Flat Rock Capital Corp. - FORM 10-K/A

Flat Rock Capital Corp. - FORM 10-K/A - October 2, 2020

Attached files

Attached files

Flat Rock Capital Corp. Reports

file	filename
EX-32.1 - CERTIFICATION - Flat Rock Capital Corp.	f10k2019a2ex32-1_flatrockcap.htm
EX-31.2 - CERTIFICATION - Flat Rock Capital Corp.	f10k2019a2ex31-2_flatrockcap.htm
EX-31.1 - CERTIFICATION - Flat Rock Capital Corp.	f10k2019a2ex31-1_flatrockcap.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

Amendment No. 2

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

For the fiscal year ended December 31, 2019

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

Flat Rock Capital Corp.

(Exact Name of Registrant as Specified in Its Charter)

Maryland		82-0894786
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

1350 6th Avenue, 18th Floor, New York, NY		10019
(Address of Principal Executive Offices)		(Zip Code)

(212) 596-3413

(Registrant’s telephone number, including area code)

Securities to be registered pursuant to Section 12(b) of the Act:

None

Securities to be registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.001 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 past 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post 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 the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the common stock held by non-affiliates of the issuer was $46,314,744 on June 30, 2019.

There were 2,991,093.773 issued and outstanding shares of the issuer’s common stock, $.001 par value per share, on September 23, 2020.

Documents Incorporated by Reference

None.

EXPLANATORY NOTE

Flat Rock Capital Corp. (the “Company,” “we,” “our,” or “us”) is filing this Amendment No. 2 (the “Amendment”) to its Annual Report on Form 10-K for the Company’s fiscal year ended December 31, 2019, as originally filed with the Securities and Exchange Commission (the “SEC”) on March 19, 2020 (the “Original Report”), and amended on April 29, 2020. The purpose of this Amendment is to file re-issued audit reports from Cohen & Company Ltd. (“Cohen”) concerning the Company’s audited financial statements for the year ended December 31, 2019 and KPMG LLP (“KPMG”) concerning the Company’s audited financial statements for the year ended December 31, 2018. Except for the audit reports of Cohen and KPMG, along with minor revisions to the notes to the financial statements, no other changes have been made to the 10-K. Also, this Form 10-K/A has not been updated to reflect events that occurred after the date of the Original Report. As such, this Form 10-K/A should be read in conjunction with the Original Report.

Updated certifications of our principal executive officer and principal financial officer are included as exhibits to this amendment.

TABLE OF CONTENTS

		Page
	PART II
Item 8.	Financial Statements and Supplementary Data	1

	PART IV
Item 15.	Exhibits, Financial Statements, and Schedules	2
SIGNATURES		4

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements

	Page

Report of Independent Registered Public Accounting Firm as of and for the year ended December 31, 2019	F-1
Report of the Predecessor Independent Registered Public Accounting Firm as of and for the year ended December 31, 2018 and the period ended December 31, 2017.	F-2
Consolidated Statements of Assets and Liabilities as of December 31, 2019 and 2018	F-3
Consolidated Statements of Operations for the Years ended December 31, 2019 and 2018 and for the Period of May 3, 2017 (commencement of operations) to December 31, 2017	F-4
Consolidated Statements of Changes in Net Assets for the Years ended December 31, 2019 and 2018 and for the Period of May 3, 2017 (commencement of operations) to December 31, 2017	F-5
Consolidated Statements of Cash Flows for the Years ended December 31, 2019 and 2018 and for the Period of May 3, 2017 (commencement of operations) to December 31, 2017	F-6
Consolidated Schedules of Investments as of December 31, 2019 and 2018	F-7
Notes to Consolidated Financial Statements	F-11

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Flat Rock Capital Corp.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Flat Rock Capital Corp. (the “Company”) as of December 31, 2019, and the related consolidated statements of operations, cash flows, and changes in net assets for the year then ended, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019, and the results of its operations, cash flows, and changes in its net assets for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. 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 audit 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 consolidated 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 audit, 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 Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated financial statements. Our procedures included confirmation of securities owned as of December 31, 2019, by correspondence with the custodian, brokers and underlying investment managers, or by other appropriate auditing procedures where replies from brokers or counterparties were not received. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

We have served as the auditor of one or more of the investment companies advised by Flat Rock Global, LLC since 2018.

COHEN & COMPANY, LTD.

Cleveland, Ohio

October 2, 2020

F-1

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Flat Rock Capital Corp.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated statement of assets and liabilities of Flat Rock Capital Corp. and subsidiary (the Company), including the consolidated schedule of investments, as of December 31, 2018, the related consolidated statements of operations, changes in net assets, and cash flows for the year ended December 31, 2018, and for the period from May 3, 2017 (commencement of operations) through December 31, 2017, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018, and the results of its operations and its cash flows for the year ended December 31, 2018, and for the period from May 3, 2017 (commencement of operations) through December 31, 2017, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 consolidated 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 Company’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 consolidated 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 consolidated financial statements. Our procedures included confirmation of investments owned as of December 31, 2018, by correspondence with third party agents. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG LLP

We served as the Company’s auditor from 2017 to 2019.

New York, New York
March 13, 2019

F-2

Flat Rock Capital Corp.

Consolidated Statements of Assets and Liabilities

	December 31, 2019			December 31, 2018
Assets:
Non-controlled/non-affiliated investments, at fair value (cost of $101,846,603 and $76,887,587, respectively)	$	101,537,724		$	76,193,199
Cash and cash equivalents		3,359,446			1,179,518
Foreign currency, at fair value (cost of $47,289)		47,289			-
Unrealized appreciation on open forward foreign currency exchange contracts		-			369,812
Receivables:
Receivable for sales of investments		1,771			-
Receivable for paydowns of investments		81,410			205,831
Due from investment adviser		196,728			89,849
Dividend receivable		64,524			-
Interest receivable		265,314			421,055
Prepaid expenses and other assets		75,000			75,000
Total Assets	$	105,629,206		$	78,534,264

Liabilities:
Credit facility, net (see note 6)	$	29,796,235		$	23,233,011
Payables:
Payable for investments purchased		18,996,667			17,946,607
Distributions payable		257,614			200,145
Management fee payable		368,452			-
Incentive fee payable		155,491			-
Accrued other general and administrative expenses		84,877			299,394
Total Liabilities	$	49,659,336		$	41,679,157

Commitments and contingencies (Note 8)

Net Assets:
Preferred shares, $0.001 par value; 25,000,000 shares authorized; 0 issued and outstanding as of December 31, 2019, and December 31, 2018	$	-		$	-
Common Shares, $0.001 par value; 125,000,000 shares authorized; 2,832,840 as of December 31, 2019, and 1,867,420 as of December 31, 2018 issued and outstanding, respectively		2,833			1,867
Additional paid-in capital		56,459,407			37,367,533
Total distributable earnings (accumulated deficit)		(492,370	)		(514,293	)
Total Net Assets	$	55,969,870		$	36,855,107
Total Liabilities and Net Assets	$	105,629,206		$	78,534,264
Net Asset Value Per Common Share	$	19.76		$	19.74

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

F-3

Flat Rock Capital Corp.

Consolidated Statements of Operations

	For the Years Ended						For the Period May 3, 2017 (commencement of operations) through
	December 31, 2019			December 31, 2018			December 31, 2017
Income:
Investment income from non-controlled, non-affiliated investments:
Interest income	$	6,497,864		$	2,369,096		$	443,683
Dividend income		121,483			-			-
Other income		76,408			109,431			-
Total investment income from non-controlled, non-affiliated investments		6,695,755			2,478,527			443,683
Total Investment Income		6,695,755			2,478,527			443,683

Expenses:
Interest expense		1,562,512			180,601			16,017
Management fees		1,376,674			625,782			233,070
Incentive fees		546,204			-			12,368
Professional fees		259,986			452,407			407,946
Other general and administrative expenses		404,596			438,738			180,290
Total Expenses		4,149,972			1,697,528			849,691
Less: Management fee waiver (Note 3)		(265,221	)		(625,782	)		(245,438	)
Less: Incentive fee waiver (Note 3)		(408,149	)		-			-
Less: Expense reimbursement (Note 3)		-			(101,939	)		(520,033	)
Net expenses		3,476,602			969,807			84,220
Net Investment Income (Loss)		3,219,153			1,508,720			359,463

Realized and unrealized gains (losses) on investments and foreign currency transactions
Net realized gains (losses):
Non-controlled, non-affiliated investments		(282,272	)		252,230			83,372
Foreign currency transactions		47,937			(5,814	)		(264,336	)
Forward foreign currency exchange contracts (Note 2)		174,789			-			-
Total net realized gains (losses)		(59,546	)		246,416			(180,964	)
Net change in unrealized gains (losses):
Non-controlled, non-affiliated investments		242,482			(602,720	)		43,070
Foreign currency translation		137,371			(395,856	)		258,486
Forward foreign currency exchange contracts (Note 2)		(369,812	)		407,953			(38,141	)
Total net change in unrealized gains (losses)		10,041			(590,623	)		263,415
Total realized and unrealized gains (losses)		(49,505	)		(344,207	)		82,451

Net Increase (Decrease) in Net Assets Resulting from Operations	$	3,169,648		$	1,164,513		$	441,914

Per Common Share Data:
Basic and diluted net investment income per common share	$	1.37		$	1.14		$	0.69
Basic and diluted net increase in net assets resulting from operations	$	1.35		$	0.88		$	0.84
Weighted Average Common Shares Outstanding - Basic and Diluted		2,350,674			1,317,698			523,748

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

F-4

Flat Rock Capital Corp.

Consolidated Statements of Changes in Net Assets

	For the Years Ended						For the Period May 3, 2017 (commencement of operations) through
	December 31, 2019			December 31, 2018			December 31, 2017
Increase (Decrease) in Net Assets Resulting from Operations:
Net investment income (loss)	$	3,219,153		$	1,508,720		$	359,463
Net realized gains (losses) on investments and foreign currency transactions		(59,546	)		246,416			(180,964	)
Net change in unrealized gains (losses) on investments, foreign currency translations, and foreign currency exchange contracts		10,041			(590,623	)		263,415
Net Increase (Decrease) in Net Assets Resulting from Operations		3,169,648			1,164,513			441,914

Decrease in Net Assets Resulting from Stockholder Distributions
Dividends and distributions to stockholders		(3,147,725	)		(1,699,455	)		(262,140	)
Return of capital		-			-			(159,125	)
Net Decrease in Net Assets Resulting from Stockholder Distributions		(3,147,725	)		(1,699,455	)		(421,265	)

Increase in Net Assets Resulting from Capital Share Transactions
Issuance of common shares		20,210,850			17,121,000			20,649,000
Reinvestment of stockholder distributions		398,064			-			-
Repurchase of common shares		(1,516,074	)		(400,600	)		-
Net Increase in Net Assets Resulting from Capital Share Transactions		19,092,840			16,720,400			20,649,000
Total Increase (Decrease) in Net Assets		19,114,763			16,185,458			20,669,649
Net Assets, Beginning of Period		36,855,107			20,669,649			-
Net Assets, End of Period	$	55,969,870		$	36,855,107		$	20,669,649
Net Asset Value per Common Share	$	19.76		$	19.74		$	20.02
Common shares outstanding at the end of the period		2,832,840			1,867,420			1,032,445

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

F-5

Flat Rock Capital Corp.

