries, bonus and benefits
1,464,381

Professional
561,650

Directors
277,500

Rent
252,110

Administration and operations
251,237

Insurance
223,901

Custody
30,188

Other
4,885

Total operating expenses
3,065,852

Net investment loss before income tax expense
(2,380,016
)
Income tax expense
6,003

Net investment loss
(2,386,019
)
Net realized gain (loss) from investments:
 

Realized gain (loss) from investments:
 

Unaffiliated publicly traded securities
6,802,818

Non-controlled affiliated privately held companies
(6,882,890
)
Controlled affiliated privately held companies
(7,613,301
)
Net realized loss from investments
(7,693,373
)
Realized loss from funds in escrow
(150
)
Net realized loss
(7,693,523
)
Change in unrealized (depreciation) appreciation on investments:
 

Unaffiliated privately held companies
(1,369,705
)
Unaffiliated publicly traded securities
(4,986,125
)
Non-controlled affiliated privately held companies
7,512,247

Non-controlled affiliated publicly traded securities
2,038,330

Controlled affiliated privately held companies
8,193,457

Unaffiliated rights to payments
(192,584
)
Net change in unrealized appreciation on investments
11,195,620

Net realized loss and change in unrealized appreciation on investments
3,502,097

Share of loss on equity method investment
(124,299
)
Net increase in net assets resulting from operations
$
991,779





The accompanying notes are an integral part of these consolidated financial statements.
8


180 DEGREE CAPITAL CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
 
Year Ended
December 31, 2018

Cash flows provided by operating activities:
 

Net increase in net assets resulting from operations
$
991,779

Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by operating activities:
 

Net realized loss from investments
7,693,373

Realized loss from funds held in escrow
150

Net change in unrealized appreciation on investments
(11,195,620
)
Share of loss on equity method investee
124,299

Depreciation of fixed assets
4,879

Accretion of bridge note PIK interest income
(59,671
)
Yield enhancing fee income on debt securities-non-cash
(182,683
)
Fee income for providing managerial assistance to portfolio companies-non-cash
(57,940
)
Purchase of U.S. government securities
(7,983,711
)
Maturity of U.S. government securities
7,983,711

Purchase of equity method investee
(113,906
)
Purchase of unaffiliated privately held portfolio companies
(1,602,368
)
Purchase of unaffiliated publicly traded securities
(12,935,685
)
Purchase of non-controlled affiliated privately held portfolio companies
(245,334
)
Purchase of non-controlled affiliated publicly traded securities
(665,750
)
Purchase on controlled affiliated privately held companies
(500,000
)
Proceeds from sale of unaffiliated privately held companies
132,000

Proceeds from sale of unaffiliated publicly traded securities
16,728,458

Proceeds from sale of non-controlled affiliated privately held companies
7,135,834

Proceeds from sale of non-controlled affiliated publicly traded securities
111,131

Proceeds from sale of controlled affiliated privately held companies
50,000

Proceeds from funds held in escrow
12,805

Changes in assets and liabilities:
 

Decrease in interest receivable
49,563

Increase on prepaid expenses
(22,908
)
Increase in receivable from portfolio companies and managed funds
(65,910
)
Decrease in other assets
31,182

Decrease in post-retirement plan liabilities
(198,940
)
Decrease in accounts payable and accrued liabilities
(715,221
)
Decrease in accrued severance
(140,923
)
Decrease in deferred rent
(45,633
)
Decrease in directors' fee payable
(58,125
)
Increase in payable for securities purchased
92,371

Net cash provided by operating activities
4,351,207

Cash flows from investing activities:
 

Purchase of fixed assets
(1,884
)
Net cash used in investing activities
(1,884
)
Net increase in cash and restricted cash
4,349,323

Cash and restricted cash at beginning of the year
3,498,540

Cash and restricted cash at end of the year
$
7,847,863

 
 
Supplemental disclosures of cash flow information:
 

Income taxes paid
$
6,003

 
 
Cash
$
7,801,712

Restricted cash
46,151

Total cash and restricted cash shown in the consolidated statement of cash flows
$
7,847,863



The accompanying notes are an integral part of these consolidated financial statements.
9


