Filed 2026-03-30 · Period ending 2025-12-31 · 57,021 words · SEC EDGAR
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# PRINCETON CAPITAL CORP (PIAC) — 10-K
**Filed:** 2026-03-30
**Period ending:** 2025-12-31
**Accession:** 0001213900-26-036469
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/845385/000121390026036469/)
**Origin leaf:** 0921f0f0605ab3734bb832e85b556abf42629d11b2c79f8bd34f4e04006ea53b
**Words:** 57,021
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**UNITED STATES**
**SECURITIES AND EXCHANGE
COMMISSION**
**Washington, D.C. 20549**
**FORM 10-K**
**(Mark One)**
******ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
**For the fiscal year ended
December 31, 2025**
**OR**
******TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**
Commission File Number 814-00710
**PRINCETON CAPITAL CORPORATION**
(Exact name of Registrant
as specified in its charter)
| Maryland | | 46-3516073 | |
| (State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) | |
| | | | |
| 800 Turnpike Street
Suite 300
North Andover, Massachusetts | | 01845 | |
| (Address of principal executive offices) | | (Zip Code) | |
**Registrants telephone number, including
area code:** (978) 794-3366
**Securities registered pursuant to Section 12(b)
of the Act:**
| Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered | |
| None | | None | | None | |
**Securities registered pursuant to Section 12(g)
of the Act:**
Common Stock, par value $.001 per share
Indicate by check mark if the Registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate by check mark if the Registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes No
Indicate
by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the Registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See definitions of large accelerated filer, accelerated filer, smaller reporting company, and
emerging growth company in Rule 12b-2 of the Exchange Act. (Check one.)
| Large accelerated filer | | Accelerated filer | | |
| Non-accelerated filer | | Smaller reporting company | | |
| | | Emerging growth company | | |
If an emerging growth company, indicate by check
mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the Registrant
has filed a report on and attestation to its managements assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report.
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants
executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
The aggregate market value of the voting and
non-voting common equity held by non-affiliates of the Registrant was approximately $330,114 based on the closing price of $0.066 per
share on the OTC Pink Limited Market on June 30, 2025, the last business day of the Registrants most recently completed second
fiscal quarter.
As of March 30, 2026, there were 120,486,061 shares
of common stock, $0.001 par value, issued and outstanding.
**DOCUMENTS INCORPORATED BY REFERENCE**
Certain exhibits previously filed with the Securities
and Exchange Commission are incorporated by reference into Part IV of this report.
**TABLE
OF CONTENTS**
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Page | |
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PART I | |
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| |
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Item
1. |
BUSINESS |
1 | |
|
Item
1A. |
RISK FACTORS |
9 | |
|
Item
1B. |
UNRESOLVED STAFF COMMENTS |
18 | |
|
Item
1C. |
CYBERSECURITY |
18 | |
|
Item
2. |
PROPERTIES |
19 | |
|
Item
3. |
LEGAL PROCEEDINGS |
19 | |
|
Item
4. |
MINE SAFETY DISCLOSURES |
19 | |
|
|
| |
|
PART II | |
|
| |
|
Item
5. |
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
20 | |
|
Item
6. |
[Reserved] |
23 | |
|
Item
7. |
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
23 | |
|
Item
7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
33 | |
|
Item
8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
34 | |
|
Item
9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
35 | |
|
Item
9A. |
CONTROLS AND PROCEDURES |
35 | |
|
Item
9B. |
OTHER INFORMATION |
35 | |
|
Item
9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
35 | |
|
|
| |
|
PART III | |
|
| |
|
Item
10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
36 | |
|
Item
11. |
EXECUTIVE COMPENSATION |
39 | |
|
Item
12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
40 | |
|
Item
13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
41 | |
|
Item
14. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
43 | |
|
|
| |
|
PART IV | |
|
| |
|
Item
15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
45 | |
|
Item
16. |
FORM 10-K SUMMARY |
45 | |
|
|
| |
|
SIGNATURES |
46 | |
- i -
**PART
I**
*In
this Annual Report on Form 10-K, except as otherwise indicated, the terms we, us, our, and
the Company refer to Princeton Capital Corporation and House Hanover refers to our investment adviser House
Hanover, LLC. Some of the statements in this Annual Report on Form 10-K constitute forward-looking statements, which relate to future
events, future performance or financial condition. These forward-looking statements involve risks and uncertainties and actual results
could differ materially from those projected in the forward-looking statements for any reason, including those factors discussed in Item
1A. Risk Factors and elsewhere in the report.*
****
**Item
1. BUSINESS**
**Overview
and Background**
Princeton Capital Corporations predecessor was initially incorporated in Florida in 1959 as Electro-Mechanical Services, Inc.
In 1998, it changed its name from Electro-Mechanical Services, Inc. to Regal One Corporation (Regal One). In 2005, the
then board of directors of Regal One determined it would be in the best interest of shareholders to change the focus of Regal Ones
operations to providing financial services through a network of advisors and professionals.
On
July 14, 2014, Regal One, the Company (then a wholly-owned subsidiary of Regal One), Capital Point Partners, LP, a Delaware limited partnership
(CPP), and Capital Point Partners II, LP, a Delaware limited partnership (CPPII and, together with CPP, the
Partnerships), entered into an Asset Purchase Agreement (the Purchase Agreement) pursuant to which we would
acquire certain equity and debt investments of the Partnerships in exchange for shares of common stock. In addition to the customary
conditions to closing the transactions contemplated by the Purchase Agreement, Regal One was required to (i) effect a reverse stock split
of its then outstanding common stock at a ratio of 1-for-2, (ii) reincorporate from Florida to Maryland by merging with and into the
Company with the Company continuing as the surviving corporation (the Reincorporation) and (iii) become an externally managed
business development company (BDC) by entering into an external investment advisory agreement with Princeton Investment
Advisors, LLC, a Delaware limited liability company.
On
March 13, 2015, following the reverse stock split and the Reincorporation, we completed our acquisition in the approximate amounts of
$11.2 million in cash, $43.5 million in equity & debt investments, and $1.9 million in restricted cash escrow deposits of the Partnerships
with an aggregate value of approximately $56.6 million and issued approximately 115.5 million shares of our common stock to the Partnerships.
The shares issued were based on a pre-valuation presumed fair value of $60.9 million.
On
December 27, 2017, following the resignation of our former President, Chief Executive Officer, and director of the Company, the Board
of Directors of the Company (the Board) approved (specifically in accordance with Rule 15a-4(b)(1)(ii) of the Investment
Company Act of 1940 (the Investment Company Act or 1940 Act)) and authorized the Company to enter into an
Interim Investment Advisory Agreement between the Company and House Hanover, LLC, a Delaware limited liability company (House
Hanover) (the Interim Investment Advisory Agreement), in accordance with Rule 15a-4 of the Investment Company Act.
The effective date of the Interim Investment Advisory Agreement was January 1, 2018.
On
April 5, 2018, the Board, including a majority of the independent directors, conditionally approved the Investment Advisory Agreement
between the Company and House Hanover (the House Hanover Investment Advisory Agreement) subject to the approval of the
Companys stockholders at the 2018 Annual Meeting of Stockholders. The House Hanover Investment Advisory Agreement replaced the
Interim Investment Advisory Agreement. On May 30, 2018, the Companys stockholders approved the House Hanover Investment Advisory
Agreement. The effective date of the House Hanover Investment Advisory Agreement was May 31, 2018. The House Hanover Investment Advisory
Agreement was last annually renewed by the Board and by a majority of the members of the Board who are not parties to the House Hanover
Investment Advisory Agreement or interested persons (as such term is defined in the 1940 Act) of any such party, in accordance
with the requirements of the 1940 Act and the House Hanover Investment Advisory Agreement on May 12, 2025.
- 1 -
Since
January 1, 2018, House Hanover has acted as our investment advisor under the Interim Investment Advisory Agreement (from January 1, 2018
until May 31, 2018) and the House Hanover Investment Advisory Agreement (since May 31, 2018).
The
full text of the House Hanover Investment Advisory Agreement is attached as Exhibit 10.1 to the Form 8-K filed on March 31, 2018 and
incorporated by reference therein. A summary of the House Hanover Investment Advisory Agreement is set forth herein.
On
November 15, 2019, our Board announced that the Company has initiated a strategic review process to identify, examine, and consider a
range of strategic alternatives available to the Company, including but not limited to, (i) selling the Companys assets to a business
development company or other potential buyer, (ii) merging with another business development company, (iii) liquidating the Companys
assets in accordance with a plan of liquidation, (iv) raising additional funds for the Company, or (v) otherwise entering into another
business combination, with the objective of maximizing stockholder value. As of December 31, 2025 and through the date of filing this
Annual Report, the Company has not entered into any agreements regarding any strategic alternative and the strategic process remains
ongoing.
The
following discussion describes the Company as of December 31, 2025 as it relates to the financial statements covered by this Annual Report
on Form 10-K and as of the latest practicable date for other information about the Company.
**General**
We
are an externally managed, non-diversified, closed-end investment company that has elected to be treated as a BDC under the 1940 Act.
While we have sought to invest primarily in private small and lower middle-market companies in various industries through first lien
loans, second lien loans, unsecured loans, unitranche and mezzanine debt financing, often times with a corresponding equity investment,
we are now (with a strategic alternatives process underway and limited resources) investing only in current investments and otherwise
conserving cash. Our investment objective is to maximize the total return to our stockholders in the form of current income and capital
appreciation through debt and related equity investments in private small and lower middle-market companies. Since January 1, 2018, we
have been managed by House Hanover, LLC, who also provides some of the administrative services necessary for us to operate.
As
a BDC, we must not acquire any assets other than qualifying assets specified in the 1940 Act unless, at the time the acquisition
is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments
in eligible portfolio companies. Under the relevant Securities and Exchange Commission (SEC) rules, the term
eligible portfolio company includes all private companies, companies whose securities are not listed on a national securities
exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization
of less than $250 million, in each case organized in the United States.
Our
investment objective is to maximize the total return to our stockholders in the form of current income and capital appreciation by:
|
|
|
accessing
the extensive origination channels that have been developed and established by our investment advisor that include long-standing
relationships with private equity firms, commercial banks, investment banks and other financial services firms; | |
|
|
|
investing
in what we believe to be companies with strong business fundamentals, generally within our core small and lower middle-market company
focus; | |
|
|
|
focusing
on a variety of industry sectors, including business services, energy, general industrial,
government services, healthcare, software and specialty finance; | |
|
|
|
| |
|
|
directly
originating transactions rather than participating in broadly syndicated financings; | |
|
|
|
applying
the disciplined underwriting standards that our investment advisor has developed over their extensive investing careers; and | |
|
|
|
capitalizing
upon the experience and resources of our investment advisor to monitor our investments. | |
- 2 -
As
a BDC, we are required to comply with regulatory requirements, including limitations on our use of debt. We are permitted to, and expect
to continue to, finance our investments through borrowings. However, as a BDC, we are only generally allowed to borrow amounts such that
our asset coverage, as defined in the 1940 Act, equals at least 200% after such borrowing. The amount of leverage that we employ will
depend on our assessment of market conditions and other factors at the time of any proposed borrowing, such as the maturity, covenant
package and rate structure of the proposed borrowings, our ability to raise funds through the issuance of our securities and the risks
of such borrowings within the context of our investment outlook. Ultimately, we only intend to use leverage if the expected returns from
borrowing to make investments will exceed the cost of such borrowings.
The
Company will be taxed as a C corporation and subject to federal and state corporation income taxes for its 2025 and 2024 taxable years.
Our
principal executive office is located at 800 Turnpike Street, Suite 300, North Andover, Massachusetts 01845, and our telephone number
is (978) 794-3366. We maintain a website on the Internet at www.princetoncapitalcorp.com. Information contained on our website is not
incorporated by reference into this annual report on Form 10-K and you should not consider information contained on our website to be
part of this annual report on Form 10-K.
**House
Hanover**
****
Since
January 1, 2018, House Hanover manages our investment activities and is responsible for analyzing investment opportunities, conducting
research and performing due diligence on potential investments, negotiating and structuring our investments, originating prospective
investments and monitoring our investments and portfolio companies on an ongoing basis. House Hanover is a registered investment adviser
and is wholly owned by Sema4, Inc.
House
Hanover is headquartered in North Andover, Massachusetts.
**Managerial
Assistance**
As
a BDC, we offer, and must provide upon request, managerial assistance to our portfolio companies. This assistance could involve monitoring
the operations of our portfolio companies, participating in board of directors and management meetings, consulting with and advising
officers of portfolio companies and providing other organizational and financial guidance. House Hanover will provide such managerial
assistance on our behalf to portfolio companies that request this assistance. We may receive fees for these services and will reimburse
House Hanover for its allocated costs in providing such assistance, subject to the review by our board of directors, including our independent
directors.
**Competition**
Our
primary competitors in providing financing to small and lower middle-market companies include public and private funds, other BDCs,
commercial and investment banks, commercial financing companies and, to the extent they provide an alternative form of financing, private
equity and hedge funds. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing
resources than we do. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could
allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors
are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or to the distribution and other requirements
we must satisfy to qualify as a regulated investment company or RIC. The Company did not meet the qualifications of a RIC
for the 2025 tax year and will be taxed as a corporation under Subchapter C of the Internal Revenue Code of 1986 (the Code).
It may not be in the best interests of the Companys stockholders to elect to be taxed as a RIC at the present time due to the
net operating losses and capital loss carryforwards the Company currently has. Further, we do not expect to meet the qualifications of
a RIC until such time as certain strategic alternatives are achieved. Management will make a determination that is in the best interests
of the Company and its stockholders.
- 3 -
**Employees**
We
do not have any direct employees, and our day-to-day investment operations are managed by House Hanover. We have a chief executive officer
and president, chief financial officer and chief compliance officer. To the extent necessary, our board of directors may hire additional
personnel going forward. Our officers are employees or consultants of our investment advisor and our allocable portion of the cost of
our chief executive officer and president, chief financial officer and chief compliance officer and their respective staffs is paid by
us pursuant to the House Hanover Investment Advisory Agreement.
**Management
Agreements**
Effective
as of January 1, 2018, House Hanover serves as our investment advisor and is registered as an investment advisor under the 1940 Act.
**Summary
of House Hanover Investment Advisory Agreement**
**
*Advisory
Services*
**
House
Hanover is registered as an investment adviser under the 1940 Act and serves as the Companys investment advisor pursuant to the
House Hanover Investment Advisory Agreement in accordance with the 1940 Act. House Hanover is owned by and an affiliate of Mr. Mark DiSalvo,
the Companys Interim President, Interim Chief Executive Officer, and a director of the Company.
Subject
to supervision by the Companys Board, House Hanover oversees the Companys day-to-day operations and provides the Company
with investment advisory services. Under the terms of the House Hanover Investment Advisory Agreement, House Hanover, among other things:
(i) determines the composition and allocation of the portfolio of the Company, the nature and timing of the changes therein and the manner
of implementing such changes; (ii) identifies, evaluates and negotiates the structure of the investments made by the Company; (iii) executes,
closes, services and monitors the Companys investments; (iv) determines the securities and other assets that the Company shall
purchase, retain, or sell; (v) performs due diligence on prospective portfolio companies; (vi) provides the Company with such other investment
advisory, research and related services as the Company may, from time to time, reasonably require for the investment of its funds; and
(vii) if directed by the Board, assists in the execution and closing of the sale of the Companys assets or a sale of the equity
of the Company in one or more transactions. House Hanovers services under the House Hanover Investment Advisory Agreement may
not be exclusive and it is free to furnish similar services to other entities so long as its services to the Company are not impaired.At
the request of the Company, House Hanover, upon any transition of the Companys investment advisory relationship to another investment
advisor or upon any internalization, shall provide reasonable transition assistance to the Company and any successor investment advisor.
*Advisory
Fee*
**
Pursuant
to the House Hanover Investment Advisory Agreement, the Company pays House Hanover a base management fee for investment advisory and
management services. The cost of the base management fee is ultimately borne by the Companys stockholders. The House Hanover Investment
Advisory Agreement does not contain an incentive fee component.
The
base management fee is calculated at an annual rate of 1.00% of the Companys gross assets, including assets purchased with borrowed
funds or other forms of leverage and excluding cash and cash equivalents net of all indebtedness of the Company for borrowed money and
other liabilities of the Company. The base management fee is payable quarterly in arrears, and determined as set forth in the preceding
sentence at the end of the two most recently completed calendar quarters. The Board may retroactively adjust the valuation of the Companys
assets and the resulting calculation of the base management fee in the event the Company or any of its assets are sold or transferred
to an independent third party or the Company or House Hanover receives an audit report or other independent third party valuation of
the Company. To the extent that any such adjustment increases or decreases the base management fee of any prior period, the Company will
be obligated to pay the amount of increase to House Hanover or House Hanover will be obligated to refund the decreased amount, as applicable.
- 4 -
*Payment
of Expenses*
**
House
Hanover bears all compensation expense (including health insurance, pension benefits, payroll taxes and other compensation related matters)
of its employees and consultants and bears the costs of any salaries or directors fees of any officers or directors of the Company
who are affiliated persons (as defined in the 1940 Act) of House Hanover. However, House Hanover, subject to approval by the Board of
the Company, is entitled to reimbursement for the portion of any compensation expense and the costs of any salaries of any such employees
to the extent attributable to services performed by such employees for the Company. During the term of the House Hanover Investment Advisory
Agreement, House Hanover will also bear all of its costs and expenses for office space rental, office equipment, utilities and other
non-compensation related overhead allocable to performance of its obligations under the House Hanover Investment Advisory Agreement.
Except
as provided in the preceding paragraph the Company reimburses House Hanover all direct and indirect costs and expenses incurred by it
during the term of the House Hanover Investment Advisory Agreement for: (i) due diligence of potential investments of the Company, (ii)
monitoring performance of the Companys investments, (iii) serving as officers of the Company, (iv) serving as directors and officers
of portfolio companies of the Company, (v) providing managerial assistance to portfolio companies of the Company, and (vi) enforcing
the Companys rights in respect of its investments and disposing of its investments; provided, however, that, any third party expenses
incurred by House Hanover in excess of $50,000 in the aggregate in any calendar quarter will require advance approval by the Board of
the Company.
In
addition to the foregoing, the Company will also be responsible for the payment of all of the Companys other expenses, including
the payment of the following fees and expenses:
|
| organizational
and offering expenses; | |
|
| expenses
incurred in valuing the Companys assets and computing its net asset value per share
(including the cost and expenses of any independent valuation firm); | |
|
| subject
to the guidelines approved by the Board, expenses incurred by House Hanover that are payable
to third parties, including agents, consultants or other advisors, in monitoring financial
and legal affairs for the Company and in monitoring the Companys investments and performing
due diligence on the Companys prospective portfolio companies or otherwise related
to, or associated with, evaluating and making investments; | |
|
| interest
payable on debt, if any, incurred to finance the Companys investments and expenses
related to unsuccessful portfolio acquisition efforts; | |
|
| offerings
of the Companys common stock and other securities; | |
|
| administration
fees; | |
|
| transfer
agent and custody fees and expenses; | |
|
| U.S.
federal and state registration fees of the Company (but not House Hanover); | |
|
| all
costs of registration and listing the Companys shares on any securities exchange; | |
|
| U.S.
federal, state and local taxes; | |
|
| independent
directors fees and expenses; | |
|
| costs
of preparing and filing reports or other documents required of the Company (but not House
Hanover) by the SEC or other regulators; | |
|
| costs
of any reports, proxy statements or other notices to stockholders, including printing costs; | |
|
| the
costs associated with individual or group stockholders; | |
|
| the
Companys allocable portion of the fidelity bond, directors and officers/errors and
omissions liability insurance, and any other insurance premiums; | |
|
| direct
costs and expenses of administration and operation of the Company, including printing, mailing,
long distance telephone, copying, secretarial and other staff, independent auditors and outside
legal costs; and | |
|
| all
other non-investment advisory expenses incurred by the Company in connection with administering
the Companys business. | |
- 5 -
*Duration
and Termination*
**
Unless
terminated earlier as described below, the House Hanover Investment Advisory Agreement will continue in effect for a period of one (1)
year from its effective date. It will remain in effect from year to year thereafter if approved annually by the Companys Board
or by the affirmative vote of the holders of a majority of the Companys outstanding voting securities, and, in either case, if
also approved by a majority of Companys directors who are neither parties to the House Hanover Investment Advisory Agreement nor
interested persons (as defined under the 1940 Act) of any such party. The House Hanover Investment Advisory Agreement was
last annually renewed by the Board and by a majority of the members of the Board who are not parties to the House Hanover Investment
Advisory Agreement or interested persons (as such term is defined in the 1940 Act) of any such party on May 12, 2025.
The
House Hanover Investment Advisory Agreement may be terminated at any time, without the payment of any penalty, (i) upon written notice,
effective on the date set forth in such notice, by the vote of a majority of the outstanding voting securities of the Company or by the
vote of the Companys directors, or (ii) upon 60 days written notice, by House Hanover. The House Hanover Investment Advisory
Agreement automatically terminates in the event of its assignment, as defined in the 1940 Act.
*Indemnification*
The
House Hanover Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of
their duties, or by reason of the material breach or reckless disregard of their duties and obligations under the House Hanover Investment
Advisory Agreement, House Hanover and its officers, managers, employees and members are entitled to indemnification from the Company
for any damages, liabilities, costs and expenses (including reasonable attorneys fees and amounts reasonably paid in settlement)
arising from the rendering of House Hanovers services under the House Hanover Investment Advisory Agreement or otherwise as the
Companys investment advisor. The amounts payable for indemnification will be calculated net of payments recovered by the indemnified
party under any insurance policy with respect to such losses.
At
all times during the term of the House Hanover Investment Advisory Agreement and for one year thereafter, House Hanover is obligated
to maintain directors and officers/errors and omission liability insurance in an amount and with a provider reasonably acceptable to
the Board of the Company.
**Regulation
as a BDC**
We
have elected to be regulated as a BDC under the 1940 Act. On an annual basis and in general, BDCs intend to elect to be treated for tax
purposes as a regulated investment company (RIC) under Subchapter M of the Code. However, we did not meet the qualifications
of a RIC for the 2024 tax year and will be taxed as a corporation under Subchapter C of the Code. Further, we do not expect to meet the
qualifications of a RIC until such time as certain strategic alternatives are achieved. The 1940 Act contains prohibitions and restrictions
relating to transactions between BDCs and their affiliates (including any investment advisors), principal underwriters and affiliates
of those affiliates or underwriters and requires that a majority of the directors be persons other than interested persons,
as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to
cease to be, or to withdraw our election as, a BDC unless approved by a majority of our outstanding voting securities.
We
may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to
such securities, we may, for the purpose of public resale, be deemed an underwriter as that term is defined in the Securities
Act. Our intention is to not write (sell) or buy put or call options to manage risks associated with the publicly traded securities of
our portfolio companies, except that we may enter into hedging transactions to manage the risks associated with interest rate fluctuations.
However, we may purchase or otherwise receive warrants to purchase the common stock of our portfolio companies in connection with acquisition
financing or other investments. Similarly, in connection with an acquisition, we may acquire rights to require the issuers of acquired
securities or their affiliates to repurchase them under certain circumstances. We also do not intend to acquire securities issued by
any investment company that exceed the limits imposed by the 1940 Act. Under these limits, we generally cannot acquire more than 3% of
the voting stock of any registered investment company, invest more than 5% of the value of our total assets in the securities of one
investment company or invest more than 10% of the value of our total assets in the securities of more than one investment company. With
regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments
might subject our stockholders to additional expenses. None of these policies is fundamental and may be changed without stockholder approval
upon 60 days prior written notice to stockholders.
- 6 -
*Qualifying
Assets*
Under
the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in section 55(a) of the 1940 Act, which are referred
to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the companys
total assets. The principal categories of qualifying assets relevant to our business are the following:
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|
(1) |
Securities
purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain
limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated
person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. Under the
1940 Act and the rules thereunder, eligible portfolio companies include (1) private domestic operating companies, (2)
public domestic operating companies whose securities are not listed on a national securities exchange (e.g., the New York
Stock Exchange) or registered under the Exchange Act, and (3) public domestic operating companies having a market capitalization
of less than $250 million. Public domestic operating companies whose securities are quoted on the over-the-counter bulletin board
(OTCBB) or through OTC Markets Group (including the Pink Market) are not listed on a national securities exchange and therefore are
eligible portfolio companies. | |
|
|
(2) |
Securities
of any eligible portfolio company which we control. | |
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|
(3) |
Securities
purchased in a private transaction from a U.S. issuer that is not an investment company or from a person who is or has been, within
the past 13 months, an affiliated person of the issuer, or in transactions incident to such a private transaction, if the issuer
is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities, was unable
to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements. | |
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|
(4) |
Securities
of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities
and we already own 60% of the outstanding equity of the eligible portfolio company. | |
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(5) |
Securities
received in exchange for or distributed on or with respect to securities described above, or pursuant to the exercise of warrants
or rights relating to such securities. | |
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(6) |
Cash,
cash equivalents, U.S. government securities or high-quality debt securities that mature in one year or less from the date of investment. | |
The
regulations defining qualifying assets may change over time. We may adjust our investment focus as needed to comply with and/or take
advantage of any regulatory, legislative, administrative or judicial actions in this area.
*Managerial
Assistance to Portfolio Companies*
**
In
order to count portfolio securities as qualifying assets for the purpose of the 70% test, a BDC must either control the issuer of the
securities or must offer to make available to the issuer of the securities significant managerial assistance. However, when the BDC purchases
securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such
managerial assistance. Making available managerial assistance means any arrangement whereby the BDC, through its directors, officers,
employees or agents, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management,
operations or business objectives and policies of a portfolio company. House Hanover will provide such managerial assistance on our behalf
to portfolio companies that request this assistance.
*Temporary
Investments*
Pending
investment in other types of qualifying assets, as described above, our investments may consist of cash, cash equivalents, U.S. government
securities, repurchase agreements and high-quality debt investments that mature in one year or less from the date of investment, which
we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets or temporary investments. We may
invest in U.S. Treasury bills or in repurchase agreements, so long as the agreements are fully collateralized by cash or securities issued
by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security
and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price that is greater than the purchase
price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that
may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements from a
single counterparty, we would not meet the Diversification Tests in order to qualify as a RIC for U.S. federal income tax purposes. Accordingly,
we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit.
- 7 -
*Senior
Securities*
We
are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock
if our asset coverage, as defined in the 1940 Act, is at least equal to 200% immediately after each such issuance. In addition, while
any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase
of such securities or shares unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may
also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to asset coverage. A
loan will be considered temporary if it is repaid within sixty days and is not extended or renewed.
*Common
Stock*
We
are not generally able to issue and sell our common stock at a price below net asset value per share. We may, however, sell our common
stock at a price below the current net asset value of the common stock if our board of directors determines that such sale is in our
best interests and that of our stockholders, and our stockholders approve such sale. In any such case, the price at which our securities
are to be issued and sold may not be less than a price which, in the determination of our board of directors, closely approximates the
market value of such securities (less any distributing commission or discount).
**Other**
****
We
are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement.
Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising
from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such persons
office.
House
Hanover and the Company will each be required to adopt and implement written policies and procedures reasonably designed to prevent violation
of relevant federal securities laws, review these policies and procedures annually for their adequacy and the effectiveness of their
implementation, and designate a chief compliance officer to be responsible for administering the policies and procedures.
We
may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior
approval of our board of directors who are not interested persons and, in some cases, prior approval by the SEC. The SEC has interpreted
the BDC prohibition on transactions with affiliates to prohibit all joint transactions between, among other things, entities
that share a common investment advisor. The staff of the SEC has granted no-action relief permitting purchases of a single class of privately
placed securities provided that the advisor negotiates no term other than price and certain other conditions are met.
**Sarbanes-Oxley
Act of 2002**
The
Sarbanes-Oxley Act imposes a wide variety of regulatory requirements on publicly held companies and their insiders. Many of these requirements
affect us. For example:
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|
|
pursuant
to Rule 13a-14 under the Exchange Act, our principal executive officer and principal financial officer must certify the accuracy
of the financial statements contained in our periodic reports; | |
|
|
|
pursuant
to Item 307 under Regulation S-K, our periodic reports must disclose our conclusions about the effectiveness of our disclosure controls
and procedures; | |
|
|
|
pursuant
to Rule 13a-15 under the Exchange Act, our management must prepare an annual report regarding its assessment of our internal control
over financial reporting; and | |
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|
|
pursuant
to Item 308 of Regulation S-K and Rule 13a-15 under the Exchange Act, our periodic reports must disclose whether there were significant
changes in our internal controls over financial reporting or in other factors that could significantly affect these controls subsequent
to the date of their evaluation, including anyremedial actions with regard to significant deficiencies and material weaknesses. | |
The
Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act
and the regulations promulgated under such act. We will continue to monitor our compliance with all regulations that are adopted under
the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance with that act.
- 8 -
**Item
1A. RISK FACTORS**
*Investing
in our securities involves a number of significant risks. Before you invest in our securities, you should be aware of various risks,
including those described below. You should carefully consider these risk factors, together with all of the other information included
in this annual report on Form 10-K, before you decide whether to make an investment in our securities. The risks set out below are the
principal risks with respect to an investment in our securities generally and with respect to a BDC with investment objectives, investment
policies, capital structures or trading markets similar to ours. However, they may not be the only risks we face. Additional risks and
uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If any
of the following events occur, our business, financial condition, results of operations and cash flows could be materially and adversely
affected. In such case, our net asset value and the trading price of our securities could decline, and you may lose all or part of your
investment.*
**Risks
Relating to our Business and Structure**
**There
are significant potential conflicts of interest that could negatively affect our investment returns.**
The
investment professionals of House Hanover serve, or may serve, as officers, directors, members, or principals of entities that operate
in the same or a related line of business as we do, or of investment funds, accounts, or investment vehicles managed by House Hanover.
Similarly, House Hanover may have other clients with similar, different or competing investment objectives. In serving in these multiple
capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in the best
interests of us or our stockholders.
**The
management fee structure we have with House Hanover may create incentives that are not fully aligned with the interests of our stockholders.**
In
the course of our investing activities, we will pay management fees to House Hanover. We have entered into an investment advisory agreement
with House Hanover that provides that these fees will be based on the value of our net assets. As a result, investors in our common stock
will invest on a gross basis and receive distributions on a net basis after expenses, resulting in a lower rate of return than one might
achieve through direct investments.
Our
board of directors is charged with protecting our interests by monitoring how House Hanover addresses these and other conflicts of interests
associated with its management services and compensation. While our board of directors is not expected to review or approve each investment
decision, borrowing or incurrence of leverage, our independent directors will periodically review House Hanovers services and
fees as well as its portfolio management decisions and performance of our portfolio. In connection with these reviews, our independent
directors will consider whether our fees and expenses (including those related to leverage) remain appropriate. As a result of this arrangement,
House Hanover may from time to time have interests that differ from those of our stockholders, giving rise to a conflict.