Consolidated Statements of Cash Flows

	For the Year Ended						For the Period May 3, 2017 (commencement of operations) through
	December 31, 2019			December 31, 2018			December 31, 2017

Cash Flows from Operating Activities:
Net increase in net assets resulting from operations	$	3,169,648		$	1,164,513		$	441,914
Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities:
Net realized (gains)/losses on investments		282,272			(246,416	)		(91,151	)
Net change in unrealized (gains)/losses on investments		(242,482	)		602,720			(42,295	)
Net change in unrealized (gains)/losses on foreign currency translations		(137,371	)		395,856			(258,486	)
Net change in unrealized (appreciation)/depreciation on forward foreign currency contracts		369,812			(407,953	)		38,141
Net accretion of discount on investments		(60,003	)		(40,345	)		(13,741	)
Purchases of investments		(170,787,006	)		(123,016,550	)		(65,518,684	)
Proceeds from sale of investments		145,605,721			73,829,280			38,206,613
Amortization of debt issuance costs		125,899			19,506			-
Changes in operating assets and liabilities:
Receivable for sales of investments		(1,771	)		1,486,885			(1,486,885	)
Interest and dividend receivable		91,217			(360,263	)		(60,792	)
Due from investment adviser		(106,879	)		430,184			(520,033	)
Receivable for paydowns of investments		124,421			(193,173	)		(12,658	)
Prepaid expenses and other assets		-			(75,000	)		-
Payable for investments purchased		1,050,060			8,211,441			9,735,166
Management fees payable		368,452			-			-
Incentive fee payable		155,491			-			-
Accrued other general and administrative expenses		(220,151	)		(288,841	)		588,235
Net cash used in operating activities		(20,212,670	)		(38,488,156	)		(18,994,656	)
Cash Flows from Financing Activities:
Borrowings on credit facility		45,094,606			36,041,685			-
Payments on credit facility		(38,611,271	)		(12,373,131	)		-
Payments of debt issuance costs		(46,010	)		(455,049	)		-
Distributions paid in cash		(2,692,213	)		(1,610,275	)		(310,300	)
Proceeds from issuance of common shares, net of change in subscriptions receivable of $0, $100,000 and ($100,000), respectively		20,210,850			17,221,000			20,549,000
Repurchase of common shares		(1,516,074	)		(400,600	)		-
Net cash provided by financing activities		22,439,887			38,423,630			20,238,700
Net increase (decrease) in cash and cash equivalents		2,227,217			(64,526	)		1,244,044
Cash, cash equivalents and foreign currency, beginning of period		1,179,518			1,244,044			-
Cash, cash equivalents and foreign currency, end of period⁽¹⁾	$	3,406,735		$	1,179,518		$	1,244,044

Supplemental and Non-Cash Information:
Interest paid during the period	$	1,562,512		$	180,601		$	16,017
Distributions declared during the period	$	3,147,725		$	-		$	-
Reinvestment of distributions during the period	$	398,064		$	-		$	-
Distributions payable	$	257,614		$	200,145		$	110,965

(1)

Agrees to the total of “Cash and cash equivalents” and “Foreign currency, at fair value” balances on the Consolidated Statements of Assets and Liabilities

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

F-6

Flat Rock Capital Corp.

Consolidated Schedule of Investments

As of December 31, 2019

Portfolio Company⁽³⁾	Industry	Interest Rate	Acquisition Date	Maturity Date		Principal / Par		Cost		Fair Value		Percentage of Net Assets
Debt Investments
First Lien Senior Secured Debt^(1)(2)(6)
AIS HoldCo, LLC(7)	Insurance Services	3M USD L + 5.00% (0% Floor)	8/15/2018		8/15/2025	$	3,875,000	$	3,875,108	$	3,826,562		6.8	%
ALM Media, Inc.(7)	Media: Advertising, Printing, and Publishing	3M USD L + 6.50% (1% Floor)	11/25/2019		11/25/2024		5,000,000		4,901,774		4,900,000		8.8	%
Broder Bros Co.(7)	Wholesale	3M USD L + 8.50% (1% Floor)	1/30/2019		12/2/2022		1,932,883		1,932,883		1,932,883		3.5	%
Diversified Risk Holdings, LLC	Insurance Services	3M USD L + 8.00% (1% Floor)	11/28/2018		11/28/2023		14,850,000		14,732,774		14,998,500		26.8	%
Ceva Logistics Finance B.V.(4)	Transportation: Cargo	3M USD L + 5.00% (0% Floor)	2/22/2019		8/4/2025		2,985,000		2,901,303		2,567,100		4.6	%
Coastal Construction Products(7)(10)	Construction & Building	1M USD L + 5.125% (1% Floor)	10/10/2018		9/4/2024		3,805,021		3,765,373		3,805,021		6.8	%
Hill International, Inc.(7)	Business Services	3M USD L + 5.75% (1% Floor)	9/22/2017		6/21/2023		1,462,500		1,457,080		1,458,844		2.6	%
Isagenix International LLC(7)	Direct Selling	3M USD L + 5.75% (1% Floor)	4/26/2018		4/25/2025		2,773,173		2,781,173		2,495,856		4.5	%
Mills Fleet Farms(7)	Consumer Goods	1M USD L + 6.25% (1% Floor)	10/19/2018		10/19/2024		4,961,078		4,876,119		4,712,031		8.4	%
NM Z Parent Inc (Zep Inc)(7)	Chemicals & Allied Products	3M USD L+ 4.00% (1% Floor)	5/25/2018		8/9/2024		982,412		972,631		808,820		1.4	%
North Pole US LLC(4)	Aerospace & Defense	3M USD L + 7.00% (0% Floor)	4/10/2019		4/10/2025		1,925,000		1,745,737		1,750,595		3.1	%
Potpourri Group, Inc.(7)	Direct Selling	1M USD L + 8.25% (0% Floor)	7/3/2019		7/3/2024		9,875,000		9,781,895		9,776,250		17.5	%
Specialist Resources Global Inc.(5)(7)(10)	Healthcare Services	1M USD L + 5.25% (0% Floor)	9/23/2019		9/23/2025		3,325,000		3,284,781		3,283,417		5.9	%
Spencer Gifts LLC(7)	Retail	1M USD L + 6.00% (0% Floor)	6/14/2019		6/12/2026		4,987,500		4,891,998		4,889,246		8.7	%
ThreeBridge Solutions Delayed Draw(7)	IT Implementation	-	12/1/2017		12/1/2022		277,916		275,688		277,916		0.5	%
ThreeBridge Solutions Term Loan(5)(7)	IT Implementation	1M USD L+ 9.00% (1% Floor)	12/1/2017		12/1/2022		5,164,392		5,115,830		5,164,392		9.2	%
World Insurance Associates, LLC Delayed Draw(7)	Banking, Finance, Insurance & Real Estate	1M USD L + 4.50% (1% Floor)	7/2/2018		7/18/2024		1,692,930		1,686,765		1,676,001		3.0	%
World Insurance Associates, LLC(7)	Banking, Finance, Insurance & Real Estate	1M USD L + 4.50% (1% Floor)	7/2/2018		7/18/2024		3,182,458		3,155,653		3,150,633		5.6	%
Total First Lien Senior Secured Debt						$	73,057,263	$	72,134,565	$	71,474,067		127.7	%

Collateralized Loan Obligations(1)(6)
Churchill Middle Market CLO IV Ltd., Class E2(4)	Investment Vehicle	3M USD L + 10.20% (0% Floor)	12/12/2019		1/23/2032		4,000,000		3,800,904		4,060,800		7.3	%
Total Collateralized Loan Obligations							4,000,000		3,800,904		4,060,800		7.3	%
Total Debt Investments						$	77,057,263	$	75,935,469	$	75,534,867		135.0	%

Private Fund Investments
BCP Great Lakes Fund LP(4)(8)(9)	Investment Vehicle	-	8/9/2019		-				6,914,467		7,006,429		12.5	%
Total Private Fund Investments								$	6,914,467	$	7,006,429		12.5	%

F-7

Flat Rock Capital Corp.

Consolidated Schedule of Investments

As of December 31, 2019

Security⁽³⁾	Yield to Maturity			Maturity Date	Acquisition Date	Number of Shares		Principal / Par		Amortized Cost⁽⁶⁾		Fair Value			Percentage of Net Assets
U.S. Government Securities⁽¹⁾⁽⁶⁾
U.S. Treasury Bill(5)		1.05	%	1/7/2020	12/31/2019		19,000,000	$	19,000,000	$	18,996,667	$	18,996,428			33.9	%
Total U.S. Government Securities									19,000,000		18,996,667		18,996,428			33.9	%

Total Investments								$	96,057,263	$	101,846,603	$	101,537,724			181.4	%
Liabilities in Excess of Other Assets													(45,567,854	)		(81.4	)%
Net assets												$	55,969,870			100.0	%

(1) The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method.

(2) Loan contains a variable rate structure, subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) (which can include one-, two-, three- or six-month LIBOR) or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate), at the borrower’s option, and which reset periodically based on the terms of the loan agreement. For each such loan, the Company has provided the interest rate in effect on the date presented. As of December 31, 2019, the 1 month (1M), 2 month (2M), and 3 month (3M) USD LIBOR rates were 1.76%, 1.83%, and 1.91%, respectively.

(3) As of December 31, 2019, all investments are non-controlled, non-affiliated investments. Non-controlled, non-affiliated investments are defined as investments in which the Company owns less than 5% of the portfolio company’s outstanding voting securities and does not have the power to exercise control over the management or policies of such portfolio company.

(4) Non-qualifying investment as defined by Section 55(a) of the Investment Company Act of 1940. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2019, 14.6% of the Company’s total assets were in non-qualifying investments.

(5) Investments or a portion of investments are unsettled as of December 31, 2019.

(6) As of December 31, 2019, the tax cost of the Company’s investments approximates their amortized cost.

(7) Security or portion thereof held within FRC Funding I, LLC, a special purpose wholly-owned subsidiary of the Company, and is pledged as collateral supporting the amounts outstanding under a revolving credit facility (see Note 6 to the consolidated financial statements).

(8) Security exempt from registration under the Securities Act of 1933 (the “Securities Act”), and may be deemed to be a “restricted security” under the Securities Act. As of December 31, 2019, the aggregate fair value of restricted securities held by the Company was $7,006,429 or 12.5% of net assets.

(9) The BCP Great Lakes Fund LP (the “Private Fund”) is a limited partnership commitment, and has a three year reinvestment period expiring November 27, 2021, and is subject to two (2) one year extensions thereof with the consent of BMO Harris Bank and BC Partners Advisors, L.P. The Private Fund’s investment strategy is to invest in middle market sponsor backed uni-tranche term loans. The reinvestment period is 3 years from the close date. The Private Fund does not permit withdrawal from the Private Fund or the withdrawal of any portion of the Company’s capital account until the termination of the Private Fund or as provided in the Private Fund’s limited partnership agreement. Of the $7,300,000 commitment to the Private Fund, $385,533 was unfunded as of December 31, 2019 (See Note 8 to the Consolidated Financial Statements).

(10) The Company had unfunded loan commitments to the portfolio company as of December 31, 2019. See Note 8 to the Consolidated Financial Statements.