180 DEGREE CAPITAL CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
 
Year Ended
December 31, 2018

 
Year Ended
December 31, 2017

Changes in net assets from operations:
 
 
 

Net investment loss
$
(2,386,019
)
 
$
(3,645,515
)
Net realized loss
(7,693,523
)
 
(11,755,179
)
Net change in unrealized appreciation on investments
11,195,620

 
24,877,695

Share of loss on equity method investment
(124,299
)
 
(59,258
)
Net increase in net assets resulting from operations
991,779

 
9,417,743

Changes in net assets from capital stock transactions:
 

 
 

Acquisition of vested restricted stock awards to pay required employee withholding tax
0

 
(139,780
)
Stock-based compensation benefit
0

 
(190,347
)
Net decrease in net assets resulting from capital stock transactions
0

 
(330,127
)
Changes in net assets from accumulated other comprehensive loss:
 

 
 

Other comprehensive loss
0

 
(300,237
)
Net decrease in net assets resulting from accumulated other comprehensive loss
0

 
(300,237
)
Net increase in net assets
991,779

 
8,787,379

Net Assets:
 

 
 

Beginning of the year
81,042,989

 
72,255,610

End of the year1
$
82,034,768

 
$
81,042,989

 
 
 
 
1 Includes accumulated net investment loss of $5,211,751 as of December 31, 2017. The Securities Exchange Commission ("SEC") eliminated the requirement to disclose accumulated net investment income (loss) in 2018.
 



The accompanying notes are an integral part of these consolidated financial statements.
10


180 DEGREE CAPITAL CORP.
FINANCIAL HIGHLIGHTS
 
Year Ended
Dec. 31, 2018
 
Year Ended
Dec. 31, 2017
 
Year Ended
Dec. 31, 2016
 
Year Ended
Dec. 31, 2015
 
Year Ended
Dec. 31, 2014
Per Share Operating Performance
 
 
 
 
 

 
 

 
 

Net asset value per share, beginning of the year
$
2.60

 
$
2.34

 
$
2.88

 
$
3.51

 
$
3.93

Net investment loss*
(0.07
)
 
(0.12
)
 
(0.15
)
 
(0.23
)
 
(0.25
)
Net realized (loss) gain from investments*
(0.25
)
 
(0.38
)
 
(0.26
)
 
0.15

 
(0.16
)
Net change in unrealized appreciation (depreciation) on investments and written call options*1
0.36

 
0.80

 
(0.12
)
 
(0.56
)
 
(0.02
)
Share of loss on equity method investment*2
0.00

 
0.00

 
0.00

 
(0.01
)
 
0.00

Total*
0.04

 
0.30

 
(0.53
)
 
(0.65
)
 
(0.43
)
Net (decrease) increase as a result of stock-based compensation expense*2
0.00

 
(0.01
)
 
0.01

 
0.03

 
0.03

Net increase as a result of purchase of treasury stock
0.00

 
0.00

 
0.00

 
0.01

 
0.00

Net decrease as a result of acquisition of vested restricted stock awards related to employee withholding2
0.00

 
(0.02
)
 
(0.01
)
 
(0.01
)
 
(0.01
)
Total (decrease) increase from capital stock transactions
0.00

 
(0.03
)
 
0.00

 
0.03

 
0.02

Net (decrease) increase as a result of other comprehensive (loss) income*2
0.00

 
(0.01
)
 
(0.01
)
 
(0.01
)
 
(0.01
)
Net increase (decrease) in net asset value
0.04

 
0.26

 
(0.54
)
 
(0.63
)
 
(0.42
)
Net asset value per share, end of the year
$
2.64

 
$
2.60

 
$
2.34

 
$
2.88

 
$
3.51

Stock price per share, end of the year
$
1.75

 
$
1.97

 
$
1.38

 
$
2.20

 
$
2.95

Total return based on stock price
(11.17
)%
 
42.75
 %
 
(37.27
)%
 
(25.42
)%
 
(1.01
)%
Supplemental Data:
 
 
 
 
 
 
 

 
 

Net assets, end of the year
$
82,034,768

 
$
81,042,989

 
$
72,255,610

 
$
88,711,671

 
$
109,654,427

Ratio of expenses, excluding taxes, to quarterly average net assets
3.62
 %
** 
6.26
 %
** 
7.88
 %
 