**The
involvement of our interested directors in the valuation process may create conflicts of interest.**
We
expect to make many of our portfolio investments in the form of loans and securities that are not publicly traded and for which no market
based price quotation is available. As a result, our board of directors will determine the fair value of these loans and securities in
good faith as described below in Our portfolio investments will be recorded at fair value as determined in good faith
by our board of directors and, as a result, there may be uncertainty as to the value of our portfolio investments. In connection
with that determination, investment professionals from House Hanover may provide our board of directors with valuations based upon the
most recent portfolio company financial statements available and projected financial results of each portfolio company. While the valuation
for most portfolio investments will be prepared quarterly by an independent valuation firm with the assistance of the Companys
Valuation Committee, the ultimate determination of fair value will be made by our board of directors, including our interested directors,
and not by such third-party valuation firm. In addition, Mr. Mark DiSalvo, an interested member of our board of directors, has a direct
pecuniary interest in House Hanover. The participation of House Hanovers investment professionals in our valuation process, and
the pecuniary interest in House Hanover by a member of our board of directors, could result in a conflict of interest as House Hanovers
management fee is based, in part, on the value of our gross assets.
- 9 -
**The
time and resources that House Hanover devote to us may be diverted, and we may face additional competition due to the fact that House
Hanover and its affiliates are not prohibited from raising money for, or managing, another entity that makes the same types of investments
that we target.**
House
Hanover and some of its affiliates, including our officers and our non-independent directors, are not prohibited from raising money for,
or managing, another investment entity that makes the same types of investments as those we target. For example, House Hanover could
seek to raise capital for a private credit fund that will have an investment strategy that is identical to our investment strategy. House
Hanover and we may seek exemptive relief from the SEC that would establish a co-investment program with investment funds, accounts and
investment vehicles managed by House Hanover; however, there can be no assurance if and when the SEC would grant such relief. In addition,
we may compete with any such investment entity for the same investors and investment opportunities.
**House
Hanovers liability is limited under the House Hanover Investment Advisory Agreement and we have agreed to indemnify House Hanover
against certain liabilities, which may lead House Hanover to act in a riskier manner on our behalf than it would when acting for its
own account.**
Under
the House Hanover Investment Advisory Agreement, House Hanover has not assumed any responsibility to us other than to render the services
called for under that agreement. It will not be responsible for any action of our board of directors by following or declining to follow
House Hanovers advice or recommendations. Under the House Hanover Investment Advisory Agreement, House Hanover, its officers,
members and personnel, and any person controlling or controlled by House Hanover will not be liable to us, any subsidiary of ours, our
directors, our stockholders or any subsidiarys stockholders or partners for acts or omissions performed in accordance with and
pursuant to the House Hanover Investment Advisory Agreement, except those resulting from acts constituting gross negligence, willful
misfeasance, bad faith or reckless disregard of the duties that House Hanover owes to us under the House Hanover Investment Advisory
Agreement. In addition, as part of the House Hanover Investment Advisory Agreement, we have agreed to indemnify House Hanover and each
of its officers, directors, members, managers and employees from and against any claims or liabilities, including reasonable legal fees
and other expenses reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted
on our behalf pursuant to authority granted by the House Hanover Investment Advisory Agreement, except where attributable to gross negligence,
willful misfeasance, bad faith or reckless disregard of such persons duties under the House Hanover Investment Advisory Agreement.
These protections may lead House Hanover to act in a riskier manner when acting on our behalf than it would when acting for its own account.
****
**Our
ability to enter into transactions with our affiliates will be restricted, which may limit the scope of investments available to us.**
We
are prohibited under the 1940 Act from participating in certain transactions with our affiliates without the prior approval of our independent
directors and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of our outstanding voting securities
will be our affiliate for purposes of the 1940 Act, and we are generally prohibited from buying or selling any security from or to such
affiliate without the prior approval of our independent directors. The 1940 Act also prohibits certain joint transactions
with certain of our affiliates, which could include concurrent investments in the same portfolio company, without prior approval of our
independent directors and, in some cases, of the SEC. We are prohibited from buying or selling any security from or to any person that
controls us or who owns more than 25% of our voting securities or certain of that persons affiliates, or entering into prohibited
joint transactions with such persons, absent the prior approval of the SEC. As a result of these restrictions, we may be prohibited from
buying or selling any security (other than any security of which we are the issuer) from or to any portfolio company of a private fund
managed by House Hanover or its affiliates without the prior approval of the SEC, which may limit the scope of investment opportunities
that would otherwise be available to us.
- 10 -
We
may, however, invest alongside House Hanovers investment funds, accounts and investment vehicles in certain circumstances where
doing so is consistent with our investment strategy as well as applicable law and SEC staff interpretations. For example, we may invest
alongside such investment funds, accounts and investment vehicles consistent with guidance promulgated by the SEC staff to purchase interests
in a single class of privately placed securities so long as certain conditions are met, including that House Hanover, acting on our behalf
and on behalf of such investment funds, accounts and investment vehicles, negotiates no term other than price. We may also invest alongside
House Hanovers investment funds, accounts and investment vehicles as otherwise permissible under regulatory guidance, applicable
regulations and House Hanovers allocation policy. This allocation policy provides that allocations among us and investment funds,
accounts and investment vehicles managed by House Hanover and its affiliates will generally be made pro rata based on capital available
for investment, as determined, in our case, by our board of directors as well as the terms of our governing documents and those of such
investment funds, accounts and investment vehicles. It is our policy to base our determinations on such factors as the amount of cash
on-hand, existing commitments and reserves, if any, our targeted leverage level, our targeted asset mix and diversification requirements
and other investment policies and restrictions set by our board of directors or imposed by applicable laws, rules, regulations or interpretations.
We expect that these determinations will be made similarly for investment funds, accounts and investment vehicles managed by House Hanover.
However, we can offer no assurance that investment opportunities will be allocated to us fairly or equitably in the short-term or over
time.
In
situations where co-investment with investment funds, accounts and investment vehicles managed by House Hanover, prior to receiving exemptive
relief, is not permitted or appropriate, such as when there is an opportunity to invest concurrently in different securities of the same
issuer or where the different investments could be expected to result in a conflict between our interests and those of House Hanovers
clients, subject to the limitations described in the preceding paragraph, House Hanover will need to decide which client will proceed
with the investment. House Hanover will make these determinations based on its policies and procedures, which generally require that
such opportunities be offered to eligible accounts on an alternating basis that will be fair and equitable over time. Moreover, except
in certain circumstances, we will be unable to invest in any issuer in which an investment fund, account or investment vehicle managed
by House Hanover has previously invested.
We
and House Hanover may seek exemptive relief from the SEC to permit greater flexibility to negotiate the terms of co-investments if our
board of directors determines that it would be advantageous for us to co-invest with investment funds, accounts and investment vehicles
managed by House Hanover in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well
as regulatory requirements and other pertinent factors. We believe that co-investment by us and investment funds, accounts and investment
vehicles managed by House Hanover may afford us additional investment opportunities and an ability to achieve greater diversification.
Accordingly, if we make an application for exemptive relief, we will seek an exemptive order permitting us to invest with investment
funds, accounts and investment vehicles managed by House Hanover in the same portfolio companies under circumstances in which such investments
would otherwise not be permitted by the 1940 Act. We expect that such exemptive relief permitting co-investments, if granted, would not
require review and approval of each co-investment by our independent directors. There can be no assurance if and when the SEC would grant
such relief.
**You
may not receive distributions, or our distributions may not grow over time.**
We
cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year
increases in cash distributions. Our ability to pay distributions might be adversely affected by the impact of one or more of the risk
factors described in this filing. Due to the asset coverage test applicable to us under the 1940 Act as a BDC, we may be limited in our
ability to make distributions. All distributions will be made at the discretion of our board of directors and will depend on our earnings,
financial condition, maintenance of RIC status, compliance with applicable BDC requirements, and such other factors as our board of directors
may deem relative from time to time. We cannot assure you that we will make distributions to our stockholders in the future.
- 11 -
**We
may have difficulty paying required distributions to qualify as a RIC if we recognize income before, or without, receiving cash representing
such income.**
For
U.S. federal income tax purposes, we will include in income certain amounts that we have not yet received in cash, such as the accrual
of original issue discount. This may arise if we receive warrants in connection with the making of a loan and in other circumstances,
or through contracted PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term.
Such original issue discount, which could be significant relative to our overall investment activities, and increases in loan balances
as a result of contracted PIK arrangements will be included in income before we receive any corresponding cash payments. We also may
be required to include in income certain other amounts that we will not receive in cash.
Since
we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to
distribute at least 90% of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, if any,
to achieve qualification as a RIC. In such a case, we may have to sell some of our investments at times we would not consider advantageous,
raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements. If we are not
able to obtain such cash from other sources, we may continue to fail to qualify as a RIC and thus be subject to corporate-level income
tax.
****
**PIK
interest payments we receive will increase our assets under management and, as a result, will increase the amount of base management
fees payable by us to House Hanover.**
Certain
of our debt investments may contain provisions providing for the payment of PIK interest. Because PIK interest results in an increase
in the size of the loan balance of the underlying loan, the receipt by us of PIK interest will have the effect of increasing our assets
under management. As a result, because the base management fee that we pay to House Hanover is based on the value of our gross assets,
the receipt by us of PIK interest will result in an increase in the amount of the base management fee payable by us.
**Our
portfolio investments will be recorded at fair value as determined in good faith by our board of directors and, as a result, there may
be uncertainty as to the value of our portfolio investments.**
As
a BDC, we generally invest in illiquid loans and securities including debt and equity securities of middle-market companies. Under procedures
established by our board of directors, we value investments for which market quotations are readily available at such market quotations.
We obtain these market values from an independent pricing service or at the mean between the bid and ask prices obtained from at least
two brokers or dealers (if available, otherwise by a principal market maker or a primary market dealer). Debt and equity securities that
are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by our
board of directors. Such determination of fair values may involve subjective judgments and estimates, although we engage independent
valuation providers to review the valuation of each portfolio investment that does not have a readily available market quotation quarterly.
Investments purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximate
fair value. With respect to unquoted securities, our board of directors values each investment considering, among other measures, discounted
cash flow models, comparisons of financial ratios of peer companies that are public and other factors, which are provided by a nationally
recognized independent valuation firm. The Company has engaged a third-party valuation firm to perform its independent valuations of
the Companys Level 3 investments. This valuation firm provides a range of values for selected investments, which is presented
to the Valuation Committee to determine the value for each of the selected investments.
When
an external event such as a purchase transaction, public offering or subsequent equity sale occurs, our board of directors uses the pricing
indicated by the external event to corroborate and/or assist us in our valuation. Because there is not a readily available market for
substantially all of the investments in our portfolio, we value our portfolio investments at fair value as determined in good faith by
our board of directors using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty
of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may
differ significantly from the values that would have been used had a readily available market value existed for such investments, and
the differences could be material.
- 12 -
With
respect to investments for which market quotations are not readily available, our board of directors undertakes a multi-step valuation
process each quarter, as described below:
|
| Our
quarterly valuation process begins with each portfolio company or investment being initially
valued by an independent valuation firm, except for those investments where market quotations
are readily available; |
|
|
| Preliminary
valuation conclusions are then documented and discussed with our senior management, our investment
advisor, and our auditors; |
|
|
| The
valuation committee of our board of directors then reviews these preliminary valuations and
approves them for recommendation to the board of directors; |
|
|
| The
board of directors then discusses valuations and determines the fair value of each investment
in our portfolio in good faith, based on the input of our investment advisor, the independent
valuation firm and the valuation committee. |
|
**Our
common stock is traded on the Over the Counter Pink Market, which may make it more difficult for investors to resell their shares due
to suitability requirements.**
Our
common stock is currently traded on the OTC Market under the symbol PIAC where we expect it to remain in the foreseeable
future. We do not believe that we will become eligible for the OTCQB Market in the foreseeable future because of our inability to meet
the required public float restrictions of the OTCQB Market. Broker-dealers often decline to trade in OTC Pink stocks given the markets
for such securities are often limited, the stocks are more volatile, and the risk to investors is greater. These factors may reduce the
potential market for our common stock by reducing the number of potential investors. This may make it more difficult for investors in
our common stock to sell shares to third parties or to otherwise dispose of their shares. This could cause our stock price to decline.
**Our
board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.**
Our
board of directors has the authority, except as otherwise provided in the 1940 Act, to modify or waive certain of our operating policies
and strategies without prior notice and without stockholder approval. However, absent stockholder approval, we may not change the nature
of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current operating
policies and strategies would have on our business, operating results and the market price of our common stock. Nevertheless, any such
changes could adversely affect our business and impair our ability to make distributions to our stockholders.
**Provisions
of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the
price of our common stock.**
The
Maryland General Corporation Law and our charter and bylaws contain provisions that may discourage, delay or make more difficult a change
in control of the Company or the removal of our directors. We are subject to the Maryland Business Combination Act, subject to any applicable
requirements of the 1940 Act. Our board of directors has adopted a resolution exempting from the Business Combination Act any business
combination between us and any other person, subject to prior approval of such business combination by our board of directors, including
approval by a majority of our independent directors. If the resolution exempting business combinations is repealed or our board of directors
does not approve a business combination, the Business Combination Act may discourage third parties from trying to acquire control of
us and increase the difficulty of consummating such an offer. Our bylaws exempt from the Maryland Control Share Acquisition Act acquisitions
of our stock by any person. If we amend our bylaws to repeal the exemption from the Control Share Acquisition Act, the Control Share
Acquisition Act also may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating
such a transaction.
We
have also adopted measures that may make it difficult for a third party to obtain control of us, including authorizing our board of directors
to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock
and to amend our charter without stockholder approval to increase or decrease the number of shares of stock that we have authority to
issue. These provisions, as well as other provisions of our charter and bylaws, may delay, defer or prevent a transaction or a change
in control that might otherwise be in the best interests of our stockholders.
- 13 -
The
foregoing provisions are expected to discourage certain coercive takeover practices and inadequate takeover bids and to encourage persons
seeking to acquire control of us to negotiate first with our board of directors. However, these provisions may deprive a stockholder
of the opportunity to sell such stockholders shares of a premium to a potential acquirer. We believe that the benefits of these
provisions outweigh the potential disadvantages of discouraging any such acquisition proposals because, among other things, the negotiation
of such proposals may improve their terms. Our board of directors has considered both the positive and negative effects of the foregoing
provisions and determined that they are in the best interests of our stockholders.
**House
Hanover can resign as our investment advisor and administrator upon 60 days notice and we may not be able to find suitable replacements
within that time, or at all, resulting in a disruption in our operations that could adversely affect our financial condition, business
and results of operations.**
House
Hanover has the right under the House Hanover Investment Advisory Agreement to resign as our investment adviser and administrator at
any time upon 60 days written notice, whether we have found a replacement or not. If House Hanover was to resign, we may not be
able to find a new investment adviser or administrator or hire internal management with similar expertise and ability to provide the
same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely
to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions to
our stockholders are likely to be adversely affected and the market price of our shares may decline. In addition, the coordination of
our internal management and investment or administrative activities, as applicable, is likely to suffer if we are unable to identify
and reach an agreement with a single institution or group of executives having the expertise possessed by House Hanover. Even if we are
able to retain comparable management, whether internal or external, the integration of such management and their lack of familiarity
with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition,
results of operations and cash flows.
**Cybersecurity
risks and cyber incidents may adversely affect our business or those of our portfolio companies by causing a disruption to our operations,
a compromise or corruption of confidential information and/or damage to business relationships, or those of our portfolio companies,
all of which could negatively impact our business, results of operations or financial condition.**
A
cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information
resources. These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to, use,
alteration or destruction of our information systems for purposes of misappropriating assets, obtaining ransom payments, stealing confidential
information, corrupting data or causing operational disruption, or may involve phishing. The result of these incidents may include disrupted
operations, misstated or unreliable financial data, liability for stolen information, misappropriation of assets, increased cybersecurity
protection and insurance costs, litigation and damage to our business relationships. This could result in significant losses, reputational
damage, litigation, regulatory fines or penalties, or otherwise adversely affect our business, financial condition or results of operations.
In addition, we may be required to expend significant additional resources to modify our protective measures and to investigate and remediate
vulnerabilities or other exposures arising from operational and security risks. The costs related to cybersecurity incidents may not
be fully insured or indemnified. As our and our portfolio companies reliance on technology has increased, so have the risks posed
to our information systems, both internal and those provided by our Investment Adviser and third-party service providers, and the information
systems of our portfolio companies. We, our Investment Adviser and its affiliates have implemented processes, procedures and internal
controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature
and extent of a risk of a cyber incident, may be ineffective and do not guarantee that a cyber incident will not occur or that our financial
results, operations or confidential information will not be negatively impacted by such an incident.
Third
parties with which we do business (including, but not limited to, service providers, such as accountants, attorneys, custodians, transfer
agents and administrators, and the issuers of securities in which we invest) may also be sources or targets of cybersecurity or other
technological risks. We outsource certain functions and these relationships allow for the storage and processing of our information and
assets, as well as certain investor, counterparty and borrower information. While we engage in actions to reduce our exposure resulting
from outsourcing, we cannot control the cybersecurity plans and systems put in place by these third parties and ongoing threats may result
in unauthorized access, loss, exposure or destruction of data, or other cybersecurity incidents, with increased costs and other consequences,
including those described above. Privacy and information security laws and regulation changes, and compliance with those changes, may
also result in cost increases due to system changes and the development of new administrative processes.
- 14 -
**Risks
Relating to our Investments**
**We
may hold the loans and debt securities of leveraged companies that may, due to the significant operating volatility typical of such companies,
enter into bankruptcy proceedings.**
Leveraged
companies may experience bankruptcy or similar financial distress. The bankruptcy process has a number of significant inherent risks.
Many events in a bankruptcy proceeding are the product of contested matters and adversary proceedings and are beyond the control of the
creditors. A bankruptcy filing by a portfolio company may adversely and permanently affect that company. If the proceeding is converted
to a liquidation, the value of the portfolio company may not equal the liquidation value that was believed to exist at the time of the
investment. The duration of a bankruptcy proceeding is also difficult to predict, and a creditors return on investment can be
adversely affected by delays until the plan of reorganization or liquidation ultimately becomes effective. The administrative costs in
connection with a bankruptcy proceeding are frequently high and would be paid out of the debtors estate prior to any return to
creditors. Because the standards for classification of claims under bankruptcy law are vague, our influence with respect to the class
of securities or other obligations we own may be lost by increases in the number and amount of claims in the same class or by different
classification and treatment. In the early stages of the bankruptcy process, it is often difficult to estimate the extent of, or even
to identify, any contingent claims that might be made. In addition, certain claims that have priority by law (for example, claims for
taxes) may be substantial.
**Our
investments in private and small and lower middle-market portfolio companies are risky, and we could lose all or part of our investment.**
Investments
in private and small and lower middle-market companies involve a number of significant risks. Generally, little public information exists
about these companies, and we will rely on the ability of House Hanovers investment professionals to obtain adequate information
to evaluate the potential returns from investing in these companies. If we are unable to uncover all material information about these
companies, we may not make a fully informed investment decision, and we may lose money on our investments. Small and lower middle-market
companies may have limited financial resources and may be unable to meet their obligations under their loans and debt securities that
we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of our realizing
any guarantees we may have obtained in connection with our investment. In addition, such companies typically have shorter operating histories,
narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors
actions and adverse market conditions, as well as general economic downturns. Additionally, middle-market companies are more likely to
depend on the management talents and efforts of a small group of persons. Therefore, the death, disability, resignation or termination
of one or more of these persons could have a material adverse impact on one or more of the portfolio companies we invest in and, in turn,
on us. Small and lower middle-market companies also may be parties to litigation and may be engaged in rapidly changing businesses with
products subject to a substantial risk of obsolescence. In addition, our executive officers, directors and investment advisor may, in
the ordinary course of business, be named as defendants in litigation arising from our investments in portfolio companies.
**The
lack of liquidity in our investments may adversely affect our business.**
All
of our assets may be invested in illiquid loans and securities, and a substantial portion of our investments in leveraged companies will
be subject to legal and other restrictions on resale or will otherwise be less liquid than more broadly traded public securities. The
illiquidity of these investments may make it difficult for us to sell such investments if the need arises. In addition, if we are required
to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously
recorded our investments. Also, as noted above, we may be limited or prohibited in our ability to sell or otherwise exit certain positions
in our initial portfolio as such a transaction could be considered a joint transaction prohibited by the 1940 Act.
- 15 -
**We
are a non-diversified investment company as defined under the 1940 Act, and therefore we are not limited with respect to the proportion
of our assets that may be invested in securities of a single issuer.**
We
are classified as a non-diversified investment company as defined under the 1940 Act, which means that we are not limited by the 1940
Act with respect to the proportion of our assets that we may invest in securities of a single issuer. Beyond the asset diversification
requirements associated with our qualification as a RIC under the Code, we do not have fixed guidelines for diversification. To the extent
that we assume large positions in the securities of a small number of issuers or our investments are concentrated in relatively few industries,
our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial
condition or the markets assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence
than a diversified investment company.
**Our
failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.**
Following
an initial investment in a portfolio company, we may make additional investments in that portfolio company as follow-on
investments, in seeking to increase or maintain in whole or in part our position as a creditor or equity ownership percentage in a portolio
company, exercise warrants, options or convertible securities that were acquired in the original or subsequent financing, or preserve
or enhance the value of our investment.
We
have discretion to make follow-on investments, subject to the availability of capital resources. Failure on our part to make follow-on
investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may
result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to
make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our level of
risk, because we prefer other opportunities or because we are inhibited by compliance with BDC requirements of the 1940 Act or the desire
to maintain our qualification as a RIC. Our ability to make follow-on investments may also be limited by House Hanovers allocation
policy.
**When
we do not hold controlling equity interests in our portfolio companies, we may not be able to exercise control over our portfolio companies
or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.**
If
we do not hold controlling equity positions in the portfolio companies included in our portfolio, we will be subject to the risk that
a portfolio company may make business decisions with which we disagree, and that the management and/or stockholders of a portfolio company
may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity of the debt and equity investments
that we expect to hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the
actions of a portfolio company and may therefore suffer a decrease in the value of our investments.
**Our
portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.**
We
intend to invest a portion of our capital in second lien and subordinated loans issued by our portfolio companies. The portfolio companies
usually have, or may be permitted to incur, other debt that ranks equally with, or senior to, the loans in which we invest. By their
terms, such debt instruments may provide that the holders are entitled to receive payment of interest or principal on or before the dates
on which we are entitled to receive payments in respect of the loans in which we invest. Also, in the event of insolvency, liquidation,
dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that
portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment.
After repaying senior creditors, a portfolio company may not have any remaining assets to use for repaying its obligation to us. In the
case of debt ranking equally with loans in which we invest, we would have to share any distributions on an equal and ratable basis with
other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant
portfolio company.
- 16 -
Additionally,
certain loans that we may make to portfolio companies may be secured on a second priority basis by the same collateral securing senior
secured debt of such companies. The first priority liens on the collateral will secure the portfolio companys obligations under
any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under
the agreements governing the loans. The holders of obligations secured by first priority liens on the collateral will generally control
the liquidation of, and be entitled to receive proceeds from, any realization of the collateral to repay their obligations in full before
us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability
of buyers and other factors. There can be no assurance that the proceeds, if any, from sales of all of the collateral would be sufficient
to satisfy the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority
liens on the collateral. If such proceeds were not sufficient to repay amounts outstanding under the loan obligations secured by the
second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured
claim against the portfolio companys remaining assets, if any.
**If
we make subordinated investments, the obligors or the portfolio companies may not generate sufficient cash flow to service their debt
obligations to us.**
We
may make subordinated investments that rank below other obligations of the obligor in right of payment. Subordinated investments are
subject to greater risk of default than senior obligations as a result of adverse changes in the financial condition of the obligor or
economic conditions in general. If we make a subordinated investment in a portfolio company, the portfolio company may be highly leveraged,
and its relatively high debt-to-equity ratio may create increased risks that its operations might not generate sufficient cash flow to
service all of its debt obligations.
**Risks
Relating to our Common Stock**
**Our
share ownership is concentrated.**
As
of April 1, 2026 the Partnerships beneficially own approximately 95% of our outstanding common stock. As a result, the Partnerships will
exert significant influence over all matters requiring stockholder approval, including the election and removal of directors, any merger,
consolidation or sale of all or substantially all of the assets, as well as any charter amendment and other matters requiring stockholder
approval. This concentration of ownership may delay or prevent a change in control and may have a negative impact on the market price
of our common stock by discouraging third party investors. In addition, the interests of the Partnerships may not always coincide with
the interests of our other stockholders.
**The
Companys common stock may be subject to the penny stock rules which might make it harder for stockholders to sell.**
As
a result of our stock price, our shares are subject to the penny stock rules. Because a penny stock is, generally speaking,
one selling for less than $5.00 per share, the Companys common stock may be subject to the foregoing rules. The application of
the penny stock rules may affect stockholders ability to sell their shares because some broker-dealers may not be willing to make
a market in the Companys common stock because of the burdens imposed upon them by the penny stock rules which include but are
not limited to:
Section
15(g) of the Securities Exchange Act of 1934 and SEC Rules 15g-1 through 15g-6, which impose additional sales practice requirements on
broker-dealers who sell Company securities to persons other than established customers and accredited investors.
Rule
15g-2 declares unlawful any broker-dealer transactions in penny stocks unless the broker-dealer has first provided to the customer a
standardized disclosure document.
Rule
15g-3 provides that it is unlawful for a broker-dealer to engage in a penny stock transaction unless the broker-dealer first discloses
and subsequently confirms to the customer the current quotation prices or similar market information concerning the penny stock in question.
- 17 -
Rule
15g-4 prohibits broker-dealers from completing penny stock transactions for a customer unless the broker-dealer first discloses to the
customer the amount of compensation or other remuneration received as a result of the penny stock transaction.
Rule
15g-5 requires that a broker-dealer executing a penny stock transaction, other than one exempt under Rule 15g-1, disclose to its customer,
at the time of or prior to the transaction, information about the sales persons compensation.
Potential
stockholders of the Company should also be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered
in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers
that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and
price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differential and markups by selling broker-dealers;
and (v) the wholesale dumping of the same securities by promoters and broker dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with consequent investor losses.
**Item
1B. UNRESOLVED STAFF COMMENTS**
Not
applicable.
**Item
1C. CYBERSECURITY**
****
Princeton
Capital Corporation (the Company) has processes in place to assess, identify, and manage material risks from cybersecurity
threats. The Companys business is dependent on the communications and information systems of House Hanover, LLC (the Investment
Adviser) and other third-party service providers. The Investment Adviser manages the Companys day-to-day operations and
has implemented a cybersecurity program that applies to the Company and its operations.
****
**Cybersecurity
Program Overview**
The
Investment Adviser has instituted a cybersecurity program designed to identify, assess, and manage cyber risks applicable to the Company.
The cyber risk management program involves risk assessments, implementation of security measures, and ongoing monitoring of systems and
networks, including networks on which the Company relies. The Investment Adviser actively monitors the current threat landscape in an
effort to identify material risks arising from new and evolving cybersecurity threats, including material risks faced by the Company.
The
Company relies on the Investment Adviser to engage external experts, including cybersecurity assessors, consultants, and auditors, to
evaluate cybersecurity measures and risk management processes, including those applicable to the Company. The Company relies on the Investment
Advisers risk management program and processes, which include cyber risk assessments.
The
Company depends on and engages various third parties, including suppliers, vendors, and service providers, to operate its business. The
Company relies on the expertise of risk management, legal, information technology, and compliance personnel of the Investment Adviser
when identifying and overseeing risks from cybersecurity threats associated with the Companys use of such entities.
****
**Board
Oversight of Cybersecurity Risks**
The
board of directors of the Company (Board) provides strategic oversight on cybersecurity matters, including risks associated
with cybersecurity threats. The Board receives periodic updates from the Chief Compliance Officer (CCO) of the Company,
who also serves as Chief Compliance Officer of the Investment Adviser, regarding the overall state of the Investment Advisers
cybersecurity program, information on the current threat landscape, and briefing on material risks from cybersecurity threats and material
cybersecurity incidents impacting the Company.
****
- 18 -
****
**Management's
Role in Cybersecurity Risk Management**
The
Companys Management, including the Companys CCO, manages the Companys cybersecurity program, under the supervision
of the Companys Audit Committee. The CCO of the Company oversees the Companys risk management function generally and relies
on the Investment Adviser to assist with assessing and managing material risks from cybersecurity threats. The Companys CCO has
been responsible for this oversight function as CCO to the Company for over 7 years and has worked in the financial services industry
for over 25 years, during which time the CCO has gained expertise in assessing and managing risks applicable to the Company.
Management
of the Company is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents impacting
the Company, including through the receipt of notifications from service providers and reliance on communications with risk management,
legal, information technology, and/or compliance personnel of the Investment Adviser.
****
**Assessment
of Cybersecurity Risk**
The
potential impact of risks from cybersecurity threats on the Company are assessed on an ongoing basis, and how such risks could materially
affect the Companys business strategy, operational results, and financial condition are regularly evaluated. During the reporting
period, the Company has not identified any risks from cybersecurity threats, including as a result of previous cybersecurity incidents,
that the Company believes have materially affected, or are reasonably likely to materially affect, the Company, including its business
strategy, operational results, and financial condition.
****
**Item
2. PROPERTIES**
The
Company does not own any real estate or other physical properties materially important to our operation. Our headquarters are located
at 800 Turnpike Street, Suite 300, North Andover, Massachusetts 01845. Our headquarters are provided to us by House Hanover, our investment
adviser since January 1, 2018. We believe that our office facilities are suitable and adequate for our business as we contemplate conducting
it.
**Item
3. LEGAL PROCEEDINGS**
As
of December 31, 2025, there were no material legal proceedings against the Company or any of its officers or directors. From time to
time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement
of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty,
we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
**Item
4. MINE SAFETY DISCLOSURES**
Not
applicable.
- 19 -
**PART
II**
**Item
5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**
**Market
Information**
Our
common stock is currently traded on the Over the Counter Pink Market (OTCPK) under the symbol PIAC where we expect it to
remain in the foreseeable future. Prior to April 20, 2015, our common stock was traded under the symbol RONE. Broker-dealers
often decline to trade in OTC Pink Market stocks given the markets for such securities are often limited, the stocks are more volatile,
and the risk to investors is greater. These factors may reduce the potential market for our common stock by reducing the number of potential
investors. This may make it more difficult for investors in our common stock to sell shares to third parties or to otherwise dispose
of their shares. This could cause our stock price to decline.
|
Quarter Ending | |
Quarterly
High | | |
Quarterly
Low | | |
|
December 31, 2025 | |
$ | 0.07 | | |
$ | 0.06 | | |
|
September 30, 2025 | |
$ | 0.07 | | |
$ | 0.05 | | |
|
June 30, 2025 | |
$ | 0.13 | | |
$ | 0.07 | | |
|
March 31, 2025 | |
$ | 0.15 | | |
$ | 0.11 | | |
|
| |
| | | |
| | | |
|
December 31, 2024 | |
$ | 0.19 | | |
$ | 0.12 | | |
|
September 30, 2024 | |
$ | 0.25 | | |
$ | 0.12 | | |
|
June 30, 2024 | |
$ | 0.31 | | |
$ | 0.11 | | |
|
March 31, 2024 | |
$ | 0.31 | | |
$ | 0.16 | | |
|
| |
| | | |
| | | |
|
December 31, 2023 | |
$ | 0.29 | | |
$ | 0.22 | | |
|
September 30, 2023 | |
$ | 0.30 | | |
$ | 0.11 | | |
|
June 30, 2023 | |
$ | 0.34 | | |
$ | 0.22 | | |
|
March 31, 2023 | |
$ | 0.35 | | |
$ | 0.19 | | |
Notwithstanding
the forgoing, our common stock is sporadically and thinly trading. Over-the-counter market quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual transactions Accordingly, although there appears to
be quotation information, the Company does not believe that there exists an established public market for our securities. Further, there
can be no assurance the current market for the Companys common stock will be sustained or grow in the future.