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

F-8

Flat Rock Capital Corp.

Consolidated Schedule of Investments

As of December 31, 2018

			Acquisition	Maturity	Principal /		Amortized		Fair		Percentage of Net
Company⁽³⁾	Industry	Interest	Date	Date	Par		Cost⁽¹⁾⁽⁶⁾		Value		Assets
Debt Investments
First Lien Senior Secured⁽²⁾
AIS HoldCo, LLC(5)	Insurance Services	3M USD L + 5.00% (1% Floor)	8/15/2018	8/15/2025	$	3,975,000	$	3,975,330	$	3,955,125		10.7	%
American Dental Partners, Inc.	Healthcare Services	3M USD L + 4.25% (1% Floor)	11/14/2018	8/30/2021		1,000,000		997,564		985,000		2.7	%
Bomgar Corporation	Computers & Electronics	3M USD L + 4.00% (1% Floor)	4/17/2018	4/17/2025		2,736,250		2,744,413		2,619,959		7.1	%
Canngen Insurance Services, LLC	Insurance Services	3M USD L + 8.00% (1% Floor)	11/28/2018	11/28/2023		15,000,000		14,854,433		14,850,000		40.3	%
Coastal Construction Products	Construction & Building	2M USD L + 5.375% (1% Floor)	10/10/2018	9/4/2024		3,995,882		3,947,388		3,955,924		10.7	%
Deliver Buyer, Inc.	Capital Equipment	3M USD L + 5.00% (1% Floor)	6/14/2018	5/1/2024		497,475		496,315		486,928		1.3	%
Elo Touch Solutions(5)	High Tech Industries	3M USD L + 6.50% (1% Floor)	12/7/2018	12/5/2025		1,000,000		950,000		950,000		2.6	%
Envision Healthcare, Inc.	Healthcare Services	1M USD L + 3.75% (1% Floor)	9/28/2018	10/10/2025		2,000,000		1,995,040		1,860,000		5.0	%
GI Revelation Acquisition LLC	Business Services	1M USD L + 5.00% (1% Floor)	4/11/2018	4/11/2025		746,873		743,357		743,139		2.0	%
Hill International, Inc.	Business Services	3M USD L + 5.75% (1% Floor)	9/22/2017	6/21/2023		1,477,500		1,471,084		1,473,806		4.0	%
Idera, Inc.	Computers & Electronics	1M USD L + 4.50% (1% Floor)	6/29/2017	6/28/2024		1,331,507		1,329,303		1,338,164		3.6	%
Isagenix International LLC	Direct Selling	3M USD L + 5.75% (1% Floor)	4/26/2018	6/14/2025		2,925,000		2,935,223		2,827,598		7.7	%
JP Intermediate Term Loan	Direct Selling	3M USD L + 5.50% (1% Floor)	10/19/2018	11/15/2025		500,000		495,073		495,000		1.3	%
Logibec Inc.(4)	Healthcare IT	1M CDOR + 6.00% (1% Floor)	6/14/2017	1/15/2020		4,563,960		4,686,491		4,518,321		12.3	%
MHVC Acquisition Corp (Magnolia/Peraton)	Aerospace and Defense	3M USD L + 5.25% (1% Floor)	9/21/2018	4/28/2024		994,949		989,975		962,614		2.6	%
Mills Fleet Farms	Consumer Goods	1M USD L + 6.25% (1% Floor)	10/19/2018	10/19/2024		5,000,000		4,902,388		4,900,000		13.4	%
MRO Holdings, Inc.	Transportation	3M USD L + 5.25% (1% Floor)	10/20/2017	10/25/2023		990,000		981,904		990,000		2.7	%
Next Level Apparel, Inc.	Consumer Goods	1M USD L + 6.00% (1% Floor)	7/27/2018	7/26/2024		1,987,500		1,968,004		1,967,625		5.3	%
NM Z Parent Inc (Zep Inc)	Chemicals & Allied Products	3M USD L+ 4.00% (1% Floor)	5/25/2018	8/9/2024		992,462		981,013		876,642		2.4	%
Octave Music Group, Inc.	Broadcasting & Subscription	1M USD L + 4.75% (1% Floor)	10/17/2017	5/28/2021		987,212		992,027		987,212		2.7	%
ScribeAmerica (HealthChannels)	Healthcare Services	1M USD L + 4.50% (1% Floor)	10/31/2018	4/3/2025		997,487		987,561		987,513		2.7	%
ThreeBridge Solutions Delayed Draw(7)	IT Implementation	-	12/1/2017	12/1/2022		277,916		275,232		275,136		0.6	%
ThreeBridge Solutions Term Loan	IT Implementation	1M USD L+ 9.00% (1% Floor)	12/1/2017	12/1/2022		5,456,700		5,394,248		5,402,133		14.7	%
World Insurance Associates, LLC Delayed Draw(5)(7)	Insurance Brokerage	1M USD L + 4.75% (1% Floor)	7/2/2018	7/18/2024		332,446		325,366		317,447		0.9	%
World Insurance Associates, LLC(5)	Insurance Brokerage	1M USD L + 4.75% (1% Floor)	7/2/2018	7/18/2024		2,493,750		2,469,748		2,468,813		6.7	%
Total First Lien Senior Secured					$	62,259,869	$	61,888,480	$	61,194,099		166.0	%

Total Debt Investments					$	62,259,869	$	61,888,480	$	61,194,099		166.0	%

	Yield to			Maturity	Acquisition	Number of		Principal /		Amortized		Fair			Percentage
Company⁽³⁾	Maturity			Date	Date	Shares		Par		Cost⁽⁶⁾		Value			of Net Assets
U.S. Government Securities
U.S. Treasury Bill(5)		0.00	%	1/3/2019	12/31/2018		15,000,000	$	15,000,000	$	14,999,107	$	14,999,100			40.7	%
Total U.S. Government Securities									15,000,000		14,999,107		14,999,100			40.7	%

Total Investments								$	77,259,869	$	76,887,587	$	76,193,199			206.7	%
Liabilities in Excess of Other Assets													(39,338,092	)		(106.7	)%
Net assets												$	36,855,107			100.0	%

F-9

Flat Rock Capital Corp.

Consolidated Schedule of Investments

As of December 31, 2018

Forward foreign currency contracts outstanding as of December 31, 2018 were as follows:

Unrealized

Currency

Expiration

Appreciation

Purchased

Sold

Counterparty

Date

(Depreciation)

USD 5,090,981

CAD 6,435,000

Bannockburn Global Forex, LLC

1/31/2019

369,812

CAD Canadian Dollar

USD United States Dollar

(1)

The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method.

(2)

Loan contains a variable rate structure, subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to either the London Interbank Offered Rate (“LIBOR” or “L”) (which can include one-, two-, three- or six-month LIBOR), Canadian Dollar Offered Rate (“CDOR”), or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate), at the borrower’s option, and which reset periodically based on the terms of the loan agreement. As of December 31, 2018, the 1 month (1M), 2 month (2M), and 3 month (3M) USD LIBOR rates were 2.50%, 2.61%, and 2.81%, respectively. As of December 31, 2018, CDOR was 2.25%.

(3)

As of December 31, 2018, all investments are non-controlled, non-affiliated investments. Non-controlled, non-affiliated investments are defined as investments in which the Company owns less than 5% of the portfolio company’s outstanding voting securities and does not have the power to exercise control over the management or policies of such portfolio company.

(4)

Non-qualifying investment as defined by Section 55(a) of the Investment Company Act of 1940. As of December 31, 2018, 5.60% of the Company’s total assets were in non-qualifying investments.

(5)

Investments or a portion of investments are unsettled as of December 31, 2018.

(6)

As of December 31, 2018, the tax cost of the Company’s investments approximates their amortized cost.

(7)

Of the entire $1,499,837 commitment to World Insurance Associates, LLC Delayed Draw, $1,167,391 was unfunded as of December 31, 2018. As such, no interest is being earned on this investment. The investment is subject to a 0.50% commitment fee (see Note 8 to the consolidated financial statements).

(8)

Security or portion thereof held within FRC Funding I, LLC and is pledged as collateral supporting the amounts outstanding under a revolving credit facility with State Bank and Trust Company (see Note 6 to the consolidated financial statements).

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

F-10

Flat Rock Capital Corp.

Notes to Consolidated Financial Statements

Note 1. Organization

Flat Rock Capital Corp. (the “Company”) is a Maryland corporation formed on March 20, 2017 that commenced operations on May 3, 2017. The Company was formed to primarily make debt investments in senior secured loans of U.S. middle-market companies (“Senior Loans”). The Company is an externally managed, non-diversified, closed-end investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for tax purposes, the Company has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). Because the Company has elected to be regulated as a BDC and has elected to be treated as a RIC under the Code, the Company’s portfolio is subject to diversification and other requirements. The Company’s investment objective is the preservation of capital while generating current income from its debt investments and seeking to maximize the portfolio’s total return.

Flat Rock Global, LLC (the “Adviser” or “Flat Rock Global”), a Delaware limited liability company, serves as the Company’s investment adviser. The Adviser is registered with the Securities and Exchange Commission (“SEC”) as an investment adviser under the Investment Advisers Act of 1940 (the “Advisers Act”). The Adviser oversees the management of the Company’s activities and is responsible for making investment decisions with respect to, and providing day-to-day management and administration of, the Company’s investment portfolio under the terms of an investment advisory agreement between the Company and the Adviser (the “Investment Advisory Agreement”), subject to the supervision of the Company’s Board of Directors (the “Board”). The Board consists of three directors, two of whom are not “interested persons,” as such term is defined in Section 2(a)(19) of the 1940 Act, of the Company of Flat Rock Global.

The Company is conducting a continuous private offering of shares of its common stock (“Shares”) to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). Shares are offered solely to investors that are “accredited investors” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act. The Company offers Shares through its agents and employees without sales commission or other remuneration on a “best efforts” basis. The Company believes that each of its employees and agents qualifies as an “associated person not deemed to be broker” within the meaning of Rule 3a4-1 promulgated pursuant to the Securities Exchange Act of 1934, as amended.

Note 2. Significant Accounting Policies

Basis of Presentation

The accompanying audited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The accompanying consolidated financial statements of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-K and Articles 6 or 10 of Regulation S-X. The Company is an investment company, and, therefore, applies the specialized accounting and reporting guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services - Investment Companies.

Basis of Consolidation

As provided under Regulation S-X and ASC Topic 946, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the results of the Company’s special purpose wholly-owned subsidiary, FRC Funding I, LLC, which was formed on August 31, 2018, in its consolidated financial statements. All intercompany transactions and balances have been eliminated in consolidation.

Revenue Recognition

Security transactions are accounted for on the trade date. Distributions received from limited liability company and limited partnership investments are evaluated to determine if the distribution should be recorded as dividend income or a return of capital. The Company does not accrue as a receivable interest or dividends on loans and securities if it has reason to doubt its ability to collect such income.

Loan origination fees, original issue discount and market discount are capitalized and the Company amortizes such amounts as interest income over the respective term of the loan or security using the effective interest method. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring and other non-recurring upfront fees are recorded as fee income when earned.