8.15
 %
 
7.14
 %
Ratio of expenses, including taxes, to quarterly average net assets
3.63
 %
** 
6.28
 %
3 ** 
7.89
 %
 
8.15
 %
 
7.15
 %
Ratio of net investment loss to quarterly average net assets
(2.82
)%
 
(4.68
)%
 
(5.64
)%
 
(7.22
)%
 
(6.70
)%
Average debt outstanding
$
0

 
$
0

 
$
4,590,164

 
$
3,780,822

 
$
0

Average debt per share
$
0.00

 
$
0.00

 
$
0.15

 
$
0.12

 
$
0.00

Portfolio turnover
20.43
 %
 
8.83
 %
 
***

 
***

 
***

Number of shares outstanding, end of the year
31,121,562

 
31,121,562

 
30,904,209

 
30,845,754

 
31,280,843


 *Based on average shares outstanding.
**The Company has entered into an expense offsetting arrangement with one of its unaffiliated brokers relating to broker fees paid. The total broker fee charged to the Company was applied as a credit to fees charged by an affiliate of the unaffiliated broker who the Company subscribes to for data services billed during the year. The Company received an offset to expense totaling approximately $17,509 and $5,700 with that broker for the year ended December 31, 2018 and the year ended December 31, 2017.
***Prior to March 2017, the Company was a business development company investing primarily in privately held securities. Portfolio turnover was not a relevant indicator for such investments given that the Company did not generally pay brokerage fees on such investments.

1 Net unrealized losses include rounding adjustments to reconcile change in net asset value per share.
2 Amounts listed as zero are amounts calculated as less than $0.005.
3 Ratio of expenses, including taxes and excluding expenses related to restructuring, to quarterly average net assets for the year ended December 31, 2017 was 5.19%.



The accompanying notes are an integral part of these consolidated financial statements.
11

180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Unaffiliated Companies (2) -
 
 
 
 
 
 
 
 
 
35.6% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) -
 
 
 
 
 
 
 
 
 
19.7% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
AutoTech Ventures Management I, LLC (3)(4)(5)
 
 
 
 
 
 
 
 
 
Venture capital investing in automotive-related companies
 
 
Asset Management & Custody Banks
 
 
 
 
 
 
LLC Interests (acquired 12/1/17)
(M) (L3)
 
 
 
$
0

 
0

 
$
150,000

 
 
 
 
 
 
 
 
 
 
D-Wave Systems, Inc. (3)(4)(6)
 
 
Technology Hardware, Storage & Peripherals
 
 
 
 
 
 
Developing high-performance quantum computing systems
 
 
 
 
 
 
 
 
 
Series 1 Class B Convertible Preferred Stock (acquired 9/30/08)
(M) (L3)
 
 
 
1,002,074

 
1,144,869

 
1,958,033

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

 
450,450

 
786,616

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

 
855,131

 
1,493,305

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

 
269,280

 
490,521

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

 
258,721

 
471,287

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

 
460,866

 
1,141,337

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

 
678,264

 
1,184,445

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

 
513,900

 
979,874

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

 
493,747

 
941,447

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

 
20,415

 
242

 
 
 
 
 
5,689,311

 
 
 
9,447,107

 
 
 
 
 
 
 
 
 
 
Fleet Health Alliance, LLC (3)(4)
 
 
Health Care Technology
 
 
 
 
 
 
Developing software for information transfer amongst healthcare providers and consumers
 
 
 
 
 
 
 
 
 
Unsecured Convertible Bridge Note, 0%, (acquired 4/22/16, no maturity date)
(I) (L3)
 
 
 
225,000

 
$
225,000

 
112,500

 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
12

180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Unaffiliated Companies (2) -
 
 
 
 
 
 
 
 
 
35.6% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) -
 
 
 
 
 
 
 
 
 
19.7% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Genome Profiling, LLC (3)(7)
 
 
Life Sciences Tools & Services
 
 
 
 
 
 
Developing a platform to analyze and understand the epigenome
 
 
 
 
 
 
 
 
 
Unsecured Convertible Bridge Note, 8%, (acquired 8/4/16, maturing 8/4/19)
(M) (L3)
 
 
 