**Holders
of record**
As of March 25, 2026, there were 37 shareholders
of our common stock.
The
number of record holders reflects shares held by a broker as one record holder. The underlying shares may be held by one or more beneficial
owners.
The Company feels the actual number of common
shareholders may be significantly higher as 1,305,167 shares of common stock are held in street name which reflected approximately 1.08%
of the outstanding shares of common stock as of March 25, 2026, according to our transfer agent.
- 20 -
**Dividends**
Our
dividends, if any, are determined by our board of directors. The Company was taxed as a C corporation and subject to federal and state
corporation income taxes for its 2024 taxable year. The Company did not meet the qualifications of a RIC for the 2025 tax year and will
be taxed as a corporation under Subchapter C of the Code. It may not be in the best interests of the Companys stockholders to
elect to be taxed as a RIC at the present time due to the net operating losses and capital loss carryforwards the Company currently has.
Management will make a determination that is in the best interests of the Company and its stockholders. While the Company does not expect
to meet the qualifications of a RIC until such time as certain strategic alternatives are achieved, it can still declare a dividend even
though it is not required to do so.
To
qualify for RIC tax treatment, we must, among other things, distribute at least 90% of our net ordinary income and realized net short-term
capital gains in excess of realized net long-term capital losses, if any. Depending on the level of taxable income earned in a tax year,
we may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax
on such income. Any such carryover taxable income must be distributed through a dividend declared prior to filing the final tax return
related to the year which generated such taxable income. We may, in the future, make actual distributions to our stockholders of our
net capital gains. We can offer no assurance that we will achieve results that will permit the payment of any cash distributions and,
if we issue senior securities, we may be prohibited from making distributions if doing so causes us to fail to maintain the asset coverage
ratios stipulated by the 1940 Act or if distributions are limited by the terms of any of our borrowings.
For
the fiscal year ended December 31, 2022, the Company declared and paid a cash dividend of $0.075 per share of common stock on or about
December 1, 2022 to stockholders of record as of the close of business on November 21, 2022.
For
each of the fiscal years ended December 31, 2025, 2024 and 2023, the Company did not declare any cash dividends on the Companys
common stock.
On
October 17, 2022, the Board terminated the Companys opt out dividend reinvestment plan, as disclosed in the Companys
8-K filed on October 19, 2022. Written notice of such termination was mailed to the Companys stockholders on October 21, 2022,
with an effective date of November 20, 2022. As a result, any distributions declared for stockholders of record after November 20, 2022,
will be paid in cash.
**Sale
of Unregistered Securities**
There
were no sales of unregistered securities during the year ended December 31, 2025.
- 21 -
**Stock
Performance Graph**
This
graph compares the return on our common stock with that of the S&P BDC Index and the Russell 2000 Index, for the past five fiscal
years. The graph assumes that, on December 31, 2020, a person invested $100 in each of our common stock, the S&P BDC Index and the
Russell 2000 Financial Services Index. The graph measures total shareholder return, which takes into account both changes in stock price
and dividends. It assumes that dividends paid are reinvested in like securities. Our Company is quoted on the OTC Pink Market and are
thus not traded on a public exchange.
*
The
graph and other information furnished under this Part II Item 5 of this Form 10-K shall not be deemed to be soliciting
material or to be filed with the SEC or subject to Regulation 14A or 14C, or to the liabilities
of Section 18 of the 1934 Act. The stock price performance included in the above graph is not necessarily indicative of future stock
price performance.
**Issuer
Purchases of Equity Securities**
****
During
the year ended December 31, 2025, there were no repurchases made by or on behalf of the issuer of shares of equity securities.
**EQUITY
COMPENSATION PLAN INFORMATION**
The
Company does not currently have any equity incentive plan.
- 22 -
**Item
6. [Reserved]**
**Item
7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
****
The
following information should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form
10-K.
References
herein to we, us or our refer to Princeton Capital Corporation (the Company or
Princeton Capital), unless the context specifically requires otherwise.
****
**Forward-Looking
Statements**
Some
of the statements in this annual report on Form 10-K constitute forward-looking statements, which relate to future events or our future
performance or financial condition. Such forward-looking statements may include statements preceded by, followed by or that otherwise
include the words may, might, will, intend, should, could,
can, would, expect, believe, estimate, anticipate,
predict, potential, plan or similar words. The forward-looking statements contained in this
annual report on Form 10-K involve risks and uncertainties, including statements as to:
|
| our
future operating results; | |
|
| our
business prospects and the prospects of our portfolio companies; | |
|
| the
effect of investments that we expect to make; | |
|
| our
contractual arrangements and relationships with third parties; | |
|
| actual
and potential conflicts of interest with our investment advisor; | |
|
| the
dependence of our future success on the general economy and its effect on the industries
in which we invest; | |
|
| the
ability of our portfolio companies to achieve their objectives; | |
|
| the
use of borrowed money to finance a portion of our investments; | |
|
| the
adequacy of our financing sources and working capital; | |
|
| the
timing of cash flows, if any, from the operations of our portfolio companies; | |
|
| the
ability of our investment advisor to locate suitable investments for us and to monitor and
administer our investments; | |
|
| the
ability of our investment advisor to attract and retain highly talented professionals; | |
|
| our
ability to qualify and maintain our qualification as a regulated investment company and as
a business development company; and | |
|
| the
effect of future changes in laws or regulations (including the interpretation of these laws
and regulations by regulatory authorities) and conditions in our operating areas, particularly
with respect to business development companies or regulated investment companies. | |
We
have based the forward-looking statements included in this annual report on Form 10-K on information available to us on the date of this
annual report on Form 10-K, and we assume no obligation to update any such forward-looking statements. Actual results could differ materially
from those anticipated in our forward-looking statements, and future results could differ materially from historical performance. We
undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or
otherwise, unless required by law or Securities and Exchange Commission (SEC) rule or regulation. You are advised to consult
any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including
annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
- 23 -
**Overview**
We
are an externally managed, non-diversified, closed-end investment company that has elected to be treated as a business development company
(BDC) under the Investment Company Act of 1940 (the 1940 Act or Investment Company Act). While
we have sought to invest primarily in private small and lower middle-market companies in various industries, we are now (with a strategic
alternatives process underway and limited resources) investing only in current investments and otherwise conserving cash. Our investment
objective is to maximize the total return to our stockholders in the form of current income and capital appreciation through debt and
related equity investments in private small and lower middle-market companies. Since January 1, 2018, we have been managed by House Hanover,
LLC (House Hanover).
As
a BDC, we must not acquire any assets other than qualifying assets specified in the 1940 Act unless, at the time the acquisition
is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions). Qualifying assets include investments
in eligible portfolio companies. Under the relevant SEC rules, the term eligible portfolio company includes
all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that
have listed their securities on a national securities exchange and have a market capitalization of less than $250 million, in each case
organized in the United States.
On
November 15, 2019, our Board announced that the Company has initiated a strategic review process to identify, examine, and consider a
range of strategic alternatives available to the Company, including but not limited to, (i) selling the Companys assets to a business
development company or other potential buyer, (ii) merging with another business development company, (iii) liquidating the Companys
assets in accordance with a plan of liquidation, (iv) raising additional funds for the Company, or (v) otherwise entering into another
business combination, with the objective of maximizing stockholder value. As of December 31, 2025 and through the date of filing this
Annual Report, the Company has not entered into any agreements regarding any strategic alternative and the strategic process remains
ongoing.
**Corporate
History**
In
order to expedite the ramp-up of our investment activities and further our ability to meet our investment objectives, on March 13, 2015
we (i) acquired approximately $11.2 million in cash, $43.5 million in equity and debt investments, and $1.9 million in restricted cash
escrow deposits of Capital Point Partners, L.P. (CPP) and Capital Point Partners II, L.P. (CPPII) (together,
the Partnerships), and (ii) issued approximately 115.5 million shares of our common stock based on a pre-valuation presumed
fair value of $60.9 million and on a price of approximately $0.53 per share. While we have sought to invest primarily in private small
and lower middle-market companies in various industries, we are now (with a strategic alternatives process underway and limited resources)
investing only in current investments and otherwise conserving cash.
On
an annual basis and in general, BDCs intend to elect to be treated for tax purposes as a regulated investment company (RIC)
under Subchapter M of the Internal Revenue Code of 1986 (the Code). To qualify as a RIC, a BDC must, among other things,
meet certain source-of-income and asset diversification requirements. As a RIC, BDCs generally will not have to pay corporate-level taxes
on any income they distribute to their stockholders. We did not meet the qualifications of a RIC for the 2024 or 2025 tax years and will
be taxed as a corporation under Subchapter C of the Code. Further, we do not expect to meet the qualifications of a RIC until such time
as certain strategic alternatives are achieved.
**Portfolio
Composition and Investment Activity**
*
*Portfolio
Composition*
We
originate and invest primarily in private small and lower middle-market companies through first lien loans, second lien loans, unsecured
loans, unitranche and mezzanine debt financing, and corresponding equity investments. United States Treasury securities may be purchased
and temporarily held in connection with complying with RIC diversification requirements under Subchapter M of the Code.
- 24 -
At
December 31, 2025, the Company had investments in 4 portfolio companies. The total cost and fair value of the total investments were
approximately $34.1 million and $14.3 million, respectively. The composition of our investments by asset class as of December 31, 2025
is as follows:
|
Investments | |
Cost | | |
Fair Value | | |
Percentage of Total Portfolio | | |
|
Portfolio Investments | |
| | |
| | |
| | |
|
First Lien Loans | |
$ | 8,738,944 | | |
| 7,589,357 | | |
| 53.2 | % | |
|
Second Lien Loans | |
| 11,734,756 | | |
| 5,787,756 | | |
| 40.6 | | |
|
Unsecured Loans | |
| 1,381,586 | | |
| - | | |
| 0.0 | | |
|
Equity | |
| 12,256,166 | | |
| 884,342 | | |
| 6.2 | | |
|
Total Portfolio Investments | |
| 34,111,452 | | |
| 14,261,455 | | |
| 100.0 | | |
|
Total Investments | |
$ | 34,111,452 | | |
| 14,261,455 | | |
| 100.0 | % | |
At
December 31, 2024, the Company had investments in 4 portfolio companies. The total cost and fair value of the total investments were
approximately $34.1 million and $19.2 million, respectively. The composition of our investments by asset class as of December 31, 2024
is as follows:
|
Investments | |
Cost | | |
Fair Value | | |
Percentage of
Total
Portfolio | | |
|
Portfolio Investments | |
| | |
| | |
| | |
|
First Lien Loans | |
$ | 8,683,944 | | |
| 9,850,963 | | |
| 51.2 | % | |
|
Second Lien Loans | |
| 11,734,756 | | |
| 7,987,797 | | |
| 41.6 | | |
|
Unsecured Loans | |
| 1,381,586 | | |
| - | | |
| 0.0 | | |
|
Equity | |
| 12,256,166 | | |
| 1,379,019 | | |
| 7.2 | | |
|
Total Portfolio Investments | |
| 34,056,452 | | |
| 19,217,779 | | |
| 100.0 | | |
|
Total Investments | |
$ | 34,056,452 | | |
| 19,217,779 | | |
| 100.0 | % | |
At
December 31, 2025, our weighted average yield based upon cost of our portfolio investments was approximately 6.66% of which approximately
6.66% is current cash interest. At December 31, 2024, our weighted average yield based upon cost of our portfolio investments was approximately
12.04% of which approximately 9.40% is current cash interest.
At
December 31, 2025 and December 31, 2024, we held no United States Treasury securities. United States Treasury securities may be purchased
and temporarily held in connection with complying with RIC diversification requirements under Subchapter M of the Code.
*Investment
Activity*
**
Our
level of investment activity can vary substantially from period to period depending on many factors, including the amount of debt and
equity capital to middle market companies, the level of merger and acquisition activity, the general economic environment and the competitive
environment for the types of investments we make.
- 25 -
The
primary portfolio investment activities for the year ended December 31, 2025 are as follows:
|
| On
March 13, 2025, the Company entered into an amendment with Performance Alloys, LLC to waive
the existing defaults and amend the minimum fixed charge coverage ratio covenants for the
2025 fiscal year. The Company will not receive interest until such time as Performance Alloys
is back in compliance with its original covenants. | |
|
| On
June 9, 2025, the Company advanced $20,000 under its loan agreement with PCC SBH Sub, Inc. | |
|
| On
November 24, 2025, the Company amended the Note and Loan Agreement with PCC SBH Sub, Inc.
to increase the availability under the Note to $150,000. | |
|
| On
November 25, 2025, the Company advanced $35,000 under its loan agreement with PCC SBH Sub,
Inc. | |
**Asset
Quality**
In
addition to various risk management and monitoring tools, our investment advisor used an investment rating system to characterize and
monitor the quality of our debt investment portfolio. Equity securities and Treasury Bills are not graded. This debt investment rating
system uses a five-level numeric scale. The following is a description of the conditions associated with each investment rating:
|
Investment
Rating |
|
Summary
Description | |
|
1 |
|
Investments
that are performing above expectations, and whose risks remain favorable compared to the expected risk at the time of the original
investment. | |
|
|
|
| |
|
2 |
|
Investments
that are performing within expectations and whose risks remain neutral compared to the expected risk at the time of the original
investment. All new loans will initially be rated 2. | |
|
|
|
| |
|
3 |
|
Investments
that are performing below expectations and that require closer monitoring, but where no loss of return or principal is expected.
Portfolio companies with a rating of 3 may be out of compliance with financial covenants. | |
|
|
|
| |
|
4 |
|
Investments
that are performing substantially below expectations and whose risks have increased substantially since the original investment.
These investments are often in work out. Investments with a rating of 4 will be those for which some loss of return but no loss of
principal is expected. | |
|
|
|
| |
|
5 |
|
Investments
that are performing substantially below expectations and whose risks have increased substantially since the original investment.
These investments almost always end up in work out. Investments with a rating of 5 are those for which some loss of return and principal
is expected. | |
The
following table shows the investment rankings of our debt investments at fair value as of December 31, 2025 and December 31, 2024:
|
| |
As of December 31, 2025 | | |
As of December 31, 2024 | | |
|
Investment Rating | |
Fair Value | | |
% of Total
Portfolio | | |
Number of
Portfolio
Companies | | |
Fair Value | | |
% of Total
Portfolio | | |
Number of
Portfolio
Companies | | |
|
1 | |
$ | | | |
| | % | |
| | | |
$ | | | |
| | % | |
| | | |
|
2 | |
| 135,000 | | |
| 1.01 | | |
| 1 | | |
| 80,000 | | |
| 0.45 | | |
| 1 | | |
|
3 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
4 | |
| 11,169,053 | | |
| 83.49 | | |
| 2 | | |
| 17,758,760 | | |
| 99.55 | | |
| 3 | | |
|
5 | |
| 2,073,060 | | |
| 15.50 | | |
| 1 | | |
| | | |
| | | |
| | | |
|
| |
$ | 13,377,113 | | |
| 100.00 | % | |
| 4 | | |
$ | 17,838,760 | | |
| 100.00 | % | |
| 4 | | |
- 26 -
**Loans
and Debt Securities on Non-Accrual Status**
We
will not accrue interest on loans and debt securities if we have reason to doubt our ability to collect such interest. As of December
31, 2025, we had 4 loans on non-accrual status. As of December 31, 2024, we had 3 loans on non-accrual status
****
**Results
of Operations**
An
important measure of our financial performance is net increase (decrease) in net assets resulting from operations, which includes net
investment income (loss), net realized gain (loss) and net change in unrealized gain (loss). Net investment income (loss) is the difference
between our income from interest, dividends, fees and other investment income and our operating expenses including interest on borrowed
funds. Net realized gain (loss) on investments is the difference between the proceeds received from dispositions of portfolio investments
and their amortized cost. Net change in unrealized gain (loss) on investments is the net change in the fair value of our investment portfolio.
****
**Revenues**
We generate revenue in the form of interest income
on debt investments and capital gains and distributions, if any, on investment securities that we may acquire in portfolio companies.
Our debt investments typically have a term of five to seven years and bear interest at a fixed or floating rate. Interest on our debt
securities is generally payable quarterly. Payments of principal on our debt investments may be amortized over the stated term of the
investment, deferred for several years or due entirely at maturity. In some cases, our debt investments may pay interest in-kind, or PIK.
Any outstanding principal amount of our debt securities and any accrued but unpaid interest will generally become due at the maturity
date. The level of interest income we receive is directly related to the balance of interest-bearing investments multiplied by the weighted
average yield of our investments. We expect that the dollar amount of interest and any dividend income that we earn to increase as the
size of our investment portfolio increases. In addition, we may generate revenue in the form of prepayment fees, commitment, loan origination,
structuring or due diligence fees, fees for providing managerial assistance and possibly consulting fees. These fees will be recognized
as they are earned.
****
**Expenses**
Our
primary operating expenses include the payment of fees to House Hanover and our allocable portion of overhead expenses under the investment
advisory agreements and other operating costs described below. We bear all other out-of-pocket costs and expenses of our operations and
transactions, which may include:
|
| organizational
and offering expenses; | |
|
| expenses
incurred in valuing the Companys assets and computing its net asset value per share
(including the cost and expenses of any independent valuation firm); | |
|
| subject
to the guidelines approved by the Board of Directors, expenses incurred by our investment
advisor that are payable to third parties, including agents, consultants or other advisors,
in monitoring financial and legal affairs for the Company and in monitoring the Companys
investments and performing due diligence on the Companys prospective portfolio companies
or otherwise related to, or associated with, evaluating and making investments; | |
|
| interest
payable on debt, if any, incurred to finance the Companys investments and expenses
related to unsuccessful portfolio acquisition efforts; | |
|
| offerings
of the Companys common stock and other securities; | |
|
| administration
fees; | |
|
| transfer
agent and custody fees and expenses; | |
|
| U.S.
federal and state registration fees of the Company (but not our investment advisor); | |
|
| all
costs of registration and listing the Companys shares on any securities exchange; | |
|
| U.S.
federal, state and local taxes; | |
- 27 -
|
| independent
directors fees and expenses; | |
|
| costs
of preparing and filing reports or other documents required of the Company (but not our investment
advisor) by the SEC or other regulators; | |
|
| costs
of any reports, proxy statements or other notices to stockholders, including printing costs; | |
|
| the
costs associated with individual or group stockholders; | |
|
| the
Companys allocable portion of the fidelity bond, directors and officers/errors
and omissions liability insurance, and any other insurance premiums; | |
|
| direct
costs and expenses of administration and operation of the Company, including printing, mailing,
long distance telephone, copying, secretarial and other staff, independent auditors and outside
legal costs; and | |
|
| all
other non-investment advisory expenses incurred by the Company in connection with administering
the Companys business. | |
****
**Comparison
of the Years Ended December 31, 2025, 2024, and 2023**
****
|
| |
Year Ended December 31, 2025 | | |
Year Ended December 31, 2024 | | |
Year Ended December 31, 2023 | | |
|
| |
Total | | |
Per Share (1) | | |
Total | | |
Per Share (1) | | |
Total | | |
Per Share (1) | | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
|
Investment income | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Interest income (2) | |
$ | 141,943 | | |
$ | 0.001 | | |
$ | 1,278,275 | | |
$ | 0.010 | | |
$ | 2,471,590 | | |
$ | 0.021 | | |
|
Other income | |
| 13,998 | | |
| 0.000 | | |
| 105,776 | | |
| 0.001 | | |
| 9,303 | | |
| 0.000 | | |
|
Total investment income | |
| 155,941 | | |
| 0.001 | | |
| 1,384,051 | | |
| 0.011 | | |
| 2,480,893 | | |
| 0.021 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Operating expenses | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Management fees | |
| 184,133 | | |
| 0.002 | | |
| 257,384 | | |
| 0.002 | | |
| 317,546 | | |
| 0.003 | | |
|
Administration fees | |
| 431,768 | | |
| 0.004 | | |
| 423,877 | | |
| 0.004 | | |
| 415,092 | | |
| 0.003 | | |
|
Audit Fees | |
| 202,800 | | |
| 0.002 | | |
| 169,520 | | |
| 0.002 | | |
| 149,136 | | |
| 0.001 | | |
|
Legal Fees | |
| 114,780 | | |
| 0.001 | | |
| 158,589 | | |
| 0.001 | | |
| 187,687 | | |
| 0.002 | | |
|
Valuation fees | |
| 90,000 | | |
| 0.000 | | |
| 90,000 | | |
| 0.001 | | |
| 90,000 | | |
| 0.001 | | |
|
Other professional fees | |
| 34,465 | | |
| 0.000 | | |
| 14,540 | | |
| 0.000 | | |
| - | | |
| 0.000 | | |
|
Directors fees | |
| 150,000 | | |
| 0.001 | | |
| 150,000 | | |
| 0.001 | | |
| 150,000 | | |
| 0.001 | | |
|
Insurance expense | |
| 131,708 | | |
| 0.001 | | |
| 117,236 | | |
| 0.001 | | |
| 151,193 | | |
| 0.001 | | |
|
Interest expense | |
| - | | |
| 0.000 | | |
| - | | |
| 0.000 | | |
| 207 | | |
| 0.000 | | |
|
Bad debt expense | |
| 444,517 | | |
| 0.004 | | |
| - | | |
| 0.000 | | |
| - | | |
| 0.000 | | |
|
Other general and administrative expenses | |
| 130,611 | | |
| 0.001 | | |
| 143,392 | | |
| 0.001 | | |
| 138,465 | | |
| 0.001 | | |
|
Total operating expenses | |
| 1,914,782 | | |
| 0.016 | | |
| 1,524,538 | | |
| 0.013 | | |
| 1,599,326 | | |
| 0.013 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net investment income (loss) before tax | |
| (1,758,841 | ) | |
| (0.015 | ) | |
| (140,487 | ) | |
| (0.001 | ) | |
| 881,567 | | |
| 0.007 | | |
|
Income tax expense (benefit) | |
| 10,100 | | |
| - | | |
| (1,850 | ) | |
| - | | |
| 64,993 | | |
| - | | |
|
Net investment income (loss) after tax | |
| (1,768,941 | ) | |
| (0.015 | ) | |
| (138,637 | ) | |
| (0.001 | ) | |
| 816,574 | | |
| 0.007 | | |
|
Net change in unrealized gain (loss) | |
| (5,011,324 | ) | |
| (0.042 | ) | |
| (5,172,924 | ) | |
| (0.043 | ) | |
| (994,274 | ) | |
| (0.008 | ) | |
|
Net realized (loss) | |
| - | | |
| - | | |
| (5,549,735 | ) | |
| (0.046 | ) | |
| (1,200 | ) | |
| - | | |
|
Net (decrease) in net assets resulting from operations | |
$ | (6,780,265 | ) | |
$ | (0.057 | ) | |
$ | (10,861,296 | ) | |
$ | (0.090 | ) | |
$ | (178,900 | ) | |
$ | (0.001 | ) | |
****
|
(1) | The
basic per share figures noted above are based on a weighted average of 120,486,061, 120,486,061
and 120,486,061 shares outstanding for the years ended December 31, 2025, 2024, and 2023,
respectively, except where such amounts need to be adjusted to be consistent with what is
disclosed in the financial highlights of our financial statements. | |
|
(2) | Interest
income includes PIK interest of $0, $318,417, and $163,341, for the years ended December
31, 2025, 2024, and 2023, respectively. | |
- 28 -
*Operating
Expenses*
Total net operating expenses increased from $1,524,538
for the year ended December 31, 2024 to $1,914,782 for the year ended December 31, 2025. The increase is primarily due to bad debt expense
as well as an increase in audit, insurance and other professional fees. The increase was minimally offset by a decrease management, legal
and other general and administrative expenses.
Total net operating expenses per share increased
from 0.013 per share for the year ended December 31, 2024 to 0.016 for the year ended December 31, 2025.
Total
net operating expenses decreased from $1,599,326 for the year ended December 31, 2023 to $1,524,538 for the year ended December 31, 2024.
The decrease is primarily due to a decrease in management, legal and insurance expense. The decrease was minimally offset by an increase
administrative expenses and other professional fees.
Total
net operating expenses per share remained the same at $0.013 per share for the years ended December 31, 2023 and December 31, 2024.
**
*Net
Investment Income (Loss)*
Net
investment income (loss) (after tax) increased from $(138,637) for the year ended December 31, 2024 to $(1,768,941) for the year ended
December 31, 2025. This increase is primarily due to an increase in bad debt expense and a decrease in interest income for the year ended
December 31, 2025 and to a lesser extent increases in audit and insurance expenses.
Net investment income (loss) (after tax) per share
increased from $(0.001) per share for the year ended December 31, 2024 to $(0.015) per share for the year ended December 31, 2025.
Net
investment income (loss) (after tax) decreased from $816,574 for the year ended December 31, 2023 to $(138,637) for the year ended December
31, 2024. This decrease is primarily due to a decrease in interest income for the year ended December 31, 2024 and to a lesser extent
increases in administration, audit, and other professional fees..
Net
investment income (loss) (after tax) per share decreased from $0.007 per share for the year ended December 31, 2023 to $(0.001) per share
for the year ended December 31, 2024.
**
*Net
Realized Gain (Loss)*
We
measure realized gains (losses) by the difference between the net proceeds from the repayment or sale and the amortized cost basis of
the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized.
For
the year ended December 31, 2025, we did not recognize any realized gain (loss).
For
the year ended December 31, 2024, we recognized ($5,549,735) net realized loss.
For
the year ended December 31, 2023, we recognized ($1,200) net realized loss.
**
*Net
Change in Unrealized Gain (Loss)*
Net
change in unrealized gain (loss) primarily reflects the change in portfolio investment values during the reporting period, including
the reversal of previously recorded appreciation or depreciation when gains or losses are realized.
Net
change in unrealized gain (loss) on investments totaled a loss of $(5,011,324) for the year ended December 31, 2025 primarily in connection
with unrealized losses of $(2,078,190), $(2,316,606), $(494,677) and $(121,851) on Performance Alloys, Inc., Rockfish Seafood Grill,
Inc., PCC SBH Sub and Advantis Certified Staffing Solutions, Inc., respectively.
Net change in unrealized gain (loss) on investments
totaled a loss of $(5,172,924) for the year ended December 31, 2024 primarily in connection with unrealized losses of $(7,320,698), $(2,357,078)
and $(899,894) on Performance Alloys, Inc., Rockfish Seafood Grill, Inc., and Advantis Certified Staffing Solutions, Inc., respectively,
and partially offset by gains of $4,226,523 and $1,342,750 on Integrated Medical Partners, LLC and Dominion Medical Management, Inc.,
respectively.
Net change in unrealized gain (loss) on investments
totaled a loss of $(994,274) for the year ended December 31, 2023 primarily in connection with unrealized losses of $(1,075,753) and $(831,927)
on Performance Alloys, Inc. and Rockfish Seafood Grill, Inc., respectively, and partially offset by unrealized gains of $1,079,494 on
Advantis Certified Staffing Solutions, Inc.
****
- 29 -
****
**Financial
Condition, Liquidity and Capital Resources**
We
intend to continue to generate cash from future offerings of securities and cash flows from operations, including earnings on investments
in our portfolio and future investments, as well as interest earned from the temporary investment of cash in U.S. government securities
and other high-quality debt investments that mature in one year or less. We may, if permitted by regulation, seek various forms of leverage
and borrow funds to make investments.
As of December 31, 2025, we had $246,832 in cash
and restricted cash, and our net assets totaled $14,263,001. We believe that our anticipated cash flows from operations will be adequate
to meet our cash needs for our daily operations for at least the next 12 months.
****
**Contractual
Obligations**
As
of December 31, 2025, we did not have any contractual obligations that would trigger the tabular disclosure of contractual obligations
under Section 303(a)(5) of Regulation S-K.
We
have entered into one contract under which we have material future commitments, the House Hanover Investment Advisory Agreement, pursuant
to which House Hanover serves as our investment adviser. Payments under the House Hanover Investment Advisory Agreement in future periods
will be equal to a percentage of the value of our net assets.
The
House Hanover Investment Advisory Agreement is terminable by either party without penalty upon written notice by the Company or 60 days
written notice by House Hanover. If this agreement is terminated, the costs we incur under a new agreement may increase. In addition,
we will likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under
our investment advisory agreement. Any new investment advisory agreement would also be subject to approval by our stockholders.
****
**Distributions**
For
the fiscal year ended December 31, 2025, no dividends were declared or distributed to stockholders.
For
the fiscal year ended December 31, 2024, no dividends were declared or distributed to stockholders.
In
order to qualify as a RIC and to avoid U.S. federal corporate level income tax on the income we distribute to our stockholders, we are
required to distribute at least 90% of our net ordinary income and our net short-term capital gains in excess of net long-term capital
losses, if any, to our stockholders on an annual basis. Additionally, we must distribute an amount at least equal to the sum of 98% of
our net ordinary income (during the calendar year) plus 98.2% of our net capital gain income (during each 12-month period ending on October
31) plus any net ordinary income and capital gain net income for preceding years that were not distributed during such years and on which
we paid no U.S. federal income tax to avoid a U.S. federal excise tax. To the extent that we have income available, we intend to make
distributions to our stockholders. Our stockholder distributions, if any, will be determined by our board of directors. Any distribution
to our stockholders will be declared out of assets legally available for distribution. The Company did not meet the requirements to qualify
as a RIC for the 2025 and 2024 tax years and will be taxed as a corporation under Subchapter C of the Code. It may not be in the best
interests of the Companys stockholders to elect to be taxed as a RIC at the present time due to the net operating losses and capital
loss carryforwards the Company currently has. Management will make a determination that is in the best interests of the Company and its
stockholders. While the Company does not expect to meet the qualifications of a RIC until such time as certain strategic alternatives
are achieved, it can still declare a dividend even though it is not required to do so.
We
may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of
our distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage requirements
applicable to us as a BDC under the 1940 Act. If we do not distribute a certain percentage of our income annually, we could suffer adverse
tax consequences, including the possible failure to qualify as a RIC. We cannot assure stockholders that they will receive any distributions.
- 30 -
To
the extent our taxable earnings fall below the total amount of our distributions for that fiscal year, a portion of those distributions
may be deemed a return of capital to our stockholders for U.S. federal income tax purposes. Thus, the source of a distribution to our
stockholders may be the original capital invested by the stockholder rather than our income or gains. Stockholders should read any written
disclosure accompanying any stockholder distribution carefully and should not assume that the source of any distribution is our ordinary
income or capital gains.