F-11

Interest and Dividend Income Recognition

Interest income is recorded on the accrual basis and includes amortization of premiums or accretion of discounts. Discounts and premiums to par value on securities purchased are accreted and amortized, respectively, into interest income over the contractual life of the respective security using the effective interest method. The amortized cost of investments represents the original cost adjusted for the amortization of premiums or accretion of discounts, if any. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income in the current period.

Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. The Company considers many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.

Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.

Other Income

From time to time, the Company may receive fees for services provided to portfolio companies. These fees are generally only available to the Company as a result of closing investments, are normally paid at the closing of the investments, are generally non-recurring and are recognized as revenue when earned upon closing of the investment. The services that the Adviser provides vary by investment, but can include closing, work, diligence or other similar fees and fees for providing managerial assistance to the Company’s portfolio companies. In addition, the Company may generate revenue in the form of commitment, origination, structuring or diligence fees, monitoring fees and possibly consulting and performance- based fees.

Use of Estimates

U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reported periods. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ materially.

F-12

Cash and Cash Equivalents

Cash and cash equivalents (e.g. U.S. Treasury bills) may include demand deposits and highly liquid investments with original maturities of three months or less. Cash and cash equivalents are carried at cost, which approximates fair value. The Company deposits its cash and cash equivalents with highly-rated banking corporations and, at times, may exceed the insured limits under applicable law.

Income Taxes

The Company has elected to be treated for U.S. federal income tax purposes as a RIC under the Code. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal 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 represents obligations of the Company’s investors and will not be reflected in the financial statements of the Company. To qualify as a RIC under Subchapter M of the Code, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its stockholders, for each taxable year, at least 90% of its “investment company taxable income” for that year, which is generally its ordinary income plus the excess of its realized net short-term capital gains over its realized net long-term capital losses.

In order for the Company not to be subject to U.S. federal excise taxes, it must distribute annually an amount at least equal to the sum of (i) 98% of its net ordinary income (taking into account certain deferrals and elections) for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the calendar year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. The Company, at its discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. federal excise tax on this income.

The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than- not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in 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, on-going analyses of tax laws, regulations and interpretations thereof.

Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company’s inception-to-date federal tax years remain subject to examination by the Internal Revenue Service and the State of Maryland Department of Assessments and Taxation.

Valuation of Portfolio Investments

The Company has adopted FASB ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP and expands disclosures about fair value measurements.

ASC Topic 820 clarifies that fair value is defined as the price that the Company would receive upon selling an investment or paying to transfer a liability to a market participant in the principal or most advantageous market for the investment. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. ASC Topic 820 provides a consistent definition of fair value that focuses on exit price and prioritizes, within a measurement of fair value, the use of market-based inputs over entity-specific inputs. In addition, ASC Topic 820 provides a framework for measuring fair value and establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date as discussed in Note 5.

The Board has established procedures for the valuation of the Company’s investment portfolio. The valuation committee, which is comprised of the independent members of the Board, is responsible for executing the valuation policy, with assistance from Flat Rock Global and one or more independent valuation firms. These procedures are detailed below.

Investments for which market quotations are readily available are valued at such market quotations.

Most of the Company’s investments are not traded on a national securities exchange and do not have the benefit of market quotations or other pricing data from such an exchange. With respect to investments for which pricing data is not readily available or when such pricing data is deemed not to represent fair value, the Board has approved a multi-step valuation process each quarter, as described below:

each portfolio company or investment is valued by Flat Rock Global, potentially with information received from one or more independent valuation firms engaged by the Company;

an independent valuation firm conducts independent valuations and makes an independent assessment of the value of each investment on a rotating basis so that each investment is valued at least twice annually;

the valuation committee of the Board reviews and discusses the preliminary valuations prepared by Flat Rock Global and that of the independent valuation firm; and

the Board discusses the valuations and determines the fair value of each investment in the Company’s portfolio in good faith based on the input of Flat Rock Global, an independent valuation firm and the valuation committee.

F-13

Investments are valued utilizing a market approach, an income approach, or both approaches, as appropriate. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business). The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present value amount (discounted) calculated based on an appropriate discount rate. The measurement is based on the net present value indicated by current market expectations about those future amounts. In following these approaches, the types of factors that may be taken into account in fair value pricing the Company’s investments include, as relevant: available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, the principal market and enterprise values, among other factors.

Investments in private investment companies are measured based upon NAV as a practical expedient to determine fair value. The Company applies the practical expedient to private investment companies on an investment-by-investment basis, and consistently with the Company’s entire position in a particular investment, unless it is probable that the Company will sell a portion of an investment at an amount different from the NAV of the investment. Each of these investments has certain restrictions with respect to rights of withdrawal by the Company as specified in the respective agreements. Generally, the Company is required to provide notice of its intent to withdraw after the investment has been maintained for a certain period of time. The management agreements of the private investment companies provide for compensation to the managers in the form of fees ranging from 0% to 2% annually of the net assets and performance incentive allocations or fees ranging from 0% to 20% on net profits earned.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

The Company measures realized gains or losses by the difference between the net proceeds from the repayment or sale and the cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects 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. The Company utilizes specific identification on a First-In, First-Out (“FIFO”) basis as their tax-lot relief method.

Debt Issuance Costs

The Company records origination and other expenses related to its debt obligations as debt issuance costs. These expenses are deferred and amortized over the life of the related debt instrument. Debt issuance costs are presented on the consolidated statement of assets and liabilities as a direct deduction from the debt liability. As of December 31, 2019, the balance of debt issuance costs was $372,544, included in Credit Facility, net of $29,796,235 on the consolidated statements of assets and liabilities. As of December 31, 2018, the balance of debt issuance costs was $435,543, included in Credit Facility, net of $23,233,011 on the consolidated statements of assets and liabilities.

Distributions to Common Stockholders

Distributions to common stockholders are recorded on the record date. The amount to be distributed is determined by the Board and is generally based upon current and estimated net earnings. Net realized long-term capital gains, if any, would be generally distributed at least annually, although the Company may decide to retain such capital gains for investment.

F-14

Derivatives and Hedging Activities

Derivative instruments are defined as financial instruments whose value and performance are based on the value and performance of another security or financial instrument. During the year ended December 31, 2019, the Company utilized forward foreign currency contracts to hedge its foreign currency exposure.

The following table provides quantitative disclosures about fair values of, and unrealized appreciation (depreciation) on, the Company’s derivative instruments as of December 31, 2019 and 2018, grouped by contract type and risk exposure category.

Derivatives
	For the Years Ended
Unrealized appreciation (depreciation) per the Consolidated Statement of Assets and Liabilities	December 31, 2019		December 31, 2018
Forward foreign currency exchange contracts	$	-	$	369,812
Derivative Assets (Liabilities)	$	-	$	369,812

The following table lists the amount of change in unrealized appreciation (depreciation) included in net increase (decrease) in net assets resulting from operations during the years ended December 31, 2019 and 2018, and the period ended December 31, 2017, grouped by contract type and risk exposure. There were no realized gains/(losses) generated on forward contracts during the year ended December 31, 2018 and the period ended December 31, 2017.

Fiscal Year Ended December 31, 2019
Derivative Type	Consolidated Statement of Operations Location	Foreign Currency Contracts

Forward foreign currency exchange contracts	Net change in unrealized gains (losses) from forward foreign currency exchange contracts	$	(369,812	)
	Net realized gains/(losses) on forward foreign currency exchange contracts	$	174,789

For the Period May 3, 2017 (commencement of operations) through December 31, 2017
Derivative Type	Consolidated Statement of Operations Location	Foreign Currency Contracts

Forward foreign currency exchange contracts	Net change in unrealized gains (losses) from forward foreign currency exchange contracts	$	(38,141	)

F-15

During the years ended December 31, 2019 and 2018, and the period ended December 31, 2017, the Company’s quarterly average volume of derivatives is as follows:

	For the Years Ended				For the Period May 3, 2017 (commencement of operations) through
Notional Amount	December 31, 2019		December 31, 2018		December 31, 2017

Forward Foreign Currency Exchange Contracts	$	4,810,461	$	5,090,981	$	3,393,987

Foreign Currency Translation

The Company’s books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:

Fair value of investment securities, other assets and liabilities — at the exchange rates prevailing at the end of the applicable period; and

Purchases and sales of investment securities, income and expenses — at the exchange rates prevailing on the respective dates of such transactions.

Although net assets and fair values are presented based on the applicable foreign exchange rates described above, the Company does not isolate that portion of the results of operations due to changes in foreign exchange rates on investments, other assets and debt from the fluctuations arising from changes in fair values of investments and liabilities held. Such fluctuations are included with the net realized gain (loss) and net change in unrealized gain (loss) from investments and liabilities.

Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices to be more volatile than those of comparable U.S. companies or U.S. government securities. During the year ended December 31, 2019, all foreign security and currency translations were closed out as a result of the sale of the Company’s investment in a first lien senior secured loan to Logibec, Inc., which was denominated in Canadian currency.

Recently Issued Accounting Pronouncements

In August 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU 2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of ASU 2018-13 and may delay adoption of the additional disclosures, which are required for public companies only, until their effective date. Management has adopted certain disclosures of ASU 2018-13 and delayed adoption of additional disclosures as permitted by the standard.

F-16

Note 3. Agreements and Related Party Transactions

Investment Advisory Agreement

On May 16, 2017, the Company entered into the Investment Advisory Agreement with Flat Rock Global. Pursuant to the Investment Advisory Agreement, the Company pays Flat Rock Global a fee for its services consisting of two components — a management fee and an incentive fee. The management fee is calculated at an annual rate of 1.375% of the Company’s average gross assets as of the end of the two most recently completed quarters and is payable quarterly in arrears. The management fee for any partial month or quarter will be appropriately pro-rated. In order to meet the diversification tests required to qualify as a RIC, the Company, on December 31, 2019, acquired $19,000,000 in face value of short-term U.S. Treasury Bills. This transaction had the effect of increasing management fees payable to Flat Rock Global by $76,236 for a total gross management fee payable of $368,452; however, Flat Rock Global waived the portion relating to the acquisition of short-term U.S. Treasury Bills. For the year ended December 31, 2019, the Company incurred management fees of $1,376,674, $265,221 of which was waived by Flat Rock Global. In addition, there are no recoupment agreements in place, and waived fees will not be recouped by Flat Rock Global.

The incentive fee consists of two parts. The first part, which is referred to as the subordinated incentive fee on income, is calculated and payable quarterly in arrears based on 15% of the Company’s pre-incentive fee net investment income for the immediately preceding quarter. The payment of the incentive fee on income is subject to payment of a preferred return to investors each quarter, expressed as a quarterly rate of return on adjusted capital at the beginning of the most recently completed calendar quarter, of 1.5% (6.0% annualized), subject to a “catch up” feature. The foregoing incentive fee is subject to a total return requirement, which provides that no incentive fee in respect of the Company’s pre- incentive fee net investment income is payable except to the extent that 15.0% of the cumulative net increase in net assets resulting from operations for the prior twelve quarters exceeds the cumulative incentive fees accrued and/or paid for the prior twelve quarters. In other words, any incentive fee on income that is payable in a calendar quarter is limited to the lesser of (i) 15.0% of the amount by which the Company’s pre- incentive fee net investment income for such calendar quarter that exceeds the 1.5% hurdle, subject to the “catch-up” provision and (ii) (x) 15.0% of the cumulative net increase in net assets resulting from operations for the prior twelve quarters minus (y) the cumulative incentive fees accrued and/or paid for the prior twelve quarters. For the foregoing purpose, the “cumulative net increase in net assets resulting from operations” is the sum of the Company’s pre-incentive fee net investment income, realized gains and losses and unrealized gains and losses since inception.