$
230,000

 
$
230,000

 
$
230,000

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

 
862,872

 
867,417

 
 
 
 
 
 
 
 
 
 
Nanosys, Inc. (3)(4)
 
 
Specialty Chemicals
 
 
 
 
 
 
Developing inorganic nanowires and quantum dots for use in LED-backlit devices
 
 
 
 
 
 
 
 
 
Series C Convertible Preferred Stock (acquired 4/10/03)
(I) (L3)
 
 
 
1,500,000

 
803,428

 
926,994

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

 
1,016,950

 
1,779,526

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

 
433,688

 
795,737

 
 
 
 
 
4,996,576

 
 
 
3,502,257

 
 
 
 
 
 
 
 
 
 
NanoTerra, Inc. (3)(4)
 
 
Research & Consulting Services
 
 
 
 
 
 
Developing surface chemistry and nano-manufacturing solutions
 
 
 
 
 
 
 
 
 
Warrants for Common Stock expiring on 2/22/21 (acquired 2/22/11)
(I) (L3)
 
 
 
69,168

 
4,462

 
0

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

 
47,508

 
31,645

 
 
 
 
 
104,571

 
 
 
31,645

 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
13

180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Unaffiliated Companies (2) -
 
 
 
 
 
 
 
 
 
35.6% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) -
 
 
 
 
 
 
 
 
 
19.7% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Petra Pharma Corporation (3)(4)(8)
 
 
Pharmaceuticals
 
 
 
 
 
 
Developing small molecule inhibitors for treatment of cancer and metabolic diseases
 
 
 
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 12/23/15-1/8/18)
(I) (L3)
 
 
 
$
1,894,798

 
1,894,798

 
$
1,018,718

Secured Convertible Bridge Note, 7% PIK, (acquired 8/30/18, maturing 1/31/19)
(M) (L3)
 
 
 
378,541

 
$
369,748

 
378,541

 
 
 
 
 
2,273,339

 
 
 
1,397,259

 
 
 
 
 
 
 
 
 
 
Phylagen, Inc. (3)
 
 
Research & Consulting Services
 
 
 
 
 
 
Developing technology to improve human health and business productivity
 
 
 
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 11/14/18)
(I) (L3)
 
 
 
249,448

 
584,597

 
401,111

 
 
 
 
 
 
 
 
 
 
Total Unaffiliated Privately Held Companies (cost: $14,631,117)
 
 
 
 
 
 
 
 
$
16,139,296

 
 
 
 
 
 
 
 
 
 
Unaffiliated Publicly Traded Securities -
 
 
 
 
 
 
 
 
 
15.9% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adesto Technologies Corporation (4)
 
 
Semiconductors
 
 
 
 
 
 
Developing low-power, high-performance solutions for the Internet of Things (IoT)
 
 
 
 
 
 
 
 
 
Common Stock (acquired 10/27/15-12/31/18)
(M) (L1)
 
 
 
$
6,564,931

 
1,116,675

 
$
4,913,370

 
 
 
 
 
 
 
 
 
 
Airgain, Inc. (4)
 
 
Electronic Components
 
 
 
 
 
 
Providing advanced antenna technologies for high-performance wireless networking
 
 
 
 
 
 
 
 
 
Common Stock (acquired 6/4/18-12/27/18)
(M) (L1)
 
 
 
1,614,289

 
188,784

 
1,870,849

 
 
 
 
 
 
 
 
 
 
Emcore Corporation (4)
 
 
Communications Equipment
 
 
 
 
 
 
Providing mixed-signal optical products
 
 
 
 
 
 
 
 
 
Common Stock (acquired 5/3/18-9/19/18)
(M) (L1)
 
 
 
2,684,497

 
564,828

 
2,372,278

 
 
 
 
 
 
 
 
 
 
Intermolecular, Inc. (4)
 
 
Semiconductors
 
 
 
 
 
 
Providing advanced materials innovation services and solutions
 
 
 
 
 
 
 
 
 
Common Stock (acquired 11/9/18-12/20/18)
(M) (L1)
 
 
 
1,328,661

 
1,411,729

 
1,425,846

 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
14

180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Unaffiliated Companies (2) -
 
 
 
 
 
 
 
 
 