On
October 17, 2022, the Board terminated the Companys opt out dividend reinvestment plan, as disclosed in the Companys
8-K filed on October 19, 2022. Written notice of such termination was mailed to the Companys stockholders on October 21, 2022,
with an effective date of November 20, 2022. As a result, any distributions declared for stockholders of record after November 20, 2022,
will be paid in cash**.**
****
**Off-Balance
Sheet Arrangements**
We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
****
**Related
Party Transactions**
**
*Management
Fees*
Management
fees under the House Hanover Investment Advisory Agreement for the years ended December 31, 2025 2024 and 2023 were $184,133, $257,384
and $317,546 , respectively. As of December 31, 2025 and 2024, management fees of $135,373 and $55,286 , respectively, were payable to
House Hanover.
**
*Incentive
Fees*
The
Company is not obligated to pay House Hanover an incentive fee. Incentive fees are a typical component of investment advisory agreements
with business development companies.
*Administration
Fees*
House
Hanover is entitled to reimbursement of expenses under the House Hanover Investment Advisory Agreement for administrative services performed
for the Company. Administration fees were $259,500, $259,500 and $259,500 for the years ended December 31, 2025, 2024 and 2023, respectively,
as shown on the Statements of Operations under administration fees. As of December 31, 2025 and 2024, there were $194,625 and $64,875,
respectively, of administration fees owed to House Hanover, as shown on the Statements of Assets and Liabilities under Due to affiliates.
On
May 1, 2022, Advantis Certified Staffing Solutions, Inc. (Advantis) requested one of its directors, Gregory J. Cannella
who also serves as our Chief Financial Officer, become the Executive Chair of Advantis to provide executive authority and leadership
in the absence of their former president, who resigned in March 2022. Mr. Cannella has agreed to take this position and in return will
be compensated by Advantis in the amount of $5,000 per month. The title and benefits of this position can be removed at any time by the
board of directors of Advantis.
****
**Recent
Accounting Pronouncements**
See
Note 2 of the financial statements for a description of recent accounting pronouncements, if any, including the expected dates of adoption
and the anticipated impact on the financial statements.
****
**Critical
Accounting Policies and Estimates**
The
preparation of our financial statements and related disclosures in conformity with U.S. Generally Accepted Accounting Principles (GAAP)
requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.
Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual
results to differ. In addition to the discussion below, our significant accounting policies are further described in the notes to the
financial statements.
****
- 31 -
****
**Valuation
of Portfolio Investments**
As
a BDC, we generally invest in illiquid loans and securities including debt and equity securities of middle-market companies. Under procedures
established by our board of directors, we value investments for which market quotations are readily available at such market quotations.
We obtain these market values from an independent pricing service or at the mean between the bid and ask prices obtained from at least
two brokers or dealers (if available, otherwise by a principal market maker or a primary market dealer). Debt and equity securities that
are not publicly traded or whose market prices are not readily available are valued at fair value as determined in good faith by our
board of directors. Such determination of fair values may involve subjective judgments and estimates, although we engage independent
valuation providers to review the valuation of each portfolio investment that does not have a readily available market quotation quarterly.
Investments purchased within 60 days of maturity are valued at cost plus accreted discount, or minus amortized premium, which approximate
fair value. With respect to unquoted securities, our board of directors values each investment considering, among other measures, discounted
cash flow models, comparisons of financial ratios of peer companies that are public and other factors, which are provided by a nationally
recognized independent valuation firm. This valuation firm provides a range of values for selected investments, which is presented to
the Valuation Committee to determine the value for each of the selected investments.
When
an external event such as a purchase transaction, public offering or subsequent equity sale occurs, our board of directors uses the pricing
indicated by the external event to corroborate and/or assist us in our valuation. Because there is not a readily available market for
substantially all of the investments in our portfolio, we value our portfolio investments at fair value as determined in good faith by
our board of directors using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty
of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may
differ significantly from the values that would have been used had a readily available market value existed for such investments, and
the differences could be material.
With
respect to investments for which market quotations are not readily available, our board of directors undertakes a multi-step valuation
process each quarter, as described below:
|
| Our
quarterly valuation process begins with each portfolio company or investment being initially
valued by an independent valuation firm, except for those investments where market quotations
are readily available; | |
|
| Preliminary
valuation conclusions are then documented and discussed with our senior management, our investment
advisor, and our auditors; | |
|
| The
valuation committee of our board of directors then reviews these preliminary valuations and
approves them for recommendation to the board of directors; | |
|
| The
board of directors then discusses valuations and determines the fair value of each investment
in our portfolio in good faith, based on the input of our investment advisor, the independent
valuation firm and the valuation committee. | |
****
**Revenue
Recognition**
Realized
gain (loss) on the sale of investments is the difference between the proceeds received from dispositions of portfolio investments and
their stated costs. Realized gains or losses on the sale of investments are calculated using the specific identification method.
Interest
income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis to the extent that we expect
to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and
added to the loan balance that generally becomes due at maturity, we do not accrue PIK interest if the portfolio company valuation indicates
that such PIK interest is not collectible. Generally, we will not accrue interest on loans and debt securities if we have reason to doubt
our ability to collect such interest. Loan origination fees, original issue discount and market discount or premium are capitalized,
and we then accrete or amortize such amounts using the effective interest method as interest income. Upon the prepayment of a loan or
debt security, any unamortized loan origination is recorded as interest income. We record prepayment premiums on loans and debt securities
as interest income.
- 32 -
Dividend
income, if any, will be recognized on the ex-dividend date.
Generally,
when a payment default occurs on a loan in the portfolio, or if the Company otherwise believes that the borrower will not be able to
make contractual interest payments, the Company may place the loan on non-accrual status and cease recognizing interest income on the
loan until all principal and interest is current through payment, or until a restructuring occurs, and the interest income is deemed
to be collectible. The Company may make exceptions to this policy if a loan has sufficient collateral value, is in the process of collection
or is viewed to be able to pay all amounts due if the loan were to be collected on through an investment in or sale of the business,
the sale of the assets of the business, or some portion or combination thereof.
****
**Recent
Developments**
****
**Portfolio
Activity**
****
|
|
|
On
March 13, 2025, the Company entered into an amendment with Performance Alloys, LLC to waive the existing defaults and amend the minimum
fixed charge coverage ratio covenants for the 2025 fiscal year.
| |
|
|
|
On
June 9, 2025, the Company advanced $20,000 under its loan agreement with PCC SBH Sub, Inc.
| |
|
|
|
On
November 24, 2025, the Company amended the Note and Loan Agreement with PCC SBH Sub, Inc. to increase the availability under the Note
to $150,000.
| |
|
|
|
On
November 25, 2025, the Company advanced $35,000 under its loan agreement with PCC SBH Sub, Inc. | |
****
**Item
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
We
are subject to financial market risks, including credit risk, illiquidity of investments in our portfolio and changes in interest rates.
Credit
risk is the primary market risk associated with our business. Credit risk originates from the fact that some of our portfolio companies
may become unable or unwilling to fulfill their contractual payment obligations to us and may eventually default on those obligations.
These contractual payment obligations arise under the debt securities and other investments that we hold. They include payment of interest,
principal, dividends, fees and payments under guarantees and similar instruments.
We
primarily invest in illiquid debt and other securities of small and mid-sized private companies. In some cases these investments include
additional equity components. Our investments may have no established trading market or are generally subject to restrictions on resale.
The illiquidity of our investments may adversely affect our ability to dispose of debt and equity securities at times when it may be
otherwise advantageous for us to liquidate such investments. As of December 31, 2025, all of our debt investments are fixed rate.
- 33 -
**Item
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**
****
**Index
to Financial Statements**
****
| | | Page | |
| Report of Independent Registered Public Accounting Firm (PCAOB ID 100) | | F-1 | |
| Statements of Assets and Liabilities as of December 31, 2025 and December 31, 2024 | | F-3 | |
| Statements of Operations for the years ended December 31, 2025, 2024 and 2023 | | F-4 | |
| Statements of Changes in Net Assets for the years ended December 31, 2025, 2024 and 2023 | | F-5 | |
| Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023 | | F-6 | |
| Schedule of Investments as of December 31, 2025 | | F-7 | |
| Schedule of Investments as of December 31, 2024 | | F-10 | |
| Notes to Financial Statements | | F-13 | |
****
- 34 -
**Report
of Independent Registered Public Accounting Firm**
To the Board of Directors and Stockholders of
Princeton Capital Corporation:
**Opinion on the Financial Statements**
We have audited the accompanying Statements of
Assets and Liabilities of Princeton Capital Corporation (the "Company"), including the schedules of investments, as of December
31, 2025 and 2024, the related statements of operations, changes in net assets, and cash flows for each of the three years in the period
ended December 31, 2025, and the related notes (collectively referred to as the "financial statements"). In our opinion, the
financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024,
and the results of its operations and its cash flows for each of the three years in the period ended December31, 2025, in conformity
with accounting principles generally accepted in the United States of America.
**Basis for Opinion**
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity's internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. Our procedures included verification by confirmation of securities as of December
31, 2025 and 2024, by correspondence with the portfolio companies. We believe that our audits provide a reasonable basis for our opinion.
**Critical Audit Matters**
The critical audit matter communicated below is
a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the
Audit Committee and that: (1)relate to accounts or disclosures that are material to the financial statements and (2)involved
our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-1
*Fair Value of Investments*
As discussed in Note 5 to the financial statements,
the Company measures substantially all of its investments at fair value using unobservable inputs and assumptions as there is no readily
available market value. As of December 31, 2025, total investments at fair value were $14,261,455.
We identified the evaluation of the fair value
of investments as a critical audit matter. Assessment of the Companys judgments regarding the use of specific valuation techniques,
inputs and assumptions involved a high degree of subjective auditor judgment. Changes in these techniques, inputs and assumptions could
have a significant impact on the fair value of investments. In particular, the Company uses the market approach, the cost approach and
net orderly liquidation analysis to determine enterprise values and total asset values. In addition, the Company relies upon the current
value method to value certain equity and debt investments. Furthermore, the Company makes judgments relating to credit risk, guideline
company market multiples, guideline transaction multiples, replacement cost indications, recovery rates and other financial performance
measures, used to determine enterprise values and total equity value indications.
Addressing the matter involved performing procedures
and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included, among
others, either (i) testing managements process for determining the fair value estimate, which included evaluating the appropriateness
of the market approach, income approach, or cost approach; testing the completeness, accuracy, and relevance of the underlying data used
in the technique; and evaluating the significant unobservable inputs and assumptions used by management, including the selected valuation
multiples, discount rates, market yields or replacement or reproduction cost indications, by considering the consistency and reasonableness
of the unobservable inputs relative to the performance and condition of the subject company or assets, and the external market and industry
data and evidence obtained in other areas of the audit; or (ii) the involvement of professionals with specialized skill and knowledge
to assist in developing an independent fair value estimate range for certain level 3 debt and equity investments, and comparison of managements
fair value indications to the independently developed range of fair value estimates. Developing the independent range involved selection
of significant unobservable inputs for the market multiples, discount rates or market yields, or replacement or reproduction cost indications,
in order to evaluate the reasonableness of managements fair value estimate of these certain level 3 investments, using a range
of available market information.
We have served as the Company's auditor since
2016.
/s/ WithumSmith+Brown, PC
Whippany, New Jersey
March 30, 2026
PCAOB Number 100
F-2
**PRINCETON
CAPITAL CORPORATION
STATEMENTS OF ASSETS AND LIABILITIES**
****
|
| |
December31,
2025 | | |
December31,
2024 | | |
|
| |
| | |
| | |
|
ASSETS | |
| | |
| | |
|
Control investments at fair value (cost of $21,745,606 and $21,690,606, respectively) | |
$ | 12,188,395 | | |
$ | 15,066,529 | | |
|
Non-control/non-affiliate investments at fair value (cost of $12,365,846 and $12,365,846, respectively) | |
| 2,073,060 | | |
| 4,151,250 | | |
|
Total investments at fair value (cost of $34,111,452 and $34,056,452, respectively) | |
| 14,261,455 | | |
| 19,217,779 | | |
|
Cash and cash equivalents | |
| 241,832 | | |
| 1,290,864 | | |
|
Restricted cash | |
| 5,000 | | |
| 5,000 | | |
|
Due from portfolio companies | |
| 34,397 | | |
| 33,049 | | |
|
Interest receivable, net of allowance for bad debt of $0 and $0, respectively | |
| 148,721 | | |
| 584,769 | | |
|
Prepaid expenses | |
| 67,194 | | |
| 76,418 | | |
|
Total assets | |
| 14,758,599 | | |
| 21,207,879 | | |
|
| |
| | | |
| | | |
|
LIABILITIES | |
| | | |
| | | |
|
Accrued management fees | |
| 135,373 | | |
| 55,286 | | |
|
Accounts payable | |
| 130,390 | | |
| 16,545 | | |
|
Due to affiliates(1) | |
| 194,625 | | |
| 64,875 | | |
|
Taxes payable | |
| 456 | | |
| - | | |
|
Accrued expenses and other liabilities | |
| 34,754 | | |
| 27,907 | | |
|
Total liabilities | |
| 495,598 | | |
| 164,613 | | |
|
| |
| | | |
| | | |
|
Net assets | |
$ | 14,263,001 | | |
$ | 21,043,266 | | |
|
| |
| | | |
| | | |
|
NET ASSETS | |
| | | |
| | | |
|
Common Stock, par value $0.001 per share (250,000,000 shares authorized; 120,486,061 shares issued and outstanding at December 31, 2025 and December 31, 2024) | |
$ | 120,486 | | |
$ | 120,486 | | |
|
Paid-in capital | |
| 64,868,884 | | |
| 64,868,884 | | |
|
Accumulated deficit | |
| (50,726,369 | ) | |
| (43,946,104 | ) | |
|
Total net assets | |
$ | 14,263,001 | | |
$ | 21,043,266 | | |
|
Net asset value per share | |
$ | 0.118 | | |
$ | 0.175 | | |
****
|
(1) | Amounts
under Due to Affiliates are for accrued amounts payable to the Companys investment advisor, House Hanover, LLC for the reimbursement
of administration fees that it incurs on the Companys behalf (Note 7). |
|
****
The accompanying notes are an integral part of
these financial statements.
****
F-3
**PRINCETON
CAPITAL CORPORATION
STATEMENTS OF OPERATIONS**
****
|
| |
For the Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
2023 | | |
|
INVESTMENT INCOME | |
| | |
| | |
| | |
|
Interest income from non-control/non-affiliate investments | |
$ | 9,469 | | |
$ | 689,083 | | |
$ | 1,254,375 | | |
|
Interest income from control investments | |
| 132,474 | | |
| 270,775 | | |
| 1,050,876 | | |
|
Interest income paid-in-kind from non-control/ non-affiliate investments | |
| - | | |
| 318,417 | | |
| 166,339 | | |
|
Other income from non-control/non-affiliate investments | |
| 13,953 | | |
| 13,953 | | |
| 8,140 | | |
|
Other income from non-investment sources (Note 2) | |
| 45 | | |
| 91,823 | | |
| 1,163 | | |
|
Total investment income | |
| 155,941 | | |
| 1,384,051 | | |
| 2,480,893 | | |
|
| |
| | | |
| | | |
| | | |
|
OPERATING EXPENSES | |
| | | |
| | | |
| | | |
|
Management fees | |
| 184,133 | | |
| 257,384 | | |
| 317,546 | | |
|
Administration fees | |
| 431,768 | | |
| 423,877 | | |
| 415,092 | | |
|
Audit fees | |
| 202,800 | | |
| 169,520 | | |
| 149,136 | | |
|
Legal fees (Note 2) | |
| 114,780 | | |
| 158,589 | | |
| 187,687 | | |
|
Valuation fees | |
| 90,000 | | |
| 90,000 | | |
| 90,000 | | |
|
Other professional fees | |
| 34,465 | | |
| 14,540 | | |
| - | | |
|
Directors fees | |
| 150,000 | | |
| 150,000 | | |
| 150,000 | | |
|
Insurance expense | |
| 131,708 | | |
| 117,236 | | |
| 151,193 | | |
|
Interest expense | |
| - | | |
| - | | |
| 207 | | |
|
Bad debt expense | |
| 444,517 | | |
| - | | |
| - | | |
|
Other general and administrative expenses | |
| 130,611 | | |
| 143,392 | | |
| 138,465 | | |
|
Total operating expenses | |
| 1,914,782 | | |
| 1,524,538 | | |
| 1,599,326 | | |
|
| |
| | | |
| | | |
| | | |
|
Net investment income (loss) before income tax expense (benefit) | |
| (1,758,841 | ) | |
| (140,487 | ) | |
| 881,567 | | |
|
Income tax expense (benefit) | |
| 10,100 | | |
| (1,850 | ) | |
| 64,993 | | |
|
Net investment income (loss) after income tax expense (benefit) | |
| (1,768,941 | ) | |
| (138,637 | ) | |
| 816,574 | | |
|
| |
| | | |
| | | |
| | | |
|
Net realized gain (loss) on: | |
| | | |
| | | |
| | | |
|
Non-control/non-affiliate investments | |
| - | | |
| (5,549,735 | ) | |
| (1,200 | ) | |
|
Total net realized gain (loss) on investments | |
| - | | |
| (5,549,735 | ) | |
| (1,200 | ) | |
|
Net change in unrealized gain (loss) on investments: | |
| | | |
| | | |
| | | |
|
Non-control/non-affiliate investments | |
| (2,078,190 | ) | |
| (7,320,698 | ) | |
| (1,075,753 | ) | |
|
Control investments | |
| (2,933,134 | ) | |
| 2,147,774 | | |
| 81,479 | | |
|
Net change in unrealized gain (loss) on investments | |
| (5,011,324 | ) | |
| (5,172,924 | ) | |
| (994,274 | ) | |
|
Net realized and unrealized gain (loss) on investments | |
| (5,011,324 | ) | |
| (10,722,659 | ) | |
| (995,474 | ) | |
|
Net decrease in net assets resulting from operations | |
$ | (6,780,265 | ) | |
$ | (10,861,296 | ) | |
$ | (178,900 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Net investment income (loss) per share | |
| | | |
| | | |
| | | |
|
Basic | |
$ | (0.015 | ) | |
$ | (0.001 | ) | |
$ | 0.007 | | |
|
Diluted | |
$ | (0.015 | ) | |
$ | (0.001 | ) | |
$ | 0.007 | | |
|
Net decrease in net assets resulting from operations per share | |
| | | |
| | | |
| | | |
|
Basic | |
$ | (0.057 | ) | |
$ | (0.090 | ) | |
$ | (0.001 | ) | |
|
Diluted | |
$ | (0.057 | ) | |
$ | (0.090 | ) | |
$ | (0.001 | ) | |
|
Weighted average shares of common stock outstanding | |
| | | |
| | | |
| | | |
|
Basic | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
|
Diluted | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
The accompanying notes are an integral part of
these financial statements.
****
F-4
****
**PRINCETON
CAPITAL CORPORATION
STATEMENTS OF CHANGES IN NET ASSETS**
****
|
| |
For the Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
2023 | | |
|
Net assets at beginning of year | |
$ | 21,043,266 | | |
$ | 31,904,562 | | |
$ | 32,083,462 | | |
|
Increase (decrease) in net assets resulting from operations: | |
| | | |
| | | |
| | | |
|
Net investment income (loss) | |
| (1,768,941 | ) | |
| (138,637 | ) | |
| 816,574 | | |
|
Realized loss on investments | |
| - | | |
| (5,549,735 | ) | |
| (1,200 | ) | |
|
Net change in unrealized loss on investments | |
| (5,011,324 | ) | |
| (5,172,924 | ) | |
| (994,274 | ) | |
|
Net decrease in net assets resulting from operations | |
| (6,780,265 | ) | |
| (10,861,296 | ) | |
| (178,900 | ) | |
|
| |
| | | |
| | | |
| | | |
|
Total decrease in net assets | |
| (6,780,265 | ) | |
| (10,861,296 | ) | |
| (178,900 | ) | |
|
Net Assets at December 31 | |
$ | 14,263,001 | | |
$ | 21,043,266 | | |
$ | 31,904,562 | | |
|
| |
| | | |
| | | |
| | | |
|
Capital share activity: | |
| | | |
| | | |
| | | |
|
Common stock | |
| | | |
| | | |
| | | |
|
Common stock outstanding at the beginning of year | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
|
Common stock outstanding at the end of year | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
The accompanying notes are an integral part of
these financial statements.
****
F-5
****
**PRINCETON
CAPITAL CORPORATION
STATEMENTS OF CASH FLOWS**
|
| |
For the Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
2023 | | |
|
Cash flows from operating activities: | |
| | |
| | |
| | |
|
Net decrease in net assets resulting from operations | |
$ | (6,780,265 | ) | |
$ | (10,861,296 | ) | |
$ | (178,900 | ) | |
|
Adjustments to reconcile decrease in net assets resulting from operations to net cash provided by (used in) operating activities: | |
| | | |
| | | |
| | | |
|
Proceeds from sales, repayments, or maturity of investments in: | |
| | | |
| | | |
| | | |
|
Portfolio investments | |
| - | | |
| 192,932 | | |
| - | | |
|
Net realized loss on investments | |
| - | | |
| 5,549,735 | | |
| 1,200 | | |
|
Net change in unrealized loss on investments | |
| 5,011,324 | | |
| 5,172,924 | | |
| 994,274 | | |
|
Purchase of investments | |
| (55,000 | ) | |
| (80,000 | ) | |
| - | | |
|
Increase in investments due to PIK | |
| - | | |
| (318,417 | ) | |
| (166,339 | ) | |
|
Changes in other assets and liabilities: | |
| | | |
| | | |
| | | |
|
Due from portfolio companies | |
| (1,348 | ) | |
| (6,457 | ) | |
| (250 | ) | |
|
Interest receivable | |
| 436,048 | | |
| (42,535 | ) | |
| (232,064 | ) | |
|
Allowance for bad debt | |
| - | | |
| (16,549 | ) | |
| - | | |
|
Prepaid expenses | |
| 9,224 | | |
| (29,112 | ) | |
| (11,754 | ) | |
|
Accrued management fees | |
| 80,087 | | |
| (23,603 | ) | |
| (13,045 | ) | |
|
Accounts payable | |
| 113,845 | | |
| (142,927 | ) | |
| (20,624 | ) | |
|
Due to affiliates | |
| 129,750 | | |
| - | | |
| - | | |
|
Tax expense payable | |
| 456 | | |
| (64,537 | ) | |
| 64,537 | | |
|
Deferred fee income | |
| - | | |
| - | | |
| 41,860 | | |
|
Accrued expenses and other liabilities | |
| 6,847 | | |
| (13,953 | ) | |
| (65,782 | ) | |
|
Net cash provided by (used in) operating activities | |
| (1,049,032 | ) | |
| (683,795 | ) | |
| 413,113 | | |
|
| |
| | | |
| | | |
| | | |
|
Net increase (decrease) in cash, cash equivalents and restricted cash | |
| (1,049,032 | ) | |
| (683,795 | ) | |
| 413,113 | | |
|
Cash, cash equivalents and restricted cash at beginning of year | |
| 1,295,864 | | |
| 1,979,659 | | |
| 1,566,546 | | |
|
Cash, cash equivalents and restricted cash at end of year | |
$ | 246,832 | | |
$ | 1,295,864 | | |
$ | 1,979,659 | | |
|
| |
| | | |
| | | |
| | | |
|
Supplemental disclosure of cash flow financing activities: | |
| | | |
| | | |
| | | |
|
Interest expense paid | |
$ | - | | |
$ | - | | |
$ | 207 | | |
|
Income tax paid | |
$ | 456 | | |
$ | 62,687 | | |
$ | 456 | | |
The accompanying notes are an integral part of
these financial statements.
F-6
**PRINCETON
CAPITAL CORPORATION**
****
**SCHEDULE OF INVESTMENTS as of December 31, 2025**
****
| Investments | | Headquarters/ Industry | | Acquisition Date | | Principal Amount/ Shares/ %Ownership | | | Amortized Cost | | | FairValue(1) | | | % of Net Assets | | |
| Portfolio Investments (5) | | | | | | | | | | | | | | | | | | | | | |
| Control investments | | | | | | | | | | | | | | | | | | | | | |
| Advantis Certified Staffing Solutions, Inc. | | Houston, TX | | | | | | | | | | | | | | | | | | | |
| Second Lien Loan, 12.0% Cash, due 11/30/2021(2) (4) (6) | | Staffing | | 3/13/2015 | | $ | 4,500,000 | | | $ | 4,500,000 | | | $ | 3,714,696 | | | | 26.04 | % | |
| Unsecured loan 6.33%, due 12/31/2027 (6) | | | | 10/01/2019 | | | 1,381,586 | | | | 1,381,586 | | | | - | | | | - | % | |
| Common Stock Series A (4) (6) | | | | 7/02/2017 | | | 225,000 | | | | 10,150 | | | | - | | | | - | % | |
| Common Stock Series B (4) (6) | | | | 7/02/2017 | | | 9,500,000 | | | | 428,571 | | | | - | | | | - | % | |
| Warrant for 250,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027 (4) (6) | | | | 7/02/2017 | | | 1 | | | | 11,278 | | | | - | | | | - | % | |
| Warrant for 700,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027 (4) (6) | | | | 12/31/2016 | | | 1 | | | | - | | | | - | | | | - | % | |
| Total | | | | | | | | | | | 6,331,585 | | | | 3,714,696 | | | | 26.04 | % | |
| PCC SBH Sub, Inc. | | Karnes City, TX | | | | | | | | | | | | | | | | | | | |
| Common stock (4) (6) | | Energy Services | | 2/06/2017 | | | 100 | | | | 2,525,481 | | | | 884,342 | | | | 6.20 | % | |
| First Lien Revolving Loan 10% Cash, due 5/8/2026 (6) | | | | 5/08/2024 | | $ | 135,000 | | | | 135,000 | | | | 135,000 | | | | 0.95 | % | |
| Total | | | | | | | | | | | 2,660,481 | | | | 1,019,342 | | | | 7.15 | % | |
| Rockfish Seafood Grill, Inc. | | Richardson,TX | | | | | | | | | | | | | | | | | | | |
| First Lien Loan, 8% Cash, 6.0% PIK, due 3/31/2018 (2) (3) (4) (6) | | Casual Dining | | 3/13/2015 | | $ | 6,352,944 | | | | 6,352,944 | | | | 5,020,776 | | | | 35.20 | % | |
| Revolving Loan, 8% Cash, due 12/31/2027 (2)(4)(6) | | | | 6/29/2015 | | $ | 2,251,000 | | | | 2,251,000 | | | | 2,433,581 | | | | 17.06 | % | |
| Rockfish Holdings, LLC | | | | | | | | | | | | | | | | | | | | | |
| Warrant for Membership Interest, exercise price $0.001 per 1% membership interest, expires 7/28/2028 (4) (6) | | | | 3/13/2015 | | | 10.0 | % | | | 414,960 | | | | - | | | | - | % | |
| Membership Interest Class A (4) (6) | | | | 3/13/2015 | | | 99.997 | % | | | 3,734,636 | | | | - | | | | - | % | |
| Total | | | | | | | | | | | 12,753,540 | | | | 7,454,357 | | | | 52.26 | % | |
| Total control investments | | | | | | | | | | | 21,745,606 | | | | 12,188,395 | | | | 85.45 | % | |
| | | | | | | | | | | | | | | | | | | | | | |
| Non-control/non-affiliate investments | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Performance Alloys, LLC | | Houston, TX | | | | | | | | | | | | | | | | | | | |
| Second Lien Loan, 10% Cash, 4% PIK, due 12/31/2026 (2) (3) (4) (6) | | Nickel Pipe, Fittings & Flanges | | 7/01/2016 | | $ | 7,234,756 | | | $ | 7,234,756 | | | $ | 2,073,060 | | | | 14.54 | % | |
| Membership Interest Class B (4) (6) | | | | 7/01/2016 | | | 25.97 | % | | | 5,131,090 | | | | - | | | | - | % | |
| Total | | | | | | | | | | | 12,365,846 | | | | 2,073,060 | | | | 14.54 | % | |
The accompanying notes are an integral part of
these financial statements.
F-7
**PRINCETON CAPITAL CORPORATION**
****
**SCHEDULE OF INVESTMENTS as of December
31, 2025**
**(Continued)**
****
|
Investments | |
Headquarters/ Industry | |
Acquisition
Date | |
Principal
Amount/
Shares/
%Ownership | | |
Amortized
Cost | | |
FairValue(1) | | |
% of Net Assets | | |
|
Non-control/non-affiliate
investments (continued) | |
| |
| |
| | | |
| | | |
| | | |
| | | |
|
Total non-control/non-affiliate
investments | |
| |
| |
| | | |
$ | 12,365,846 | | |
$ | 2,073,060 | | |
| 14.54 | % | |
|
Total Portfolio Investments | |
| |
| |
| | | |
| 34,111,452 | | |
| 14,261,455 | | |
| 99.99 | % | |
|
| |
| |
| |
| | | |
| | | |
| | | |
| | | |
|
Total Investments | |
| |
| |
| | | |
$ | 34,111,452 | | |
$ | 14,261,455 | | |
| 99.99 | % | |
|
(1) | See Note 5 of the Notes to Financial Statements for a discussion of the methodologies used to value securities in the portfolio. | |
|
(2) | Investment is on non-accrual status. | |
|
(3) | Represents a security with a payment-in-kind component (PIK). At the option of the issuer, interest can be paid in cash or cash and PIK. The percentage of PIK shown is the maximum PIK that can be elected by the portfolio company. | |
|
(4) | Investment is non-income producing as of December 31, 2025. | |
|
(5) | Represents an illiquid investment. At December 31, 2025, 100% of the total fair value of portfolio investments are illiquid. All of the Companys portfolio investments are generally subject to restrictions on resale as restricted securities. | |
|
(6) | Represents an investment valued using significant unobservable inputs. | |
The accompanying notes are an integral part of
these financial statements.
F-8
**PRINCETON
CAPITAL CORPORATION**
****
**SCHEDULE
OF INVESTMENTS as of December 31, 2025**
**(Continued)**
The
following tables show the fair value of our portfolio of investments (excluding U.S. Treasury Bills) by geography and industry as of
December 31, 2025.
|
| |
December 31, 2025 | | |
|
Geography | |
Investmentsat
Fair Value | | |
Percentageof
Net Assets | | |
|
United States | |
$ | 14,261,455 | | |
| 99.99 | % | |
|
Total | |
$ | 14,261,455 | | |
| 99.99 | % | |
|
| |
December 31, 2025 | | |
|
Industry | |
Investmentsat
Fair Value | | |
Percentageof
Net Assets | | |
|
Casual Dining | |
$ | 7,454,357 | | |
| 52.26 | % | |
|
Staffing | |
| 3,714,696 | | |
| 26.04 | | |
|
Nickel Pipe, Fittings and Flanges | |
| 2,073,060 | | |
| 14.54 | | |
|
Energy Services | |
| 1,019,342 | | |
| 7.15 | | |
|
Total | |
$ | 14,261,455 | | |
| 99.99 | % | |
The accompanying notes are an integral part of
these financial statements.