The total return requirement described above is designed to measure the performance of Flat Rock Global over a longer time horizon than on a quarterly basis and to ensure that Flat Rock Global does not earn fees for exceeding the hurdle rate in selected quarters while under-performing on a longer- term basis. The total return requirement is likewise designed to incentivize Flat Rock Global to not focus solely on quarterly performance, but to seek investments that exhibit strong performance on a long-term basis. The Company believes that the total return requirement is beneficial to investors and has the potential to reduce the fees payable to Flat Rock Global in the event of under-performance on a long-term basis.

F-17

Under the capital gains component of the incentive fee, the Company pays Flat Rock Global at the end of each calendar year 15.0% of its aggregate cumulative realized capital gains from inception through the end of that year, computed net of the Company’s aggregate cumulative realized capital losses and the Company’s aggregate cumulative unrealized losses through the end of such year, less the aggregate amount of any previously paid capital gain incentive fees. For the foregoing purpose, the Company’s “aggregate cumulative realized capital gains” does not include any unrealized gains. It should be noted that the Company accrues an incentive fee for accounting purposes taking into account any unrealized gains in accordance with U.S. GAAP. The capital gains component of the incentive fee is not subject to any minimum return to stockholders. If such amount is negative, then no capital gains incentive fee is payable for such year. Additionally, if the Investment Advisory Agreement is terminated as of a date that is not a calendar year end, the termination date is treated as though it were a calendar year end for purposes of calculating and paying the capital gains incentive fee.

For the year ended December 31, 2019, the Company incurred incentive fees on income of $546,204 of which $408,149 was waived by Flat Rock Global. In addition, there are no recoupment agreements in place, and waived incentive fees will not be recouped by Flat Rock Global.

For the year ended December 31, 2018, the Company did not incur incentive fees on income. For the period May 3, 2017 (commencement of operations) through December 31, 2017, the Company incurred subordinated incentive fees on income and capital gain incentive fees of $0 and $12,368, respectively, all of which were waived by Flat Rock Global.

The Company includes unrealized gains in the calculation of the capital gains incentive fee expense and related accrued capital gains incentive fee. This accrual reflects the incentive fees that would be payable to Flat Rock Global if the Company’s entire portfolio was liquidated at its fair value as of the balance sheet date even though Flat Rock Global is not entitled to an incentive fee with respect to unrealized gains unless and until such gains are actually realized. For the years ended December 31, 2019 and 2018, and the period ended December 31, 2017, the Company did not accrue capital gains incentive fees. On a quarterly basis, the Company accrues for the capital gains incentive fee by calculating such fee as if it were due and payable as of the end of such period.

Administration Agreement

The Company entered into an administration agreement with Flat Rock Global to serve as its Administrator. Pursuant to the administration agreement, Flat Rock Global provides the Company with services such as accounting, financial reporting, legal and compliance support and investor relations support necessary for the Company to operate or has engaged a third-party firm to perform some or all of these functions. The Company does not pay Flat Rock Global any fees pursuant to the Administration Agreement. The Company reimburses Flat Rock Global for administrative expenses it incurs as a result of providing these services. Beginning on May 3, 2017, Flat Rock Global agreed to reimburse the Company for certain operating expenses. Flat Rock Global has no obligation to reimburse any portion of the Company’s expenses but has indicated that it expects to continue such reimbursements until it deems that the Company has achieved economies of scale sufficient to ensure that the Company bears a reasonable level of expenses in relation to its income. The specific amount of expenses reimbursed by Flat Rock Global, if any, will be determined at the end of each quarter. For the year ended December 31, 2019, there was no reimbursement for audit, fund accounting, fund administration, insurance, legal, valuation and other fees. For the year ended December 31, 2018, the reimbursement totaled $101,939. For the fiscal period May 3, 2017 (commencement of operations) through December 31, 2017, the reimbursement totaled $520,033. To the extent reimbursements may be needed in the future, there can be no assurance that Flat Rock Global will provide any such reimbursements. In addition, there are no recoupment agreements in place and the aforementioned expenses will not be recouped by Flat Rock Global.

Note 4. Investments

The following table presents the composition of the Company’s investment portfolio at cost and fair value as of December 31, 2019 and 2018:

	December 31, 2019				December 31, 2018
			Fair				Fair
	Cost		Value		Cost		Value
First-lien senior secured debt	$	72,134,565	$	71,474,067	$	61,888,480	$	61,194,099
Private Fund Investments		6,914,467		7,006,429		-		-
Collateralized Loan Obligations		3,800,904		4,060,800		-		-
U.S. Government Securities		18,996,667		18,996,428		14,999,107		14,999,100
		101,846,603		101,537,724		76,887,587		76,193,199
Forward foreign currency exchange contracts		-		-		-		369,812
Total Investments	$	101,846,603	$	101,537,724	$	76,887,587	$	76,563,011

As of December 31, 2019, 14.6% of the investment portfolio at amortized cost and 14.6% of the investment portfolio measured at fair value, respectively, were invested in portfolio companies with foreign domiciles, specifically Luxembourg and Switzerland, or non-controlled investment companies. Such investments are not qualifying assets as defined by Section 55(a) of the 1940 Act. As of December 31, 2018, approximately 6.10% of the investment portfolio at amortized cost and 5.93% of the investment portfolio measured at fair value, respectively, were invested in portfolio companies with foreign domiciles, specifically Canada. Such investments are not qualifying assets as defined by Section 55(a) of the Investment Company Act of 1940.

F-18

The industry composition of investments based on fair value as of December 31, 2019 and 2018 was as follows:

	December 31, 2019			December 31, 2018

U.S. Government Securities		18.8	%		19.6	%
Insurance Services		18.6	%		24.6	%
Direct Selling		12.1	%		4.3	%
Investment Vehicle		10.9	%		0.0	%
IT Implementation		5.3	%		7.4	%
Retail		4.8	%		0.0	%
Banking, Finance, Insurance & Real Estate		4.8	%		0.0	%
Media: Advertising, Printing, and Publishing		4.8	%		0.0	%
Consumer Goods		4.6	%		9.0	%
Construction & Building		3.8	%		5.2	%
Healthcare Services		3.2	%		5.0	%
Transportation: Cargo		2.5	%		0.0	%
Wholesale		1.9	%		0.0	%
Aerospace & Defense		1.7	%		1.3	%
Business Services		1.4	%		2.9	%
Chemicals & Allied Products		0.8	%		1.1	%
Healthcare IT		0.0	%		5.9	%
Computers & Electronics		0.0	%		5.2	%
Transportation		0.0	%		1.3	%
High Tech Industries		0.0	%		1.2	%
Broadcasting & Subscription		0.0	%		1.3	%
Capital Equipment		0.0	%		0.6	%
Insurance Brokerage		0.0	%		3.6	%
Forward Foreign Currency Exchange Contracts		0.0	%		0.5	%
Total		100.0	%		100.0	%

The geographic composition of investments based on fair value as of December 31, 2019 and 2018 was as follows:

	December 31, 2019			December 31, 2018

United States:
Northeast		42.1	%		14.4	%
U.S. Government Securities		18.8	%		19.7	%
West		17.1	%		27.0	%
Midwest		10.0	%		13.9	%
Southeast		7.0	%		12.1	%
South		0.8	%		7.0	%
Switzerland		2.5	%		0.0	%
Luxembourg		1.7	%		0.0	%
Canada		0.0	%		5.9	%
Total		100.0	%		100.0	%

F-19

Note 5. Fair Value of Investments

Fair value is defined as the price that the Company would receive upon selling an investment or paying to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. Accounting guidance emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs.

Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances. The valuation hierarchical levels are based upon the transparency of the inputs to the valuation of the investment as of the measurement date. The three levels are defined as follows:

	Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date.

	Level 2 — Valuations based on inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable at the measurement date. This category includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in non-active markets including actionable bids from third parties for privately held assets or liabilities, and observable inputs other than quoted prices such as yield curves and forward currency rates that are entered directly into valuation models to determine the value of derivatives or other assets or liabilities.

	Level 3 — Valuations based on inputs that are unobservable and where there is little, if any, market activity at the measurement date.

Investments in private investment companies measured based upon NAV as a practical expedient to determine fair value are not required to be categorized in the fair value hierarchy.

The inputs for the determination of fair value may require significant management judgment or estimation and are based upon management’s assessment of the assumptions that market participants would use in pricing the assets or liabilities. These investments include debt and equity investments in private companies or assets valued using the market or income approach and may involve pricing models whose inputs require significant judgment or estimation because of the absence of any meaningful current market data for identical or similar investments. The inputs in these valuations may include, but are not limited to, capitalization and discount rates, beta and earnings before interest, taxes, depreciation, and amortization (“EBITDA”) multiples. The information may also include 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 disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence.

Pricing inputs and weightings applied to determine fair value require subjective determination. Accordingly, valuations do not necessarily represent the amounts that may eventually be realized from sales or other dispositions of investments.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

F-20

The following table presents the fair value hierarchy of investments as of December 31, 2019 and December 31, 2018. Assets valued using NAV as a practical expedient, an indicator of fair value, are listed in a separate column to permit reconciliation to totals in the Consolidated Statement of Assets and Liabilities:

	Fair Value Hierarchy as of December 31, 2019
Investments:	Level 1		Level 2		Level 3		Investments Valued at Net Asset Value		Total
First-lien senior secured debt	$	-	$	-	$	71,474,067	$	-	$	71,474,067
Private Fund Investments		-		-		-		7,006,429		7,006,429
Collateralized Loan Obligations		-		-		4,060,800		-		4,060,800
U.S. Government Securities		-		18,996,428		-		-		18,996,428
Total Investments	$	-	$	18,996,428	$	75,534,867	$	7,006,429	$	101,537,724

	Fair Value Hierarchy as of December 31, 2018
Investments:	Level 1		Level 2		Level 3		Investments Valued at Net Asset Value		Total
First-lien senior secured debt	$	-	$	-	$	61,194,099	$	-	$	61,194,099
U.S. Government Securities		-		14,999,100		-		-		14,999,100
Forward foreign currency exchange contracts		-		369,812		-		-		369,812
Total Investments	$	-	$	15,368,912	$	61,194,099	$	-	$	76,563,011

The following table presents changes in the fair value of investments for which Level 3 inputs were used to determine the fair value as of and for the years ended December 31, 2019 and 2018:

	For the Years Ended
First-lien senior secured debt	December 31, 2019			December 31, 2018
Fair value, beginning of period	$	61,194,099		$	19,718,232
Purchases of investments		80,447,699			87,520,229
Proceeds from principal payments and sales of investments		(70,252,423	)		(45,086,107	)
Net change in unrealized gain (loss)		25,593			(998,600	)
Net accretion of discount on investments		59,099			40,345
Transfers into (out of) Level 3		-			-
Fair value, end of period	$	71,474,067		$	61,194,099

	For the Years Ended
Collateralized loan obligations	December 31, 2019		December 31, 2018
Fair value, beginning of period	$	-	$	-
Purchases of investments		3,800,000		-
Proceeds from principal payments and sales of investments		-		-
Net change in unrealized gain (loss)		259,896		-
Net accretion of discount on investments		904		-
Transfers into (out of) Level 3		-		-
Fair value, end of period	$	4,060,800	$	-

The following table presents the net change in unrealized gains/(losses) for the period relating to these Level 3 assets that were still held by the Company at the end of the years ended December 31, 2019 and 2018 and the period ended December 31, 2017:

	For the Years Ended						For the Period May 3, 2017 (commencement of operations) through
Net Change in Unrealized Gain (Loss)	December 31, 2019			December 31, 2018			December 31, 2017

First-lien senior secured debt	$	(87,939	)	$	(992,391	)	$	301,587
Collateralized loan obligations		259,896			-			-
	$	171,957		$	(992,391	)	$	301,587

F-21

Market Based Approach: The Company may estimate the total enterprise value of each portfolio company by utilizing market value cash flow (EBITDA) multiples of publicly traded comparable companies and comparable transactions. The Company considers numerous factors when selecting the appropriate companies whose trading 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, and relevant risk factors, as well as size, profitability and growth expectations. The Company may apply an average of various relevant comparable company EBITDA multiples to the portfolio company’s latest twelve–month EBITDA or projected EBITDA to calculate the enterprise value of the portfolio company. Significant increases or decreases in the EBITDA multiple will result in an increase or decrease in enterprise value, which may result in an increase or decrease in the fair value estimate of the investment. In applying the market-based approach as of December 31, 2019 and December 31, 2018, the Company used the relevant EBITDA and revenue multiple ranges set forth in the table below to determine the enterprise value of its portfolio companies.