35.6% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unaffiliated Publicly Traded Securities -
 
 
 
 
 
 
 
 
 
15.9% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lantronix, Inc. (4)
 
 
Communications Equipment
 
 
 
 
 
 
Providing secure data access and management solutions
 
 
 
 
 
 
 
 
 
Common Stock (acquired 9/18/18-12/17/18)
(M) (L1)
 
 
 
$
1,475,580

 
400,000

 
$
1,176,000

 
 
 
 
 
 
 
 
 
 
Mersana Therapeutics, Inc. (4)
 
 
Biotechnology
 
 
 
 
 
 
Developing antibody drug conjugates for cancer therapy
 
 
 
 
 
 
 
 
 
Common Stock (acquired 7/27/12-12/31/18)
(M) (L1)
 
 
 
4,414,817

 
301,100

 
1,228,488

 
 
 
 
 
 
 
 
 
 
OpGen, Inc. (4)
 
 
Biotechnology
 
 
 
 
 
 
Developing tools for genomic sequence assembly and analysis
 
 
 
 
 
 
 
 
 
Warrants for the Purchase of Common Stock expiring 5/8/20 (acquired 5/5/15)
(M) (L2)
 
 
 
425,579

 
12,033

 
989

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

 
1,248

 
202

 
 
 
 
 
426,364

 
 
 
1,191

 
 
 
 
 
 
 
 
 
 
Miscellaneous Common Stocks (4)(9)
(M) (L1)
 
 
 
46,863

 
 
 
44,554

 
 
 
 
 
 
 
 
 
 
Total Unaffiliated Publicly Traded Securities (cost: $18,556,002)
 
 
 
 
 
 
 
 
$
13,032,576

 
 
 
 
 
 
 
 
 
 
Total Investments in Unaffiliated Companies (cost: $33,187,119)
 
 
 
 
 
 
 
 
$
29,171,872

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
15

180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Non-Controlled Affiliated Companies (2) -
 
 
 
 
 
 
 
 
 
46.7% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) -
 
 
 
 
 
 
 
 
 
32.2% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ABSMaterials, Inc. (3)
 
 
Specialty Chemicals
 
 
 
 
 
 
Developing nano-structured absorbent materials for water remediation and consumer applications
 
 
 
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 2/17/10-10/24/11)
(I) (L3)
 
 
 
$
435,000

 
390,000

 
$
15,864

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

 
1,037,751

 
286,562

Secured Convertible Bridge Note, 8% PIK, (acquired 1/20/16, maturing 12/31/19)
(M) (L3)
 
 
 
123,605

 
$
100,000

 
123,605

Secured Convertible Bridge Note, 8% PIK, (acquired 3/28/17, maturing 12/31/19)
(M) (L3)
 
 
 
28,529

 
$
25,000

 
28,529

 
 
 
 
 
1,804,778

 
 
 
454,560

 
 
 
 
 
 
 
 
 
 
AgBiome, LLC (3)(4)
 
 
Fertilizers & Agricultural Chemicals
 
 
 
 
 
 
Providing early-stage research and discovery for agriculture and utilizing the crop microbiome to identify products that reduce risk and improve yield
 
 
 
 
 
 
 
 
 
Series A-1 Convertible Preferred Units (acquired 1/30/13)
(I) (L3)
 
 
 
2,000,000

 
2,000,000

 
10,442,684

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

 
417,392

 
2,214,058

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

 
160,526

 
951,079

 
 
 
 
 
3,021,746

 
 
 
13,607,821

 
 
 
 
 
 
 
 
 
 
Coba Therapeutics Corporation (3)(10)
 
 
 
 
 
 
 
 
 
Developed therapeutics for obesity, diabetes and liver diseases
 
 
Pharmaceuticals
 
 
 
 
 
 
Unsecured Convertible Bridge Note, 6% PIK, (acquired 2/27/18, maturing 2/27/19)
(I) (L3)
 
 
 
151,606

 
$
145,530

 
21,776

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
16

180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Non-Controlled Affiliated Companies (2) -
 
 
 
 
 
 
 
 
 
46.7% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) -
 
 
 
 
 
 
 
 
 
32.2% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
EchoPixel, Inc. (3)(4)
 
 
Health Care Equipment
 
 
 