F-9
**PRINCETON
CAPITAL CORPORATION**
****
**SCHEDULE
OF INVESTMENTS as of December 31, 2024**
| Investments | | Headquarters/ Industry | | Acquisition Date | | Principal
Amount/
Shares/
%Ownership | | | Amortized Cost | | | FairValue(1) | | | % of
Net Assets | | |
| Portfolio Investments (5) | | | | | | | | | | | | | | | | | |
| Control investments | | | | | | | | | | | | | | | | | |
| Advantis Certified Staffing Solutions, Inc. | | Houston, TX | | | | | | | | | | | | | | | |
| Second Lien Loan, 12.0% Cash, due 11/30/2021(2) (4) (6) | | Staffing | | 3/13/2015 | | $ | 4,500,000 | | | $ | 4,500,000 | | | $ | 3,836,547 | | | | 18.24 | % | |
| Unsecured loan 6.33%, due 12/31/2027 (6) | | | | 10/01/2019 | | | 1,381,586 | | | | 1,381,586 | | | | - | | | | - | % | |
| Common Stock Series A (4) (6) | | | | 7/02/2017 | | | 225,000 | | | | 10,150 | | | | - | | | | - | % | |
| Common Stock Series B (4) (6) | | | | 7/02/2017 | | | 9,500,000 | | | | 428,571 | | | | - | | | | - | % | |
| Warrant for 250,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027 (4) (6) | | | | 7/02/2017 | | | 1 | | | | 11,278 | | | | - | | | | - | % | |
| Warrant for 700,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027 (4) (6) | | | | 12/31/2016 | | | 1 | | | | - | | | | - | | | | - | % | |
| Total | | | | | | | | | | | 6,331,585 | | | | 3,836,547 | | | | 18.24 | % | |
| PCC SBH Sub, Inc. | | Karnes City, TX | | | | | | | | | | | | | | | | | | | |
| Common stock (4) (6) | | Energy Services | | 2/06/2017 | | | 100 | | | | 2,525,481 | | | | 1,379,019 | | | | 6.55 | % | |
| First
Lien Revolving Loan 10% Cash, due 5/8/2026 (6) | | | | 5/08/2024 | | $ | 80,000 | | | | 80,000 | | | | 80,000 | | | | 0.38 | % | |
| Total | | | | | | | | | | | 2,605,481 | | | | 1,459,019 | | | | 6.93 | % | |
| Rockfish Seafood Grill, Inc. | | Richardson, TX | | | | | | | | | | | | | | | | | | | |
| First
Lien Loan, 8% Cash, 6.0% PIK, due 3/31/2018 (3) (6) | | Casual Dining | | 3/13/2015 | | $ | 6,352,944 | | | | 6,352,944 | | | | 7,519,963 | | | | 35.75 | % | |
| Revolving Loan, 8% Cash, due 12/31/2027 (6) | | | | 6/29/2015 | | $ | 2,251,000 | | | | 2,251,000 | | | | 2,251,000 | | | | 10.70 | % | |
| Rockfish Holdings, LLC | | | | | | | | | | | | | | | | | | | | | |
| Warrant for Membership Interest, exercise price $0.001 per 1% membership interest, expires 7/28/2028 (4) (6) | | | | 3/13/2015 | | | 10.0 | % | | | 414,960 | | | | - | | | | - | % | |
| Membership Interest Class A (4) (6) | | | | 3/13/2015 | | | 99.997 | % | | | 3,734,636 | | | | - | | | | - | % | |
| Total | | | | | | | | | | | 12,753,540 | | | | 9,770,963 | | | | 46.45 | % | |
| Total control investments | | | | | | | | | | | 21,690,606 | | | | 15,066,529 | | | | 71.62 | % | |
| | | | | | | | | | | | | | | | | | | | | | |
| Non-control/non-affiliate investments | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | |
| Performance Alloys, LLC | | Houston, TX | | | | | | | | | | | | | | | | | | | |
| Second
Lien Loan, 10% Cash, due 12/31/2026 (3) (6) | | Nickel Pipe, Fittings & Flanges | | 7/01/2016 | | $ | 7,234,756 | | | $ | 7,234,756 | | | $ | 4,151,250 | | | | 19.73 | % | |
| Membership Interest Class B (4) (6) | | | | 7/01/2016 | | | 25.97 | % | | | 5,131,090 | | | | - | | | | - | % | |
| Total | | | | | | | | | | | 12,365,846 | | | | 4,151,250 | | | | 19.73 | % | |
The accompanying notes are an integral part of
these financial statements.
F-10
**PRINCETON
CAPITAL CORPORATION**
****
**SCHEDULE
OF INVESTMENTS as of December 31, 2024 (Continued)**
|
Investments | |
Headquarters/ Industry | |
Acquisition
Date | |
Principal
Amount/
Shares/
%Ownership | | |
Amortized
Cost | | |
FairValue(1) | | |
% of
Net Assets | | |
|
Non-control/non-affiliate investments (continued) | |
| |
| |
| | |
| | | |
| | | |
| | | |
|
Total
non-control/non-affiliate investments | |
| |
| |
| | | |
$ | 12,365,846 | | |
$ | 4,151,250 | | |
| 19.73 | % | |
|
Total Portfolio Investments | |
| |
| |
| | | |
| 34,056,452 | | |
| 19,217,779 | | |
| 91.35 | % | |
|
| |
| |
| |
| | | |
| | | |
| | | |
| | | |
|
Total Investments | |
| |
| |
| | | |
$ | 34,056,452 | | |
$ | 19,217,779 | | |
| 91.35 | % | |
|
(1) | See Note 5 of the Notes to Financial Statements for a discussion of the methodologies used to value securities in the portfolio. | |
|
(2) | Investment is on non-accrual status. | |
|
(3) | Represents a security with a payment-in-kind component (PIK). At the option of the issuer, interest can be paid in cash or cash and PIK. The percentage of PIK shown is the maximum PIK that can be elected by the portfolio company. | |
|
(4) | Investment is non-income producing as of December 31, 2024. | |
|
(5) | Represents an illiquid investment. At December 31, 2024, 100% of the total fair value of portfolio investments are illiquid. All of the Companys portfolio investments are generally subject to restrictions on resale as restricted securities. | |
|
(6) | Represents
an investment valued using significant unobservable inputs. | |
The accompanying notes are an integral part of
these financial statements.
F-11
**PRINCETON
CAPITAL CORPORATION**
****
**SCHEDULE
OF INVESTMENTS as of December 31, 2024 (Continued)**
The
following tables show the fair value of our portfolio of investments (excluding U.S. Treasury Bills) by geography and industry as of
December 31, 2024.
|
| |
December 31, 2024 | | |
|
Geography | |
Investmentsat Fair Value | | |
Percentageof Net Assets | | |
|
United States | |
$ | 19,217,779 | | |
| 91.35 | % | |
|
Total | |
$ | 19,217,779 | | |
| 91.35 | % | |
|
| |
December 31, 2024 | | |
|
Industry | |
Investmentsat Fair Value | | |
Percentageof Net Assets | | |
|
Casual Dining | |
$ | 9,770,963 | | |
| 46.44 | % | |
|
Nickel Pipe, Fittings and Flanges | |
| 4,151,250 | | |
| 19.73 | | |
|
Staffing | |
| 3,836,547 | | |
| 18.24 | | |
|
Energy Services | |
| 1,459,019 | | |
| 6.94 | | |
|
Total | |
$ | 19,217,779 | | |
| 91.35 | % | |
The accompanying notes are an integral part of
these financial statements.
F-12
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
****
**NOTE
1 NATURE OF OPERATIONS**
**
*References
herein to we, us or our refer to Princeton Capital Corporation (the Company or
Princeton Capital), unless the context specifically requires otherwise.*
Princeton
Capital Corporation, a Maryland corporation, was incorporated under the general laws of the State of Maryland on July 25, 2013. We are
a non-diversified, closed-end investment company that has filed an election to be regulated as a business development company (BDC),
under the Investment Company Act of 1940, as amended (the 1940 Act). A goal of a BDC is to annually qualify and elect to
be treated as a regulated investment company (RIC) under Subchapter M of the Internal Revenue Code of 1986, as amended
(the Code). The Company, however, did not meet the requirements to qualify as a RIC for the 2025 tax year and will be taxed
as a corporation under Subchapter C of the Code and does not expect to meet the qualifications of a RIC until such time as certain strategic
alternatives are achieved. While we have sought to invest primarily in private small and lower middle-market companies in various industries
through first lien loans, second lien loans, unsecured loans, unitranche and mezzanine debt financing, often times with a corresponding
equity investment, we are now (with a strategic alternatives process underway and limited resources) investing only in current investments
and otherwise conserving cash. Our investment objective is to maximize the total return to our stockholders in the form of current income
and capital appreciation through debt and related equity investments.
Prior
to March 13, 2015, Princeton Capitals predecessor operated under the name Regal One Corporation (Regal One). Regal
One had been located in Scottsdale, Arizona, and was a Florida corporation initially incorporated in 1959 as Electro-Mechanical Services
Inc. Since inception, Regal One had been involved in several industries. In 1998, Electro-Mechanical Services Inc. changed its name to
Regal One Corporation.
On
March 7, 2005, Regal Ones board of directors determined it was in the shareholders best interest to change the focus of
its operations to providing financial consulting services through its network of advisors and professionals, and to be regulated as a
BDC under the 1940 Act. On September 16, 2005, Regal One filed a Form N54A (Notification of Election by Business Development Companies)
with the Securities and Exchange Commission (SEC), which transformed Regal One into a BDC in accordance with sections 55
through 65 of the 1940 Act. Regal One reported as an operating BDC from March 31, 2006 until March 13, 2015 and since March 13, 2015
(following the Reincorporation described below) Princeton Capital has reported as an operating BDC.
On
December 27, 2017, the Board approved (specifically in accordance with Rule 15a-4(b)(1)(ii) of the Investment Company Act) and authorized
the Company to enter into an Interim Investment Advisory Agreement between the Company and House Hanover, LLC, a Delaware limited liability
company (House Hanover) (the Interim Investment Advisory Agreement), in accordance with Rule 15a-4 of the
Investment Company Act. The effective date of the Interim Investment Advisory Agreement was January 1, 2018.
On
April 5, 2018, the Board, including a majority of the independent directors, conditionally approved the Investment Advisory Agreement
between the Company and House Hanover (the House Hanover Investment Advisory Agreement) subject to the approval of the
Companys stockholders at the 2018 Annual Meeting of Stockholders. The House Hanover Investment Advisory Agreement replaced the
Interim Investment Advisory Agreement. On May 30, 2018, the Companys stockholders approved the House Hanover Investment Advisory
Agreement. The effective date of the House Hanover Investment Advisory Agreement was May 31, 2018. The House Hanover Investment Advisory
Agreement was last annually renewed by the Board and by a majority of the members of the Board who are not parties to the House Hanover
Investment Advisory Agreement or interested persons (as such term is defined in the 1940 Act) of any such party, in accordance
with the requirements of the 1940 Act and the House Hanover Investment Advisory Agreement on May 12, 2025.
Since
January 1, 2018, House Hanover has acted as our investment advisor under the Interim Investment Advisory Agreement (from January 1, 2018
until May 31, 2018) and the House Hanover Investment Advisory Agreement (since May 31, 2018).
F-13
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
On
November 15, 2019, our Board announced that the Company has initiated a strategic review process to identify, examine, and consider a
range of strategic alternatives available to the Company, including but not limited to, (i) selling the Companys assets to a business
development company or other potential buyer, (ii) merging with another business development company, (iii) liquidating the Companys
assets in accordance with a plan of liquidation, (iv) raising additional funds for the Company, or (v) otherwise entering into another
business combination, with the objective of maximizing stockholder value. As of December 31, 2025 and through the date of filing this
Annual Report, the Company has not entered into any strategic alternative, and the strategic process remains ongoing.
**NOTE
2 SIGNIFICANT ACCOUNTING POLICIES**
****
**Basis
of Presentation**
The
accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America (U.S. GAAP). In accordance with Regulation S-X under the Securities Act of 1933 and Securities Exchange Act
of 1934, the Company does not consolidate portfolio company investments. The accounting records of the Company are maintained in U.S.
dollars. As an investment company, as defined by the 1940 Act, the Company follows investment company accounting and reporting guidance
of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946
Financial Services - Investment Companies, which is U.S. GAAP.
****
**Use
of Estimates**
The
preparation of financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses
during the reporting period. Changes in the economic environment, financial markets, creditworthiness of our portfolio companies and
any other parameters used in determining these estimates could cause actual results to differ. It is likely that changes in these estimates
will occur in the near term. The Companys estimates are inherently subjective in nature and actual results could differ materially
from such estimates.
****
**Portfolio
Investment Classification**
The
Company classifies its investments in accordance with the requirements of the 1940 Act. Under the 1940 Act, Control Investments
are defined as investments in companies in which the Company owns more than 25% of the voting securities or maintains greater than 50%
of the board representation. Under the 1940 Act, Affiliated Investments are defined as those non-control investments in
companies in which the Company owns between 5% and 25% of the voting securities. Under the 1940 Act, Non-affiliated Investments
are defined as investments that are neither Control Investments nor Affiliated Investments. As of December 31, 2025, the Company had
control investments in Advantis Certified Staffing Solutions, Inc., PCC SBH Sub, Inc., Rockfish Holdings, LLC, and Rockfish Seafood Grill,
Inc. as defined under the 1940 Act. As of December 31, 2024, the Company had control investments in Advantis Certified Staffing Solutions,
Inc., PCC SBH Sub, Inc., Rockfish Holdings, LLC, and Rockfish Seafood Grill, Inc. as defined under the 1940 Act.
Investments
are recognized when we assume an obligation to acquire a financial instrument and assume the risks for gains or losses related to that
instrument. Investments are derecognized when we assume an obligation to sell a financial instrument and forgo the risks for gains and
losses related to that instrument. Specifically, we record all security transactions on a trade date basis. Investments in other non-security
financial instruments, such as limited partnerships or private companies, are recorded on the basis of subscription date or redemption
date, as applicable. Amounts for investments recognized or derecognized but not yet settled are reported as receivables for investments
sold or payable for investments acquired, respectively, in the Statements of Assets and Liabilities.
F-14
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
**Valuation
of Investments**
In
accordance with U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability
(i.e., the exit price) in an orderly transaction between market participants at the measurement date.
In
determining fair value, our board of directors uses various valuation approaches. In accordance with U.S. GAAP, ASC 820 establishes a
fair value hierarchy for inputs and is used in measuring fair value that maximizes the use of observable inputs and minimizes the use
of unobservable inputs by requiring that the most observable inputs be used when available.
Observable
inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent
of the board of directors. Unobservable inputs reflect our board of directors assumptions about the inputs market participants
would use in pricing the asset or liability developed based on the best information available in the circumstances.
With
respect to investments for which market quotations are not readily available, our board of directors undertakes a multi-step valuation
process each quarter, as described below:
|
| Our
quarterly valuation process begins with each portfolio company or investment being initially
valued by an independent valuation firm, except for those investments where market quotations
are readily available; | |
|
|
|
Preliminary valuation conclusions are then documented and discussed with our senior management, our investment advisor, and our auditors; | |
|
| The
valuation committee of our board of directors then reviews these preliminary valuations and
approves them for recommendation to the board of directors; and | |
|
| The
board of directors then discusses valuations and determines the fair value of each investment
in our portfolio in good faith, based on the input of our investment advisor, the independent
valuation firm and the valuation committee. | |
U.S.
GAAP establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value.
The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value
hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair
value measurement. The levels of the fair value hierarchy are as follows:
Level
1 Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the
ability to access. Valuation adjustments and block discounts are not applied to Level 1 securities. Since valuations are based on quoted
prices that are readily and regularly available in an active market, valuation of these securities does not entail a significant degree
of judgment.
Level
2 Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either
directly or indirectly.
Level
3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
The
availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors
including, the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular
to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market,
the determination of fair value requires more judgment. Those estimated values do not necessarily represent the amounts that may be ultimately
realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation,
those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities
existed. Accordingly, the degree of judgment exercised by the board of directors in determining fair value is greatest for securities
categorized in Level 3. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.
In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement in its entirety
falls is determined based on the lowest level input that is significant to the fair value measurement. For the fair value measurements
as of December 31, 2025, there were no changes in the valuation technique for the Company's investments from the prior quarter.
F-15
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
Fair
value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore,
even when market assumptions are not readily available, the Companys own assumptions are set to reflect those that market participants
would use in pricing the asset or liability at the measurement date. The Company uses prices and inputs that are current as of the measurement
date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced
for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.
****
**Valuation
Processes**
The
Company establishes valuation processes and procedures to ensure that the valuation techniques for investments that are categorized within
Level 3 of the fair value hierarchy are fair, consistent, and verifiable. The Companys board of directors designates a Valuation
Committee (the Committee) to oversee the entire valuation process of the Companys Level 3 investments. The Committee
is comprised of independent directors and reports to the Companys board of directors. The Committee is responsible for developing
the Companys written valuation processes and procedures, conducting periodic reviews of the valuation policies, and evaluating
the overall fairness and consistent application of the valuation policies.
The
Committee meets on a quarterly basis, or more frequently as needed, to determine the valuations of the Companys Level 3 investments.
Valuations determined by the Committee are required to be supported by market data, third-party pricing sources, industry accepted pricing
models, counterparty prices, or other methods that the Committee deems to be appropriate.
The
Company will periodically test its valuations of Level 3 investments through performing back testing of the sales of such investments
by comparing the amounts realized against the most recent fair values reported, and if necessary, uses the findings to recalibrate its
valuation procedures. On a quarterly basis, the Company engages the services of a nationally recognized third-party valuation firm to
perform an independent valuation of the Companys Level 3 investments.This valuation firm provides a range of values for
selected investments, which is presented to the Valuation Committee to determine the value for each of the selected investments.
****
**Investment
Valuation**
We
expect that most of our portfolio investments will take the form of securities that are not publicly traded. The fair value of loans,
securities and other investments that are not publicly traded may not be readily determinable, and we will value these investments at
fair value as determined in good faith by our board of directors, including reflecting significant events affecting the value of our
investments. Most, if not all, of our investments (other than cash and cash equivalents) will be classified as Level 3 under Financial
Accounting Standards Board Accounting Standards Codification Fair Value Measurements and Disclosures, or ASC 820. This
means that our portfolio valuations will be based on unobservable inputs and our own assumptions about how market participants would
price the asset or liability in question. We expect that inputs into the determination of fair value of our portfolio investments will
require significant management judgment or estimation. Even if observable market data are available, such information may be the result
of consensus pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price in an
actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers materially reduces the reliability
of such information. We expect to retain the services of one or more independent service providers to review the valuation of these loans
and securities. The types of factors that the board of directors may take into account in determining the fair value of our investments
generally include, as appropriate, comparison to publicly traded securities including such factors as yield, maturity and measures of
credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio companys
ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business and other
relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain,
may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the
values that would have been used if a ready market for these loans and securities existed. Our net asset value could be adversely affected
if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon
the disposal of such loans and securities.
F-16
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
We
will adjust the valuation of our portfolio quarterly to reflect our board of directors determination of the fair value of each
investment in our portfolio. Any changes in fair value are recorded in our Statements of Operations as net change in unrealized gain
or loss on investments.
**
*Debt
Securities*
The
Companys portfolio consists primarily of first lien loans, second lien loans, and unsecured loans. Investments for which market
quotations are readily available (Level 2 Loans) are generally valued using market quotations, which are generally obtained
from an independent pricing service or broker-dealers. For other debt investments (Level 3 Loans), market quotations are
not available and other techniques are used to determine fair value. The Company considers its Level 3 Loans to be performing if the
borrower is not in default, the borrower is remitting payments in a timely manner, the loan is in covenant compliance or is otherwise
not deemed to be impaired. In determining the fair value of the performing Level 3 Loans, the Board considers fluctuations in current
interest rates, the trends in yields of debt instruments with similar credit ratings, financial condition of the borrower, economic conditions,
success and prepayment fees, and other relevant factors, both qualitative and quantitative. In the event that a Level 3 Loan instrument
is not performing, as defined above, the Board may evaluate the value of the collateral utilizing the same framework described above
for a performing loan to determine the value of the Level 3 Loan instrument.
**
*Equity
Investments*
Our
equity investments, including common stock, membership interests, and warrants, are generally valued using a market approach and income
approach. The income approach utilizes primarily the discount rate to value the investment whereas the primary inputs for the market
approach are the earnings before interest, taxes, depreciation and amortization (EBITDA) multiple and revenue multiples.
The Black-Scholes Option Pricing Model, a valuation technique that follows the income approach, is used to allocate the value of the
equity to the investment. The pricing model takes into account the contract terms (including maturity) as well as multiple inputs, including
time value, implied volatility, equity prices, risk free rates, and interest rates.
****
**Valuation
of Other Financial Instruments**
The
carrying amounts of the Companys other, non-investment, financial instruments, consisting of cash, receivables, accounts payable,
and accrued expenses, approximate fair value due to their short-term nature.
****
**Cash,
Cash Equivalents and Restricted Cash**
The
Company deposits its cash in financial institutions and, at times, such balances may be in excess of the Federal Deposit Insurance Corporation
insured limit; however, management does not believe it is exposed to any significant credit risk. Cash Equivalents are short-term, highly
liquid investments that are readily convertible to known amounts of cash and present insignificant risk of changes in value. All of the
Companys cash equivalents are being held in a Money Market account.
F-17
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
The
following table provides a reconciliation of cash and restricted cash reporting within the Statements of Assets and Liabilities that
sum to the total of the same such amounts shown in the Statements of Cash Flows:
|
| |
December31, | | |
December31, | | |
|
| |
2025 | | |
2024 | | |
|
Cash and Cash Equivalents | |
$ | 241,832 | | |
$ | 1,290,864 | | |
|
Restricted Cash | |
| 5,000 | | |
| 5,000 | | |
|
Total Cash, Cash Equivalents and Restricted Cash | |
$ | 246,832 | | |
$ | 1,295,864 | | |
As of December 31, 2025 and December 31, 2024,
restricted cash consisted of cash held for deposit with a law firm that represents the Company in an appeal on a matter incurred in the
normal operating course of business.
**U.S.
Treasury Bills**
At the end of each fiscal quarter, we may take
proactive steps to be in compliance with the RIC diversification requirements under Subchapter M of the Internal Revenue Code, which are
dependent upon the composition of our total assets at quarter end. We may accomplish this in several ways, including purchasing U.S. Treasury
Bills and closing out positions after quarter-end. As of December 31, 2025 and December 31, 2024, the Company did not purchase any U.S.
Treasury Bills. The Company does not expect to meet the qualifications of a RIC nor anticipate buying U.S. Treasury Bills until such time
as certain strategic alternatives are achieved.
****
**Revenue
Recognition**
Realized
gains or losses on the sale of investments are calculated using the specific identification method. The Company measures realized gains
or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without
regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties.
Interest
income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Origination, closing and/or
commitment fees associated with senior and subordinated secured loans are accreted into interest income over the respective terms of
the applicable loans. Upon the prepayment of a senior or subordinated secured loan, any prepayment penalties and unamortized loan origination,
closing and commitment fees are recorded as interest income. Generally, when a payment default occurs on a loan in the portfolio, or
if the Company otherwise believes that the borrower will not be able to make contractual interest payments, the Company may place the
loan on non-accrual status and cease recognizing interest income on the loan until all principal and interest is current through payment,
or until a restructuring occurs, and the interest income is deemed to be collectible. The Company may make exceptions to this policy
if a loan has sufficient collateral value, is in the process of collection or is viewed to be able to pay all amounts due if the loan
were to be collected on through an investment in or sale of the business, the sale of the assets of the business, or some portion or
combination thereof.
Dividend
income is recorded on the ex-dividend date.
Structuring
fees, excess deal deposits, prepayment fees and similar fees are recognized as income as earned, usually when paid.
Other fee income from investment sources, can
include loan fees, annual fees or monitoring fees from our portfolio investments and are included in other income from non-control/non-affiliate
investments and other income from affiliate investments. Income from such sources for the years ended December 31, 2025, 2024 and 2023
was $13,953, $13,953 and $8,140, respectively.
Other
income from non-investment sources is generally comprised of interest income earned on cash held in a bank account. For the year ended
December 31, 2024, $90,866 of the other income from non-investment sources resulted from the reversal of accrued legal fees from prior
periods that were determined to no longer be payable.
****
F-18
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
**Payment-in-Kind
Interest (PIK)**
We have investments in our portfolio that contain
a PIK interest provision. Any PIK interest is added to the principal balance of such investments and is recorded as income, if the portfolio
company valuation indicates that such PIK interest is collectible. For the years ended December 31, 2025, 2024 and 2023, PIK interest
was $0, $318,417, and $166,339, respectively.
****
**Net
Realized Gain and Loss**
Net
realized gain (loss) on investments is the difference between the proceeds received from the dispositions of portfolio investments and
their amortized cost.
****
**Net
Change in Unrealized Gain or Loss**
Net
change in unrealized gain or loss will reflect the change in portfolio investment values during the reporting period, including any reversal
of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
****
**Legal
Fees**
Legal fees invoiced to the Company for the years
ended December 31, 2025, December 31, 2024 and December 31, 2023, were incurred in the normal operating course of business and are included
in legal fees on the Statements of Operations.
****
**Bad
Debt Expense**
****
The Company recognizes bad debt expense to reflect
estimated losses arising from the inability of borrowers to make required interest payments. Management evaluates the collectability of
interest receivable on an ongoing basis. For the year ended December 31, 2025, the Company incurred $444,517 of bad debt expense related
to the interest receivable that was deemed uncollectible from Rockfish Seafood Grill, Inc.
****
**Federal
and State Income Taxes**
The
Company was taxed as a regular corporation (a C corporation) under subchapter C of the Internal Revenue Code of 1986, as
amended (the Code), for its 2024 and 2023 taxable years. The Company uses the liability method of accounting for income
taxes. Deferred tax assets and liabilities are recorded for tax loss carryforwards and temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements, using statutory tax rates in effect for the year in which
the temporary differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is more likely
than not that some portion or all of the deferred tax assets will not be realized.
The
Company did not meet the qualifications of a RIC for the 2024 and 2023 tax years and was taxed as a corporation under the Code. For the
2023 tax year, the Company used available net operating loss carryforwards to reduce taxable income. A portion of the net operating loss
carryforwards could only be used to offset 80% of the taxable income, which resulted in a federal tax expense of $54,019 for the year
ended December 31, 2023.
The
Company did not meet the qualifications of a RIC for the 2025 tax year and will be taxed as a corporation under the Code. It may not
be in the best interests of the Companys stockholders to elect to be taxed as a RIC at the present time due to the net operating
losses and capital loss carryforwards the Company currently has. Further, we do not expect to meet the qualifications of a RIC until
such time as certain strategic alternatives are achieved. Management will make a determination that is in the best interests of the Company
and its stockholders.
F-19
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
In
order to qualify as a RIC, among other things, the Company is required to distribute to its stockholders on a timely basis at least 90%
of investment company taxable income, as defined by the Code, for each year. So long as the Company achieves its status as a RIC, it
generally will not pay corporate-level U.S. federal and state income taxes on any ordinary income or capital gains that it distributes
at least annually to its stockholders as dividends. Rather, any tax liability related to income earned by the Company will represent
obligations of the Companys investors and will not be reflected in the financial statements of the Company. While the Company
does not expect to meet the qualifications of a RIC until such time as certain strategic alternatives are achieved, it can still declare
a dividend even though it is not required to do so.
The
Company evaluates tax positions taken or expected to be taken while preparing its financial statements to determine whether the tax positions
are more-likely-than-not of being sustained by the applicable tax authority. The Company recognizes the tax benefits of
uncertain tax positions only where the position has met the more-likely-than-not threshold. The Company classifies penalties
and interest associated with income taxes, if any, as income tax expense. Conclusions regarding tax positions are subject to review and
may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations
thereof.
****
**Dividends
and Distributions**
Dividends
and distributions to common stockholders are recorded on the ex-dividend date. The amount, if any, to be paid as a dividend is approved
by our board of directors each quarter and is generally based upon our managements estimate of our earnings for the quarter.
Dividends
and distributions to common stockholders are recorded on the ex-dividend date. The amount, if any, to be paid as a dividend is approved
by our board of directors each quarter and is generally based upon our managements estimate of our earnings for the quarter.
For
the years ended December 31, 2025, 2024 and 2023, and through the date of issuance of this report, no dividends were declared or distributed
to stockholders.
****
**Per
Share Information**
Basic and diluted earnings (loss) per common share
is calculated using the weighted average number of common shares outstanding for the periods presented.
Basic
earnings (loss) per share is computed by dividing earnings (loss) by the weighted average number of shares of common stock outstanding
during the period. Diluted earnings (loss) per share is computed by dividing earnings (loss) per share by the weighted average number
of shares outstanding, plus, any potentially dilutive shares outstanding during the period. For the years ended December 31, 2025, 2024
and 2023, basic and diluted earnings (loss) per share were the same, since there were no potentially dilutive securities outstanding.
****
**Capital
Accounts**
Certain
capital accounts including undistributed net investment income, accumulated net realized gain or loss, accumulated net unrealized gain
or loss, and paid-in capital in excess of par, are adjusted, at least annually, for permanent differences between book and tax. In addition,
the character of income and gains to be distributed is determined in accordance with income tax regulations that may differ from U.S.
GAAP.
****
**Recent
Accounting Pronouncements**
In March 2022, the FASB issued Accounting Standards
Update (ASU) 2022-02, which is intended to address issues identified during the post-implementation review of ASU 2016-13,
Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendment,
among other things, eliminates the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, Receivables
- Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings
by creditors when a borrower is experiencing financial difficulty. The new guidance is effective for interim and annual periods beginning
after December 15, 2022. The Company has evaluated and will continue to evaluate the impact of the adoption of ASU 2022-02 on its financial
statements and disclosures. Presently, the adoption of ASU 2022-02 has no impact on the Companys financial statements and disclosures.
F-20
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
In June 2022, the FASB issued ASU No. 2022-03,
Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, which
changed the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurements and Disclosures. The amendments
clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security
and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account,
recognize and measure a contractual sale restriction. The new guidance is effective for fiscal years beginning after December 15, 2023,
including interim periods therein. Early application is permitted. The Company has evaluated and will continue to evaluate the impact
the adoption of this new accounting standard on its financial statements. Presently, the adoption of this new accounting standard has
no impact on the Companys financial statements.
In
November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures.