The Company believes these were reasonable ranges in light of current comparable company trading levels and the specific portfolio companies involved.

Income Based Approach: The Company also may use a discounted cash flow analysis to estimate the fair value of an investment. Projected cash flows represent the relevant security’s contractual interest, fee and principal payments plus the assumption of full principal recovery at the investment’s expected maturity date. These cash flows are discounted at a rate established utilizing a yield calibration approach, which incorporates changes in the credit quality (as measured by relevant statistics) of the portfolio company, as compared to changes in the yield associated with comparable credit quality market indices, between the date of origination and the valuation date. Significant increases or decreases in the discount rate would result in a decrease or increase in the fair value measurement. In applying the income-based approach as of December 31, 2019 and December 31, 2018, the Company used the discount ranges set forth in the table below to value investments in its portfolio companies.

Fair value was also determined in some cases based on transaction pricing or recent acquisition or sale as the best measure of fair value with no material changes in operations of the related portfolio company since the transaction date.

The following table presents quantitative information about the significant unobservable inputs of the Company’s Level 3 investments as of December 31, 2019 and 2018. The table is not intended to be all-inclusive but instead captures the significant unobservable inputs relevant to the Company’s determination of fair value.

As of December 31, 2019

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

Collateralized loan obligations

4,060,800

Third Party Vendor Pricing Service

Broker Quotes

101.52 - 101.52 (101.52)

First-lien senior secured debt

4,900,000

Recent transaction

Transaction price

98.00 - 98.00 (98.00)

First-lien senior secured debt

66,574,067

Market & income approach

EBITDA multiple

8.4x - 16.5x (12.7x)

75,534,867

Revenue multiple

0.88x - 3.5x (2.1x)

Discount rate

4.31% - 11.62% (9.33%)

As of December 31, 2018

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

First-lien senior secured debt

37,072,165

Recent transaction

Transaction price

95.00 - 99.50 (98.50)

First-lien senior secured debt

24,121,934

Market & income approach

EBITDA multiple

7.8x - 10.2x (8.99x)

61,194,099

Discount rate

6.75% - 8.75% (7.79%)

Note 6. Borrowings

In accordance with the 1940 Act, with certain limitations, BDCs are allowed to borrow amounts such that their asset coverage ratios, as defined in the 1940 Act, are at least 200% after such borrowing. As of May 30, 2019, as a result of complying with the requirements set forth in the Small Business Credit Availability Act (“SBCAA”), the Company is able to borrow amounts such that its asset coverage ratio is at least 150%, rather than 200%. As of December 31, 2019 and 2018, the Company’s asset coverage ratio was 287% and 250%, respectively.

On October 12, 2018, the Company, through a special purpose wholly-owned subsidiary, FRC Funding I, LLC (“FRC Funding” and together with the Company, the “Borrowers”) entered into a Loan and Security Agreement (the “Loan Agreement”) with certain financial institutions as lenders (“Lenders”), State Bank and Trust Company as the administrative agent (“State Bank”) and Alostar Capital Finance (“Alostar”), as Lead Arranger and Bookrunner, pursuant to which the Lenders agreed to provide the Company with a revolving line of credit (the “Credit Facility”). The Loan Agreement was effective as of October 12, 2018. Per the second amendment of the Loan Agreement, Cadence Bank, N.A. is the successor by merger to State Bank and Trust Company. The termination date for the Loan Agreement is October 12, 2022.

F-22

The Loan Agreement provides for an initial $20.0 million in Revolver Commitments (as defined in the Loan Agreement) to be available at closing that the Company can draw down and repay for three years, subject to borrowing base eligibility. The Loan Agreement matures at the earliest of (a) the date that is four (4) years from closing, (b) the date on which FRC Funding terminates the Revolver Commitments pursuant to the Loan Agreement; or (c) the date on which the Revolver Commitments are terminated pursuant to certain events of default under the Loan Agreement; and the Scheduled Revolving Period End Date (as defined in the Loan Agreement) is three years from closing. On December 10, 2018, the Loan Agreement was amended to add Hitachi Capital America Corp. to the definition of “Lenders” and to amend the definition of “Revolver Commitments” to increase the aggregate amount available to the Borrowers under the Revolver Commitments to $30 million, beginning with the effective date of the amendment. On May 31, 2019, the Loan Agreement was further amended to revise the definitions for “Asset Coverage Ratio” and “Service Termination Event,” and increase the aggregate amount available to Borrowers under the Revolver Commitments to $35 million, beginning with the effective date of the amendment.

Debt obligations consisted of the following as of December 31, 2019 and December 31, 2018:

	December 31, 2019
	Aggregate Principal Committed		Outstanding Principal		Amount Available⁽¹⁾		Net Carrying Value⁽²⁾
Credit Facility	$	35,000,000	$	30,048,313	$	2,579,058	$	29,796,235
Total debt	$	35,000,000	$	30,048,313	$	2,579,058	$	29,796,235

(1)

The amount available reflects any limitations related to the Credit Facility’s borrowing base.

(2)

The carrying value of the Credit Facility is presented net of deferred financing costs and loan servicing fees of approximately $0.4 million.

	December 31, 2018
	Aggregate Principal Committed		Outstanding Principal		Amount Available⁽¹⁾		Net Carrying Value⁽²⁾
Credit Facility	$	30,000,000	$	23,668,554	$	576,091	$	23,233,011
Total debt	$	30,000,000	$	23,668,554	$	576,091	$	23,233,011

(1)

The amount available reflects any limitations related to the Credit Facility’s borrowing base.

(2)

The carrying value of the Credit Facility is presented net of deferred financing costs and loan servicing fees of approximately $0.4 million.

Average debt outstanding during the years ended December 31, 2019 and 2018 was $25,684,091 and $12,654,577, respectively.

The Loan Agreement accrues interest at the Daily LIBOR Rate, plus a 2.88% margin, and principal is repayable in full at maturity. Interest is generally required to be paid monthly in arrears. The Loan Agreement requires the payment of an unused line fee of between 0.50% and 1.0%, commencing on the date that is two months from closing, based on the amount by which the Revolver Commitments exceed the average daily balance of the Revolver Loans (as defined in the Loan Agreement) during any month. Such fee is payable monthly in arrears. The Loan Agreement has an advance rate against FRC Funding’s Eligible Portfolio Investments (as defined in the Loan Agreement). The advance rate, as to any Eligible Portfolio Investment, is 75.0% when the Company’s asset coverage ratio is equal or greater than 200.0% or 70.0% when the Company’s asset coverage ratio is less than 200.0%, subject to certain eligibility requirements.

For the years ended December 31, 2019 and 2018, the components of interest expense relating to the credit facility were as follows:

	For the Years Ended
	December 31, 2019			December 31, 2018

Interest expense	$	1,350,669		$	150,100
Amortization of debt issuance costs		125,899			19,508
Total interest expense	$	1,476,568		$	169,608
Average interest rate		5.06	%		5.23	%
Unamortized deferred financing costs, revolving credit facility	$	372,544		$	435,543

Pursuant to the terms of the Loan Agreement, the Borrowers granted to State Bank for the benefit of State Bank and Hitachi, Lenders, Alostar and its affiliates, a security interest and a lien in substantially all of FRC Funding’s assets. The Loan Agreement contains certain affirmative and negative covenants, including a minimum Company asset coverage ratio, a minimum fixed charge ratio, and a minimum Company tangible net worth. Under the Loan Agreement, the Borrowers are required to make certain customary representations and warranties and are required to comply with various covenants, reporting requirements and other requirements that are customary for similar credit facilities. The obligations under the Loan Agreement may be accelerated upon the occurrence of an event of default under the Loan Agreement or in the event of a change of control of the Company or FRC Funding.

F-23

Note 7. Share Transactions

Offering Proceeds

During the year ended December 31, 2019, the Company issued and sold 1,021,942 shares of its common stock at an aggregate purchase price of $20.2 million. During the year ended December 31, 2018, the Company issued and sold 854,788 shares of its common stock at an aggregate purchase price of $17,121,000. For the period May 3, 2017 (commencement of operations) through December 31, 2017, the Company issued and sold 1,032,445 shares of its common stock at an aggregate purchase price of $20,649,000.

Distributions

The following table reflects the distributions declared on shares of the Company’s common stock during the years ended December 31, 2019 and 2018, and the period from May 3, 2017 (commencement of operations) through December 31, 2017:

The following table reflects the distributions declared on shares during the fiscal year ended December 31, 2019:

Total

Declaration

Record

Per

Payment

Distributions

Date

Share

Date

Declared

11/13/2018

1/26/2019

0.108

2/6/2019

201,660

11/13/2018

2/26/2019

0.108

3/6/2019

209,035

2/28/2019

3/26/2019

0.108

4/8/2019

213,723

3/28/2019

4/26/2019

0.111

5/6/2019

224,726

3/28/2019

5/26/2019

0.111

6/6/2019

227,886

5/14/2019

6/26/2019

0.111

7/6/2019

266,832

5/14/2019

7/26/2019

0.114

8/6/2019

284,194

5/14/2019

8/26/2019

0.114

9/6/2019

295,882

8/12/2019

9/26/2019

0.114

10/7/2019

299,494

8/12/2019

10/24/2019

0.114

11/6/2019

306,130

8/12/2019

11/25/2019

0.114

12/6/2019

307,703

11/12/2019

12/23/2019

0.114

1/6/2020

⁽¹⁾

310,460

3,147,725

(1)

As of December 31, 2019, this distribution had not been paid, which consisted of a cash dividend of $257,614 and dividends reinvested of $52,845. See disclosure of payment noted in Note 11 to the consolidated financial statements.