 
 
 
Developing virtual reality 3-D visualization software for life sciences and health care applications
 
 
 
 
 
 
 
 
 
Series Seed Convertible Preferred Stock (acquired 6/21/13-6/30/14)
(I) (L3)
 
 
 
$
1,250,000

 
4,194,630

 
$
1,201,023

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

 
1,476,668

 
429,732

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

 
1,471,577

 
499,616

 
 
 
 
 
2,100,000

 
 
 
2,130,371

 
 
 
 
 
 
 
 
 
 
Essential Health Solutions, Inc. (3)
 
 
Health Care Technology
 
 
 
 
 
 
Developing software for information transfer amongst healthcare providers and consumers
 
 
 
 
 
 
 
 
 
Common Stock (acquired 11/18/16)
(I) (L3)
 
 
 
20

 
200,000

 
128,339

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

 
2,750,000

 
2,781,300

Unsecured Convertible Bridge Note, 8% PIK, (acquired 12/19/18, maturing 12/19/19)
(M) (L3)
 
 
 
50,142

 
$
50,000

 
50,142

 
 
 
 
 
2,800,162

 
 
 
2,959,781

 
 
 
 
 
 
 
 
 
 
Lodo Therapeutics Corporation (3)(4)
 
 
Pharmaceuticals
 
 
 
 
 
 
Developing and commercializing novel therapeutics derived from a metagenome-based Natural Product Discovery Platform
 
 
 
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 12/21/15-4/22/16)
(I) (L3)
 
 
 
658,190

 
658,190

 
779,467

 
 
 
 
 
 
 
 
 
 
NGX Bio, Inc. (3)(4)(10)
 
 
Research & Consulting Services
 
 
 
 
 
 
Developing translational genomics solutions
 
 
 
 
 
 
 
 
 
Series Seed Convertible Preferred Stock (acquired 6/6/14-1/10/16)
(I) (L3)
 
 
 
500,002

 
666,667

 
17,273

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

 
329,989

 
8,550

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

 
666,001

 
17,256

 
 
 
 
 
1,686,330

 
 
 
43,079

 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
17

180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Non-Controlled Affiliated Companies (2) -
 
 
 
 
 
 
 
 
 
46.7% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) -
 
 
 
 
 
 
 
 
 
32.2% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ORIG3N, Inc. (3)(4)
 
 
Health Care Technology
 
 
 
 
 
 
Developing consumer focused genetic tests
 
 
 
 
 
 
 
 
 
Series 1 Convertible Preferred Stock (acquired 2/5/15-8/5/15)
(H) (L3)
 
 
 
$
500,000

 
1,195,315

 
$
1,232,502

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

 
1,364,666

 
1,431,936

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

 
176,386

 
189,592

 
 
 
 
 
2,200,002

 
 
 
2,854,030

 
 
 
 
 
 
 
 
 
 
Produced Water Absorbents, Inc. (3)(4)(11)
 
 
Oil & Gas Equipment & Services
 
 
 
 
 
 
Providing integrated process separation solutions to the global oil and gas industries, enabling onsite treatment of produced and flowback water
 
 
 
 
 
 
 
 
 
Common Stock (acquired 4/30/16)
(M) (L3)
 
 
 
7,670,281

 
50,243,350

 
0

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

 
450,000

 
0

Senior Secured Debt, 15% commencing on 4/1/16, maturing on 12/31/19 (acquired 4/1/16)
(M) (L3)
 
 
 
2,323,680

 
$
2,533,766

 
76,863

 
 
 
 
 
10,059,211

 
 
 
76,863

 
 
 
 
 
 
 
 
 
 
TARA Biosystems, Inc. (3)(4)
 
 
Life Sciences Tools & Services
 
 
 
 
 
 
Developing human tissue models for toxicology and drug discovery applications
 
 
 
 
 
 
 
 
 
Common Stock (acquired 8/20/14)
(I) (L3)
 
 
 
20

 
2,000,000

 
659,162

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

 
6,878,572

 
2,842,393

 
 
 
 
 
2,545,513

 
 
 
3,501,555

 
 
 
 
 
 
 
 
 
 
Total Non-Controlled Affiliated Privately Held Companies (cost: $27,027,538)
 
 
 