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses,
whose operating results are reviewed regularly by the chief operating decision-maker, and for which discrete financial information is
available. The Company operates under one operating segment and reporting unit, investment management. The Companys chief operating
decision-maker is our interim chief executive officer, who is responsible for determining our investment strategy, capital allocation,
expense allocation, expense structure and significant transactions. Key metrics include, but are not limited to, net investment income
(loss) after income tax expense (benefit) and net increase (decrease) in net assets resulting from operations that is reported on the
Statements of Operations, fair value of investments as disclosed on the Schedule of Investments, as well as distributions made to the
Companys shareholders. The Companys adoption of ASU No. 2023-07 impacted its financial statement disclosures, but did not
impact the financial position or results of its operations. (See Note 11)
In December 2023, the FASB issued ASU No. 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which intends to enhance transparency by providing more
detailed tax disclosures to investors. ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted
on a prospective basis with the option to apply retrospectively. The Company adopted ASU 2023-09 on the required effective date for the
Companys financial statements issued for annual reporting periods beginning on January 1, 2025. The Company concluded that the
adoption of this guidance did not have any material impact on its financial statements.
**NOTE
3 CONCENTRATION OF CREDIT RISK**
In
the normal course of business, the Company maintains its cash balances in financial institutions, which at times may exceed federally
insured limits. The Company is subject to credit risk to the extent any financial institution with which it conducts business is unable
to fulfill contractual obligations on its behalf. Management monitors the financial condition of such financial institutions and does
not anticipate any losses from these counterparties.
****
F-21
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
**NOTE 4 NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS
PER COMMON SHARE**
The following information sets forth the computation
of basic and diluted net decrease in net assets resulting from operations per common share for the years ended December 31, 2025, 2024,
and 2023.
|
| |
For the Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
2023 | | |
|
Per Share Data (1): | |
| | |
| | |
| | |
|
Net decrease in net assets resulting from operations | |
$ | (6,780,265 | ) | |
$ | (10,861,296 | ) | |
$ | (178,900 | ) | |
|
Weighted average shares outstanding for year | |
| | | |
| | | |
| | | |
|
Basic | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
|
Diluted | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
|
Basic and diluted net decrease in net assets resulting from operations per common share | |
| | | |
| | | |
| | | |
|
Basic | |
$ | (0.057 | ) | |
$ | (0.090 | ) | |
$ | (0.001 | ) | |
|
Diluted | |
$ | (0.057 | ) | |
$ | (0.090 | ) | |
$ | (0.001 | ) | |
|
(1) | Per
share data based on weighted average shares outstanding. | |
**NOTE
5 FAIR VALUE OF INVESTMENTS**
The
Companys assets recorded at fair value have been categorized based upon a fair value hierarchy in accordance with ASC Topic 820
Fair Value Measurements and Disclosures (ASC 820). See Note 2 for a discussion of the Companys policies.
The
following tables present information about the Companys assets measured at fair value as of December 31, 2025 and 2024:
|
| |
As of December 31, 2025 | | |
|
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | | |
|
Portfolio Investments | |
| | |
| | |
| | |
| | |
|
First Lien Loans | |
$ | - | | |
$ | - | | |
$ | 7,589,357 | | |
$ | 7,589,357 | | |
|
Second Lien Loans | |
| - | | |
| - | | |
| 5,787,756 | | |
| 5,787,756 | | |
|
Equity | |
| - | | |
| - | | |
| 884,342 | | |
| 884,342 | | |
|
Total Portfolio Investments | |
| - | | |
| - | | |
| 14,261,455 | | |
| 14,261,455 | | |
|
Total Investments | |
$ | - | | |
$ | - | | |
$ | 14,261,455 | | |
$ | 14,261,455 | | |
|
| |
As of December 31, 2024 | | |
|
| |
Level 1 | | |
Level 2 | | |
Level 3 | | |
Total | | |
|
Portfolio Investments | |
| | |
| | |
| | |
| | |
|
First Lien Loans | |
$ | - | | |
$ | - | | |
$ | 9,850,963 | | |
$ | 9,850,963 | | |
|
Second Lien Loans | |
| - | | |
| - | | |
| 7,987,797 | | |
| 7,987,797 | | |
|
Equity | |
| - | | |
| - | | |
| 1,379,019 | | |
| 1,379,019 | | |
|
Total Portfolio Investments | |
| - | | |
| - | | |
| 19,217,779 | | |
| 19,217,779 | | |
|
Total Investments | |
$ | - | | |
$ | - | | |
$ | 19,217,779 | | |
$ | 19,217,779 | | |
F-22
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
During
the years ended December 31, 2025 and 2024, there were no transfers between Level 1, Level 2 or Level 3. During the year ended December
31, 2025, the Company advanced $55,000 under its loan agreement with PCC SBH Sub, Inc. During the year ended December 31, 2024, the Company
advanced $80,000 under its loan agreement with PCC SBH Sub, Inc.
The
following table presents additional information about Level 3 assets measured at fair value. Both observable and unobservable inputs
may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized
gains and losses for assets within the Level 3 category may include changes in fair value that were attributable to both observable (e.g.,
changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.
Changes
in Level 3 assets measured at fair value for the year ended December 31, 2025 are as follows:
|
| |
First Lien
Loans | | |
Second Lien
Loans | | |
Unsecured
Loans | | |
Equity | | |
Total | | |
|
Fair value at beginning of year | |
$ | 9,850,963 | | |
$ | 7,987,797 | | |
$ | - | | |
$ | 1,379,019 | | |
$ | 19,217,779 | | |
|
Purchases of investments | |
| 55,000 | | |
| - | | |
| - | | |
| - | | |
| 55,000 | | |
|
Change in unrealized loss on investments | |
| (2,316,606 | ) | |
| (2,200,041 | ) | |
| - | | |
| (494,677 | ) | |
| (5,011,324 | ) | |
|
Fair value at end of year | |
$ | 7,589,357 | | |
$ | 5,787,756 | | |
$ | - | | |
$ | 884,342 | | |
$ | 14,261,455 | | |
|
Change in unrealized loss onLevel 3 investments still held as ofDecember 31, 2025 | |
$ | (2,316,606 | ) | |
$ | (2,200,041 | ) | |
$ | - | | |
$ | (494,677 | ) | |
$ | (5,011,324 | ) | |
Changes
in Level 3 assets measured at fair value for the year ended December 31, 2024 are as follows:
|
| |
First Lien Loans | | |
Second Lien Loans | | |
Unsecured Loans | | |
Equity | | |
Total | | |
|
Fair value at beginning of year | |
$ | 12,301,440 | | |
$ | 11,652,480 | | |
$ | - | | |
$ | 5,781,033 | | |
$ | 29,734,953 | | |
|
Purchases of investments | |
| 80,000 | | |
| - | | |
| - | | |
| - | | |
| 80,000 | | |
|
Sales or repayment of investments | |
| (192,932 | ) | |
| - | | |
| - | | |
| - | | |
| (192,932 | ) | |
|
Payment-in-kind interest | |
| - | | |
| 318,417 | | |
| - | | |
| - | | |
| 318,417 | | |
|
Change in unrealized loss on investments | |
| (1,014,333 | ) | |
| (3,983,100 | ) | |
| - | | |
| (175,491 | ) | |
| (5,172,924 | ) | |
|
Realized loss on investments | |
| (1,323,212 | ) | |
| - | | |
| - | | |
| (4,226,523 | ) | |
| (5,549,735 | ) | |
|
Fair value at end of year | |
$ | 9,850,963 | | |
$ | 7,987,797 | | |
$ | - | | |
$ | 1,379,019 | | |
$ | 19,217,779 | | |
|
Change in unrealized gain (loss) on Level 3 investments still held as of December 31, 2024 | |
$ | (2,357,078 | ) | |
$ | (3,983,100 | ) | |
$ | - | | |
$ | (4,402,014 | ) | |
$ | (10,742,192 | ) | |
F-23
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
The
following table provides quantitative information regarding Level 3 fair value measurements as of December 31, 2025:
| Description | | Fair Value | | | Valuation Technique (1) | | Unobservable Inputs | | Range (Average (2)) | |
| | | | | | | | | | | |
| First Lien Loans | | $ | 7,454,357 | | | Enterprise Value Coverage | | EV / STORE LEVEL EBITDAR | | 4.00x-4.50x (4.25x) | |
| | | | | | | | | Location Value | | $1,050,000-$1,250,000 ($1,150,000) | |
| | | | 67,500 | | | Appraisal Value Coverage | | Cost Approach | | $838,000-$1,077,000 ($958,000) | |
| | | | | | | | | Sales Comparison Approach | | $928,000-$1,187,000 ($1,058,000) | |
| | | | 67,500 | | | Broker Estimates | | Broker Estimate | | $972,000-$1,211,000 ($1,092,000) | |
| Total | | | 7,589,357 | | | | | | | | |
| | | | | | | | | | | | |
| Second Lien Loans | | | 4,232,961 | | | Enterprise Value Coverage | | EV / LTM Revenue | | 0.27x-0.32x (0.29x) | |
| | | | | | | | | EV / PF Revenue | | 1.20x-1.30x (1.25x) | |
| | | | 1,554,795 | | | Net Orderly Liquidation Value | | Total Asset Value Recovery Rate | | 15%-44% (29%) | |
| Total | | | 5,787,756 | | | | | | | | |
| | | | | | | | | | | | |
| Unsecured Loans | | | - | | | Enterprise Value Coverage | | EV / LTM Revenue | | 0.27x-0.32x (0.29x) | |
| Total | | | - | | | | | | | | |
| | | | | | | | | | | | |
| Equity | | | - | | | Enterprise Value Coverage | | EV / LTM Revenue | | 0.27x-0.32x (0.29x) | |
| | | | | | | | | EV / PF Revenue | | 1.20x-1.30x (1.25x) | |
| | | | | | | | | EV / STORE LEVEL EBITDAR Location Value | | 4.00x-4.50x (4.25x) $1,050,000-$1,250,000 ($1,150,000) | |
| | | | - | | | Net Orderly Liquidation Value | | Total Asset Value Recovery Rate | | 15%-44% (29%) | |
| | | | | | | | | | | | |
| | | | 442,171 | | | Appraisal Value Coverage | | Cost Approach | | $838,000-$1,077,000 ($958,000) | |
| | | | | | | | | Sales Comparison Approach | | $928,000-$1,187,000 ($1,058,000) | |
| | | | 442,171 | | | Broker Estimates | | Broker Estimates | | $972,000-$1,211,000 (1,092,000) | |
| Total | | | 884,342 | | | | | | | | |
| Total Level 3 Investments | | $ | 14,261,455 | | | | | | | | |
|
(1) | There
were no changes in the valuation technique for the Company's investments from the prior quarter. | |
|
(2) | The
average represents the arithmetic average of the unobservable inputs and is not weighted
by the relative fair value. | |
The Company had no other remaining Level 3 investments.
As a result, there were no unobservable inputs that have been internally developed by the Company in determining the fair values of these
investments as of December 31, 2025.
F-24
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
The
following table provides quantitative information regarding Level 3 fair value measurements as of December 31, 2024:
| Description | | Fair Value | | | Valuation Technique (1) | | Unobservable Inputs | | Range (Average (2)) | |
| | | | | | | | | | | |
| First Lien Loans | | $ | 9,770,963 | | | Enterprise Value Coverage | | EV / STORE LEVEL EBITDAR | | 4.75x-5.25x(5.00x) | |
| | | | | | | | | Location Value | | $1,300,000-$1,500,000 ($1,400,000) | |
| | | | 80,000 | | | Appraisal Value Coverage | | Cost Approach | | $1,323,000-$1,617,000 ($1,470,000) | |
| | | | | | | | | Sales Comparison Approach | | $1,395,000-$1,705,000 ($1,550,000) | |
| Total | | | 9,850,963 | | | | | | | | |
| | | | | | | | | | | | |
| Second Lien Loans | | | 4,874,360 | | | Enterprise Value Coverage | | EV / LTM Revenue | | 0.37x-0.42x (0.40) | |
| | | | | | | | | EV / PF Revenue | | 1.05x-1.15x (1.10x) | |
| | | | 3,113,437 | | | Net Orderly Liquidation Value | | Total Asset Value Recovery Rate | | 54%-86% (70%) | |
| Total | | | 7,987,797 | | | | | | | | |
| | | | | | | | | | | | |
| Unsecured Loans | | | - | | | Enterprise Value Coverage | | EV / LTM Revenue | | 0.37x-0.42x (0.40x) | |
| Total | | | - | | | | | | | | |
| | | | | | | | | | | | |
| Equity | | | - | | | Enterprise Value Coverage | | EV / LTM Revenue | | 0.37x-0.42x (0.40x) | |
| | | | | | | | | EV / PF Revenue | | 1.05x-1.15x (1.10x) | |
| | | | | | | | | EV / Store level EBITDAR Location Value | | 4.75x-5.25x (5.00x) $1,300,000-$1,500,000 ($1,400,000) | |
| | | | - | | | Net Orderly Liquidation Value | | Total Asset Value Recovery Rate | | 54%-86% (70%) | |
| | | | | | | | | | | | |
| | | | 1,379,019 | | | Appraisal Value Coverage | | Cost Approach | | $1,323,000-$1,617,000 ($1,470,000) | |
| | | | | | | | | Sales Comparison Approach | | $1,395,000-$1,705,000 ($1,550,000) | |
| Total | | | 1,379,019 | | | | | | | | |
| Total Level 3 Investments | | $ | 19,217,779 | | | | | | | | |
|
(1) | There
were no changes in the valuation technique for the Company's investments from the prior quarter. | |
|
(2) | The
average represents the arithmetic average of the unobservable inputs and is not weighted
by the relative fair value. | |
As
of December 31, 2025 and 2024, respectively, the Company used a market approach to value certain equity investments as the Company felt
this approach better reflected the fair value of these investments.
F-25
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
The
Company considers all relevant information that can reasonably be obtained when determining the fair value of Level 3 investments. Due
to any given portfolio companys information rights, changes in capital structure, recent events, transactions, or liquidity events,
the type and availability of unobservable inputs may change. Increases (decreases) in revenue multiples, earnings before interest and
taxes (EBIT) multiples, time to expiration, and stock price/strike price would result in higher (lower) fair values all
else equal. Decreases (increases) in discount rates, volatility, and annual risk rates, would result in higher (lower) fair values all
else equal. The market approach utilizes market value (revenue and EBIT) multiples of publicly traded comparable companies and available
precedent sales transactions of comparable companies. The Company carefully considers numerous factors when selecting the appropriate
companies whose multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization,
similarity to the business being valued, relevant risk factors, as well as size, profitability and growth expectations. In general, precedent
transactions include recent rounds of financing, recent purchases made by the Company, and tender offers. Refer to Note 2Significant
Accounting Policies for more detail.
The
primary significant unobservable input used in the fair value measurement of the Companys debt securities (first lien loans, second
lien loans and unsecured loans), when using an income approach, is the discount rate. Significant increases (decreases) in the discount
rate in isolation would result in a significantly lower (higher) fair value measurement. In determining the discount rate, for the income
(discounted cash flow) or yield approach, the Company considers current market yields and multiples, portfolio company performance, leverage
levels and credit quality, among other factors in its analysis. Changes in one or more of these factors can have a similar directional
change on other factors in determining the appropriate discount rate to use in the income approach.
The
primary significant unobservable inputs used in the fair value measurement of the Companys equity investments, when using a market
approach, are the EBITDA multiple and revenue multiple, which is used to determine the Enterprise Value. Significant increases (decreases)
in the Enterprise Value in isolation would result in a significantly higher (lower) fair value measurement. To determine the Enterprise
Value for the market approach, the Company considers current market trading and/or transaction multiples, portfolio company performance
(financial ratios) relative to public and private peer companies and leverage levels, among other factors. Changes in one or more of
these factors can have a similar directional change on other factors in determining the appropriate multiple to use in the market approach.
The
primary unobservable inputs used in the fair value measurement of the Companys equity investments, when using an option pricing
model to allocate the equity value to the investment, are the discount rate for lack of marketability and volatility. Significant increases
(decreases) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement. Significant increases
(decreases) in the volatility in isolation would result in a significantly higher (lower) fair value measurement. Changes in one or more
factors can have a similar directional change on other factors in determining the appropriate discount rate or volatility to use in the
valuation of equity using an option pricing model.
**NOTE
6 INCOME TAX**
The
Company is currently taxable as a C corporation and subject to federal and state corporate income taxes. The Company recorded a provision
as follows:
|
| |
2025 | | |
2024 | | |
2023 | | |
|
Current expense/(benefit) | |
$ | 10,100 | | |
$ | (1,850 | ) | |
$ | 64,993 | | |
|
Deferred expense | |
| - | | |
| - | | |
| - | | |
|
Total expense/(benefit) | |
$ | 10,100 | | |
$ | (1,850 | ) | |
$ | 64,993 | | |
F-26
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
The
components of deferred tax assets and liabilities at December 31, 2025, 2024 and 2023 were as follows:
|
Deferred tax assets: | |
2025 | | |
2024 | | |
2023 | | |
|
Net operating loss carryforward | |
$ | 976,271 | | |
$ | 676,170 | | |
$ | 641,502 | | |
|
Net capital loss carryforwards | |
| 1,032,603 | | |
| 1,683,864 | | |
| 651,514 | | |
|
Other | |
| - | | |
| - | | |
| 3,476 | | |
|
Basis differences in investments | |
| 2,835,059 | | |
| 1,949,538 | | |
| 730,130 | | |
|
Total gross deferred tax assets | |
| 4,843,933 | | |
| 4,309,572 | | |
| 2,026,622 | | |
|
Less: Valuation allowance | |
| (4,843,933 | ) | |
| (4,309,572 | ) | |
| (2,026,622 | ) | |
|
Net deferred tax assets | |
$ | - | | |
$ | - | | |
$ | - | | |
As of December 31, 2025 and 2024, the total amount
of federal net operating loss carryforwards was approximately $4,648,908 and $2,889,156, respectively. The federal net operating loss
carryforwards in the amount of $4,648,909 will not expire, but can only be used to offset 80% of taxable income. As of December 31, 2025
and 2024, the total amount of federal capital loss carryforwards was approximately $4,917,156 and $8,018,402, respectively. The federal
capital loss carryforwards in the amount of $4,915,956 and $1,200 will expire in 2029 and 2028, respectively.
The recognition of a valuation allowance for deferred
taxes requires management to make estimates and judgments about the Companys future profitability which are inherently uncertain.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion
of all of the deferred tax assets will not be realized. Management believes that the likelihood of realizing the benefits of these deductible
differences at December 31, 2025, does not meet the more likely than not threshold as defined in ASC 740 Income
Taxes and thus management has recorded a full valuation allowance.
For
federal and state purposes, a portion of the Companys net operating loss carryforwards and basis differences may be subject to
limitations on annual utilization in case of a change in ownership, as defined by federal and state law. The amount of such limitations,
if any, has not been determined. Accordingly, the amount of such tax attributes available to offset future profits may be significantly
less than the actual amounts of the tax attributes.
The difference between the tax provision (benefit)
at the statutory federal income tax rate and the tax provision (benefit) before the adoption of ASU 2023-09 was as follows:
|
| |
2024 | | |
2023 | | |
|
Federal statutory tax rate | |
| 21.00 | % | |
| 21.00 | % | |
|
Federal payable true up | |
| - | | |
| - | | |
|
State tax, net of federal benefit | |
| 0.01 | | |
| (7.25 | ) | |
|
Permanent items | |
| - | | |
| - | | |
|
Capital loss carryforward expiration | |
| - | | |
| - | | |
|
Deferred true-up | |
| 0.03 | | |
| (30.33 | ) | |
|
Rate change | |
| - | | |
| - | | |
|
Increase (decrease) in valuation allowance | |
| (21.02 | ) | |
| (40.48 | ) | |
|
Other | |
| - | | |
| - | | |
|
Effective tax rate | |
| 0.02 | % | |
| (57.06 | )% | |
F-27
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
The difference between the tax provision (benefit)
at the statutory federal income tax rate and the tax provision (benefit) after the adoption of ASU 2023-09 was as follows:
|
| |
2025 | | |
|
Tax at U.S Statutory Rate | |
| (1,421,735 | ) | |
| 21.00 | % | |
|
State and Local Income Taxes | |
| 360 | | |
| (0.01 | )% | |
|
Foreign Tax Effects | |
| - | | |
| - | | |
|
Effect of Cross-Border Tax Laws | |
| - | | |
| - | | |
|
Tax Credits | |
| - | | |
| - | | |
|
Changes in Valuation Allowance | |
| 1,431,475 | | |
| (21.14 | )% | |
|
Nontaxable and Nondeductible Items | |
| - | | |
| - | | |
|
Changes in Unrecognized Tax Benefits | |
| - | | |
| - | | |
|
Other Adjustments | |
| - | | |
| - | | |
|
Effective Tax Rate | |
| 10,100 | | |
| (0.15 | )% | |
The
Company did not meet the qualifications of a RIC for the 2025 tax year and will be taxed as a corporation under Subchapter C of the Code.
It may not be in the best interests of the Companys stockholders to elect to be taxed as a RIC at the present time due to the
net operating losses and capital loss carryforwards the Company currently has. Management will make a determination that is in the best
interests of the Company and its stockholders. As a RIC, the Company generally will not pay corporate-level U.S. federal income taxes
on any net ordinary income or capital gains that the Company distributes to its stockholders as dividends and claims dividends paid deductions
to compute taxable income. A RIC will not be eligible to utilize net operating losses. However, the net operating losses may become available
should the Company disqualify as a RIC and become a C corporation in the future. In the event that the Company qualifies as a RIC, the
Company itself will no longer be required to recognize deferred tax assets or liabilities.
In
addition to meeting other requirements, the Company must generally distribute at least 90% of its investment company taxable income to
qualify for the special treatment accorded to a RIC and, if the Company qualifies, to maintain its RIC status. As part of maintaining
RIC status, undistributed taxable income (subject to a 4% excise tax) pertaining to a given fiscal year may be distributed up to 12 months
subsequent to the end of that fiscal year, provided such dividends are declared prior to the later of (1) the fifteenth day of the ninth
month following the close of that fiscal year or (2) the extended due date for filing the federal income tax return for that fiscal year.
The
Company did not have any unrecognized tax benefits as of the period presented herein. The Company identified its major tax jurisdiction
as U.S. federal. For the years ended December 31, 2025, and 2024, no income tax expenses or related liabilities for uncertain tax positions
were recognized for the Companys open tax years from inception through 2025. The Company is not aware of any tax positions for
which it is reasonably possible that the total amount of unrecognized tax benefits will change significantly in the next 12 months. The
Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In general, the federal and state
income tax returns remain open to examination by taxing authorities for tax years beginning in 2021 to present.
On
July 2, 2025, H.R.1 commonly referred to as the One Big Beautiful Bill Act (the Act), was enacted, which includes a broad
range of tax reform provisions. There has not been, and nor do we anticipate, a material impact on our financial statements as a result
of the enactment of this Act.
In December 2023, the FASB issued ASU No. 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which intends to enhance transparency by providing more
detailed tax disclosures to investors. ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted
on a prospective basis with the option to apply retrospectively. The Company adopted ASU 2023-09 on the required effective date for the
Companys financial statements issued for annual reporting periods beginning on January 1, 2025. The Company concluded that the
adoption of this guidance did not have any material impact on its financial statements.
For
the year ended December 31, 2025, the Company paid $456 to the State of Massachusetts as a minimum tax on the Companys taxable
income.
**NOTE
7 RELATED PARTY TRANSACTIONS**
****
**House
Hanover Investment Advisory Agreement**
House
Hanover has served as the Companys investment advisor since January 1, 2018 pursuant to the Interim Investment Advisory Agreement
(until May 31, 2018) and the House Hanover Investment Advisory Agreement (since May 31, 2018). House Hanover is registered as an investment
advisor under the 1940 Act.
****
F-28
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
**Advisory
Services**
**
House
Hanover is registered as an investment adviser under the 1940 Act and serves as the Companys investment advisor pursuant to the
House Hanover Investment Advisory Agreement in accordance with the 1940 Act. House Hanover is owned by and an affiliate of Mr. Mark DiSalvo,
the Companys Interim President, Interim Chief Executive Officer, and a director of the Company.
Subject
to supervision by the Companys Board, House Hanover oversees the Companys day-to-day operations and provides the Company
with investment advisory services. Under the terms of the House Hanover Investment Advisory Agreement, House Hanover, among other things:
(i) determines the composition and allocation of the portfolio of the Company, the nature and timing of the changes therein and the manner
of implementing such changes; (ii) identifies, evaluates and negotiates the structure of the investments made by the Company; (iii) executes,
closes, services and monitors the Companys investments; (iv) determines the securities and other assets that the Company shall
purchase, retain, or sell; (v) performs due diligence on prospective portfolio companies; (vi) provides the Company with such other investment
advisory, research and related services as the Company may, from time to time, reasonably require for the investment of its funds; and
(vii) if directed by the Board, assists in the execution and closing of the sale of the Companys assets or a sale of the equity
of the Company in one or more transactions. House Hanovers services under the House Hanover Investment Advisory Agreement may
not be exclusive and it is free to furnish similar services to other entities so long as its services to the Company are not impaired.At
the request of the Company, House Hanover, upon any transition of the Companys investment advisory relationship to another investment
advisor or upon any internalization, shall provide reasonable transition assistance to the Company and any successor investment advisor.
**Management
Fee**
**
Pursuant
to the House Hanover Investment Advisory Agreement, the Company pays House Hanover a base management fee for investment advisory and
management services. The cost of the base management fee is ultimately borne by the Companys stockholders. The House Hanover Investment
Advisory Agreement does not contain an incentive fee component.
The
base management fee is calculated at an annual rate of 1.00% of the Companys gross assets, including assets purchased with borrowed
funds or other forms of leverage and excluding cash and cash equivalents net of all indebtedness of the Company for borrowed money and
other liabilities of the Company. The base management fee is payable quarterly in arrears, and determined as set forth in the preceding
sentence at the end of the two most recently completed calendar quarters. The Board may retroactively adjust the valuation of the Companys
assets and the resulting calculation of the base management fee in the event the Company or any of its assets are sold or transferred
to an independent third party or the Company or House Hanover receives an audit report or other independent third party valuation of
the Company. To the extent that any such adjustment increases or decreases the base management fee of any prior period, the Company will
be obligated to pay the amount of increase to House Hanover or House Hanover will be obligated to refund the decreased amount, as applicable.
Management fees under the House Hanover Investment
Advisory Agreement for the years ended December 31, 2025, 2024 and 2023, were $184,133, $257,384 and $317,546, respectively. As of December
31, 2025 and 2024, management fees of $135,373 and $55,286, respectively were payable to House Hanover.
****
**Incentive
Fee**
The Company is not obligated to pay House Hanover
an incentive fee. Incentive fees are a typical component of investment advisory agreements with business development companies.
****
**Payment
of Expenses**
****
House
Hanover bears all compensation expenses (including health insurance, pension benefits, payroll taxes and other compensation related matters)
of its employees and bears the costs of any salaries or directors fees of any officers or directors of the Company who are affiliated
persons (as defined in the 1940 Act) of House Hanover. However, House Hanover, subject to approval by the Board of the Company, is entitled
to reimbursement for the portion of any compensation expense and the costs of any salaries of any such employees to the extent attributable
to services performed by such employees for the Company. During the term of the House Hanover Investment Advisory Agreement, House Hanover
will also bear all of its costs and expenses for office space rental, office equipment, utilities and other non-compensation related
overhead allocable to performance of its obligations under the House Hanover Investment Advisory Agreement.
Except
as provided in the preceding paragraph the Company reimburses House Hanover all direct and indirect costs and expenses incurred by it
during the term of the House Hanover Investment Advisory Agreement for: (i) due diligence of potential investments of the Company, (ii)
monitoring performance of the Companys investments, (iii) serving as officers of the Company, (iv) serving as directors and officers
of portfolio companies of the Company, (v) providing managerial assistance to portfolio companies of the Company, and (vi) enforcing
the Companys rights in respect of its investments and disposing of its investments; provided, however, that, any third party expenses
incurred by House Hanover in excess of $50,000 in the aggregate in any calendar quarter will require advance approval by the Board of
the Company.
F-29
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
In
addition to the foregoing, the Company will also be responsible for the payment of all of the Companys other expenses, including
the payment of the following fees and expenses:
|
| organizational
and offering expenses; | |
|
| expenses
incurred in valuing the Companys assets and computing its net asset value per share
(including the cost and expenses of any independent valuation firm); | |
|
| subject
to the guidelines approved by the Board of Directors, expenses incurred by House Hanover
that are payable to third parties, including agents, consultants or other advisors, in monitoring
financial and legal affairs for the Company and in monitoring the Companys investments
and performing due diligence on the Companys prospective portfolio companies or otherwise
related to, or associated with, evaluating and making investments; | |
|
| interest
payable on debt, if any, incurred to finance the Companys investments and expenses
related to unsuccessful portfolio acquisition efforts; | |
|
| offerings
of the Companys common stock and other securities; | |
|
| administration
fees; | |
|
| transfer
agent and custody fees and expenses; | |
|
| U.S.
federal and state registration fees of the Company (but not House Hanover); | |
|
| all
costs of registration and listing the Companys shares on any securities exchange; | |
|
| U.S.
federal, state and local taxes; | |
|
| independent
directors fees and expenses; | |
|
| costs
of preparing and filing reports or other documents required of the Company (but not House
Hanover) by the SEC or other regulators; | |
|
| costs
of any reports, proxy statements or other notices to stockholders, including printing costs; | |
|
| the
costs associated with individual or group stockholders; | |
|
| the
Companys allocable portion of the fidelity bond, directors and officers/errors and
omissions liability insurance, and any other insurance premiums; | |
|
| direct
costs and expenses of administration and operation of the Company, including printing, mailing,
long distance telephone, copying, secretarial and other staff, independent auditors and outside
legal costs; and | |
|
| all
other non-investment advisory expenses incurred by the Company regarding administering the
Companys business. | |
****
**Duration
and Termination**
**
Unless
terminated earlier as described below, the House Hanover Investment Advisory Agreement will continue in effect for a period of one (1)
year from its effective date. It will remain in effect from year to year thereafter if approved annually by the Companys Board
or by the affirmative vote of the holders of a majority of the Companys outstanding voting securities, and, in either case, if
also approved by a majority of Companys directors who are neither parties to the House Hanover Investment Advisory Agreement nor
interested persons (as defined under the 1940 Act) of any such party. The House Hanover Investment Advisory Agreement was
last annually renewed by the Board and by a majority of the members of the Board who are not parties to the House Hanover Investment
Advisory Agreement or interested persons (as such term is defined in the 1940 Act) of any such party, in accordance with
the requirements of the 1940 Act and the House Hanover Investment Advisory Agreement on May 12, 2025.
F-30
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
The
House Hanover Investment Advisory Agreement may be terminated at any time, without the payment of any penalty, (i) upon written notice,
effective on the date set forth in such notice, by the vote of a majority of the outstanding voting securities of the Company or by the
vote of the Companys directors, or (ii) upon 60 days written notice, by House Hanover. The House Hanover Investment Advisory
Agreement automatically terminates in the event of its assignment, as defined in the 1940 Act.
