CION Investment Corp 10-Q Summary
Business Context and Reporting Period
This Form 10-Q covers the quarterly period ended June 30, 2012. CION Investment Corp is a newly organized, externally managed, non-diversified closed-end management investment company incorporated in Maryland on August 9, 2011. The company has elected to be regulated as a Business Development Company (BDC) under the Investment Company Act of 1940 and intends to be taxed as a Regulated Investment Company (RIC).
As of the reporting date, the company was in a pre-operational stage, having not yet met the minimum offering requirement of $2,500,000 from unaffiliated investors. Consequently, no operations had commenced, and no statement of operations or cash flows is presented.
Key Financial Metrics
The company reported minimal financial activity due to its pre-operational status.
| Metric | June 30, 2012 | January 31, 2012 |
|---|---|---|
| Total Assets | $1,000 | $1,000 |
| Cash | $1,000 | $1,000 |
| Total Liabilities | $0 | $0 |
| Total Stockholder's Equity | $1,000 | $1,000 |
| Net Asset Value (NAV) per Share | $9.00 | $9.00 |
| Shares Outstanding | 111.11 | 111.11 |
Revenue, Profit, and Cash Flow: The filing text does not provide values for revenue, profit, or operating cash flow as the company had no operations during the period.
Debt and Liquidity: The company held $1,000 in cash and reported no debt. Liquidity is currently dependent on the successful completion of its initial public offering.
Material Changes and Private Placements
While the balance sheet remained static at $1,000, significant capital commitments were made subsequent to the balance sheet date or pending the minimum offering requirement:
- Private Placements: In June 2012, affiliates ICON Investment Group, LLC (IIG) and Apollo Principal Holdings III, L.P. each subscribed to contribute $1,000,000 to purchase 111,111 shares at $9.00 per share. These shares are to be issued upon meeting the minimum offering requirement.
- Offering Costs: As of June 30, 2012, IIG and its affiliates had incurred approximately $1,189,000 in organization and offering costs. These costs are not liabilities of the company until the minimum offering requirement is met.
- Offering Status: The company's registration statement (Form N-2) was declared effective by the SEC on July 2, 2012, and the offering commenced on that date.
Outlook, Management Commentary, and Risks
Investment Strategy: Upon commencing operations, the company intends to invest primarily in senior secured loans (including unitranche loans) and, to a lesser extent, second lien and mezzanine loans of private and thinly traded U.S. middle-market companies. The objective is to generate current income and capital appreciation.
Management Fees: The company has entered into an investment advisory agreement with CION Investment Management, LLC (CIM). CIM will receive a base management fee of 2.0% of average gross assets (excluding cash) and an incentive fee based on performance. Apollo Investment Management, L.P. will serve as the sub-adviser, receiving 50% of the fees payable to CIM.
Share Repurchase Program: The company intends to offer quarterly repurchases of common stock beginning one year after meeting the minimum offering requirement, limited to 15% of the weighted average shares outstanding in the prior year.
Risks and Contingencies:
- Pre-Operational Risk: The company has no revenue and relies entirely on the success of its public offering to fund operations.
- Cost Reimbursement: There is no assurance that IIG will seek reimbursement for the organization and offering costs it has incurred, though it has the discretion to do so up to 1.5% of gross proceeds.
- Conflicts of Interest: Management teams are shared with other funds (equipment finance funds), which may lead to allocation of investment opportunities to other clients rather than CION.
Key Facts for Investor Verification
- Operational Status: Verify that the company has met the $2.5 million minimum offering requirement from unaffiliated investors to confirm the commencement of operations.
- Capitalization: Confirm the issuance of the 222,222 shares subscribed by IIG and Apollo in the June 2012 private placements.
- Cost Reimbursement: Monitor whether the company elects to reimburse IIG for the approximately $1.2 million in organization and offering costs incurred to date.
- Offering Price: Verify the current offering price per share, which is set at $10.00 but may be adjusted if the net asset value declines by 2.5% or more.
- Related Party Transactions: Review the specific allocation of investment opportunities between CION and other funds managed by CIM/Apollo to assess potential conflicts.