The following table reflects the distrubtions declared on shares during the fiscal year ended December 31, 2018:

Total

Declaration

Record

Per

Payment

Distributions

Date

Share

Date

Declared

1/26/2018

0.108

2/6/2018

111,504

2/26/2018

0.108

3/6/2018

113,258

3/26/2018

0.108

4/6/2018

113,554

4/26/2018

0.108

5/6/2018

115,928

5/26/2018

0.108

6/6/2018

117,518

6/26/2018

0.108

7/6/2018

122,506

7/26/2018

0.108

8/6/2018

135,436

8/26/2018

0.108

9/6/2018

136,430

9/26/2018

0.108

10/6/2018

148,211

10/26/2018

0.108

11/6/2018

187,125

11/13/2018

11/26/2018

0.108

12/6/2018

197,860

11/13/2018

12/26/2018

0.108

1/7/2019

⁽¹⁾

200,125

1,699,455

(1)

As of December 31, 2018, this distribution had not been paid, which consisted of a cash dividend of $200,145 and no dividends reinvested. See balance payable on the Consolidated Statements of Assets and Liabilities, as well as disclosure of payment noted in Note 11 to the consolidated financial statements.

F-24

The following table reflects the distrubtions declared on shares during the fiscal year ended December 31, 2017:

Total

Declaration

Record

Per

Payment

Distributions

Date

Share

Date

Declared

8/25/2017

0.108

9/6/2017

36,207

9/26/2017

0.108

10/6/2017

63,585

10/26/2017

0.108

11/6/2017

104,134

11/26/2017

0.108

12/6/2017

106,375

12/26/2017

0.108

1/6/2018

⁽¹⁾

110,964

421,265

(1)

As of December 31, 2017, this distribution had not been paid, which consisted of a cash dividend of $110,964 and no dividends reinvested. See balance payable on the Consolidated Statements of Assets and Liabilities, as well as disclosure of payment noted in Note 11 to the consolidated financial statements.

Distribution Reinvestment Plan

On March 28, 2019, the Board approved the establishment of a distribution reinvestment plan (the “DRIP”). The DRIP was effective as of, and was first applied to the reinvestment of cash distributions paid on or after, May 1, 2019.

Under the DRIP, cash distributions paid to participating stockholders are reinvested in Shares at a price equal to the net asset value per share of the Shares as of such date. New stockholders of the Company on or after May 1, 2019 became participating stockholders in the DRIP unless they affirmatively declined participation in the DRIP. Existing stockholders of the Company prior to May 1, 2019 were given the opportunity to participate in the DRIP.

The following table reflects the common stock issued pursuant to the DRIP during the period May 1, 2019 to December 31, 2019:

Declaration	Record	Payment
Date	Date	Date		Shares
3/28/2019	5/26/2019	6/6/2019			2,208
5/14/2019	6/26/2019	7/6/2019			2,220
5/14/2019	7/26/2019	8/6/2019			2,503
5/14/2019	8/26/2019	9/6/2019			2,605
8/12/2019	9/26/2019	10/7/2019			2,605
8/12/2019	10/24/2019	11/6/2019			2,642
8/12/2019	11/25/2019	12/6/2019			2,660
11/12/2019	12/23/2019	1/6/2020	⁽¹⁾		2,676
					20,119

(1)

As of December 31, 2019, this distribution had not been paid, which consisted of a reinvestment of 2,676 shares at a value of $52,845. See balance payable on the Consolidated Statements of Assets and Liabilities, as well as disclosure of payment noted in Note 11 to the consolidated financial statements.

Repurchases of Shares

As a result of the Company’s compliance with the requirements set forth in the SBCAA, the asset coverage ratio test applicable to the Company was decreased from 200% to 150%, effective May 30, 2019. In order to comply with the requirement that the Company extend, within twelve months from May 30, 2018, to each of the Company’s stockholders as of May 30, 2018, the opportunity to sell the securities held by that stockholder as of that date, the Company filed four tender offers on June 27, 2018, August 7, 2018, September 12, 2018, and October 24, 2018, each representing 25% of the total issued and outstanding shares as of May 30, 2018, July 31, 2018, September 11, 2018 and October 23, 2018, respectively. The tender offer filed on June 27, 2018 resulted in the Company purchasing all 20,000 shares validly tendered and not withdrawn at a price equal to $20.03 per share for an aggregate purchase price of approximately $400,600. The remaining tender offers did not result in the Company purchasing any Shares pursuant to the offers.

Following the closing of the final tender offer above in order to comply with the provisions of the SBCAA, the Company commenced its share repurchase program, whereby it intends to offer to repurchase up to 5% if its issued and outstanding shares on a quarterly basis through registered tender offers. The table below shows the effects of the quarterly repurchase offers made by the Company during the year ended December 31, 2019:

Repurchase Offer Date	Repurchase Date	Number of Shares Repurchased		Percentage of Shares Repurchased			Repurchase Price Per Share		Aggregate Consideration for Repurchased Shares
April 1, 2019	April 29, 2019		18,750		100	%	$	19.80	$	371,250
July 16, 2019	August 14, 2019		19,996		100	%	$	19.77	$	395,326
October 1, 2019	November 6, 2019		37,911		100	%	$	19.77	$	749,498
TOTAL			76,657						$	1,516,074

F-25

Note 8. Commitments and Contingencies

The Company had an aggregate of $3,052,200 of unfunded commitments to provide debt financing to its portfolio companies or to fund limited partnership interests as of December 31, 2019. As of December 31, 2019, there were no capital calls or draw requests made by the portfolio companies to fund these commitments. Such commitments are generally up to the Company’s discretion to approve or are subject to the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in the Company’s consolidated statement of assets and liabilities and are not reflected in the Company’s consolidated statement of assets and liabilities.

A summary of the composition of the unfunded commitments as of December 31, 2019 is shown in the table below:

		As of
	Expiration Date ⁽¹⁾	December 31, 2019

Coastal Construction Products	9/4/2020	$	1,000,000
Specialist Resources Global Inc.	9/26/2021		1,666,667
BCP Great Lakes Fund LP	11/27/2021		385,533
Total unfunded commitments		$	3,052,200

(1)

Commitments are generally subject to borrowers meeting certain criteria such as compliance with covenants and certain operational metrics. These amounts may remain outstanding until the commitment period of an applicable loan expires, which may be shorter than its maturity.

A summary of the composition of the unfunded commitments as of December 31, 2018 is shown in the table below:

(1)

From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of December 31, 2019, management is not aware of any pending or threatened litigation.

F-26

Note 9. Earnings Per Share

In accordance with the provisions of ASC Topic 260, Earnings per Share, basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. As of December 31, 2019 and 2018, there were no dilutive shares.

The following table sets forth the computation of basic and diluted earnings per common share for the years ended December 31, 2019 and 2018, and the period from May 3, 2017 (commencement of operations) through December 31, 2017:

					For the Period
	For the Years Ended				May 3, 2017 (commencement of operations) through
	December 31, 2019		December 31, 2018		December 31, 2017

Net increase in net assets resulting from operations	$	3,169,648	$	1,164,513	$	441,914
Weighted average common shares of common stock outstanding - basic and diluted		2,350,674		1,317,698		523,748
Earnings per common share - basic and diluted	$	1.35	$	0.88	$	0.84

Note 10. Income Taxes

The Company has elected to be treated as a RIC under the Code beginning with the taxable year end December 31, 2017. As a RIC, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed currently to its stockholders as dividends. As a RIC, the Company is also subject to a federal excise tax based on distributive requirements of its taxable income on a calendar year basis. Depending on the level of taxable income earned in a tax year, the Company 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, to the extent required.

The permanent differences for tax purposes from distributable earnings to additional paid in capital were reclassified for tax purposes for the tax year ended December 31, 2019. These reclassifications have no impact on net assets.

		Year Ended December 31, 2019

Increase (decrease) in distributable earnings		-

Increase (decrease) in capital in excess of par value	$	-

F-27

The following reconciles net increase in net assets resulting from operations to taxable income for the years ended December 31, 2019 and December 31, 2018, and the period ended December 31, 2017:

	Year Ended December 31, 2019			Year Ended December 31, 2018		For the Period May 3, 2017 (commencement of operations) through December 31, 2017
Net increase (decrease) in net assets resulting from operations	$	3,169,648		$	1,164,513	$	441,914
Net change in unrealized appreciation (depreciation) from investments		(10,041	)		590,623		(263,415	)
Net realized losses		318,751			-		-
Other book tax differences		(369,812	)		149,467		83,641
Taxable income before deductions for distributions	$	3,108,546		$	1,904,603	$	262,140

	Year Ended December 31, 2019		Year Ended December 31, 2018		For the Period May 3, 2017 (commencement of operations) through December 31, 2017
Distributions paid from:

Ordinary income	$	3,147,725	$	1,699,455	$	262,140
Capital gains		—		—		—
Return of Capital		—		—		159,125
Total	$	3,147,725	$	1,699,455	$	421,265

For the years ended December 31, 2019 and 2018, and the period ended December 31, 2017, the components of accumulated earnings on a tax basis were as follows:

	Year Ended			Year Ended			For the Period May 3, 2017 (commencement of operations) through
	December 31,			December 31,			December 31,
	2019			2018			2017
Undistributed net investment income (loss)	$	401,162		$	136,522		$	(83,641	)
Undistributed capital gains		—			246,350			—
Capital loss carryforward		(318,751	)		—			—
Other accumulated gain (loss)/dividends payable		(265,902	)		(200,145	)		83,641
Net unrealized appreciation		(308,879	)		(697,020	)		263,415
Total	$	(492,370	)	$	(514,293	)	$	263,415

Capital losses can be carried forward indefinitely to offset future capital gains. As of December 31, 2019, the Company had short term loss carryforwards of $314,489 and long term loss carryforwards of $4,262.

As of December 31, 2019, the Company’s aggregate unrealized appreciation and depreciation on investments based on cost for U.S. federal income tax purposes was as follows:

	December 31, 2019
Tax cost		101,846,603
Gross unrealized appreciation		794,415
Gross unrealized depreciation		(1,103,294	)
Net unrealized appreciation/(depreciation) on investments	$	(308,879	)

F-28

The Company adopted FASB ASC Topic 740, Accounting for Uncertainty in Income Taxes (“ASC 740”) as of December 31, 2018. ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented, and disclosed in the consolidated financial statements. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns 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 is “more likely than not” to be sustained assuming examination by tax authorities. As of December 31, 2019, management has analyzed the Company’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken in the Company’s current year tax return. The Company identifies its major tax jurisdictions as U.S. Federal, New York State, and New York City. The Company is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. Management’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof.