**Indemnification**
The
House Hanover Investment Advisory Agreement provides that, absent willful misfeasance, bad faith or negligence in the performance of
their duties, or by reason of the material breach or reckless disregard of their duties and obligations under the House Hanover Investment
Advisory Agreement, House Hanover and its officers, managers, employees and members are entitled to indemnification from the Company
for any damages, liabilities, costs and expenses (including reasonable attorneys fees and amounts reasonably paid in settlement)
arising from the rendering of House Hanovers services under the House Hanover Investment Advisory Agreement or otherwise as the
Companys investment advisor. The amounts payable for indemnification will be calculated net of payments recovered by the indemnified
party under any insurance policy with respect to such losses.
At
all times during the term of the House Hanover Investment Advisory Agreement and for one year thereafter, House Hanover is obligated
to maintain directors and officers/errors and omission liability insurance in an amount and with a provider reasonably acceptable to
the Board of the Company.
**Administration
Services and Service Agreement**
House
Hanover is entitled to reimbursement of expenses under the House Hanover Investment Advisory Agreement for administrative services performed
for the Company.
On
January 1, 2018, Princeton Capital Corporation directly entered into a service agreement with SS&C Technologies Holdings, Inc. (the
Sub-Administrator) to provide certain administrative services to the Company. In exchange for providing services, the Company
pays the Sub-Administrator an asset-based fee with a $168,597 annual minimum as adjusted for any reimbursement of expenses. This annual
minimum was amended in the service agreement on April 20, 2019 and has increased annually by the US Consumer Price Index - All Urban
Consumers per the service agreement on July 1st of each year beginning on July 1, 2020. This asset-based fee will vary depending upon
our gross assets, as adjusted, as follows:
| Gross Assets | | Fee | |
| first $150 million of gross assets | | 20 basis points (0.20%) | |
| next $150 million of gross assets | | 15 basis points (0.15%) | |
| next $200 million of gross assets | | 10 basis points (0.10%) | |
| in excess of $500 million of gross assets | | 5 basis points (0.05%) | |
Administration
fees were $259,500, $259,500 and $259,500 for the years ended December 31, 2025, 2024 and 2023, respectively, and sub-administration
fees were $172,268, $164,377 and $155,592 for the years ended December 31, 2025, 2024 and 2023, respectively, as shown on the Statements
of Operations under administration fees. As of December 31, 2025 and 2024, there were $194,625 and $64,875, respectively, of administration
fees owed to House Hanover, as shown on the Statements of Assets and Liabilities under Due to affiliates.
****
**Managerial
Assistance**
As
a BDC, we offer, and must provide upon request, managerial assistance to our portfolio companies. This assistance could involve monitoring
the operations of our portfolio companies, participating in board of directors and management meetings, consulting with and advising
officers of portfolio companies and providing other organizational and financial guidance. As of December 31, 2022, none of the portfolio
companies had accepted our offer for such services, except for Advantis Certified Staffing Solutions, Inc. (Advantis).
On May 1, 2022, Advantis requested one of its directors, Gregory J. Cannella who also serves as our Chief Financial Officer, become the
Executive Chair of Advantis to provide executive authority and leadership in the absence of their former president, who resigned in March
2022. Mr. Cannella has agreed to take this position and in return will be compensated by Advantis in the amount of $5,000per month.
The title and benefits of this position can be removed at any time by the board of directors of Advantis.
F-31
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
**NOTE
8 FINANCIAL HIGHLIGHTS**
|
| |
2025 | | |
2024 | | |
2023 | | |
2022 | | |
2021 | | |
|
Per Share Data (1): | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net asset value at beginning of period | |
$ | 0.175 | | |
$ | 0.265 | | |
$ | 0.266 | | |
$ | 0.286 | | |
$ | 0.187 | | |
|
Net investment income (loss) | |
| (0.015 | ) | |
| (0.001 | ) | |
| 0.007 | | |
| (0.006 | ) | |
| (0.007 | ) | |
|
Change in unrealized gain (loss) | |
| (0.042 | ) | |
| (0.043 | ) | |
| (0.008 | ) | |
| 0.025 | | |
| 0.106 | | |
|
Realized gain (loss) | |
| - | | |
| (0.046 | ) | |
| - | | |
| 0.036 | | |
| - | | |
|
Dividend distribution | |
| - | | |
| - | | |
| - | | |
| (0.075 | ) | |
| - | | |
|
Net asset value at end of period | |
$ | 0.118 | | |
$ | 0.175 | | |
$ | 0.265 | | |
$ | 0.266 | | |
$ | 0.286 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Total return based on net asset value (2) | |
| (32.6 | )% | |
| (34.0 | )% | |
| (0.4 | )% | |
| (7.0 | )% | |
| 52.9 | % | |
|
Weighted average shares outstanding for period, basic | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
|
Ratio/Supplemental Data: | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net assets at end of period | |
$ | 14,263,001 | | |
$ | 21,043,266 | | |
$ | 31,904,562 | | |
$ | 32,083,462 | | |
$ | 34,472,992 | | |
|
Average net assets | |
$ | 18,965,398 | | |
$ | 26,066,545 | | |
$ | 32,367,368 | | |
$ | 35,317,720 | | |
$ | 29,126,862 | | |
|
Total operating expenses to average net assets | |
| 10.1 | % | |
| 5.8 | % | |
| 4.9 | % | |
| 6.6 | % | |
| 6.0 | % | |
|
Net operating expenses to average net assets | |
| 10.1 | % | |
| 5.8 | % | |
| 4.9 | % | |
| 6.6 | % | |
| 6.0 | % | |
|
Net operating expenses excluding management fees, incentive fees, and interest expense to average net assets | |
| 9.1 | % | |
| 4.8 | % | |
| 4.0 | % | |
| 5.6 | % | |
| 5.1 | % | |
|
Net investment income (loss) to average net assets | |
| (9.3 | )% | |
| (0.5 | )% | |
| 2.5 | % | |
| (2.2 | )% | |
| (3.0 | )% | |
|
Net investment income (loss) to average net assets, excluding other income from non-investment sources | |
| (9.3 | )% | |
| (0.9 | )% | |
| 2.5 | % | |
| (2.3 | )% | |
| (3.0 | )% | |
|
Net increase (decrease) in net assets resulting from operations to average net assets | |
| (35.8 | )% | |
| (41.6 | )% | |
| (0.6 | )% | |
| 18.8 | % | |
| 41.2 | % | |
|
Portfolio Turnover | |
| 0.3 | % | |
| 0.3 | % | |
| 0.0 | % | |
| 32.3 | % | |
| 0.4 | % | |
|
(1) |
Financial highlights are based on weighted average shares outstanding. | |
|
|
| |
|
(2) |
Total return based on net asset value is based upon the change in net asset value per share between the opening and ending net asset values per share in the period. The total returns are not annualized. | |
|
|
| |
|
(3) |
Financial Highlights for the periods of less than one year are annualized and the ratios of operating expenses to average net assets and net investment loss to average net assets are adjusted accordingly. Non-recurring expenses are not annualized. For the years ended December 31, 2025 and 2024, the Company did not exclude any nonrecurring expenses. Because the ratios are calculated for the Companys common stock taken as a whole, an individual investors ratios may vary from these ratios. | |
F-32
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
****
**NOTE
9 COMMITMENTS AND CONTINGENCIES**
In
the normal course of business, the Company may enter into investment agreements under which it commits to make an investment in a portfolio
company at some future date or over a specified period of time. The Company maintains sufficient assets to provide adequate cover to
allow it to satisfy its unfunded commitment amount as of December 31, 2025. The unfunded commitment is accounted for under ASC 820. As
of the date of this report, all commitments have been funded.
On
December 24, 2024, the Company entered into a Corporate Guaranty Agreement with a new food vendor of Rockfish Seafood Grill, Inc. (Rockfish)
that should provide significant savings to Rockfish. This guaranty was limited to $90,000 and expired on June 1, 2025. As of September
30, 2025, the Company has no further obligations under this guaranty.
**Legal
Proceedings**
From
time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating
to the enforcement of the Companys rights under contracts with its portfolio companies. The Company is not currently subject to
any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us.
**Risks
and Uncertainties**
**Russia/Belarus
Action with Ukraine**
****
Various
social and political circumstances in the U.S. and around the world (including wars and other forms of conflict, including rising trade
tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the U.S. and foreign,
trade, economic and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods,
earthquakes, tornadoes, hurricanes and global health epidemics), may also contribute to increased market volatility and economic uncertainties
or deterioration in the U.S. and worldwide. Specifically, the rising conflict between Russia and Ukraine, and resulting market volatility
could adversely affect the Companys operations. In response to the conflict between Russia and Ukraine, the U.S. and other countries
have imposed sanctions or other restrictive actions against Russia. Any of the above factors, including sanctions, export controls, tariffs,
trade wars and other governmental actions, may materially impact the valuation of the portfolio investments and in turn, the net asset
value of the Company. The specific impact on the Companys financial condition, results of operations, and cash flows is not determinable
as of the date of these financial statements.
**NOTE
10 UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES**
The
Companys investments are primarily in private small and lower middle-market companies. In accordance with Rules 3.09 and 4.08(g)
of Regulation S-X, the Company must determine which of its unconsolidated controlled portfolio companies are considered significant
subsidiaries, if any. On May 21, 2020, the U.S. Securities and Exchange Commission adopted rule amendments to be effective on
January 1, 2021. Under the new rules, a new definition of significant subsidiary was adopted.
F-33
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
In
evaluating these investments, there are now two tests utilized to determine if any of the Companys control investments are considered
significant subsidiaries; the investment and the income significant tests. The asset significant test was eliminated under the new rules.
Rule 3-09 of Regulation S-X, as interpreted by the SEC, requires the Company to include separate audited financial statements of any
unconsolidated majority-owned subsidiary in this filing if the subsidiary investment value exceeds 20% of the Companys total investments
at fair value, the income from the subsidiary investment exceeds 80% of the Companys change in net assets resulting from operations,
or the income from the subsidiary investment exceeds 20% of the Companys change in net assets resulting from operations and the
subsidiary investment value exceeds 5% of the Companys total investments at fair value. Rule 4-08(g) of Regulation S-X requires
summarized financial information of an unconsolidated subsidiary where the Company owns more than 25% of the voting securities or is
otherwise controlled by the Company in this filing if it does not qualify under Rule 3.09 of Regulation S-X and if the subsidiary investment
value exceeds 10% of the Companys total investments at fair value, the income from the subsidiary investment exceeds 80% of the
Companys change in net assets resulting from operations, or the income from the subsidiary investment exceeds 10% of the Companys
change in net assets resulting from operations and the subsidiary investment value exceeds 5% of the Companys total investments
at fair value.
The Company has determined that Rockfish Seafood
Grill, Inc. and Advantis Certified Staffing Solutions, Inc., majority owned or control investments, were each considered a significant
subsidiary at the 20% level at December 31, 2025 as prescribed under Rule 3-09 of Regulation S-X. The Company has included the audited
financial statements of Rockfish Seafood Grill, Inc. for the years ended December 31, 2025 and December 25, 2024 and Advantis Certified
Staffing Solutions, Inc. for the years ended December 31, 2025 and 2024. See Item 15. Exhibits And Financial Statement Schedules.
****
**NOTE
11 SEGMENT INFORMATION**
An
operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses,
whose operating results are reviewed regularly by the chief operating decision-maker, and for which discrete financial information is
available. The Company operates under one operating segment and reporting unit, investment management. The Companys chief operating
decision-maker is our interim chief executive officer, who is responsible for determining our investment strategy, capital allocation,
expense allocation, expense structure and significant transactions.
Key
metrics include, but are not limited to, net investment income (loss) after income tax expense (benefit) and net increase (decrease)
in net assets resulting from operations that is reported on the Statements of Operations, fair value of investments as disclosed on the
Schedule of Investments, as well as distributions made to the Companys shareholders.
The following table illustrates key metrics for
the years ended December 31, 2025 and 2024 as reported on the Statements of Operations:
|
| |
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Net investment loss after taxes | |
$ | (1,768,941 | ) | |
$ | (138,637 | ) | |
|
Net decrease in net assets resulting from operations | |
$ | (6,780,265 | ) | |
$ | (10,861,296 | ) | |
The following table illustrates key metrics as
of December 31, 2025 and December 31, 2024 as reported on the Schedules of Investments:
|
| |
December31,
2025 | | |
December31,
2024 | | |
|
Fair value of investments | |
$ | 14,261,455 | | |
$ | 19,217,779 | | |
F-34
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
****
**NOTE
12 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)**
|
| |
Quarter Ended | | |
|
| |
December31,
2025 | | |
September30,
2025 | | |
June 30,
2025 | | |
March 31,
2025 | | |
|
| |
| | |
| | |
| | |
| | |
|
Total Investment Income | |
$ | 30,728 | | |
$ | 25,734 | | |
$ | 27,417 | | |
$ | 72,062 | | |
|
Total Operating Expenses | |
| 805,654 | | |
| 326,235 | | |
| 362,541 | | |
| 420,352 | | |
|
Income tax expense (benefit) | |
| 114 | | |
| 9,302 | | |
| 570 | | |
| 114 | | |
|
Net Investment Income (Loss) | |
| (775,040 | ) | |
| (309,803 | ) | |
| (335,694 | ) | |
| (348,404 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Net Change in Unrealized Appreciation/(Depreciation) | |
| (2,427,842 | ) | |
| (702,832 | ) | |
| (178,885 | ) | |
| (1,701,765 | ) | |
|
Net Increase (Decrease) in Net Assets Resulting from Operations | |
$ | (3,202,882 | ) | |
$ | (1,012,635 | ) | |
$ | (514,579 | ) | |
$ | (2,050,169 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Net Increase (Decrease) in Net Assets from Operations per Common Share: | |
| | | |
| | | |
| | | |
| | | |
|
Basic | |
$ | (0.028 | ) | |
$ | (0.008 | ) | |
$ | (0.004 | ) | |
$ | (0.017 | ) | |
|
Diluted | |
$ | (0.028 | ) | |
$ | (0.008 | ) | |
$ | (0.004 | ) | |
$ | (0.017 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Weighted Average Common Shares Outstanding - Basic | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
|
Weighted Average Common Shares Outstanding - Diluted | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
****
|
| |
Quarter Ended | | |
|
| |
December31, 2024 | | |
September30, 2024 | | |
June 30, 2024 | | |
March 31, 2024 | | |
|
| |
| | |
| | |
| | |
| | |
|
Total Investment Income | |
$ | 420,927 | | |
$ | 326,698 | | |
$ | 319,654 | | |
$ | 316,772 | | |
|
Total Operating Expenses | |
| 372,385 | | |
| 352,234 | | |
| 402,451 | | |
| 397,468 | | |
|
Income tax expense (benefit) | |
| (5,206 | ) | |
| 1,402 | | |
| 552 | | |
| 1,402 | | |
|
Net Investment Income (Loss) | |
| 53,748 | | |
| (26,938 | ) | |
| (83,349 | ) | |
| (82,098 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Net Realized Gain (Loss) on Investments | |
| - | | |
| - | | |
| (5,549,735 | ) | |
| - | | |
|
Net Change in Unrealized Appreciation/(Depreciation) | |
| (2,135,886 | ) | |
| (986,123 | ) | |
| 4,500,937 | | |
| (6,551,852 | ) | |
|
Net Increase (Decrease) in Net Assets Resulting from Operations | |
$ | (2,082,138 | ) | |
$ | (1,013,061 | ) | |
$ | (1,132,147 | ) | |
$ | (6,633,950 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Net Increase (Decrease) in Net Assets from Operations per Common Share: | |
| | | |
| | | |
| | | |
| | | |
|
Basic | |
$ | (0.017 | ) | |
$ | (0.008 | ) | |
$ | (0.009 | ) | |
$ | (0.055 | ) | |
|
Diluted | |
$ | (0.017 | ) | |
$ | (0.008 | ) | |
$ | (0.009 | ) | |
$ | (0.055 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Weighted Average Common Shares Outstanding - Basic | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
|
Weighted Average Common Shares Outstanding - Diluted | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
****
F-35
****
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
|
| |
December31,
2023 | | |
September30,
2023 | | |
June 30,
2023 | | |
March 31,
2023 | | |
|
| |
| | |
| | |
| | |
| | |
|
Total Investment Income | |
$ | 518,826 | | |
$ | 513,278 | | |
$ | 740,055 | | |
$ | 708,734 | | |
|
Total Operating Expenses | |
| 393,392 | | |
| 354,352 | | |
| 419,818 | | |
| 431,764 | | |
|
Income tax expense | |
| 59,363 | | |
| 174 | | |
| 5,456 | | |
| - | | |
|
Net Investment Income | |
| 66,071 | | |
| 158,752 | | |
| 314,781 | | |
| 276,970 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Net Realized Loss on Investments | |
| (1,200 | ) | |
| - | | |
| - | | |
| - | | |
|
Net Change in Unrealized Appreciation/(Depreciation) | |
| (919,008 | ) | |
| (941,952 | ) | |
| 2,160,718 | | |
| (1,294,032 | ) | |
|
Net Increase (Decrease) in Net Assets Resulting from Operations | |
$ | (854,137 | ) | |
$ | (783,200 | ) | |
$ | 2,475,499 | | |
$ | (1,017,062 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Net Increase (Decrease) in Net Assets from Operations per Common Share: | |
| | | |
| | | |
| | | |
| | | |
|
Basic | |
$ | (0.007 | ) | |
$ | (0.007 | ) | |
$ | 0.021 | | |
$ | (0.008 | ) | |
|
Diluted | |
$ | (0.007 | ) | |
$ | (0.007 | ) | |
$ | 0.021 | | |
$ | (0.008 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
|
Weighted Average Common Shares Outstanding - Basic | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
|
Weighted Average Common Shares Outstanding - Diluted | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
| 120,486,061 | | |
**NOTE
13 SUBSEQUENT EVENTS**
****
**Portfolio
Activity**
Subsequent
to the year ended December 31, 2025 and through the date of this filing, there was no portfolio activity or other events to report.
F-36
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
**Schedule
12-14**
The
table below represents the fair value of control and affiliate investments at December 31, 2024 and any amortization, purchases, sales,
and realized and change in unrealized gain (loss) made to such investments, as well as the ending fair value as of December 31, 2025.
| Portfolio Company/Type of Investment (1) | | Principal Amount/Shares/ Ownership % at December 31, 2025 | | | Amount of Interestand Dividends Credited in Income | | | Fair Value at December31, 2024 | | | Purchases(2) | | | Sales | | | Transfers from Restructuring/ Transfers into Control Investments | | | Change in Unrealized Gains/(Losses) | | | Fair Value at December31, 2025 | | |
| Control Investments | | | | | | | | | | | | | | | | | | | | | | | | | |
| Advantis Certified Staffing Solutions, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | |
| Second Lien Loan, 12.0% Cash, due 11/30/2021(3) | | $ | 4,500,000 | | | $ | - | | | $ | 3,836,547 | | | $ | - | | | $ | - | | | $ | - | | | $ | (121,851 | ) | | $ | 3,714,696 | | |
| Unsecured loan Consolidated BL Note 6.33% due 12/31/2027 | | $ | 1,381,586 | | | | 87,454 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Common Stock Series A (3) | | | 225,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Common Stock Series B (3) | | | 9,500,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Warrant for 250,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027(3) | | | 1 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Warrant for 700,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027(3) | | | 1 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| PCC SBH Sub, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock (3) | | | 100 | | | | - | | | | 1,379,019 | | | | - | | | | - | | | | - | | | | (494,677 | ) | | | 884,342 | | |
| First lien Revolving Loan 10%, due 5/8/2026 (4) | | | 135,000 | | | | | | | | 80,000 | | | | 55,000 | | | | | | | | | | | | - | | | | 135,000 | | |
| Rockfish Seafood Grill, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| First Lien Loan, 8% Cash, 6.0% PIK, due 3/31/2018 (2) (3) | | $ | 6,352,944 | | | | - | | | | 7,519,963 | | | | - | | | | - | | | | - | | | | (2,499,187 | ) | | | 5,020,776 | | |
| Revolving Loan, 8% Cash, due 12/31/2027(3) | | $ | 2,251,000 | | | | 45,020 | | | | 2,251,000 | | | | - | | | | - | | | | - | | | | 182,581 | | | | 2,433,581 | | |
| Rockfish Holdings, LLC | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Warrant for Membership Interest, exercise price $0.001 per 1% membership interest, expires 7/28/2028 (3) | | | 10.0 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Membership Interest Class A (3) | | | 99.997 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Total Control Investments | | | | | | $ | 132,474 | | | $ | 15,066,529 | | | $ | 55,000 | | | $ | - | | | $ | - | | | $ | (2,933,134 | ) | | $ | 12,188,395 | | |
|
(1) | Represents an illiquid
investment. |
|
|
(2) |
Includes
PIK interest. | |
|
(3) | Non-income producing
security. |
|
|
(4) | Represents an investment
valued using significant unobservable inputs. |
|
F-37
**PRINCETON CAPITAL CORPORATION**
**NOTES TO FINANCIAL STATEMENTS**
**December 31, 2025**
**Schedule
12-14**
The
table below represents the fair value of control and affiliate investments at December 31, 2023 and any amortization, purchases, sales,
and realized and change in unrealized gain (loss) made to such investments, as well as the ending fair value as of December 31, 2024.
| Portfolio Company/Type of Investment(1) | | Principal Amount/Shares/ Ownership % at December 31, 2024 | | | Amountof Interestand Dividends Creditedin Income | | | FairValueat December31, 2023 | | | Purchases(2) | | | Sales | | | Transfers from Restructuring/ Transfers into Control Investments | | | Change in Unrealized Gains/(Losses) | | | Fair Value at December31, 2024 | | |
| Control Investments | | | | | | | | | | | | | | | | | | | | | | | | | |
| Advantis Certified Staffing Solutions, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | |
| Second Lien Loan, 12.0% Cash, due 11/30/2021(3) | | $ | 4,500,000 | | | $ | - | | | $ | 4,736,141 | | | $ | - | | | $ | - | | | $ | - | | | $ | (899,594 | ) | | $ | 3,836,547 | | |
| Unsecured loan Consolidated BL Note 6.33% due 12/31/2027 | | $ | 1,381,586 | | | | 87,694 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Common Stock Series A (3) | | | 225,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Common Stock Series B (3) | | | 9,500,000 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Warrant for 250,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027(3) | | | 1 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Warrant for 700,000 Shares of Series A Common Stock, exercise price $0.01 per share, expires 1/1/2027(3) | | | 1 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Dominion Medical Management, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| First Lien Loan, 12.0% Cash, 6% PIK due, 3/31/2020 (2) (3) | | $ | 1,516,144 | | | | - | | | | 173,399 | | | | - | | | | (5,742,667 | ) | | | - | | | | 5,569,268 | | | | - | | |
| Integrated Medical Partners, LLC | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Membership Class A units (3) | | | 800 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Preferred Membership Class B units (3) | | | 760 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Common Units (3) | | | 14,082 | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| PCC SBH Sub, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock (3) | | | 100 | | | | - | | | | 1,543,841 | | | | - | | | | - | | | | - | | | | (164,822 | ) | | | 1,379,019 | | |
| First lien Revolving Loan 10%, due 5/8/2026 (4) | | | 80,000 | | | | | | | | - | | | | 80,000 | | | | | | | | | | | | - | | | | 80,000 | | |
| Rockfish Seafood Grill, Inc. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| First Lien Loan, 8% Cash, 6.0% PIK, due 3/31/2018 (2) (3) | | $ | 6,352,944 | | | | - | | | | 9,877,041 | | | | - | | | | - | | | | - | | | | (2,357,078 | ) | | | 7,519,963 | | |
| Revolving Loan, 8% PIK, due 12/31/2027 | | $ | 2,251,000 | | | | 183,081 | | | | 2,251,000 | | | | - | | | | - | | | | - | | | | - | | | | 2,251,000 | | |
| Rockfish Holdings, LLC | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Warrant for Membership Interest, exercise price $0.001 per 1% membership interest, expires 7/28/2028(3) | | | 10.0 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Membership Interest Class A (3) | | | 99.997 | % | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | | | - | | |
| Total Control Investments | | | | | | $ | 270,775 | | | $ | 18,581,422 | | | $ | 80,000 | | | $ | (5,742,667 | ) | | $ | - | | | $ | 2,147,774 | | | $ | 15,066,529 | | |
|
(1) |
Represents an illiquid investment. | |
|
(2) |
Includes PIK interest. | |
|
(3) |
Non-income producing security. | |
|
(4) |
Represents an investment valued using significant unobservable inputs. | |
End
of notes to financial statements.
F-38
****
**Item
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**
None.
**Item
9A. CONTROLS AND PROCEDURES**
**Evaluation
of Disclosure Controls and Procedures**
As
of December31, 2025 (the end of the period covered by this report), we, including our Interim Chief Executive Officer (Principal
Executive Officer) and Chief Financial Officer (Principal Financial Officer), evaluated the effectiveness of the design and operation
of our disclosure controls and procedures (as defined in Rule****13a-15(e)of the 1934 Act). Based on that evaluation,
our management, including our Interim Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and
procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is
recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information
is accumulated and communicated to our management, including our Interim Chief Executive Officer and Chief Financial Officer, as appropriate,
to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized
that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired
control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefitrelationship of
possible controls and procedures.
**Managements
Report on Internal Control Over Financial Reporting**
****
Management
is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an assessment
of the effectiveness of internal control over financial reporting as of December31, 2025. Internal control over financial reporting
is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. The Companys internal control over
financial reporting includes those policies and procedures that (i)pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii)provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii)provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the companys assets that could have a material effect on the financial statements.
Management
performed an assessment of the effectiveness of the Companys internal control over financial reporting as of December31,
2025 based upon criteria in Internal ControlIntegrated Framework (2013)issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on our assessment, management determined that the Companys
internal control over financial reporting was effective as of December31, 2025 based on the criteria in Internal ControlIntegrated
Framework issued by COSO.
*Attestation
Report of the Registered Public Accounting Firm*
The
independent registered public accounting firm that audited our financial statements has not issued an audit report on the effectiveness
of our internal control over financial reporting, due to exemptions for non-acceleratedfilers under the Sarbanes-OxleyActof2002,
as amended.
****
**Changes
in Internal Control over Financial Reporting**
Management
did not identify any change in the Companys internal control over financial reporting that occurred during the fourth quarter
of 2025 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial
reporting.
**Item
9B. OTHER INFORMATION**
**Rule
10b5-1 Trading Plans**
During
the quarter ended December 31, 2025, none of the Companys directors or Section 16 officers adopted or terminated any Rule 10b5-1
trading arrangements or non-Rule 10b5-1 trading arrangements.
**Item
9C. DISCLOSURES REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS**
****
Not
Applicable.
- 35 -
**PART
III**
**Item
10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**
**Director
and Executive Officer Information**
****
The
following table sets forth the names, ages and positions held by each of our directors and executive officers, followed by a brief biography
of each individual, including the business experience of each individual during the past five years and the specific qualifications that
led to the conclusion that each individual should serve as a director.
****
|
Name | |
Age | |
Position | |
Director Since | |
Term Expires | |
|
| |
| |
| |
| |
| |
|
Interested Directors | |
| |
| |
| |
| |
|
Mark S. DiSalvo | |
71 | |
Interim Chief Executive Officer, Interim President, and Director | |
2016 | |
2026 | |
|
| |
| |
| |
| |
| |
|
Independent Directors | |
| |
| |
| |
| |
|
Darren Stainrod | |
61 | |
Chairman of the Board of Directors | |
2016 | |
2026 | |
|
Greg Bennett | |
53 | |
Director | |
2016 | |
2026 | |
|
Martin Laidlaw | |
69 | |
Director | |
2016 | |
2026 | |
|
| |
| |
| |
| |
| |
|
Executive Officers | |
| |
| |
| |
| |
|
Gregory J. Cannella | |
51 | |
Chief Financial Officer, Secretary, and Treasurer | |
| |
| |
****
**Mark
S. DiSalvo**, 71, serves as our Interim Chief Executive Officer and Interim President. He was originally elected to the Companys
Board on June 9, 2016 and most recently re-elected to the Board by the Companys stockholders at the 2025 Annual Meeting on December
18, 2025. He is the President and CEO of Sema4, Inc., a leading global professional services provider of private equity funds-under-management.
He has been a senior executive and entrepreneur at international companies such as Euromoney Institutional Investor and Fairfield Whitney,
and was founder of Hall, Berwick and DiSalvo where he provided funding and management advisory services to zero and first stage entities
prior to founding Sema4. He has extensive experience in private equity, entrepreneurial management, and emerging market strategy, particularly
as to underserved markets and economic development. A frequent speaker at worldwide industry conferences, he is a charter member of the
Inner City Economic Forum. Mr. DiSalvo was educated at the University of Massachusetts, degreed in Political Studies and has earned the
professional designations CPC and CTA. He has been a long-time lecturer at the Johnson School of Business at Cornell University and the
Kellogg School of Business at Northwestern University in their full-time MBA programs where he contributed case studies in private equity,
emerging market economics and cross-border M&A. We believe Mr. DiSalvos broad experience with private equity funds and early
stage growth companies makes him a well-qualified member of our Board.
**Darren
Stainrod**, 61, serves as the Chairman of the Companys Board and was originally elected to the Companys Board on
January 18, 2016 and most recently re-elected to the Board by the Companys stockholders at the 2025 Annual Meeting on December
18, 2025. Mr. Stainrod is a Principal of Marbury Fund Services (Cayman) Limited (Marbury), a fiduciary services company
focused on the alternative investment industry and licensed by the Cayman Islands Monetary Authority. He is registered as a director
with the Authority pursuant to the Directors Licensing and Registration Law, 2014. Prior to joining Marbury, Mr. Stainrod was a Principal
at HighWater Limited in Cayman for almost 3 years where he provided professional director services to hedge funds, fund of funds and
private equity vehicles. Before becoming a professional director in May 2013, Mr. Stainrod spent 18 years at UBS where he was a Managing
Director and the Global Head of UBS Alternative Fund Services. At UBS he had responsibility for the overall management and development
of the global hedge fund administration business in seven countries with more than 300 staff servicing alternative investment funds with
over $200 billion in assets under administration. Before joining UBS, he worked for three years with Coopers & Lybrand in Cayman
and four years with Deloitte in the UK. Mr. Stainrod holds a BA (Hons) in Politics from the University of Reading in the UK. He is a
member of the Institute of Chartered Accountants in England and Wales and the Cayman Islands Institute of Professional Accountants. He
is a past Chairman of the Cayman Islands Fund Administrators Association and is the current Treasurer of AIMA Cayman Chapter. Mr. Stainrod
brings to the Board extensive experience as a director of hedge funds, fund of funds and private equity funds as well as considerable
experience in the investment fund industry, all of which provide our Board with valuable insight. Mr. Stainrod serves as chairman of
the Companys Nominating and Corporate Governance Committee and he is a member of the Companys Audit Committee and the Companys
Valuation Committee.