 
 
 
 
 
$
26,429,303

 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
18

180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Non-Controlled Affiliated Companies (2) -
 
 
 
 
 
 
 
 
 
46.7% of net assets at value (cont.)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-Controlled Affiliated Publicly Traded Securities -
 
 
 
 
 
 
 
 
 
14.5% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Synacor, Inc. (4)(12)
 
 
Application Software
 
 
 
 
 
 
Providing technology development, multiplatform services and revenue partner for video, internet and communications providers, device manufacturers, and enterprises
 
 
 
 
 
 
 
 
 
Common Stock (acquired 4/6/17-12/31/18)
(M) (L1)
 
 
 
$
4,338,396

 
1,595,306

 
$
2,361,053

 
 
 
 
 
 
 
 
 
 
TheStreet, Inc. (4)(13)
 
 
Financial Exchanges & Data
 
 
 
 
 
 
Providing financial news and proprietary data to consumers and businesses
 
 
 
 
 
 
 
 
 
Common Stock (acquired 4/19/17-5/18/18)
(M) (L1)
 
 
 
4,949,734

 
4,668,552

 
9,477,161

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

 
3,333

 
1,995

Stock Options for Common Stock Expiring 5/18/25 (acquired 5/18/18) (3)
(I) (L3)
 
 
 
0

 
10,000

 
2,500

Restricted Stock Units (acquired 5/18/18) (3)
(M) (L3)
 
 
 
0

 
33,333

 
64,668

 
 
 
 
 
4,949,734

 
 
 
9,546,324

 
 
 
 
 
 
 
 
 
 
Total Non-Controlled Affiliated Publicly Traded Securities (cost: $9,288,130)
 
 
 
 
 
 
 
 
$
11,907,377

 
 
 
 
 
 
 
 
 
 
Total Investments in Non-Controlled Affiliated Companies (cost: $36,315,668)
 
 
 
 
 
 
 
 
$
38,336,680

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
19

180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investments in Controlled Affiliated Companies (2) -
 
 
 
 
 
 
 
 
 
6.4% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Privately Held Companies (Illiquid) -
 
 
 
 
 
 
 
 
 
6.4% of net assets at value
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Black Silicon Holdings, Inc. (3)(10)(14)
 
 
Semiconductors
 
 
 
 
 
 
Holding company for interest in a company that develops silicon-based optoelectronic products
 
 
 
 
 
 
 
 
 
Series A Convertible Preferred Stock (acquired 8/4/15)
(M) (L3)
 
 
 
$
750,000

 
233,499

 
$
0

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

 
2,966,667

 
0

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

 
4,207,537

 
0

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

 
1,892,836

 
0

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

 
1,674,030

 
0

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

 
$
1,278,453

 
476,187

 
 
 
 
 
7,870,245

 
 
 
476,187

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

 
1,000,000

 
146,462

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

 
11,000,000

 
2,147,894

Series Seed-2 Convertible Preferred Stock (acquired 12/28/18)
(I) (L3)
 
 
 
2,500,000

 
12,083,132

 
2,500,871

 
 
 
 
 
4,396,930

 
 
 
4,795,227

 
 
 
 
 
 
 
 
 
 
Total Controlled Affiliated Privately Held Companies (cost: $12,267,175)
 
 
 
 
 
 
 
 
$
5,271,414

 
 
 
 
 
 
 
 
 
 
Total Investments in Controlled Affiliated Privately Held Companies (cost: $12,267,175)
 
 
 
 
 
 
 
 
$
5,271,414

 
 
 
 
 
 
 
 
 
 
Total Investments in Privately Held Companies and Publicly Traded Securities (cost: $81,769,962)
 
 
 
 
 
 
 
 
$
72,779,966

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

The accompanying notes are an integral part of these consolidated financial statements.
20

180 DEGREE CAPITAL CORP.
CONSOLIDATED SCHEDULE OF INVESTMENTS AS OF DECEMBER 31, 2018
 
 
 
 
 
 
 
 
 
 
 
Method of
Valuation (1)
 
Industry
 
Cost
 
Shares/
Principal
 
Value


Investment in Equity Method Privately Held Company (2) -
 
 
 
 
 
 
 
 
 
0.3% of net assets at value