Note 11. Financial Highlights

The following per common share data has been derived from information provided in the audited financial statements. The following is a schedule of financial highlights for the years ended December 31, 2019 and 2018, and the period from May 3, 2017 (commencement of operations) through December 31, 2017:

							For the Period
	For the Years Ended						May 3, 2017 (commencement of operations) through
	December 31, 2019			December 31, 2018			December 31, 2017
Per Common Share Operating Performance
Net Asset Value, Beginning of Period	$	19.74		$	20.02		$	-

Results of Operations:
Net Investment Income⁽¹⁾		1.37			1.15			0.69
Net Realized and Unrealized Gain (Loss) on Investments⁽¹⁾⁽⁵⁾		(0.01	)		(0.13	)		(0.13	)
Net Increase (Decrease) in Net Assets Resulting from Operations		1.36			1.02			0.56

Distributions to Common Stockholders
Distributions from Net Investment Income		(1.34	)		(1.30	)		(0.34	)
Return of Capital		-			-			(0.20	)
Net Decrease in Net Assets Resulting from Distributions		(1.34	)		(1.30	)		(0.54	)

Capital Share Transactions
Issuance of Common Stock		-			-			20.00
Net Increase (Decrease) Resulting from Capital Share Transactions		-			-			20.00
Net Asset Value, End of Period	$	19.76		$	19.74		$	20.02

Shares Outstanding, End of Period		2,832,840			1,867,420			1,032,445

Ratio/Supplemental Data
Net assets, end of period	$	55,969,870		$	36,855,107		$	20,669,649
Weighted-average shares outstanding		2,350,674			1,317,698			523,748
Total Return⁽³⁾		7.13	%		5.07	%		2.80	%
Portfolio turnover		84.6	%		136.5	%		156.3	%
Ratio of operating expenses to average net assets without waiver and reimbursement⁽²⁾⁽⁴⁾		8.83	%		6.15	%		11.95	%
Ratio of operating expenses to average net assets with waiver and reimbursement⁽²⁾⁽⁴⁾		7.39	%		3.52	%		1.18	%
Ratio of net investment income (loss) to average net assets without waiver and reimbursement⁽²⁾⁽⁴⁾		5.41	%		2.84	%		(5.71	%)
Ratio of net investment income (loss) to average net assets with waiver and reimbursement⁽²⁾⁽⁴⁾		6.85	%		5.47	%		5.06	%

(1)

The per common share data was derived by using weighted average shares outstanding.

(2)

The ratios reflect an annualized amount.

(3)

Total return is calculated as the change in net asset value (“NAV”) per share during the period, plus distributions per share (if any), divided by the beginning NAV per share. Total return is not annualized.

(4)

Includes interest expense of 2.92%, 0.53%, 0.23%, respectively, which is not subject to reimbursement by Flat Rock Global.

(5)

Realized and unrealized gains and losses per share in this caption are balancing amounts necessary to reconcile the change in net asset value per share for the period, and may not reconcile with the aggregate gains and losses in the Consolidated Statement of Operations due to share transactions during the period.

F-29

Note 12. Selected Quarterly Financial Data (Unaudited)

	For the Three Months Ended
	March 31, 2019			June 30, 2019			September 30, 2019			December 31, 2019

Investment income	$	1,562,580		$	1,593,794		$	1,642,598		$	1,896,783
Net expenses		816,583			870,334			896,443			893,243
Net investment income (loss)		745,997			723,460			746,155			1,003,540
Net realized gain (loss) on investments, and foreign currency transactions		407,483			(328,422	)		(139,061	)		454
Net unrealized gain (loss) on investments, foreign currency translations, and foreign currency contracts		(464,240	)		321,216			263,557			(110,492	)
Increase (decrease) in net assets resulting from operations	$	689,240		$	716,254		$	870,651		$	893,502
Net asset value per share as of the end of the quarter	$	19.77		$	19.77		$	19.77		$	19.76

	For the Three Months Ended
	March 31, 2018		June 30, 2018		September 30, 2018			December 31, 2018

Investment income	$	415,523	$	439,548	$	613,700		$	1,009,756
Net expenses		145,498		177,737		276,045			370,527
Net investment income (loss)		270,025		261,811		337,655			639,229
Net realized gain (loss) on investments, and foreign currency transactions		36,834		44,305		87,506			77,771
Net unrealized gain (loss) on investments, foreign currency translations, and foreign currency contracts		41,998		51,627		(3,008	)		(681,240	)
Increase (decrease) in net assets resulting from operations	$	348,857	$	357,743	$	422,153		$	35,760
Net asset value per share as of the end of the quarter	$	20.03	$	20.03	$	20.03		$	19.74

	For the Three Months Ended
	June 30, 2017*		September 30, 2017			December 31, 2017

Investment income	$	685	$	113,255		$	329,743
Net expenses		480		36,753			46,987
Net investment income (loss)		205		76,502			282,756
Net realized gain (loss) on investments, and foreign currency transactions		-		(266,658	)		85,694
Net unrealized gain (loss) on investments, foreign currency translations, and foreign currency contracts		362		289,381			(26,328	)
Increase (decrease) in net assets resulting from operations	$	567	$	99,225		$	342,122
Net asset value per share as of the end of the quarter	$	20.00	$	20.00		$	20.02

* Commenced operations on May 3, 2017

F-30

Note 13. Subsequent Events

The Company’s management has evaluated subsequent events through the date of issuance of the financial statements included herein. There have been no subsequent events that require recognition or disclosure in these financial statements except for the following:

Issuance of Common Stock

On January 29, 2020, the Company issued and sold approximately 7,606 shares of its common stock at an aggregate purchase price of $150,000. The issuance of the shares of common stock was exempt from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) and Rule 506(b) of Regulation D thereof.

On March 2, 2020, the Company issued and sold 34,862 shares of its common stock at an aggregate purchase price of $689,925. The issuance of the shares of common stock was exempt from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) and Rule 506(b) of Regulation D thereof.

Distributions

On November 12, 2019, the Company declared a distribution of $0.114 per share, or $322,943, for holders of record as of January 24, 2020, which was paid on February 6, 2020.

On November 12, 2019, the Company declared a distribution of $0.114 per share, or $322,863, for holders of record as of February 24, 2020, which was paid on March 6, 2020.

On January 8, 2020, following approval from the Board, the Company filed a tender offer to repurchase up to 141,245 Shares of the Company’s issued and outstanding common stock, which represented 5% of the issued and outstanding shares as of January 6, 2020. The tender offer expired at 11:59 P.M., Central Time, on February 7, 2020 (the “Offer Expiration Date”). As of the Offer Expiration Date, 11,009 Shares for a total of $217,583 were validly tendered and withdrawn pursuant to the tender offer.

F-31

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) DOCUMENTS FILED AS PART OF THIS REPORT

The following is a list of our financial statements included in this Annual Report on Form 10-K/A under Item 8 of Part II hereof:

1. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

Index to Financial Statements

	Page

Report of Independent Registered Public Accounting Firm as of and for the year ended December 31, 2019	F-1
Report of the Predecessor Independent Registered Public Accounting Firm as of and for the year ended December 31, 2018 and the period ended December 31, 2017.	F-2
Consolidated Statements of Assets and Liabilities as of December 31, 2019 and 2018	F-3
Consolidated Statements of Operations for the Years ended December 31, 2019 and 2018 and for the Period of May 3, 2017 (commencement of operations) to December 31, 2017	F-4
Consolidated Statements of Changes in Net Assets for the Years ended December 31, 2019 and 2018 and for the Period of May 3, 2017 (commencement of operations) to December 31, 2017	F-5
Consolidated Statements of Cash Flows for the Years ended December 31, 2019 and 2018 and for the Period of May 3, 2017 (commencement of operations) to December 31, 2017	F-6
Consolidated Schedules of Investments as of December 31, 2019 and 2018	F-7
Notes to Consolidated Financial Statements	F-11

(b) EXHIBITS

3.1		Articles of Incorporation of Flat Rock Capital Corp. (Incorporated by reference to the initial filing of the Registration Statement on Form 10 (SEC File No. 000-55767) filed with the SEC on March 24, 2017.)

3.2		Amended and Restated Articles of Incorporation (Incorporated by reference to Amendment No. 2 to the Registration Statement on Form 10 (SEC File No. 000-55767) filed with the SEC on May 19, 2017.)

3.3		Bylaws (Incorporated by reference to Amendment No. 1 to the Registration Statement on Form 10 (SEC File No. 000- 55767) filed with the SEC on May 1, 2017.)

4.1		Form of Subscription Agreement (Incorporated by reference to Amendment No. 2 to the Registration Statement on Form 10 (SEC File No. 000-55767) filed with the SEC on May 19, 2017.)

4.2		Distribution Reinvestment Plan (Incorporated by reference to Form 8-K Exhibit 4.1 (SEC File No. 000-55767) filed with the SEC on April 5, 2019.)

10.1		Investment Advisory Agreement by and between Flat Rock Capital Corp. and Flat Rock Global, LLC, dated May 16, 2017 (Incorporated by reference to Amendment No. 2 to the Registration Statement on Form 10 (SEC File No. 000- 55767) filed with the SEC on May 19, 2017.)

10.2		Amendment No. 1 to Investment Advisory Agreement (Incorporated by reference to Amendment No. 3 to the Registration Statement on Form 10 (SEC File No. 000-55767) filed with the SEC on May 23, 2017.)

10.3		Administration Agreement (Incorporated by reference to Amendment No. 2 to the Registration Statement on Form 10 (SEC File No. 000-55767) filed with the SEC on May 19, 2017.)

10.4		Custody Agreement (Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the period ended September 30, 2017, filed with the SEC on November 14, 2017.)

10.5		Loan and Security Agreement among FRC Funding I, LLC as borrower, Flat Rock Capital Corp. as servicer, the Lenders party thereto, and State Bank and Trust Company as agent for the Lenders, dated October 12, 2018 (Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed with the SEC on October 18, 2018.)

10.6		First Amendment to Loan and Security Agreement by and among FRC Funding I, LLC as borrower, Flat Rock Capital Corp. as servicer, the Existing Lender party thereto, State Bank and Trust Company as agent for the Lenders and Hitachi Capital America Corp. as a New Lender, dated December 10, 2018 (Incorporated by reference to the Registrant’s Current Report on Form 8-K, filed with the SEC on December 17, 2018.)

10.7		Second Amendment to Loan and Security Agreement (Incorporated by reference to Form 8-K (SEC File No. 000-55767) filed with the SEC on July 3, 2019.)

14.1		Code of Business Conduct and Ethics (Incorporated by reference to Form 10-K filed with the SEC on March 19, 2020.

21.1		Subsidiaries of the Registrant (Incorporated by reference to Form 10-K filed with the SEC on March 19, 2020.

31.1*		Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 and Section 302 of the Sarbanes-Oxley Act of 2002

32.1*		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

Filed herewith

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.

	FLAT ROCK CAPITAL CORP.

Dated: October 2, 2020	By:	/s/ Robert K. Grunewald
		Robert K. Grunewald
		President and Chief Executive Officer
		(Principal Executive Officer)

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

Dated: October 2, 2020	By:	/s/ Robert K. Grunewald
		Robert K. Grunewald
		President and Chief Executive Officer
		(Principal Executive Officer)

Dated: October 2, 2020	By:	/s/ Richard A. Petrocelli
		Richard A. Petrocelli
		Chief Financial Officer and
		Chief Operating Officer
		(Principal Financial and Accounting Officer)

Dated: October 2, 2020	By:	/s/ R. Scott Coolidge
		R. Scott Coolidge
		Director

Dated: October 2, 2020	By:	/s/ Marshall H. Durston
		Marshall H. Durston
		Director

Fiscal Year Ended December 31, 2018

Derivative Type

Consolidated Statement of Operations Location

Foreign
Currency
Contracts

Forward foreign currency exchange contracts

Net change in unrealized gains (losses) from forward foreign currency exchange contracts