- 36 -
**Martin
Laidlaw**, 69, who was originally elected by the Board on January 18, 2016 and most recently re-elected to the Board by the Companys
stockholders at the 2025 Annual Meeting on December 18, 2025, provides Director Services in and from the Cayman Islands. Martin has over
30 years of experience in the offshore financial industry and has an extensive range of experience with all forms of investment fund
products and has held numerous directorship positions for a wide variety of offshore fund vehicles. Previously, Mr. Laidlaw was a Director
of a Premier Fiduciary Services Company providing Directorship services. He was also a former Managing Director of a Fund Administration
entity. Martin was previously employed by CIBC Bank and Trust Company (Cayman) Limited from 1989 through 2009. He was appointed Director
and Head of Fund Services and was responsible for leading the fund services team and developing new business and client relationships.
Prior to his years at CIBC, he was employed with KPMG, Cayman Islands where he led various financial services audits. He was a founding
member, Director and Treasurer of the Cayman Islands Fund Administrators Association. Martin graduated from Edinburgh University in Scotland
with a Bachelor of Commerce Degree. He was admitted as a Member of the Institute of Chartered Accountants of Scotland in February, 1984
and continues to maintain his qualification. Mr. Laidlaws extensive experience in the financial industry, including his financial
and accounting background, and his experience as a director of various offshore fund vehicles makes him well qualified to serve on our
Board. Mr. Laidlaw serves as chairman of the Companys Audit Committee and he is a member of the Companys Nominating and
Corporate Governance Committee and the Companys Valuation Committee.
**Greg
Bennett**, 53, who was originally elected to the Companys Board on June 9, 2016 and most recently re-elected to the Board
by the Companys stockholders at the 2025 Annual Meeting on December 18, 2025, is the founder of Azimuth Governance Limited (Azimuth).
Mr. Bennett has more than twenty five years of experience in financial services having started his professional career with Coopers &
Lybrand in Canada in 1996. From 2011 through 2014, prior to founding Azimuth, Mr. Bennett was a Director of The Harbour Trust Co. Ltd.,
where he provided fiduciary services to their clients, including serving as an independent hedge fund director. In 2004 Mr. Bennett joined
Butterfield Fund Services (Cayman) Limited as head of client relationship management and he became a Director of that firm in 2005. In
2008 he was promoted to Managing Director where he had responsibility for all aspects of the business, including managing over 75 staff
responsible for providing full fund administration services to a wide range of hedge fund clients with in excess of $30 billion in assets
under management. In 2010 Mr. Bennett established the Cayman office of HedgeServ and held the position of Managing Director. Mr. Bennett
graduated with a Bachelor of Commerce from the University of Alberta in Canada in 1995. He is a Chartered Accountant (Canada), a Certified
Public Accountant (US), and a CFA Charterholder. Mr. Bennett is also a past Director of Hedge Funds Care Cayman, past Deputy Chairman
of the Cayman Islands Fund Administrators Association, past Treasurer of AIMA Cayman and a past President of the CFA Society of the Cayman
Islands. Mr. Bennetts considerable experience in the financial services industry and as a director of various hedge funds and
his accounting background make him well qualified to serve on our Board. Mr. Bennett serves as chairman of the Companys Valuation
Committee and he is a member of the Companys Nominating and Corporate Governance Committee and the Companys Audit Committee.
**Gregory
J. Cannella**, 51, has served as our Chief Financial Officer, Treasurer and Secretary since March 13, 2015. Mr. Cannella is responsible
for financial reporting, investor communications, financial modeling and due diligence and analysis of acquisitions and dispositions.
Prior to this, Mr. Cannella was the Chief Financial Officer of Capital Point Partners, a private equity group that focused on mezzanine
lending to small and middle market private companies, where he was responsible for financial reporting, investor communications, financial
modeling and due diligence and analysis of acquisitions and dispositions. Prior to working at Capital Point Partners, Mr. Cannella was
an Asset Manager at First Commonwealth Holdings Corp., a wealth management firm in Houston, Texas where he was responsible for managing
various commercial and multi-family residential real estate investment funds as well as oversight of accounting functions and reporting
for the funds. Mr. Cannella received a B.B.A. in Management from Stephen F. Austin State University and an M.B.A. with honors in Accounting
and Finance from the University of Houston. He is a Certified Public Accountant in the State of Texas.
**Information
About our Chief Compliance Officer**
****
**Florina
Klingbaum** has served as our Chief Compliance Officer since January 1, 2018. Ms. Klingbaum is a Managing Member of Altemis Capital
Management LLC an investment management provider specializing in compliance and regulatory services. Ms. Klingbaum also serves as the
Chief Compliance Officer of House Hanover, LLC (House Hanover), the investment advisor of the Company. From 2015-2016,
she served as a Consultant for Nuveen Investments in New York City. During her career, Ms. Klingbaum has held senior roles at both Citigroup
Global Markets as well as Credit Suisse. She has extensive experience in alternative investments, structured products and overall fund
operations including fund administration, accounting, regulatory, compliance and fund liquidation services. Ms. Klingbaum started her
career at KPMG LLP where she was a Senior Auditor in the Financial Services division. She holds two Masters degrees, in Accounting and
Business Administration respectively, from Pace University, a BA in Sociology from the University of Toronto, and is a CPA.
- 37 -
**Delinquent
Section 16(a) Reports**
****
Section
16(a) of the Securities Exchange Act of 1934, as amended, and the disclosure requirements of Item 405 of SEC Regulation S-K require that
our directors and executive officers, and any persons holding more than 10% of any class of our equity securities report their ownership
of such equity securities and any subsequent changes in that ownership to the SEC and to us.
Based
solely on a review of the written statements and copies of such reports furnished to us by our executive officers, directors and greater
than 10% beneficial owners, we believe that during the fiscal year ended December 31, 2025 all Section 16(a) filing requirements applicable
to the executive officers, directors and greater than 10% beneficial owners were timely satisfied.
****
**Code
of Business Conduct and Ethics and Statement on the Prohibition of Insider Trading**
****
Our
Code of Business Conduct and Ethics and Statement on the Prohibition of Insider Trading (the Code of Ethics), which is
signed by directors and executive officers of the Company, requires that directors and executive officers avoid any conflict, or the
appearance of a conflict, between an individuals personal interests and the interests of the Company. Pursuant to the Code of
Ethics which is available on our website under the Corporate Governance link under the Princeton Capital Corporation
link at www.princetoncapitalcorp.com, each director and executive officer must disclose any conflicts of interest, or actions or relationships
that might give rise to a conflict, to the audit committee. Certain actions or relationships that might give rise to a conflict of interest
are reviewed and approved by the Board. The Code of Ethics also contains our policies and procedures relating to insider trading and
material non-public information.
**Insider
Trading Policy**
Our
insider trading policy (the Insider Trading Policy) governs the purchase, sale, and/or any other dispositions of our securities
by directors, officers, employees and other covered persons and is designed to promote compliance with insider trading laws, rules and
regulations, and listing standards applicable to us. To the extent we engage in transactions in our securities, we do so in accordance
with applicable laws.
**Nomination
of Directors**
****
There
have been no material changes to the procedures by which stockholders may recommend nominees to our Board of Directors implemented since
the filing of our Proxy Statement for our 2024 Annual Meeting of Stockholders.
**Audit
Committee**
****
The
members of the audit committee are Messrs. Laidlaw, Stainrod, and Bennett each of whom meets the independence standards established by
the SEC and the NASDAQ (the NASDAQ) for audit committees and is independent for purposes of the 1940 Act. Mr. Laidlaw serves
as chairman of the audit committee. Our Board has determined that Mr. Laidlaw is an audit committee financial expert as
that term is defined under Item 407 of Regulation S-K of the Securities Exchange Act of 1934, as amended. The Board has adopted a charter
of the audit committee, which is available in print to any stockholder who requests it and it is also available on the Companys
website at www.princetoncapitalcorp.com. The audit committee met four times and took action by written consent on one occasion during
the year ended December 31, 2025. Each member attended 100% of the audit committee meetings that were held while the director was a member
of the audit committee in 2025.
The
audit committee is responsible for approving our independent accountants, reviewing with our independent accountants the plans and results
of the audit engagement, approving professional services provided by our independent accountants, reviewing the independence of our independent
accountants and reviewing the adequacy of our internal accounting controls. The audit committee is also responsible for aiding our Board
in fair value pricing debt and equity securities that are not publicly traded or for which current market values are not readily available.
The Board and audit committee utilizes the services of an independent valuation firm to help them determine the fair value of these securities.
Given that the audit committee is comprised of all the independent directors on the Board, the audit committee may also be tasked with
special investigations into director and/or officer conduct, conflicts of interest, or other claims impacting the Company.
**Compensation
Recovery and Clawback Policies**
Under
the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act), in the event of misconduct that results in a financial
restatement that would have reduced a previously paid incentive amount, we can recoup those improper payments from our Chief Executive
Officer and Chief Financial Officer (if any). The SEC also recently adopted Exchange Act Rule 10D-1 which directs national stock exchanges
to require listed companies to implement policies intended to recoup bonuses paid to executives if the company is found to have misstated
its financial results. At this time, Rule 10D-1 is not applicable to the Company as the Companys securities are not listed on
a national securities exchange. If we issue incentive-based compensation to executive officers in the future, we plan to consider implementing
a clawback policy, although we have not yet implemented such a policy and are not required to do so.
- 38 -
**Item
11. EXECUTIVE COMPENSATION**
**Compensation
of Executive Officers**
****
None
of our officers receive direct compensation from the Company. Mr. DiSalvo, through his financial interest in House Hanover is entitled
to receive and has received a portion of investment advisory fees paid by the Company to House Hanover under the Investment Advisory
Agreement with the Company. Our other executive officers will be paid by House Hanover, subject to reimbursement by us of our allocable
portion of such compensation for services rendered by such persons to the Company under the Investment Advisory Agreement. To the extent
that House Hanover outsources any of its functions, we will reimburse House Hanover for the fees associated with such functions without
profit or benefit to House Hanover.
****
**Compensation
of Directors**
Each
independent director receives an annual fee of $30,000. In addition, they will also receive $1,500 plus reimbursement of reasonable out-of-pocket
expenses incurred in connection with attending in person or telephonically each regular board of directors meeting and each special telephonic
meeting. They will also receive $1,500 plus reimbursement of reasonable out-of-pocket expenses incurred in connection with each committee
meeting attended in person and each telephonic committee meeting. The chairmen of the audit committee, the valuation committee and the
nominating and corporate governance committee will receive an annual fee of $3,500, respectively. On March 13, 2017, the independent
directors agreed to cap directors fees at $50,000 per independent director annually, and to have an amount of $12,500 advanced
to them each quarter, subject to true up at the end of each quarter. We have obtained directors and officers liability
insurance on behalf of our directors and officers. No compensation is paid to directors who are interested persons.
The
following table shows information regarding the compensation earned by our directors for the fiscal year ended December 31, 2025. No
compensation is paid by us to any interested director or executive officer of the Company.
|
Name | |
Aggregate Compensation from Princeton Capital Corporation | | |
Pension or Retirement Benefits Accrued as Part of Company Expenses(1) | |
Total Compensation from Princeton Capital Corporation | | |
|
Interested Directors: | |
| | |
| |
| | |
|
Mark S. DiSalvo | |
| None | | |
None | |
| None | | |
|
Independent Directors: | |
| | | |
| |
| | | |
|
Greg Bennett | |
$ | 50,000 | | |
None | |
$ | 50,000 | | |
|
Martin Laidlaw | |
$ | 50,000 | | |
None | |
$ | 50,000 | | |
|
Darren Stainrod | |
$ | 50,000 | | |
None | |
$ | 50,000 | | |
|
(1) |
We do not have a profit-sharing or retirement plan, and directors
do not receive any pension or retirement benefits. | |
**Compensation Committee**
****
We
do not have a compensation committee or a committee performing similar functions because our executive officers do not receive any direct
compensation from the Company. All decisions concerning compensation of House Hanover are made by the Board (with Mr. DiSalvo recusing
himself from deliberations and voting). Executive officers of the Company are employees or independent contractors of, and are compensated
by, House Hanover. Compensation payable by the Company to the Advisor is required to be approved by a majority of the Companys
independent directors pursuant to Section 15(c) of the 1940 Act. Since the Audit Committee consists of a majority of the independent
directors of the Company, the Company has allocated responsibility to consider the compensation paid to the Advisor to the Audit Committee.
The
Nominating and Corporate Governance Committee will review the form and amount of independent director compensation at least annually
and make any changes, as it deems appropriate.
- 39 -
****
**Item
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**
The following table sets forth, as of March 25,
2026, the beneficial ownership of each current director, the Companys executive officers, each person known to us to beneficially
own 5% or more of the outstanding shares of the Companys common stock, and the executive officers and directors as a group.
Beneficial ownership is determined in accordance
with the rules of the SEC and includes voting or investment power with respect to the securities. Common stock subject to options or warrants
that are currently exercisable or exercisable within 60 days of March 25, 2026 are deemed to be outstanding and beneficially owned by
the person holding such options or warrants. Such shares, however, are not deemed outstanding for the purposes of computing the percentage
ownership of any other person. Percentage of ownership is based on 120,486,061 shares of the Companys common stock outstanding
as of March 25, 2026.
Unless
otherwise indicated, to our knowledge, each stockholder listed below has sole voting and investment power with respect to the shares
beneficially owned by the stockholder, except to the extent authority is shared by their spouses under applicable law. The address of
all executive officers and directors is c/o Princeton Capital Corporation, 800 Turnpike Street, Suite 300, North Andover, Massachusetts
01845.
The
Companys directors are divided into two groups - interested directors and independent directors. Interested directors are interested
persons as defined in Section 2(a)(19) of the 1940 Act and the NASDAQ (NASDAQ) Stock Market Rules, as the Over the
Counter Pink Market (OTCPK) exchange where the Company trades, does not establish director independence standards.
|
Name of Beneficial Owner | |
Number of Shares Owned Beneficially(1) | | |
Percentage of Class(2) | | |
|
Interested Directors | |
| | |
| | |
|
Mark S. DiSalvo(3) | |
| 115,484,327 | | |
| 95.85 | % | |
|
| |
| | | |
| | | |
|
Independent Directors | |
| | | |
| | | |
|
Greg Bennett | |
| 0 | | |
| * | |
|
|
Martin Laidlaw | |
| 0 | | |
| * | |
|
|
Darren Stainrod | |
| 0 | | |
| * | |
|
|
| |
| | | |
| | | |
|
Executive Officers | |
| | | |
| | | |
|
Mark S. DiSalvo(3) | |
| 115,484,327 | | |
| 95.85 | % | |
|
Gregory J. Cannella | |
| 0 | | |
| * | |
|
|
| |
| | | |
| | | |
|
Executive officers and directors as a group | |
| 115,484,327 | | |
| 95.85 | % | |
|
| |
| | | |
| | | |
|
Greater than 5% Holders | |
| | | |
| | | |
|
Capital Point Partners, LP (4) | |
| 104,562,000 | | |
| 86.78 | % | |
|
Capital Point Partners II, LP(4) | |
| 10,922,327 | | |
| 9.07 | % | |
|
* |
Indicates less than 1% | |
|
(1) | Beneficial ownership
has been determined in accordance with Rule 13d-3 of the Securities Exchange Act of 1934, as amended. |
|
|
(2) |
Based on a total of 120,486,061 shares of our common stock issued and outstanding on March 25, 2026. | |
|
(3) | Mr. DiSalvo, by
virtue of his ownership of all of the outstanding stock of Sema4, Inc., the general partner of Capital Point Partners, LP (CPP)
and Capital Point Partners II, LP (CPP II), may be deemed to be the beneficial owner of the 104,562,000 shares of the Companys
common stock owned by CPP and the 10,922,327 shares of the Companys common stock owned by CPP II. Mr. DiSalvo and Sema4, Inc.
each disclaims beneficial ownership of any shares held by CPP and CPP II, except to the extent of their pecuniary interest therein. The
address of Sema4, Inc., CPP and CPP II is 800 Turnpike Street, Suite 300, North Andover, MA 01854. |
|
|
(4) | This information
is based on information included in the Schedule 13D filed with the SEC. |
|
- 40 -
The following table sets forth as of March 25,
2026, the dollar range of our securities owned by our directors and executive officers. The Company is not part of a family of
investment companies, as that term is defined in Schedule 14A.
|
Name | |
Dollar Range of
Equity Securities
Beneficially
Owned(1)(2) | |
Aggregate Dollar
Range of Equity
Securities in All Funds
Overseen or
to be Overseen
by Director or
Nominee in Family
of Investment
Companies | |
|
Interested Director: | |
| |
| |
|
Mark S. DiSalvo | |
Over $100,000 | |
n/a | |
|
| |
| |
| |
|
Independent Directors: | |
| |
| |
|
Greg Bennett | |
None | |
n/a | |
|
Martin Laidlaw | |
None | |
n/a | |
|
Darren Stainrod | |
None | |
n/a | |
|
| |
| |
| |
|
Executive Officers: | |
| |
| |
|
Mark S. DiSalvo | |
Over $100,000 | |
n/a | |
|
Gregory J. Cannella | |
None | |
n/a | |
|
(1) |
The dollar range of the equity securities beneficially owned is based on the closing price per share of the Companys common stock of $0.06 on March 25, 2026 on the OTCPK. | |
|
(2) |
The dollar ranges of equity securities beneficially owned are:
none; $1$10,000; $10,001$50,000; $50,001$100,000; and over $100,000. | |
We
also note that Florina Klingbaum, our Chief Compliance Officer, does not own any securities of the Company.
****
**Item
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**
**Transactions
with Related Persons**
****
We
have procedures in place for the review, approval and monitoring of transactions involving us and certain persons related to us. As a
business development company, the 1940 Act restricts us from participating in transactions with any persons affiliated with us, including
our officers, directors, and employees and any person controlling or under common control with us or our affiliates, subject to certain
exceptions. In the ordinary course of business, we may enter into transactions with portfolio companies that may be considered related
party transactions. We have implemented certain procedures, both written and unwritten, to ensure that we do not engage in any prohibited
transactions with any persons affiliated with us. If such affiliations are found to exist, we will seek Board and/or committee review
and approval or exemptive relief for such transactions, as appropriate. In accordance with NASDAQ Rule 5630, an independent body of the
Board shall be responsible for conducting an appropriate review and oversight of all related party transactions. The Board has delegated
this responsibility to the Audit Committee.
- 41 -
As
disclosed in various filings with the SEC, House Hanover has served as the Companys investment advisor since January 1, 2018 under
an Interim Investment Advisory Agreement that took effect on January 1, 2018 and terminated on May 30, 2018 (the Interim Investment
Advisory Agreement) and an Investment Advisory Agreement that took effect on May 31, 2018 (the Investment Advisory Agreement).
The Investment Advisory Agreement was approved by the Companys stockholder at the 2018 Annual Meeting of Stockholders. The value
of the Interim Investment Advisory Agreement and the Investment Advisory Agreement was determined based on a management fee. The amount
of management fees accrued to House Hanover for the fiscal year ended December 31, 2025, under the Investment Advisory Agreement were
$184,133. In addition to compensation based on a management fee, the Investment Advisory Agreement also provides for, subject to approval
by the Board of Directors, reimbursement for the portion of any compensation expense and the costs of any salaries of any such employees
to the extent attributable to services performed by such employees for the Company (Administration Expenses). The amount
of administration expenses accrued for House Hanover for the fiscal year ended December 31, 2025 under the Investment Advisory Agreement
was $259,500. House Hanover is controlled by Mr. DiSalvo.
Mr.
DiSalvo owns all of the interests in Sema4, Inc., the general partner of Capital Point Partners, LP and Capital Point Partners II, LP,
which own approximately 87% and 9% of our common stock, respectively.
****
**Review,
Approval or Ratification of Transactions with Related Persons**
We
have also adopted a Code of Business Conduct and Ethics which applies to, among others, our senior officers, including our Chief Executive
Officer and Chief Financial Officer, as well as all of our officers, directors and employees. Our Code of Business Conduct and Ethics
requires that all employees and directors avoid any conflict, or the appearance of a conflict, between an individuals personal
interests and our interests. Pursuant to our Code of Business Conduct and Ethics, each employee and director must disclose any conflicts
of interest, or actions or relationships that might give rise to a conflict. Our Audit Committee is charged with approving any waivers
under our Code of Ethics.
****
**Director
Independence**
In
accordance with rules of the NASDAQ, the Board annually determines the independence of each director. No director is considered independent
unless the Board has determined that he or she has no material relationship with the Company. The Company monitors the status of its
directors and officers through the activities of the Companys nominating and corporate governance committee and through a questionnaire
to be completed by each director no less frequently than annually (and most recently in February of 2026), with updates periodically
if information provided in the most recent questionnaire has changed.
In
order to evaluate the materiality of any such relationship, the Board uses the definition of director independence set forth in the rules
promulgated by the NASDAQ Stock Market. Rule 5605(a)(2) provides that a director of a business development company (BDC)
shall be considered to be independent if he or she is not an interested person of the Company, as defined in Section 2(a)(19)
of the 1940 Act. Section 2(a)(19) of the 1940 Act defines an interested person to include, among other things, any person
who has, or within the last two years had, a material business or professional relationship with the Company.
The
Board has determined that each of the directors is independent and has no relationship with the Company, except as a director and stockholder
of the Company, with the exception of Mr. DiSalvo. Mr. DiSalvo is an interested person of the Company due to his interests in House Hanover,
our investment advisor, his position as Interim Chief Executive Officer and Interim President of the Company, and his interests in Sema4,
Inc., the general partner of Capital Point Partners, LP and Capital Point Partners II, LP, which own approximately 87% and 9% of our
common stock, respectively.
- 42 -
**Item
14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES**
**Independent
Registered Public Accounting Firm**
****
**PRINCIPAL
ACCOUNTANT FEES AND SERVICES**
****
**(fiscal
year ended December 31, 2025)**
****
The
following aggregate fees by WithumSmith, the Companys independent registered public accounting firm for the fiscal year ended
December 31, 2025 were billed to the Company for work attributable to audit, tax and other services.
|
| |
WithumSmith Fiscal Year Ended December 31, 2025 | | |
|
Audit Fees | |
$ | 202,800 | | |
|
Audit-Related Fees | |
| - | | |
|
Tax Fees | |
| - | | |
|
All Other Fees | |
| - | | |
|
Total Fees: | |
$ | 202,800 | | |
Services
rendered by WithumSmith in connection with fees presented above were as follows:
****
**Audit
Fees.**Audit fees include fees for the audit of our annual financial statements and the review of our quarterly
financial statements filed with the SEC on forms 10-K and 10-Q in accordance with generally accepted auditing standards.
****
**Audit-Related
Fees.**Audit related fees are assurance related services that traditionally are performed by the independent accountant,
such as attest services that are not required by statute or regulation.
****
**Tax
Fees.**Tax fees include professional fees for tax compliance and tax advice.
****
**All
Other Fees.**Fees for other services would include fees for products and services other than the services reported above.
In
the fiscal year 2025, the percentage of services designated for Audit Fees, Audit-Related Fees, Tax Fees, and All Other Fees that were
approved by the audit committee were 100%, 0%, 0%, and 0%, respectively.
- 43 -
**PRINCIPAL
ACCOUNTANT FEES AND SERVICES**
****
**(fiscal
year ended December 31, 2024)**
The
following aggregate fees by WithumSmith, the Companys independent registered public accounting firm for the fiscal year ended
December 31, 2024, were billed to the Company for work attributable to audit, tax and other services.
|
| |
WithumSmith
Fiscal Year Ended December 31,
2024 | | |
|
Audit Fees | |
$ | 169,520 | | |
|
Audit-Related Fees | |
| - | | |
|
Tax Fees | |
| - | | |
|
All Other Fees | |
| - | | |
|
Total Fees: | |
$ | 169,520 | | |
Services
rendered by WithumSmith in connection with fees presented above were as follows:
****
**Audit
Fees.**Audit fees include fees for the audit of our annual financial statements and the review of our quarterly
financial statements filed with the SEC on forms 10-K and 10-Q in accordance with generally accepted auditing standards.
****
**Audit-Related
Fees.**Audit related fees are assurance related services that traditionally are performed by the independent accountant,
such as attest services that are not required by statute or regulation.
****
**Tax
Fees.**Tax fees include professional fees for tax compliance and tax advice.
****
**All
Other Fees.**Fees for other services would include fees for products and services other than the services reported above.
In
the fiscal year 2024, the percentage of services designated for Audit Fees, Audit-Related Fees, Tax Fees, and All Other Fees that were
approved by the audit committee were 100%, 0%, 0%, and 0%, respectively.
****
**Pre-Approval
Policy**
The
Audit Committee has established a pre-approval policy that describes the permitted audit, audit-related, tax and other services to be
provided by the Companys independent registered public accounting firm. The policy requires that the Audit Committee pre-approve
all audit and non-audit services performed by the independent auditor in order to assure that the provision of such service does not
impair the auditors independence. In accordance with the pre-approval policy, the Audit Committee includes every year a discussion
and pre-approval of such services and the expected costs of such services for the year.
Any
requests for audit, audit-related, tax and other services that have not received general pre-approval at the first Audit Committee meeting
of the year must be submitted to the Audit Committee for specific pre-approval, irrespective of the amount, and cannot commence until
such approval has been granted. Normally, pre-approval is provided at regularly scheduled meetings of the Audit Committee. However, the
Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated
shall report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee does not delegate its
responsibilities to pre-approve services performed by the independent registered public accounting firm to management.
- 44 -
**PART
IV**
**Item
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES**
|
a. |
Documents Filed as Part of this Report | |
The following financial statements are set forth in Item 8:
|
Report of Independent Registered Public Accounting Firm (PCAOB ID 100) |
F-1 | |
|
Statements of Assets and Liabilities as of December 31, 2025 and December 31, 2024 |
F-3 | |
|
Statements of Operations for the years ended December 31, 2025, 2024 and 2023 |
F-4 | |
|
Statements of Changes in Net Assets for the years ended December 31, 2025, 2024 and 2023 |
F-5 | |
|
Statements of Cash Flows for the years ended December 31, 2025, 2024 and 2023 |
F-6 | |
|
Schedule of Investments as of December 31, 2025 |
F-7 | |
|
Schedule of Investments as of December 31, 2024 |
F-10 | |
|
Notes to the Financial Statements |
F-13 | |
b.
Exhibits
The
following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC:
|
Exhibit |
|
Description | |
|
2.1 |
|
Agreement and Plan of Merger between Regal One Corporation and Princeton Capital Corporation (Incorporated by reference from Exhibit 2.1 of the Registrants Current Report on Form 8-K, filed on March 19, 2015). | |
|
3.1 |
|
Articles of Amendment and Restatement (Incorporated by reference from Exhibit 3.2 of the Registrants Current Report on Form 8-K, filed on March 19, 2015). | |
|
3.2 |
|
Articles of Amendment of Princeton Capital Corporation (Incorporated by reference from Exhibit 3.2 of Registrants Annual Report on Form 10-K, filed on December 14, 2016). | |
|
3.3 |
|
Bylaws (Incorporated by reference from Exhibit 3.3 of the Registrants Current Report on Form 8-K, filed on March 19, 2015). | |
|
3.4 |
|
Second Amendment to Bylaws (Incorporated by reference from Exhibit 3.1 of the Registrants Current Report on Form 8-K, filed on February 27, 2018). | |
|
3.5 |
|
Third Amendment to Bylaws (Incorporated by reference from Exhibit 3.1 of the Registrants Current Report on Form 8-K, filed on May 19, 2020). | |
|
4.1 |
|
Form of Stock Certificate (Incorporated by reference from Exhibit 4.1 of the Registrants Current Report on Form 8-K, filed on March 19, 2015). | |
|
4.2 |
|
Description of Securities (Incorporated by reference from Exhibit 4.2 of Registrants Annual Report on Form 10-K, filed on March 30, 2023). | |
|
10.1 |
|
Custody Agreement between Registrant and U.S. Bank, N.A. (Incorporated by reference from Exhibit 10.2 of Registrants Annual Report on Form 10-K, filed on April 15, 2015). | |
|
10.2 |
|
Administration Agreement between Registrant and PCC Administrator LLC (Incorporated by reference from Exhibit 10.3 of Registrants Annual Report on Form 10-K, filed on April 15, 2015). | |
|
10.3 |
|
License Agreement between the Registrant and Princeton Investment Advisors, LLC (Incorporated by reference from Exhibit 10.5 of Registrants Annual Report on Form 10-K, filed on April 15, 2015). | |
|
10.4 |
|
Form of Indemnification Agreement between the Registrant and the executive officers and directors. (Incorporated by reference from Exhibit 10.6 of Registrants Annual Report on Form 10-K, filed on April 15, 2015). | |
|
10.5 |
|
Investment Advisory Agreement between Registrant and House Hanover, LLC (Incorporated by reference from Exhibit 10.1 of Registrants Current Report on Form 8-K, filed on May 31, 2018) | |
|
14.1 |
|
Code of Ethics (Incorporated by reference from Exhibit 14.1 of Registrants Annual Report on Form 10-K, filed on December 14, 2016). | |
|
19.1* |
|
Insider Trading Policy | |
|
31.1* |
|
Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended. | |
|
31.2* |
|
Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended. | |
|
32* |
|
Certification of Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002. | |
|
99.1* |
|
Audited Financial Statements of Rockfish Seafood Grill, Inc. as of and for the years ended December 31, 2025 and December 25, 2024. | |
|
99.2 |
|
Audited Financial Statements of Rockfish Seafood Grill, Inc. as of and for the year ended December 25, 2024 and December 27, 2023 (Incorporated by reference from Exhibit 99.1 of Registrants Annual Report on Form 10-K, filed on April 1, 2025. | |
|
99.3* |
|
Audited Financial Statements of Advantis Certified Staffing Solutions, Inc. as of and for the year ended December 31, 2025 and 2024. | |
|
101.INS |
|
Inline XBRL Instance Document. | |
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document. | |
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. | |
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit101). | |
|
* |
Filed herewith. | |
**Item
16. FORM 10-K SUMMARY**
****
None.
- 45 -
**SIGNATURES**
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
|
|
Princeton
Capital Corporation | |
|
|
|
| |
|
|
By: |
/s/
Mark S. DiSalvo | |
|
|
|
Mark
S. DiSalvo | |
|
|
|
Interim
Chief Executive Officer | |
Dated:
March 30, 2026
Pursuant to the requirements of the Securities
Exchange Act of 1934, this report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
|
NAME |
|
TITLE |
|
DATE | |
|
|
|
|
|
| |
|
/s/ Mark S. DiSalvo |
|
Interim Chief Executive Officer and Director, |
|
March 30, 2026 | |
|
Mark S. DiSalvo |
|
(Principal Executive Officer) |
|
| |
|
|
|
|
|
| |
|
/s/ Gregory J. Cannella |
|
Chief Financial Officer |
|
March 30, 2026 | |
|
Gregory J. Cannella |
|
(Principal Financial and Accounting Officer) |
|
| |
|
|
|
|
|
| |
|
/s/ Darren Stainrod |
|
Director |
|
March 30, 2026 | |
|
Darren Stainrod |
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Martin Laidlaw |
|
Director |
|
March 30, 2026 | |
|
Martin Laidlaw |
|
|
|
| |
|
|
|
|
|
| |
|
/s/ Greg Bennett |
|
Director |
|
March 30, 2026 | |
|
Greg Bennett |
|
|
|
| |
|
|
|
|
|
| |
- 46 -